- - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 1-10524 UNITED DOMINION REALTY TRUST, INC. (Exact name of registrant as specified in its charter) VIRGINIA 54-0857512 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 10 South Sixth Street, Suite 203 Richmond, Virginia 23219-3802 (Address of principal executive offices-zip code) (804) 780-2691 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: <TABLE> <CAPTION> TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED <S> <C> Common Stock, $1 Par Value New York Stock Exchange 9 1/4% Series A Cumulative Redeemable Preferred Stock New York Stock Exchange </TABLE> 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, and (2) has been subject to filing requirements for at least 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 the 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. ( ) The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on March 15, 1996 was approximately $854 million. As of March 15, 1996, there were 56,506,249 shares of common stock, $1 par value, outstanding. Part III incorporates certain information by reference from the definitive proxy statement to be filed with respect to the Annual Meeting of Shareholders to be held on May 7, 1996. *In determining this figure, the Company has assumed that all of its officers and directors, and persons known to the Company to be beneficial owners of more than 5% of the Company's shares, are affiliates. Such assumption should not be deemed to be conclusive for any other purpose. - - -------------------------------------------------------------------------------
UNITED DOMINION REALTY TRUST, INC. TABLE OF CONTENTS PAGE PART I. Item 1. Business 3 Item 2. Properties 12 Item 3. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security-Holders 13 PART II. Item 5. Market for Registrant's Common Equity and Related 15 Stockholder Matters Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial 17 Condition and Results of Operation Item 8. Financial Statements and Supplementary Data 22 Item 9. Changes in and Disagreements with Accountants on 22 Accounting and Financial Disclosure PART III. Item 10. Directors and Executive Officers of the 23 Registrant Item 11. Executive Compensation 23 Item 12. Security Ownership of Certain Beneficial 23 Owners and Management Item 13. Certain Relationships and Related Transactions 23 PART IV. Item 14. Exhibits, Financial Statement Schedule, and 24 Reports on Form 8-K
Part I Item 1. Business United Dominion Realty Trust, Inc., a Virginia corporation, and its subsidiaries (collectively, the "Company") is a self-administered equity real estate investment trust ("REIT"), formed in 1972, whose business is devoted to one industry segment, the ownership and operation of income-producing real estate, primarily apartment communities located in the southeastern U.S. (the "Southeast"). The Company is headquartered in Richmond, Virginia with divisional offices in Richmond, Atlanta, Georgia, and Orlando, Florida, and regional offices in the previously mentioned cities plus Columbia, Maryland, Raleigh, North Carolina, and Nashville, Tennessee. The Company has approximately 1,100 associates as of March 15, 1996. The Company is a fully integrated real estate company with acquisition, development and asset and property management capabilities. The Company acquires, upgrades and operates its properties with the goals of maximizing its funds from operations ("FFO") (defined as income before gains [losses] on investments and extraordinary items [computed in accordance with generally accepted accounting principles] plus real estate depreciation, less preferred dividends and after adjustment for significant nonrecurring items, if any) and quarterly distributions to shareholders, while building equity primarily through real estate appreciation. At the beginning of 1991, the Company embarked on a major expansion of its apartment portfolio in an effort to take advantage of unique buying opportunities resulting from the real estate credit crisis. This enabled the Company to (i) acquire more stable apartment properties having high occupancy levels and not requiring substantial renovation, and (ii) enter into new markets including the Baltimore/Washington area, central and south Florida, Nashville and Memphis, Tennessee. The Company's acquisition strategy focuses on acquiring two types of apartment communities: (i) near Class A properties built since 1980 where the investment (purchase price plus planned improvements) represents a significant discount to replacement cost and (ii) well-located communities built in the late 1960s or 1970s that can be upgraded and repositioned for the longer term. In 1995, the Company purchased 23 apartment communities with 5,142 apartment homes for approximately $195 million. This includes 9 apartment communities with 1,596 apartment homes acquired in a portfolio purchase for $65.7 million, including closing costs. As of March 15, 1996, the Company's portfolio of income-producing real estate consisted of 154 properties including 144 apartment complexes, 6 shopping centers, and 4 other properties. A geographic distribution of the Company's portfolio of apartment communities held for investment is included in Item 2, "Properties". The Company is operated so as to qualify as a real estate investment trust under the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify, the Company must meet certain tests which, among other things, require that its assets consist primarily of real estate, its income be derived primarily from real estate, and at least 95% of its taxable income be distributed to its shareholders. Because the Company qualifies as a REIT, it is generally not subject to Federal income taxes. The Company manages its properties directly, rather than through outside property management firms. During 1995, the cost of internal property management of the Company's apartment properties was approximately 2.6% of rents collected versus the 4-5% fee typically charged by independent fee management companies in the Company's region. In determining its cost of self management, the Company considers all direct and indirect costs associated with the internal property management function. Near the end of 1992, management of the Company determined that the Company should devote substantially all of its resources to the apartment business. During 1994, the Company sold one shopping center and during 1995 the Company sold seven shopping centers. As of the end of 1995, six of the Company's remaining seven shopping centers were under contract to be sold. There is no assurance that these sales transactions will be consummated. Although no formal plans for divestiture have been made, the Company hopes to substantially liquidate its commercial properties over time as opportunities arise. A significant aspect of the Company's investment strategy has been to concentrate its investments within the Southeast. The Company currently owns properties in the seven coastal states from Delaware to Florida plus Tennessee and Alabama. This strategy of geographically focusing on one region, has enabled management to regularly inspect each property and to monitor developments in local real estate markets. The Company is a significant apartment owner in 15 Southeast markets with each market averaging approximately 2,000 apartment homes. The Company's strategy is to establish a dominant presence in each of these markets in order to: 3
(bullet) Be a local market leader. (bullet) Improve operating efficiencies in the purchase of good and services. (bullet) Reduce the cost of community management. (bullet) Generate new sources of revenue from services marketed to residents. (bullet) Reduce costs and add revenues from utility deregulation. (bullet) Build stronger local organizations which are conducive to growing and retaining associates. The Company will continue to grow principally through acquisitions. However, given its size, as well as its objective to be a dominant owner in its larger markets, management believes that it is important that the Company have some development capability. During 1995, the Company began building its prototype apartment building as a second phase to Clear Run Apartments in Wilmington, North Carolina. The Company plans to build this prototype as a second phase at four other communities in 1996. The Company also plans to do a ground up development of 360 apartment homes in a suburb of Nashville. As a qualified REIT, the Company distributes a substantial portion of its cash flow to its shareholders in the form of dividends. Over the past several years, the Company has reduced its payout ratio (the ratio of distributions declared per share to FFO per share) from above 90% to approximately 76% in 1995. For 1995, the Company's cash flow from operating activities exceeded cash distributions paid to common shareholders by approximately $20.7 million. The Company utilizes a variety of primarily external financing sources to fund new acquisitions, property renovations and expansions, major capital improvements and balloon debt payments. The Company has frequently utilized its bank lines of credit to temporarily finance these expenditures and has subsequently replaced the short-term bank debt with longer term debt or equity. During 1995 the Company recognized cash proceeds from sales of real estate owned of $23.5 million. Property sales should continue to be a funding source in the future. During 1995 the Company raised approximately $218 million externally. This included $78.7 million from the sale of common stock in February, September and October and $101.5 million from the April sale of 4,200,000 shares of 9 1/4% Series A Cumulative Redeemable Preferred Stock ($25 per share liquidation preference value) ("Preferred Stock"). Also during 1995, the Company completed new tax-exempt housing bond financings or assumed such bond financings and conventional mortgage notes in connection with certain acquisitions in the aggregate amount of approximately $38.0 million. In the past, the Company utilized fixed rate mortgage debt to finance its growth. As the Company's capital base has broadened over the past several years primarily through its sale of common stock in seven of the last nine years, its financial strength and credit standing have improved. The Company's senior debt is currently rated BBB+ by Standard & Poor's and Baal by Moody's. As a result of its investment grade debt ratings, the Company has used and expects to continue to use unsecured debt as its primary debt funding source. The Company also uses secured debt financing but to a much lesser extent and only (i) when such financing takes the form of tax-exempt housing bonds or (ii) in connection with an acquisition when existing mortgage financing is in place that either is closed to prepayment or cannot be repaid at a reasonable cost. At December 31, 1995, the Company had $70 million of revolving credit facilities with four commercial banks plus $33.5 million of additional available lines of credit with three of these banks. The Company will seek to further expand these credit arrangements during 1996. At December 31, 1995, the Company had $18.4 million of borrowings outstanding under the revolving credit facilities and no borrowings outstanding under its lines of credit. 4
At the end of 1995, the apartment portion of the Company's portfolio included 141 complexes having a total of 34,224 apartment homes and constituting 95.8% of the Company's real estate owned, at cost. During 1995, the Company acquired 23 apartment complexes, having a total of 5,142 apartment homes, a 16.9% increase in the number of apartment homes owned. During 1995, 1994, and 1993, apartments provided approximately 96%, 93% and 89% respectively, of the Company's rental income. The Company's apartment communities consist primarily of upper middle to moderate income complexes which make up the broadest segment of the apartment market. Management believes that well located apartments offer the Company a good combination of current income and longer term equity growth. Although there is no known move toward rent control in any of the markets in which the Company now owns apartments, should rent control legislation be enacted, the Company's ability to raise rents to cover increases in operating expenses might be impaired. While the Company has been largely unaffected by military cutbacks and base closures, the effect of future defense cuts on the Company's region is unknown. As the Company has expanded beyond Virginia and North Carolina, it has attempted to avoid markets where the exposure to reduced defense spending is believed to be high. The Company has one property, Indian Hills in Anniston, Alabama, which caters to Fort McClellan which was included in the list of military base closings announced by the Defense Department in February, 1995. Management expects the Company's apartment business to continue to be stable during the next two to three years. Apartment markets in the Company's region in 1994 and 1995 generally benefitted from the combination of job growth which led to strong growth in the number of renter households and only modest apartment construction. Beginning in mid-year 1994 and lasting through mid-year 1995, physical occupancy of the Company's apartments steadily increased. However, occupancy trended downward beginning in August, 1995 and continued to decline albeit slowly through year end. Physical occupancy at the Company's apartment properties averaged 93.9% for December, 1995. Management believes that apartment markets within the Southeast will remain in balance over the next few years if construction activity remains at 1994 and 1995 levels. Because the Company's apartment occupancy has stabilized at approximately 94% at the beginning of 1996, it is anticipated that the Company will benefit more from higher rent growth in 1996 and 1997 than from occupancy gains. It is widely believed by those who closely follow the industry that the next few years will be a period of consolidation for REITs. Prior to 1990, United Dominion was the only major publicly held REIT focusing almost exclusively on apartment investments. Since then, a number of new multifamily REITs have been formed. According to the National Association of Real Estate Investment Trusts (NAREIT), there were more than 35 apartment REITs as of February 29, 1996. It is believed that some of these REITs may be forced to seek to be acquired by larger, better capitalized REITs with superior access to the capital markets, such as the Company. If consolidation occurs, then the Company expects to participate in the process as an acquirer of other apartment REITs when such transactions are accretive to FFO earnings and can enhance dividend growth and shareholder value. At December 31, 1995, commercial properties, primarily shopping centers, constituted the remaining 4% of the Company's real estate owned at cost. During 1995, 1994, and 1993, commercial properties provided 4%, 7%, and 11%, respectively, of the Company's rental income. The commercial portfolio has become a non-material portion of the Company's total portfolio. In most of the Company's markets, the competition for residents among properties is very intense. Some competing properties are larger and/or newer than the Company's properties and offer features for prospective residents not offered by properties owned by the Company. The competitive situation of each property varies and intensifies as additional properties are constructed. The Company expects to continue to aggressively acquire additional apartment properties within the Southeast during 1996. When it is in the market for new acquisitions, the Company competes with numerous other investors, including REITs, individuals, partnerships, corporations, pension funds, syndicators, insurance companies, foreign investors, and other real estate entities. Management believes that the Company, in general, is well positioned in terms of economic and other resources to compete effectively. Even though the Company has certain advantages over some of its competitors because of its substantial presence in the region and its access to capital, some competing investors are larger than the Company in terms of assets and other investment resources and may have a competitive advantage. 5
To date, compliance with Federal, State, and local environmental protection regulations has not had a material effect upon the capital expenditures, earnings, or competitive position of the Company. However, over the past few years, there have been increasing concerns raised regarding the presence of asbestos and other hazardous materials in existing real estate properties. In response to this, on March 1, 1991, the Company adopted a property management plan for hazardous materials. As part of the plan, Phase I environmental site investigation and reports have been completed for each property owned by the Company and not previously inspected. In addition, all proposed acquisitions are inspected prior to acquisition. In general, within the Company's region, owners of property for sale have been required by purchasers to remove or control asbestos and other environmental hazards prior to the transfer of the property. Consequently, when the Company sells properties in the future, management anticipates that the Company will similarly be required to remove or control such hazards, if any. In some cases, the Company has abandoned otherwise economically attractive acquisitions because the costs of removal or control have been prohibitive and/or the Company has been unwilling to accept the potential risks involved. Management believes that thorough professional environmental inspections and testing for asbestos and other hazardous materials, coupled with a conservative posture toward accepting known risk, the Company can minimize its exposure to potential liability associated with environmental hazards. The Company is not aware of any environmental hazards on or in its properties which individually or in the aggregate may have a material adverse impact on its operations or financial position. To the best of its knowledge, the Company is in compliance with all applicable environmental rules and regulations. UNITED DOMINION REALTY, L.P. On October 23, 1995, the Company organized United Dominion Realty, L.P. (the "Partnership") under the Virginia Revised Uniform Limited Partnership Act. The Company is the sole General Partner of the Partnership and currently holds a 99% interest therein. The remaining 1% is currently held by UDRT of North Carolina, L.L.C., a wholly owned subsidiary of the Company. In 1995, the Company acquired two apartment communities and land to develop an additional apartment community using the Partnership, and transferred seven of its Tennessee properties into the Partnership. The Partnership is intended to assist the Company in competing for acquisitions of properties that meet the Company's investment strategies from seller partnerships some or all of whose partners may wish to defer taxation of gain realized on sale through an exchange of partnership interests. The Partnership is organized under a First Amended and Restated Agreement of Limited Partnership dated as of December 31, 1995 (the "Partnership Agreement"). A summary of certain provisions of the Partnership Agreement is set forth below. The summary does not purport to be complete and is subject to and qualified in its entirety by reference to applicable provisions of the Partnership Act and the complete Partnership Agreement, which is filed as an exhibit to this annual report on Form 10-K for the year ended December 31, 1995. ADMISSION OF LIMITED PARTNERS; INVESTMENT AGREEMENTS The Company presently intends to limit admission to the Partnership to Limited Partners who are "accredited investors," as defined in Rule 501(a) under the Securities Act of 1933, as amended (the "Securities Act"). Limited Partners will be admitted upon executing and delivering to the Company an Investment Agreement (the "Investment Agreement") 6
and delivering to the Partnership the consideration prescribed therein. In the Investment Agreement, the prospective Limited Partner makes representations as to his status as an accredited investor and other representations and agreements regarding the Units, defined below, to be issued to him, intended to assure compliance with the Securities Act. Any rights to Securities Act registration of the Common Stock of the Company, if any, issued to such Limited Partner upon redemption of his Units (see "Redemption Rights" below), will also be set forth in the Investment Agreement. UNITS The interests in the Partnership of the Partnership's limited Partners (the "Limited Partners") are represented by units of limited partnership interest (the "Units"). All holders of Units are entitled to share in cash distributions from, and in the profits and losses of, the Partnership. Distributions by the Partnership are made equally for each Unit outstanding. As the Partnership's sole General Partner, the Company intends to make distributions per Unit in the same amount as the cash dividends paid by the Company on each share of Common Stock. However, because the Partnership properties, which are the primary source of cash available for distribution to Unit holders, are significantly fewer than the properties held directly by the Company and may not perform as well, there can be no assurance that distributions per Unit will always equal Common Stock dividends per share. A distribution made to the Company to enable it to maintain its REIT status (see "Management and Operations" below) may deplete cash otherwise distributable to Unit holders. The Partnership may borrow from the Company for the purpose of equalizing per Unit and per share of Common Stock distributions, but neither the Partnership nor the Company is under any obligation regarding Partnership borrowings for this or any other purpose. The Limited Partners have the rights to which limited partners are entitled under the Partnership Act. The Units are illiquid; they are not registered for secondary sale under any securities laws, state or federal, and cannot be transferred by a holder unless they are so registered or an exemption from such registration is available. Neither the Partnership nor the Company is under any obligation to effect any such registration or to establish any such exemption. The Partnership Agreement imposes additional restrictions on the transfer of Units, as described below under "Transferability of Interests." MANAGEMENT AND OPERATIONS The Company, as the sole General Partner of the Partnership, has full, exclusive and complete responsibility and discretion in the management and control of the Partnership, and the Limited Partners have no authority to transact business for, or participate in the management activities or decisions of, the Partnership. The Partnership Agreement requires that the Partnership be operated in a manner that will enable the Company to satisfy the requirements for being classified as a REIT and to avoid any federal income tax liability. The General Partner is expressly directed, notwithstanding anything to the contrary in the Partnership Agreement, to cause the Partnership to distribute amounts (including proceeds of Partnership borrowings) sufficient to enable the Company to pay distributions to its shareholders required to maintain its REIT status and avoid income tax or excise tax liability. ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST The Company and other persons (including officers, directors, employees, agents and other affiliates of the Company) are not prohibited under the Partnership Agreement from engaging in other business activities, including business activities substantially similar or identical to those of the Partnership, and the Company will not be required to present any business opportunities to the Partnership or to any Limited Partner. BORROWING BY THE PARTNERSHIP The General Partner is authorized under the Partnership Agreement to cause the Partnership to borrow money and to issue and guarantee debt as it deems necessary for the conduct of the activities of the Partnership. Such debt may be secured by mortgages, deeds of Company, pledges or other liens on the assets of the Partnership. REIMBURSEMENT OF GENERAL PARTNER; TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES The General Partner will receive no compensation for its services as General Partner of the Partnership. However, as a partner in the Partnership, the General Partner has the same right to allocations of profit and loss and distributions as other partners of the Partnership. In addition, the Partnership will reimburse the General Partner for all expenses it incurs 7
relating to the ownership and operation of, or for the benefit of, the Partnership and any offering of Units or other partnership interests, and for the pro rata share of the expenses of any offering securities of the Company some or all the proceeds of which are contributed to the Partnership. LIABILITY OF GENERAL PARTNER AND LIMITED PARTNERS The General Partner is liable for all general obligations of the Partnership to the extent not paid by the Partnership. The General Partner is not liable for the non-recourse obligations of the Partnership. The Limited Partners are not required to make further capital contributions to the Partnership after their respective initial contributions are fully paid. Assuming that a Limited Partner acts in conformity with the provisions of the Partnership Agreement, the liability of the Limited Partner for obligations of the Partnership under the Partnership Agreement and Partnership Act will be limited, subject to certain possible exceptions, to the loss of the Limited Partner's investment in the Partnership. The Partnership is qualified to conduct business in each state in which it owns property and may qualify to conduct business in other jurisdictions. Maintenance of limited liability may require compliance with certain legal requirements of those jurisdictions and certain other jurisdictions. Limitations on the liability of a limited partner for the obligations of a limited partnership have not clearly been established in many states. Accordingly, if it were determined that the right, or exercise of the right by the Limited Partners, to make certain amendments to the Partnership Agreement or to take other action pursuant to the Partnership Agreement constituted "control" of the Partnership's business for the purposes of the statutes of any relevant state, the Limited Partners might be held personally liable for the Partnership's obligations. The Partnership will operate in a manner the General Partner deems reasonable, necessary and appropriate to preserve the limited liability of the Limited Partners. EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER The Partnership Agreement provides that the General Partner will incur no liability for monetary damages to the Partnership or any Limited Partner for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith. In addition, the General Partner is not responsible for any misconduct or negligence on the part of its agents, provided the General Partner appointed such agents in good faith. The Partnership Agreement also provides for indemnification of the General Partner, the directors, officers and employees of the General Partner, and such other persons as the General Partner may from time to time designate, against any and all losses, claims, damages, liabilities (joint or several), expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, that relate to the operations of the Partnership in which any such indemnitee may be involved, or is threatened to be involved, unless it is established that (i) the act or omission of such indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) such indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal proceeding, such indemnitee had reasonable cause to believe that the act or omission was unlawful. SALE OF ASSETS Under the Partnership Agreement, the General Partner generally has the exclusive authority to determine whether, when and on what terms the assets of the Partnership will be sold. REMOVAL OF THE GENERAL PARTNER; TRANSFER OF GENERAL PARTNER'S INTEREST The Partnership Agreement does not authorize the Limited Partners to remove the General Partner and the Limited Partners have no right to remove the General Partner under the Partnership Act. The General Partner may not transfer any of its interest as General Partner and withdraw as General Partner, except (a) to a wholly-owned subsidiary of the General Partner or the owner of all the ownership interests in the General Partner, (b) in connection with a merger or sale of all or substantially all of the assets of the General Partner or (c) as a result of the bankruptcy of the General Partner. A substitute or additional General Partner may be admitted upon compliance with the applicable provisions of the Partnership Agreement, including delivery by counsel for the Partnership of an opinion that admission of such General Partner will not cause (i) the 8
Partnership to be classified other than as a partnership for federal income tax purposes, or (ii) the loss of any Limited Partner's limited liability. The General Partner may not sell all or substantially all of its assets, or enter into a merger, unless the sale or merger includes the sale of all or substantially all of the assets of, or the merger of, the Partnership and the Limited Partners receive for each Unit substantially the same consideration as the holder of one share of Common Stock. TRANSFERABILITY OF INTERESTS A Limited Partner may transfer his interest in the Partnership without the consent of the General Partner, unless in the opinion of counsel for the Partnership such transfer would require the registration of such interest under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards) and unless such transfer would have undesirable federal income tax consequences for the Partnership. The General Partner may require, as a condition of any transfer, that the transferring Limited Partner assume all costs incurred by the Partnership in connection with such transfer. REDEMPTION RIGHTS Each Limited Partner has the right (the "Redemption Right"), subject to the purchase right of the General Partner described below, to cause the redemption of such Limited Partner's Units for cash in an amount per Unit equal to the average of the closing sale prices of the Common Stock of the Company on the New York Stock Exchange (the "NYSE") for the ten trading days immediately preceding the date of receipt by the General Partner of notice of such Limited Partner's exercise of the Redemption Right. A Limited Partner that exercises the Redemption Right shall be deemed to have offered to sell the Units to be redeemed to the General Partner, and the General Partner may elect to purchase such Units by paying to such Limited Partner either the redemption price in cash or by delivering to such Limited Partner a number of shares of Common Stock of the Company equal to the product of the number of such Units, multiplied by the "Conversion Factor," which is 1.0, subject to customary antidilution provisions in the event of stock dividends on or subdivisions or combinations of the Common Stock subsequent to issuance of such Units. Any Common Stock issued to the redeeming Limited Partner will be listed on the NYSE and if and to the extent provided in such Redeeming Partner's Investment Agreement, registered under the Securities Act and/or entitled to rights to Securities Act registration. NO WITHDRAWAL OF CAPITAL BY LIMITED PARTNERS No Limited Partner has the right to withdraw any part of his capital contribution to the Partnership or to interest thereon or to receive any distribution, except as provided in the Partnership Agreement. ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTERESTS AND OTHER PARTNERSHIP SECURITIES The General Partner is authorized, without the consent of the Limited Partners, to cause the Partnership to issue additional Units or other Partnership securities to the partners or to other persons on such terms and conditions and for such consideration, including cash or any property or other assets permitted by the Partnership Act, as the General Partner deems appropriate. MEETINGS The Partnership Agreement does not provide for annual meetings of the Limited Partners, and the General Partner does not anticipate calling such meetings. AMENDMENT OF PARTNERSHIP AGREEMENT Amendments to the Partnership Agreement may, with four exceptions, be made by the General Partner without the consent of the Limited Partners. Any amendment to the Partnership Agreement which would (i) affect the Conversion Factor or the Redemption Rights of the Limited Partners, (ii) adversely affect the rights of the Limited Partners to receive distributions payable to them under the Partnership Agreement, (iii) alter the Partnership's profit and loss allocations or (iv) impose any obligation upon the Limited Partners to make additional capital contributions to the Partnership shall require the consent of Limited Partners owning more than 50% of the percentage interests in the Partnership. 9
BOOKS AND REPORTS The General Partner is required to keep at the specified office of the Partnership the Partnership's books and records, including copies of the Partnership's federal, state and local tax returns, a list of the partners and their last known business addresses, the Partnership Agreement, the Partnership certificate and all amendments thereto and any other documents and information required under Partnership Act. Any partner or his duly authorized representative, upon paying duplicating, collection and mailing costs, is entitled to inspect or copy such records during ordinary business hours. The General Partner will furnish to each Limited Partner, as soon as practicable after the close of each fiscal year, an annual report containing financial statements of the Partnership (or the Company, if consolidated financial statements including the Partnership are prepared) for such fiscal year. The financial statements will be audited by accountants selected by the General Partner. In addition, as soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), the General Partner will furnish to each Limited Partner a quarterly report containing unaudited financial statements of the Partnership (or the Company and the Partnership, consolidated). The General Partner will furnish to each Limited Partner, within 75 days after the close of each fiscal year of the Partnership, the tax information necessary to file such Limited Partner's individual tax returns. LOANS TO PARTNERSHIP The Partnership Agreement provides that the General Partner may borrow additional Partnership funds for any Partnership purpose from the General Partner or a subsidiary or subsidiaries of the General Partner or otherwise. ADJUSTMENTS OF CAPITAL ACCOUNTS AND PERCENTAGE INTERESTS A separate capital account will be established and maintained for each Partner. If (i) a new or existing general or limited partner of the Partnership (a "Partner" or collectively "Partners") acquires an additional interest in the Partnership interest in exchange for more than a de minimis capital contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property as consideration for a Partnership interest, or (iii) the Partnership is liquidated for federal income tax purposes, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole discretion) in accordance with applicable federal income tax regulations. When the Partnership's property is revalued by the General Partner, the capital accounts of the partners shall be adjusted in accordance with such regulations, which generally require such capital accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the capital accounts previously) would be allocated among the partners pursuant to the Partnership Agreement if there were a taxable disposition of such property for its fair market value on the date of the revaluation. If the number of outstanding Units increases or decreases during a taxable year, each partner's percentage interest in the Partnership shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to a percentage equal to the number of Units held by such Partner divided by the aggregate number of Units outstanding after giving effect to such increase or decrease, and profits and losses for the year will be allocated among the partners in a manner selected by the General Partner to give appropriate effect to such adjustments. REGISTRATION RIGHTS Limited Partners have no rights to Securities Act registration of any Common Stock of the Company received in connection with redemption of Units except as provided in their respective Investment Agreements. TAX MATTERS; PROFIT AND LOSS ALLOCATIONS Pursuant to the Partnership Agreement, the General Partner is the tax matters partner of the Partnership and, as such, has the authority to handle tax audits and to make tax elections under the Code on behalf of the Partnership. Profit and loss of the Partnership generally will be allocated among the Partners in accordance with their respective interests in the Partnership based on the number of Units held by the Partners. 10
DISTRIBUTIONS The Partnership Agreement provides that the General Partner shall distribute cash quarterly, in amounts determined by the General Partner in its sole discretion, to the partners in accordance with their respective percentage interests in the Partnership, except that the amount of cash distributable to a Limited Partner who has not been a Limited Partner for the full quarter for which the distribution is paid is subject to pro rata reduction. Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, any remaining assets of the Partnership will be distributed to all Partners with positive capital accounts in accordance with their respective positive capital account balances. If the General Partner has a negative balance in its capital account following a liquidation of the Partnership, it will be obligated to contribute cash to the Partnership equal to the negative balance in its capital account. TERM The Partnership will continue until December 31, 2051, or until sooner dissolved upon (i) the bankruptcy, dissolution, death or withdrawal of a General Partner (unless the Limited Partners elect to continue the Partnership by electing by unanimous consent a substitute General Partner within 90 days of such occurrence), (ii) the passage of 90 days after the sale or other disposition of all or substantially all the assets of the Partnership, (iii) the redemption of all Limited Partners' interests in the Partnership, or (iv) election by the General Partner. Upon dissolution of the Partnership, the General Partner will proceed to liquidate the assets of the Partnership and distribute the proceeds remaining after payment or adequate provision for payment of all debts and obligations of the Partnership as provided in the Partnership Agreement. 11
ITEM 2. PROPERTIES REAL ESTATE HELD FOR INVESTMENT The table below sets forth a summary by major geographic market of the Company's portfolio of apartment rental properties held for investment at December 31, 1995. The Company also held five commercial properties for investment at December 31, 1995, having an aggregate cost of $7,249,020 containing 325,000 square feet. See also Notes 1 and 2 to the Consolidated Financial Statements and Schedule III - Summary of Real Estate Owned. <TABLE> <CAPTION> AVERAGE NUMBER NUMBER PERCENTAGE REAL ECONOMIC MONTHLY MAJOR OF OF OF ESTATE COST OCCUPANCY RENT GEOGRAPHIC APARTMENT APARTMENT APARTMENT AT PER FULL YEAR DECEMBER MARKETS COMMUNITIES HOMES HOMES COST ENCUMBERANCES UNIT 1995 1995 - - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Richmond, Virginia 12 3,541 11% $99,088,108 $10,546,791 $27,982 95.8% $495 Columbia, South Carolina 11 3,218 10% 95,294,439 19,841,033 29,613 94.6% 471 Raleigh, North Carolina 7 2,272 7% 81,186,113 7,000,000 35,733 99.0% 558 Tampa, Florida 8 2,351 7% 76,449,020 -- 32,518 90.1% 537 Charlotte, North Carolina 10 2,002 6% 71,555,132 10,629,071 35,742 95.3% 533 Orlando, Florida 8 2,253 7% 78,902,434 27,510,000 35,021 90.5% 534 Atlanta, Georgia 6 1,670 5% 57,011,100 6,027,182 34,138 92.0% 538 Baltimore, Maryland 8 1,746 5% 73,650,412 30,800,000 42,182 93.4% 628 Eastern, North Carolina 8 1,730 5% 47,537,154 1,463,867 27,478 98.1% 499 Hampton Roads, Virginia 6 1,436 5% 42,319,745 3,900,000 29,471 94.4% 516 Nashville, Tennessee 5 1,344 4% 46,520,494 5,223,854 34,613 97.9% 536 Greenville/Spartanburg, South Carolina 7 1,330 4% 37,328,147 3,265,000 28,066 93.9% 475 Washington, DC 4 1,011 3% 34,380,221 11,437,183 34,006 93.1% 631 Ft. Lauderdale, Florida 4 960 3% 58,232,414 -- 60,659 91.6% 770 Memphis, Tennessee 4 935 3% 30,179,225 5,890,000 32,277 94.4% 476 Other Maryland 4 784 2% 31,548,586 -- 40,241 96.1% 591 Other North Carolina 2 447 1% 14,497,318 -- 32,432 90.8% 446 Other Florida 6 1,524 5% 51,283,043 17,452,916 33,652 90.9% 529 Other Virginia 6 988 3% 33,138,387 2,960,000 33,541 96.3% 519 Delaware 3 468 1% 19,238,635 -- 41,108 95.4% 590 Other Georgia 2 468 1% 20,067,668 6,407,421 42,880 90.8% 612 Other South Carolina 2 408 1% 12,030,615 2,200,000 29,487 89.2% 391 Alabama 2 382 1% 12,410,936 -- 32,489 87.0% 488 ================================================================================================= 135 33,268 100% $1,123,849,346 $172,554,318 $33,782 94.1% $516 ================================================================================================= </TABLE> At December 31, 1995, the Company has six shopping centers and six apartment properties classified in the consolidated balance sheet as real estate held for disposition in the amount of $51,015,137, net of accumulated depreciation in the amount of $23,572,195 and impairment loss valuation allowance in the amount of $1,700,000. These properties are not included in the above table.
ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its apartment communities is presently subject to any material litigation nor, to the Company's knowledge, is any litigation threatened against the Company or any of the communities, other than routine actions arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the business or financial condition or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's shareholders during the last quarter of its fiscal year ended December 31, 1995. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, listed below, serve in their respective capacities for approximate one year terms and are subject to re-election annually by the Board of Directors, normally in May of each year. Name Age Office Since John P. McCann 51 President and Chief 1974 Executive Officer James Dolphin 46 Senior Vice President 1979 and Chief Financial Officer Barry M. Kornblau 46 Senior Vice President and 1991 Director of Apartment Operations Richard B. Chess 42 Vice President and Director 1987 of Acquisitions Richard A. Giannotti 40 Vice President and Director 1985 of Construction Katheryn E. Surface 37 Vice President, Corporate Secretary and General Counsel 1992 Jerry A. Davis 33 Vice President and Corporate Controller 1989 Mr. McCann, a Director, has been the Company's managing officer since 1974, serving as its President since 1979, its Secretary from 1974 to 1980, and its Treasurer from 1982 to 1985. Mr. Dolphin, a Director, was first employed by the Company in May, 1979 as Controller and served as Corporate Secretary from 1980 to February, 1994. He was elected Vice President of Finance in 1985 and Senior Vice President in 1987. Mr. Kornblau, a Director, joined the Company in 1991 as Senior Vice President and Director of Apartment Operations. From 1985 through 1990, he was President and Chief Executive Officer of Summit Realty Group, Inc. which managed the Trust's apartment properties during that period. He is a licensed real estate broker and a C.P.M. Mr. Chess joined the Company in October, 1987 as Director of Acquisitions. He was elected Assistant Vice President in 1988 and Vice President in 1989. Mr. Giannotti joined the Company as Director of Development and Construction in September, 1985. He was elected Assistant Vice President in 1988 and Vice President in 1989. Ms. Surface joined the Company in 1992 as Assistant Vice President and Legal Counsel and in 1994 was elected General Counsel, Corporate Secretary and Vice President. From 1986 to 1992, she was an attorney with the law firm of Hunton and Williams, the Company's outside counsel. Mr. Davis joined the Company in March, 1989 as Controller and was subsequently elected Assistant Secretary. In 1991 he was elected Vice President. He is a certified public accountant.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "UDR". The following table sets forth the quarterly high and low closing sale prices per share reported on the NYSE for each quarter of the last two years. Distribution information reflects distributions declared per share for each calender quarter and paid at the end of the following month. DISTRIBUTIONS 1994 HIGH LOW DECLARED 1st Quarter $ 15 7/8 $ 12 3/4 $ .195 2nd Quarter 15 1/8 13 3/8 .195 3rd Quarter 14 1/4 13 .195 4th Quarter 14 1/2 12 1/4 .195 1995 1st Quarter $ 14 5/8 $ 13 $ .225 2nd Quarter 15 3/8 13 1/2 .225 3rd Quarter 15 13 1/2 .225 4th Quarter 15 13 1/4 .225 On March 15, 1996, the closing sale price of the Common Stock was $15.50 per share on the NYSE. On March 15, 1996 there were 5,636 holders of record of the 56,506,249 shares of Common Stock. The Company pays regular quarterly dividends to holders of shares of Common Stock. Future distributions by the Company will be at the discretion of its Board of Directors and will depend on the actual funds from operations of the Company, the Company's financial condition and capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as the Board of Directors deems relevant. The Company has a Dividend Reinvestment and Stock Purchase Plan under which holders of Common and Preferred Stock may elect to automatically reinvest their dividends and make additional cash payments to acquire additional shares of the Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial and other information for the Company as of and for each of the years in the five year period ended December 31, 1995. The table should be read in conjunction with the Consolidated Financial Statements of United Dominion Realty Trust, Inc. and the Notes thereto included elsewhere herein. Selected Financial Information <TABLE> <CAPTION> Years ended December 31, 1995 1994 1993 1992 1991 - - ---------------------------------------------------------------------------------------------------------------------------------- In thousands, except per share data and apartments owned <S> <C> <C> <C> <C> <C> OPERATING DATA Rental Income $195,240 $139,972 $ 89,084 $ 63,202 $ 51,250 Income from property operations 74,659 52,377 31,709 21,142 17,562 Income before gains (losses) on investments and extraordinary item 29,737 19,118 11,286 8,141 3,578 Gains (losses) on investments 5,090 108 (89) (1,564)(b) 26 Impairment loss on real estate held for disposition (1,700)(b) - - - - Extraordinary item - early extinguishment of debt - (89) - (242) (35) Net income 33,127 (b) 19,137 11,197 6,335 (b) 3,569 Dividends to preferred shareholders 6,637 - - - - Net income available to common shareholders 26,490 (b) 19,137 11,197 6,335 (b) 3,569 Common distributions declared 48,610 37,539 27,988 23,271 15,872 Weighted average number of common shares outstanding (a) 52,781 46,182 38,202 34,604 24,642 Per Share: (a) Net income available to common shareholders $ 0.50 (b) $ 0.41 $ 0.29 $ 0.18 (b) $ 0.14 Common distributions declared 0.90 0.78 0.70 0.66 0.63 BALANCE SHEET DATA Real estate held for investment $1,131,098 $1,007,599 $ 582,213 $454,115 $361,503 Real estate held for disposition 51,015 - - - - Accumulated depreciation 129,454 120,341 91,444 71,806 56,074 Total assets 1,080,616 911,913 505,840 390,365 314,473 Mortgage notes payable 180,481 158,449 72,862 76,516 73,373 Notes payable 349,858 368,215 156,558 104,605 94,973 Shareholders' equity 516,389 356,968 259,963 197,677 136,152 Number of common shares outstanding (a) 56,375 50,356 41,653 35,285 27,133 OTHER DATA: CASH FLOW DATA Cash provided by operating activities 66,428 54,544 33,939 24,608 16,614 Cash used in investing activities (183,930) (359,631) (130,064) (81,373) (67,321) Cash provided by financing activities 113,145 306,575 100,793 56,777 50,815 FUNDS FROM OPERATIONS (C) Income before gains (losses) on investments and extraordinary items $ 29,737 $ 19,118 $ 11,286 $ 8,141 $ 3,578 Adjustments: Real estate depreciation 38,939 28,729 19,516 15,557 12,732 Non-recurring items: Adoption of SFAS No. 112 "Employers' Accounting for Postemployment Benefits" - 450 - - - Prior years' employment and other taxes (d) 395 Imputed interest expense - - - - 530 Dividends to preferred shareholders (6,637) - - - - ------ ------ ------ ------ ------ Funds from operations $ 62,434 $ 48,297 $ 30,802 $ 23,698 $ 16,840 ====== ====== ====== ====== ====== APARTMENTS HOMES OWNED Total apartment homes owned at December 31, 1995 34,224 29,282 17,914 13,832 10,924 Weighted average number of apartment homes owned during the year 31,242 23,160 15,445 11,387 9,491 </TABLE> (a) All share and per share information has been adjusted to give effect to a 2-for-1 stock split May, 1993. (b) Reflects a provision for possible investment losses of $1,564 ($0.4 per share) in 1992 and a $1,700 ($.03 per share) impairment loss on real estate held for disposition in 1995. (c) Funds from operations ("FFO") is defined as income before gains (losses) on investments and extraordinary items (computed in accordance with generally accepted accounting principals) plus real estate depreciation, less preferred dividends and after adjustment for significant non-recurring items, if any. This definition conforms to the recommendations set forth in a White Paper adopted by the National Association of Real Estate Investment Trusts ("NAREIT") in early 1995. FFO for years prior to 1995 have been adjusted to conform to the NAREIT definition. The Trust considers FFO in evaluating property acquisitions and its operationg performance and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the Trust's operating performance and liquidity. FFO does not represent cash generated from operating activities in accorance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. (d) Prior years payroll tax liability resulting from an Internal Revenue Service examination for the years 1993 and 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION FUNDS FROM OPERATIONS ("FFO") is defined as income before gains (losses) on investments and extraordinary items (computed in accordance with generally accepted accounting principles) plus real estate depreciation, less preferred dividends and after adjustment for significant non-recurring items, if any. The Company considers FFO in evaluating property acquisitions and its operating performance, and believes that FFO should be considered along with, but not as an alternative to, net income and cash flows as a measure of the Company's operating performance and liquidity. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. For 1995, the Company implemented a revised definition of FFO and has restated FFO for prior years to conform to the recommendations set forth in a White Paper adopted by NAREIT (The National Association of Real Estate Investment Trusts) at the beginning of the year. The impact of adopting the NAREIT recommendations was to reduce FFO for 1995, 1994 and 1993 by $1.1 million, $915,000 and $855,000, respectively. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 For 1995, the Company reported significant increases over 1994 in rental income, income from property operations, income before gains (losses) on investments and extraordinary items, net income and FFO. Net income available to common shareholders increased $7.4 million or $.09 per share over 1994. During 1994 and 1995, the Company acquired a total of 16,308 apartment homes in 67 communities, net of properties resold, representing a 91% expansion in the number of apartment homes owned during that period. These apartment homes (the "non-mature" communities) provided a substantial portion of the aggregate reported increases noted above. However, the improved performance of the Company's mature group of 17,916 apartment homes in the 74 communities acquired prior to 1994 (the "mature" communities) also contributed to the increases, particularly when considered on a per share basis. For 1995, the Company's mature communities provided approximately 53% of the Company's rental income and 52% of its net operating income (rental income less rental expenses). Total rental income from these apartment homes grew 5.0%, or $4.9 million in 1995, reflecting an increase in economic occupancy to 94.8% from 94.1% for 1994, and growth in average rents and other income of 4.4%. The improvement in occupancy reflected stronger apartment markets throughout the Company's region. Occupancy peaked in mid-1994 and remained above 95% through mid-1995 before trending downward slighty in the second half of the year. Rental expenses at these communities increased 2.6%, or $1.1 million, resulting in a decrease in the operating expense ratio (the ratio of rental expenses to rental income) of 1.0% to 42.9%. The increase in rental expenses reflected increased repairs, real estate taxes and exterior painting expenses. These increases were offset somewhat by lower gas, property management, and promotional expenses caused primarily by the combination of stronger occupancy and efficiencies of size. As a result of an Internal Revenue Service examination, property management expenses for the 1995 period include a $395,000 payment for employment and other taxes associated with employee occupied apartment homes for the 1993 and 1994 tax years. In 1995, the Company was able to internally manage its mature apartment communities at a cost of approximately 2.6% of rental income versus 3.4% in 1994. This reduction was achieved through economies of scale, as the Company acquired a significant number of apartment communities over the past two years without a corresponding increase in property management costs. Turnover (measured by move-outs) was 60% at the mature communities for 1995 versus 59% in 1994. The combination of increased occupancy, higher rents and only a moderate operating expense increase led to an increase in net operating income from mature communities of approximately $3.8 million or 6.9%. For the 16,308 apartments in the 67 non-mature communities, average occupancy was 93.1% and the operating expense ratio was 41.3% during 1995. These communities provided increases of $52.1 million, $21.6 million and $30.5 million, respectively, in rental income, rental expenses excluding depreciation expense, and net operating income. For the 34,224 apartment homes in the 141 communities owned on December 31, 1995, occupancy averaged 94.0% and the operating expense ratio was 42.2% for the full year 1995. For 1994, the 29,282 apartment homes then owned had occupancy of 93.7% and an expense ratio of 43.2% for that year. For 1995, rental income, rental expenses excluding depreciation expense, net operating income and real estate depreciation from commercial properties decreased $1.8 million, $370,000, $1.4 million and $741,000, respectively since 1994, primarily due to the sales of eight shopping centers over the past two years. For 1995, depreciation of real estate owned increased $10.2 million with substantially all of the increase attributable to the portfolio expansion that occured during 1994 and 1995. For 1995, interest expense increased approximately $12.1 million over 1994. The Company used both debt and equity to finance its growth over the past two years; however, the weighted average amount of debt employed was higher in 1995 than it was in 1994 ($512 million in 1995 versus $392 million in 1994). The $.15 per share increase in interest expense reflected this higher average amount of outstanding debt in 1995 together with an increase in the weighted average interest rate on this debt from 7.3% in 1994 to 7.9% in 1995. The rate increase reflected the Company's heavier reliance on lower rate short-term bank borrowings in 1994 than in 1995 ($33.8 million in 1994 versus $8.2 million in 1995). General and administrative expenses were relatively flat in 1995, increasing by only $62,000 over 1994. General and administrative expense for 1994 included a $450,000 charge related to the adoption of SFAS No. 112, "Employers' Accounting for Postemployment Benefits". In 1995, the Company incurred increases in most of its general and administrative expense categories with the largest percentage increase attributable to costs related to abandoned acquisitions, including $204,000 associated with an unsuccessful business combination with another apartment company. During 1995, the Company sold seven shopping centers and two apartment communities and recognized gains for financial reporting purposes totaling $5.1 million. Four of the shopping centers were sold to First Washington Realty Trust, Inc. on June 30, 1995. In connection with the sales, the Company received cash and 358,000 shares of First Washington's 9.75% Series A Cumulative Participating Convertible Preferred Stock having a fair value of $7.7 million on the date of sale. Five of the shopping center sales during the year were structured to qualify as tax deferred exchanges which enabled the Company to defer approximately $4.5 million of capital gains for income tax purposes. The Company also sold two apartment communities, both of which were acquired as part of the Clover Portfolio in 1994. No significant book gain or loss was recognized on the sale of either property. In March, 1995, the FASB issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the estimated undiscounted future cash flows are not sufficient to recover the assets carrying value. The statement requires that impairment losses be recognized for long-lived assets to be disposed of when the fair value of the asset, less the estimated cost to sell, is less than the carrying value of that asset measured at the time management commits to the sale or disposal. On October 1, 1995, the Company opted for the early adoption of Statement No. 121. At the end of October, 1995, the Company executed a letter of intent to sell five shopping centers in a bulk sale at an aggregate purchase price of $28.4 million. Closing is expected to occur in the first half of 1996. Based on a preliminary allocation of the sales price, the Company recognized a $1.7 million impairment loss associated with the disposition of one of these centers, Village Square, in Myrtle Beach, South Carolina. The other four centers are expected to be sold at modest gains. At December 31, 1995, an additional shopping center plus six apartment communities were under contracts or letters of intent to sell. These twelve properties are classified on the consolidated balance sheet as "Real estate held for disposition" in the amount of $51.0 million, net of accumulated depreciation and impairment loss valuation allowance. Real estate held for disposition contributed income from property operations of approximately $4.1 million for the year ended December 31, 1995. YEAR ENDED DECEMBER 31, 1994 For 1994, the Company reported significant increases over 1993 in rental income, income from property operations, income before gains (losses) on investments and extraordinary item, net income and funds from operations. During 1993 and 1994, the Company acquired 15,450 apartment units (63 apartment communities) representing a 112% expansion in the number of apartment homes owned during that two year period. These additional apartment homes provided a substantial portion of the reported increases noted above. However, the improved performance of the Company's mature group of 13,832 apartment homes (57 apartment communities) acquired prior to 1993 also contributed to the increases, particularly when considered on a per share basis. For 1994, the Company's mature apartment communities provided approximately 53% of the Company's rental income and 51% of its net operating income. Total rental income from these apartment homes grew 6.2%, or $4.3 million in 1994, reflecting an increase in economic occupancy to 94.3% compared to 91.6% for 1993, and growth in average rents and other income of 3.3%. The improvement in occupancy reflected stronger apartment markets throughout the Company's region. Rental expenses at these properties increased 2.3% resulting in a decrease in the operating expense ratio (the ratio of rental expenses to rental income) of 1.7% to 44.0%. The increase in rental expenses was moderated by lower advertising, rental promotions, electricity, and interior painting and cleaning expenses caused by the combination of stronger occupancy and lower tenant turnover. Turnover was 57% for 1994. The combination of increased occupancy, higher rents and only a moderate operating expense increase led to an increase in net operating income from these mature apartment homes of approximately $3.6 million or 9.5%. For the 15,450 apartments in the 63 apartment communities acquired by the Company since the beginning of 1993, average occupancy was 92.8% and the operating expense ratio was 43.1% during 1994. These communities provided increases of $46.2 million, $19.9 million and $26.3 million, respectively, in rental income, rental expenses excluding depreciation expense and net operating income. For the 29,282 apartment homes in the 120 communities owned on December 31, 1994, occupancy averaged 93.7% and the operating expense ratio was 43.6% for the full year 1994. For 1993, the 17,914 apartment homes then owned had occupancy of 91.5% and an expense ratio of 45.5% for that year. For 1994, rental income, rental expenses excluding depreciation expense and net operating income from commercial properties increased $351,000, $130,000 and $221,000, respectively. For 1994, depreciation of real estate owned increased $9.2 million with substantially all of the increase attributable to the portfolio expansion that occurred during 1993 and 1994. Interest expense increased approximately $11.4 million in 1994 over 1993. The Company used both debt and equity to finance its growth during the two year period; however, the Company used more debt relative to equity in 1994 than it did in 1993. The increase in interest expense of approximately $.17 per share also reflects the rising interest rate environment of 1994 when rates were generally higher than in 1993. General and administrative expenses increased by $1.5 million or 43% during 1994. In January, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits" and incurred a $450,000 charge to expense. In 1994, the Company incurred increases in most of its general and administrative expense categories. The largest percentage increase related to employee payroll and related employee overhead costs which resulted from the significant growth the Company experienced during 1994. LIQUIDITY AND CAPITAL RESOURCES As a qualified REIT, the Company distributes a substantial portion of its cash flow to its shareholders in the form of dividends. Over the past few years, the Company has reduced its payout ratio (the ratio of common dividends declared per share to FFO) from above 96% in 1992 to 76% for 1995. The Company presently intends to continue to reduce its payout ratio over the next few years to 70% or below, which allows for the retention of sufficient cash to cover normal operating needs, including routine replacements and to help fund additional acquisitions. For 1995, the Company's cash flow from operating activities exceeded cash distributions paid to common shareholders by approximately $20.7 million. The Company utilizes a variety of primarily external financing sources to fund portfolio growth, major capital improvement programs and balloon debt payments. The Company has frequently utilized its bank lines of credit to temporarily finance these expenditures and has subsequently replaced this short-term bank debt with longer term debt or equity. The Company has, from time to time, used derivative instruments to synthetically alter on-balance sheet liabilities or to hedge anticipated financing transactions. Derivative contracts did not have a material impact on results of operations during the three year period ended December 31, 1995. At the beginning of 1995, the Company had approximately $7.3 million of cash and cash equivalents and $89.4 million of available and unused bank lines of credit. For 1995, the Company's cash flow from operating activities increased $11.9 million over the same period last year, primarily as a result of the significant expansion of the Company's portfolio as discussed below and under "Results of Operations". During 1995, net cash used for investing activities was $183.9 million which resulted primarily from the Company's acquisition of 23 apartment communities containing 5,142 apartment homes and several parcels of undeveloped land for a total cost of $198.1 million, which includes $24.1 million of mortgage and bond indebtedness assumed in these transactions. The Company also funded $35.6 million of capital improvements to its properties during the year. This includes $10.5 million of improvements at the Company's 17,916 mature apartment homes. Excluding 11 communities that were acquired in the latter part of 1993 and which still were undergoing rehabilitation in 1995, the remaining 15,220 mature apartment homes averaged $424 in capital expenditures. This includes the following: carpet and tile replacements ($141/unit), appliances ($48/unit), HVAC equipment ($33/unit), various interior improvements ($50/unit), various exterior improvements including new roofs ($89/unit), various land improvements including parking lots and site lighting ($31/unit) and various other improvements ($32/unit). The Company also received net cash proceeds of $23.5 million from the sale of real estate owned during 1995 and payments aggregating $2.2 million on mortgage notes receivable. Net cash provided by financing activities during 1995 was approximately $113.1 million reflecting (i) the sale of common and preferred stock during the year netting approximately $181.1 million, (ii) net proceeds from the issuance of mortgage notes payable and notes payable of approximately $31.3 million, (iii) net short-term bank borrowings of $4.25 million and (iv) mortgage financing proceeds released from construction funds of $2.5 million. These cash inflows were partially offset by (i) $50.4 million of cash distributions paid to common and preferred shareholders, (ii) scheduled mortgage principal payments of $1.9 million, and (iii) payments on notes and non-scheduled mortgage principal payments of $53.7 million. In February, 1995 the Company sold 1,360,000 shares of its common stock to a group of institutional investors at a price of $131/8 per share. Net proceeds of $17.8 million were used to curtail then outstanding bank debt. In April, 1995, the Company sold 4,200,000 shares of 91/4% Cumulative Redeemable Preferred Stock ($25 per share liquidation preference value). Net proceeds of the offering after deducting underwriting commissions and direct offering costs aggregated approximately $101.5 million, of which approximately $33.1 million was used to repay then outstanding bank debt and approximately $65.7 million was used to acquire a portfolio of nine apartment communities. The remaining net proceeds were temporarily invested in short-term money market instruments and were subsequently used to fund additional apartment acquisitions. In September and October, 1995, the Company sold an aggregate of 4,550,000 shares of common stock in a public offering at $14.25 per share. Net proceeds of the offering, after deducting underwriting commissions and direct offering costs, aggregated approximately $61 million. Proceeds from the offering were used to repay $26.8 million of then existing bank debt. The remaining proceeds were temporarily invested in short-term money market instruments and subsequently used to purchase additional apartment communities. Also during 1995, the Company completed new tax-exempt multifamily housing bond financings or assumed such bond financings and conventional mortgage notes in connection with certain acquisitions in the aggregate amount of approximately $45.4 million. The Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Company expects to acquire 5,000 to 7,000 apartment homes during 1996 at an estimated cost of $35,000 to $40,000 per apartment home. While the Company used primarily equity, both preferred and common, to fund its acquisition program during 1995, it anticipates that it will use a combination of equity, debt and proceeds from property sales to fund its 1996 acquisitions. During the first half of 1996 the Company plans to implement a medium-term note program which is expected to include an initial $50 million 7-10 year issue. In November, 1995, the Company entered into a treasury rate lock transaction which had the effect of fixing a 10-year Treasury rate beginning March 1, 1996 at 5.946%. This agreement was terminated on February 20, 1996 at no gain or loss to the Company. The Company anticipates a second medium-term note issue around mid-July, 1996 in the amount of $50 million, primarily to repay a then maturing $35 million senior note issue. In July, 1995, the Company executed a forward starting interest rate swap with a notional amount of $50 million which had the effect of fixing the interest rate on a 10-year Treasury starting July 15, 1996 at 6.544%. Including the $35 million loan, the Company has aggregate debt maturities of $47 million in 1996. The maturing debt has a weighted average interest rate of 9.26%. When this hedge transaction was executed, it was intended to fix a rate on 7-10 year debt at approximately 7.5% which is approximately 170 basis points lower than the weighted average interest rate on the maturing debt to be refinanced. At December 31, 1995, the Company had an aggregate unrealized loss on these derivative instruments of approximately $4 million, which includes $1.4 million relating to the rate lock agreement terminated on February 20, 1996 at no gain or loss. The Company currently has six shopping centers and six apartment communities under contracts or letters of intent to sell. These sales are scheduled to occur during the first half of 1996 and will generate approximately $63 million of cash proceeds. Three of these properties are encumbered with an aggregate amount of approximately $7.9 million of secured debt. If all twelve sales occur, the Company will recognize an aggregate gain of approximately $8.5 million for financial reporting purposes. For income tax purposes, several of the sales are expected to be structured as tax deferred exchanges. The proceeds from these property dispositions will be used to purchase apartment communities. There are no assurances that any of these sales transactions will be consummated. Depending upon the volume and timing of acquisition activity, the Company anticipates raising equity capital during the middle of the year through both a public offering and private placements. The Company's liquidity and capital resources are believed to be more than adequate to meet its cash requirements for the next several years. The Company expects to meet its long-term liquidity requirements, such as balloon debt maturities, property acquisitions and significant capital improvements primarily through the issuance of capital stock and the issuance of long-term unsecured notes payable. The Company will also rely upon (i) the assumption of mortgage indebtedness, (ii) property sales, (iii) distributions reinvested and cash reinvested through the Company's Dividend Reinvestment and Stock Purchase Plan and (iv) retained cash flow to meet its cash requirements. INFLATION Management believes that the direct effects of inflation on the Company's operations have been inconsequential.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Consolidated Financial Statements and Schedule on page F-1 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on May 7, 1996. Information required by this item regarding the executive officers of the Company is included in Part I of this Annual Report on Form 10-K in the section entitled "Executive Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on May 7, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on May 7, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference from the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Shareholders to be held on May 7, 1996.
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1&2) See Index to Consolidated Financial Statements and Schedule on page F-1 of this Annual Report on Form 10-K. (3) Exhibits . The exhibits listed below are filed as part of this annual report. References under the caption "Location" to exhibits, forms, or other filings indicate that the form or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. Exhibit Description Location 3(a)(i) Restated Articles of Exhibit 3 to the Incorporation Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992. 3(a)(ii) Amendment of Restated Articles Exhibit 6(a)(2) to the of Incorporation Company's Form 8-A Registration Statement dated April 19, 1990. 3(a)(iii) Amendment and Restated Articles Exhibit 1 (c) to the of Incorporation Company's Form 8-A Registration Statement dated April 24, 1995. 3(b)(i) By-Laws Exhibit 4(c) to the Company's Form S-3 Registration Statememt (Registration No. 33-44743) filed with the Commission on December 31, 1991. 3(b)(ii) Amendment of By-Laws Filed herewith. 4(i)(a) Specimen Common Stock Exhibit 4(i) to the Certificate Company's Annual Report on Form 10-K for the year ended December 31, 1993. 4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the of 9 1/4% Series A Cumulative Company's Form 8-A Redeemable Preferred Stock Registration Statement dated April 24, 1995. 4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(i) to the November 7, 1991, between the Company's Form 8-A Company and Aid Association for Registration Statement Lutherans dated April 19, 1990. 4(ii)(c) Note Purchase Agreement dated Exhibit 6(c)(3) to the as of February 19, 1992, between Company's Form 8-A the Company and Principal Mutual Registration Statement Life Insurance Company dated April 19, 1990. 4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the as of February 15, 1993, between Company's Form 8-A the Company and CIGNA Property Registration Statement and Casualty Insurance Company, dated April 19, 1990. Connecticut General Life Insurance Company, Connecticut General Life Insurance Company, on behalf of one or more separate accounts, Insurance Company of North America, Principal Mutual Life Insurance Company and Aid Association for Lutherans 4(ii)(f) Credit Agreement dated as of Exhibit 6 (c)(6) to the December 15, 1994 between the Company's Form 8-A Company and First Union National Registration Statement Bank of Virginia dated April 19, 1990. 4(ii)(g)(1) Indenture dated as of April 1, Exhibit 4(ii)(f)(1) to 1994, between the Company and the Company's Quarterly NationsBank of Virginia, N.A., Report on Form 10-Q for as Trustee the quarter ended March 31, 1994. 4(ii)(g)(2) Resolution of the Board of Exhibit 4(ii)(f)(2) to Directors of the Company the Company's Quarterly establishing terms of 7 1/4% Report on Form 10-Q for Notes due April 1, 1999 the quarter ended March 13, 1994. 4(ii)(g)(3) Form of 7 1/4% Notes due Exhibit 4(ii)(f)(3) to the April 1, 1999 Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. 4(ii)(g)(4) Resolution of the Board of Exhibit 4 (ii)(f)(4) to the the Company establishing terms Company's Quarterly Report of the 8 1/2% Debentures due on Form 10-Q for quarter September 15, 2024 ended September 30, 1994. 4(ii)(g)(5) Form of 8 1/2% Debentures Exhibit 4 (ii)(f)(5) to the due September 15, 2024 Company's Quarterly Report on Form 10-Q for the quarter ended Septem- ber 30, 1994. The Company agrees to furnish to the Commission on request a copy of any instrument with respect to long-term debt of the Company or its subsidiaries the total amount of securities authorized under which does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. 10(i) Employment Agreement between Exhibit 10(v)(i) to the the Company and John P. McCann Company's Annual report on dated October 29, 1982 Form 10-K for the year ended December 31, 1982. 10(ii) Employment Agreement between Exhibit 10(v)(ii) to the the Company and James Dolphin Company's Annual Report on dated October 29, 1982. Form 10-K for the year ended December 31, 1982. 10(iii) Employment Agreement between Exhibit 10(iii) to the The Company and Barry M. Company's Annual Report on Kornblau, dated Form 10-K for the year February 1, 1991. December 31, 1990. 10(iv) 1985 Stock Option Plan, Exhibit B to the Company's as amended definitive proxy statement dated April 13, 1992. 10(v) 1991 Stock Purchase and Loan Exhibit 10(v) to the Plan Company's Annual Report on Form 10-K for the year ended December 31, 1991. 10(vi) Amended and Restated Agreement Filed herewith. Of Limited Partnership of United Dominion Realty, L.P. Dated as of December 31, 1995 12 Computation of Ratio of Earnings Filed herewith. to Fixed Charges 21 The Company has the following subsidiaries, all of which are wholly owned: The Commons of Columbia, a Virginia corporation UDRT of North Carolina, L.L.C., a North Carolina limited liability company UDRT of Alabama, Inc., an Alabama corporation UDR of Marble Hill, L.L.C., a Virginia limited liability company United Dominion Realty, L.P., a Virginia limited partnership United Dominion Residential, Inc., a Virginia corporation UDRT of Virginia, Inc., a Virginia corporation 23 Consent of Independent Auditors Filed herewith. Exhibits 10(i) through 10(v) inclusive, are management contracts or compenatory plans or arrangements required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report. (b) Reports on Form 8-K (i) A Form 8-K dated December 28, 1995 was filed with the Securities and Exchange Commission on January 11, 1996 and amended by a Form 8-K/A dated March 11, 1996. The filing reported the acquisition of certain properties which in the aggregate were deemed to be significant. The financial statements filed as a part of this report are statements of rental operations of Andover Place Apartments, Mallards of Wedgewood Apartments, Hunters Ridge Apartments and Marble Hill Apartments.
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. United Dominion Realty Company, Inc. (registrant) By /s/ James Dolphin James Dolphin Senior Vice President and Chief Financial Officer March 29, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 29, 1996 by the following persons on behalf of the registrant and in the capacities indicated. /s/ John P. McCann /s/ R. Toms Dalton, Jr. John P. McCann R. Toms Dalton, Jr. Director, President and Chief Director Executive Officer /s/ James Dolphin /s/ Jeff C. Bane James Dolphin Jeff C. Bane Director, Senior Vice President, Director Secretary and Chief Financial Officer /s/ Jerry A. Davis Jerry A. Davis John C. Lanford Vice President, Controller-Corporate Director Accounting and Chief Accounting Officer /s/ C. Harmon Williams, Jr. /s/ H. Franklin Minor C. Harmon Williams, Jr. H. Franklin Minor Chairman of the Board of Directors Director /s/ Barry M. Kornblau /s/ Robert P. Buford Barry M. Kornblau Robert P. Buford Director, Senior Vice President and Director Director of Apartments
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE UNITED DOMINION REALTY TRUST, INC. Page FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT Report of Ernst & Young LLP, Independent Auditors F-2 Consolidated Balance Sheets at December 31, 1995 and 1994 F-3 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1995 F-4 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1995 F-5 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 F-6 Notes to Consolidated Financial Statements F-7 SCHEDULE FILED AS PART OF THIS REPORT Schedule III - Summary of Real Estate Owned F-18 All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.
Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Shareholders United Dominion Realty Trust, Inc. We have audited the accompanying consolidated balance sheets of United Dominion Realty Trust, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Dominion Realty Trust, Inc. and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 1995 the Company changed its method of accounting for impairment of long-lived assets and long-lived assets held for disposition. /s/ ERNST & YOUNG LLP Richmond, Virginia January 25, 1996 UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA) <TABLE> <CAPTION> December 31, 1995 1994 - - ------------ ---- ---- <S> <C> <C> ASSETS Real estate held for investment (Notes 2 and 3): Apartments $1,123,849 $ 928,758 Shopping centers 2,934 74,237 Office and industrial buildings 4,315 4,604 ------------ ---------- 1,131,098 1,007,599 Less accumulated depreciation 129,454 120,341 ------------ ---------- 1,001,644 887,258 Real estate held for disposition (Notes 1 and 2) 51,015 -- Cash and cash equivalents 2,904 7,261 Other assets 25,053 17,394 ---------- --------- $1,080,616 $ 911,913 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage notes payable (Note 4) $ 180,481 $ 158,449 7 1/4% Notes due April 1, 1999 (Note 5) 75,000 75,000 8 1/2% Debentures due September 15, 2024 (Note 5) 150,000 150,000 Other notes payable (Note 5) 124,858 143,215 Accounts payable, accrued expenses and other liabilities 21,193 18,459 Distributions payable to common shareholders 12,695 9,822 ---------- ----------- 564,227 554,945 Shareholders' equity (Notes 9 and 10): Preferred stock, no par value; 25,000,000 shares authorized: 9 1/4% Series A Cumulative Redeemable Preferred Stock (liquidation preference of $25 per share), 4,200,000 shares issued and outstanding (no shares outstanding in 1994) 105,000 -- Common stock, $1 par value; 100,000,000 shares authorized 56,375,333 shares issued and outstanding (50,355,640 in 1994) 56,375 50,356 Additional paid-in capital 480,971 410,797 Notes receivable from officer shareholders (6,091) (5,991) Distributions in excess of net income (120,314) (98,194) Unrealized gain on securities available-for-sale 448 -- ------------ ----------- Total shareholders' equity 516,389 356,968 ------------ ----------- $1,080,616 $ 911,913 ============ =========== </TABLE> See accompanying notes.
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA) <TABLE> <CAPTION> Years ended December 31, 1995 1994 1993 - - ------------------------ ---- ---- ---- <S> <C> <C> Income Property operations: Rental income $195,240 $139,972 $ 89,084 Property expenses: Utilities 14,464 11,206 7,838 Repairs and maintenance 30,374 21,216 13,950 Real estate taxes 14,058 9,658 5,777 Property management 5,300 4,645 2,782 Other operating expenses 17,446 12,141 7,512 Depreciation of real estate owned 38,939 28,729 19,516 --------- -------- -------- 120,581 87,595 57,375 --------- -------- -------- Income from property operations 74,659 52,377 31,709 Interest and other income 1,692 756 708 ---------- --------- --------- 76,351 53,133 32,417 Expenses Interest 40,646 28,521 17,237 General and administrative 4,865 4,803 3,349 Other depreciation and amortization 1,103 691 545 ---------- --------- --------- 46,614 34,015 21,131 --------- -------- -------- Income before gains (losses) on investments and extraordinary item 29,737 19,118 11,286 Gains (losses) on sales of real estate 5,090 108 (89) Impairment loss on real estate held for disposition (Note 2) (1,700) -- -- --------- --------- --------- Income before extraordinary item 33,127 19,226 11,197 Extraordinary item--early extinguishment of debt -- (89) -- --------- ---------- --------- Net income 33,127 19,137 11,197 Dividends to preferred shareholders 6,637 -- -- --------- ---------- --------- Net income available to common shareholders $ 26,490 $ 19,137 $ 11,197 ======== ======== ======== Net income per common share $ .50 $ .41 $ .29 ========= ========= ======== Weighted average number of common shares outstanding 52,781 46,182 38,202 </TABLE> See accompanying notes.
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (In thousands, except share and per share amounts) <TABLE> <CAPTION> Common Stock, $1 Par Value Preferred Stock ---------------------------- -------------------- Additional Number Number Paid-in of Shares Amount of Shares Amount Capital ---------------- --------- -------------------------------- - <S> <C> <C> <C> <C> <C> Balance at December 31, 1992 35,284,718 $35,285 - $ - $227,935 - - Common shares issued in public offering 6,095,000 6,095 - - 71,573 Exercise of common share options 98,900 99 - - 741 Common shares purchased by officers, net of repayments 135,500 135 - - 1,712 Common shares issued through Employee Stock Purchase Plan 38,979 39 - - 525 Common stock dividends declared ($.70 per share) - - - - - Net income - - - - - ---------------- --------- ----------- ---------- ----------- Balance at December 31, 1993 41,653,097 41,653 302,486 Common shares issued in public offering 8,479,400 8,479 - - 105,731 Exercise of common share options 50,488 51 - - 456 Common shares purchased by officers, net of repayments 137,500 138 - - 1,652 Common shares issued through Employee Stock Purchase Plan 35,155 35 - - 472 Common stock dividends declared ($.78 per share) - - - - - Net income - - - - - ---------------- --------- ----------- ---------- ----------- Balance at December 31, 1994 50,355,640 50,356 - 410,797 Common shares issued in direct institutioanl sale 1,360,000 1,360 - 16,452 Preferred shares issued in public offering - - 4,200,000 105,000 (3,522) Common shares issued in public offering 4,550,000 4,550 - - 56,376 Exercise of common share options 98,536 98 - - 717 Common shares purchased by officers, net of repayments 10,000 10 - - 136 Common shares issued through Employee Stock Purchase Plan 1,157 1 - - 15 Preferred stock dividends declared (1.58 per share) - - - - - Common stock dividends declared ($.90 per share) - - - - - Unrealized gain on securities available for sale at December 31, 1995 - - - - - Net income - - - - - ================ ========= =========== =========== ======== Balance at December 31, 1995 56,375,333 $56,375 4,200,000 $105,000 $480,971 ================ ========= =========== =========== ======== </TABLE> <TABLE> <CAPTION> Unrealized Receivable Distributions Gain on from in Excess Securities Total Officer of Available Shareholders' Shareholders Net Income for Sale Equity ----------------------------------------------------- <S> <C> <C> <C> <C> Balance at December 31, 1992 ($2,542) ($63,001) $ - $197,677 - - - Common shares issued in public offering - - - 77,668 Exercise of common share options - - - 840 Common shares purchased by officers, net of repayments (1,842) - - 5 Common shares issued through dividend reinvestment and stock purchase plan - - - 564 Common stock dividends declared ($.70 per share) - (27,988) - (27,988) Net income - 11,197 - 11,197 --------- ------------ ------------ ------------- Balance at December 31, 1993 (4,384) (79,792) 259,963 Common shares issued in public offering - - - 114,210 Exercise of common share options - - - 507 Common shares purchased by officers, net of repayments (1,607) - - 183 Common shares issued through dividend reinvestment and stock purchase plan - - - 507 Common stock dividends declared ($.78 per share) - (37,539) - (37,539) Net income - 19,137 - 19,137 --------- ------------ ------------ ------------- Balance at December 31, 1994 (5,991) (98,194) 356,968 Common shares issued in direct institutional sale - - - 17,812 Preferred shares issued in public offering - - - 101,478 Common shares issued in public offering - - - 60,926 Exercise of common share options - - - 815 Common shares purchased by officers, net of repayments (100) - - 46 Common shares issued through Employee Stock Purchase Plan - - - 16 Preferred stock dividends declared ($1.58 per share) - (6,637) - (6,637) Common stock dividends declared ($.90 per share) - (48,610) - (48,610) Unrealized gain on securities available for sale at December 31, 1995 - - 448 448 Net income - 33,127 - 33,127 ========== ============ ============ ============= Balance at December 31, 1995 ($6,091) ($120,314) $448 $516,389 ========== ============ ============ ============= </TABLE> See accompanying notes.
UNITED DOMINION REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) <TABLE> <CAPTION> Years ended December 31, 1995 1994 1993 - - ------------------------ ---- ---- ---- <S> <C> <C> <C> OPERATING ACTIVITIES Net income $33,127 $19,137 $11,197 Adjustments to reconcile net income to net cash provided by operating activities: (Gains) losses on sales of real estate owned (5,090) (108) 89 Impairment loss on real estate held for disposition 1,700 -- -- Extraordinary item -- 89 -- Depreciation and amortization 40,042 29,644 20,372 Adoption of SFAS No. 112 "Employers' Accounting for Postemployment Benefits" -- 450 -- Changes in operating assets and liabilities: Increase in operating liabilities 763 6,680 2,724 Decrease in operating assets (4,114) (1,348) (443) -------- -------- -------- Net cash provided by operating activities 66,428 54,544 33,939 INVESTING ACTIVITIES Acquisitions of real estate, net of debt and liabilities assumed (173,937) (346,730) (117,197) Capital expenditures (35,613) (19,154) (11,060) Net proceeds from sales of real estate owned 23,464 2,706 69 Proceeds from gain on interest rate hedge transaction -- 3,484 -- Net (increase) decrease in mortgage notes receivable 2,156 63 (1,907) Other -- -- 31 ------- ------- ------- Net cash used in investing activities (183,930) (359,631) (130,064) FINANCING ACTIVITIES Net proceeds from issuance of common stock 79,615 115,407 79,077 Net proceeds from issuance of preferred stock 101,478 -- -- Net proceeds from issuance of mortgage notes payable 21,349 12,006 13,800 Net proceeds from issuance of notes payable 10,000 250,000 52,000 Net borrowings (repayments) of short-term bank borrowings 4,250 (14,500) 150 Mortgage financing proceeds released from construction funds 2,457 24,866 -- Cash distributions paid to preferred shareholders (4,613) -- -- Cash distributions paid to common shareholders (45,737) (35,005) (26,523) Scheduled mortgage principal payments (1,932) (1,455) (806) Payments on notes and non-scheduled mortgage principal payments (53,722) (44,744) (16,905) -------- -------- -------- Net cash provided by financing activities 113,145 306,575 100,793 Net increase in cash and cash equivalents (4,357) 1,488 4,668 Cash and cash equivalents, beginning of year 7,261 5,773 1,105 -------- -------- -------- Cash and cash equivalents, end of year $ 2,904 $ 7,261 $ 5,773 ======== ======== ======== </TABLE> See accompanying notes. UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION United Dominion Realty Trust, Inc. (the "Company"), a Virginia corporation, is an owner-operator of income producing real estate, primarily multifamily apartment communities in the mid-Atlantic and Southeastern, U.S. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FEDERAL INCOME TAXES The Company is operated as and annually elects to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). Generally, a real estate investment trust, which complies with the provisions of the Code and distributes at least 95% of its taxable income to its shareholders, does not pay federal income taxes on its distributed income. Accordingly, no provision has been made for federal income taxes. CASH AND CASH EQUIVALENTS All highly liquid investments with maturities of three months or less, when purchased, are considered to be cash equivalents. REAL ESTATE ASSETS AND DEPRECIATION On October 1, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The statement requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows are not sufficient to recover the assets, carrying value. If such indicators are present, an impairment loss is recognized based on the excess of the carrying amount of the impaired asset over its fair value. For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset, less the estimated cost to sell, is less than the carrying value of the asset measured at the time management commits to a plan to dispose of the asset. Assets are classified as assets to be disposed of when management has committed to sell and is actively marketing the property. Assets to be disposed of are carried at the lower of carrying value or fair value less cost to dispose, determined on an asset by asset basis. Depreciation is not recorded during the period in which assets are held for disposal and gains(losses) from initial and subsequent adjustments to the carrying value of the assets, if any, are recorded as a separate component of income from continuing operations. Real estate assets held for disposition are reported separately on the consolidated balance sheet, net of accumulated depreciation and impairment loss valuation allowance. Ordinary repairs and maintenance costs are expensed as incurred; significant improvements, renovations, and replacements are capitalized and depreciated over their estimated useful lives. Certain costs, principally payroll, directly related to real estate acquisitions and redevelopment, are capitalized. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which range from 25 to 40 years for properties, 10 to 35 years for major improvements, and 3 to 15 years for fixtures, equipment and other assets. INTEREST Interest is capitalized on accumulated expenditures relating to the acquisition and development of certain qualifying properties. During 1995, 1994 and 1993, total interest paid was $39,568,000, $22,944,000 and $14,649,000, respectively, which includes $40,000 that was capitalized during 1995. No interest was capitalized in 1994 or 1993. DEFERRED FINANCING COSTS Deferred financing costs are generally amortized over a period not to exceed the term of the related debt. Amortization of deferred financing costs is classified as interest expense and included in the consolidated statements of operations in the amounts of $1,078,000, $1,180,000 and $707,000 for 1995, 1994 and 1993, respectively.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INTEREST RATE SWAP AGREEMENTS The Company enters into interest rate swap agreements to alter the interest rate characteristics of outstanding debt instruments. The interest rate swap agreements involve the periodic exchange of interest payments over the life of the agreements. Amounts received or paid on the interest rate swap agreements that are used to alter the interest rate characteristics of outstanding debt are recorded on an accrual basis as an adjustment to the related interest expense of the outstanding debt. The related amount payable to and receivable from counterparties are included in other liabilities. Changes in the fair value of the interest rate swap agreements accounted for under the accrual method are not reflected in the accompanying financial statements. INTEREST RATE RISK MANAGEMENT AGREEMENTS The Company enters into interest rate risk management agreements to manage interest rate risk associated with anticipated debt transactions. The Company follows SFAS No.80 "Accounting for Futures Contracts" which permits hedge accounting for anticipatory transactions meeting certain criteria. Gains and losses, if any, on these transactions are deferred and amortized over the terms of the related debt as an adjustment to interest expense. Changes in the fair values of interest rate risk management agreements are not recognized in the financial statements. In the event that the anticipated transaction is no longer likely to occur, the Company would mark the derivative to market and would recognize any adjustment in the consolidated statement of operations. The Company does not enter into interest rate risk management agreements for trading purposes. INCOME PER COMMON SHARE Primary net income per common share is calculated using the weighted average number of shares outstanding during each year. Options outstanding are not included since their inclusion would not be materially dilutive. INVESTMENT IN MARKETABLE EQUITY SECURITIES In connection with certain property sales during 1995, the Company received marketable preferred stock with a fair value of $7.7 million on the date of receipt. These securities are classified as available-for-sale and are included in other assets. Securities available-for-sale are stated at fair value. Unrealized gains and losses are reported as a separate component of shareholders' equity and are not reported in the consolidated statement of operations until realized or until a decline in fair value is deemed to be other-than-temporary. POSTEMPLOYMENT BENEFITS Effective January 1, 1994, the Company adopted the provisions of SFAS No. 112, "Employers' Accounting for Postemployment Benefits". This statement requires the accrual of the estimated cost of benefits provided by an employer to its former or inactive employees after employment, but before retirement. Adoption of SFAS No. 112 increased 1994 general and administrative expense by $450,000 or $.01 per share. RECLASSIFICATIONS Certain previously reported amounts have been reclassified to conform with the current financial statement presentation. STOCK BASED COMPENSATION In October, 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation" which is effective for the Company's December 31, 1996 financial statements. SFAS No. 123 allows companies to either account for stock-based compensation under the new provisions of SFAS No. 123 or under the provisions of APB Opinion No. 25, but requires pro forma disclosure in the footnotes and financial statements as if the measurement provisions of SFAS No. 123 had been adopted. The Company intends to continue accounting for its stock-based compensation in accordance with the provisions of APB No. 25. As such, the adoption of SFAS No. 123 will not impact the financial position or the results of operations of the Company.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. REAL ESTATE OWNED The Company operates primarily in 15 separate major markets dispersed throughout a nine state area. At December 31, 1995, the Company did not own more than 11% of its apartment homes in any one market. The following summarizes real estate held for investment at December 31, 1995 and 1994: <TABLE> <CAPTION> Dollars in thousands 1995 1994 ---- ---- <S> <C> <C> Land and land improvements $ 193,672 $ 174,536 Buildings and improvements 864,331 773,015 Furniture, fixtures and equipment 72,576 59,552 Construction in progress 519 496 ----------- ----------- Real estate held for investment 1,131,098 1,007,599 Accumulated depreciation (129,454) (120,341) ---------- ---------- Real estate held for investment, net $ 1,001,644 $ 887,258 ========== ========== </TABLE> The following is a summary of real estate owned at December 31, 1995: <TABLE> <CAPTION> Initial Dollars in thousands Number of Acquisition Carrying Accumulated REAL ESTATE HELD FOR INVESTMENT Properties Cost Value* Depreciation Encumbrances ---------- ----------- -------- ------------ ------------ <S> <C> <C> <C> <C> <C> APARTMENTS North Carolina 27 $180,491 $ 214,776 $ 37,187 $ 19,093 Florida 26 247,582 264,869 12,269 44,962 Virginia 28 175,432 208,924 44,865 28,844 South Carolina 20 121,089 144,653 14,558 25,306 Georgia 8 68,338 77,079 8,750 12,435 Maryland 12 99,906 105,199 5,093 30,800 Tennessee 9 71,481 76,700 3,193 11,114 Alabama 2 12,742 12,411 637 -- Delaware 3 18,684 19,239 652 -- COMMERCIAL Tennessee 1 1,176 2,438 716 -- Virginia 4 4,288 4,810 1,534 -- ---- ----------- ---------- -------- -------- 140 $1,001,209 $1,131,098 $129,454 $172,554 ==== =========== ========== ======== ======== REAL ESTATE HELD FOR DISPOSITION APARTMENTS North Carolina 3 $ 11,906 $ 17,254 $ 7,268 $ 3,231 Virginia 2 4,014 5,806 2,504 1,246 Georgia 1 4,526 7,914 2,319 -- COMMERCIAL Virginia 5 11,766 21,541 6,556 3,450 South Carolina 2 12,566 13,396 2,787 -- North Carolina 1 5,169 8,676 2,138 -- ---- --------- --------- --------- --------- 14 $ 49,947 $ 74,587 $ 23,572 $ 7,927 ==== ========= ========= ========= ========= </TABLE> * Real estate held for disposition is stated at the lower of carrying value or fair value, less cost to sell.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Real estate held for disposition includes two parcels of land, six shopping centers and six smaller apartment communities which contributed income from property operations in the aggregate amount of approximately $4.1 million for the year ended December 31, 1995. The sales of real estate held for disposition are expected to occur during the first half of 1996, however, there are no assurances that these sales will be consummated. Subsequent to its adoption of SFAS No. 121, the Company recorded a $1.7 million impairment loss associated with management's decision to sell a shopping center at a discount as part of a portfolio transaction. The following is a reconciliation of the carrying amount of real estate held for investment: <TABLE> <CAPTION> In thousands 1995 1994 1993 - - ------------ ---- ---- ---- <S> <C> <C> <C> Balance at January 1 $ 1,007,599 $ 582,213 $ 454,115 Real estate purchased* 198,136 409,280 118,265 Improvements 35,682 18,857 10,380 Real estate sold (34,031) (2,751) (547) Transferred to real estate held for disposition (76,288) -- -- ---------- ----------- --------- Balance at December 31 $ 1,131,098 $ 1,007,599 $ 582,213 ========== ========== ======== </TABLE> *In connection with the acquisition of certain apartment properties in 1995 and 1994, the Company assumed approximately $24.1 and $60.3 million, respectively, of mortgage debt encumbering the properties acquired. The following is a reconciliation of accumulated depreciation: <TABLE> <CAPTION> In thousands 1995 1994 1993 - - ------------ ---- ---- ---- <S> <C> <C> <C> Balance at January 1 $ 120,341 $ 91,444 $ 71,806 Depreciation expense for the year* 39,442 29,049 19,764 Transferred to real estate held for disposition (23,572) -- -- Real estate sold (6,757) (152) (126) --------- ---------- -------- Balance at December 31 $ 129,454 $ 120,341 $ 91,444 ======== ======== ======= </TABLE> *Depreciation expense of $503, $320 and $248, for 1995, 1994 and 1993, respectively, is included in "Other depreciation and amortization" in the consolidated statements of operations. The Company's properties are leased to others under operating leases. Certain shopping center leases provide that tenants share certain operating costs such as real estate taxes, insurance and maintenance by reimbursement to the Company. Such reimbursements amounted to $887,000 in 1995, $1,070,000 in 1994 and $936,000 in 1993. The Company has no material net lease arrangements. The aggregate cost of real estate owned for federal income tax purposes was approximately $1.192 billion at December 31, 1995 and $987 million at December 31, 1994. 3. ACQUISITIONS During 1995, the Company acquired 23 apartment communities containing 5,142 apartment homes at a total cost of $195.0 million. During 1994, the Company acquired 47 apartment communities containing 11,433 apartment homes at a total cost of $409.3 million. Information concerning unaudited pro forma results of operations for the years ended December 31, 1995 and 1994 is set forth below. For 1995, such information assumes the acquisition of 13 apartment communities containing 2,417 apartment homes at a total cost of $98.6 million, as if the acquisitions had occurred on January 1, 1995. For 1994, such pro forma information assumes (i) the acquisition of 41 apartment communities containing 9,749 homes at a total cost of $350.3 million, and (ii) the 1995 acquisitions of 13 apartment communities containing 2,417 apartment homes at a total cost of $98.6 million, as if the acquisitions had occurred on January 1, 1994.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <CAPTION> Pro Forma Pro Forma In thousands, except per share amounts 1995 1994 - - -------------------------------------- ---- ---- <S> <C> <C> Rental income $202,804 $183,836 Net income available to common shareholders 26,299 18,904 Net income per common share $ .50 $ .38 </TABLE The unaudited information is not necessarily indicative of what the Company's consolidated results of operations would have been if the acquisitions had occurred at the beginning of each period presented. Additionally, the pro forma information does not purport to be indicative of the Company's results of operations for future periods. 4. MORTGAGE NOTES PAYABLE Mortgage notes payable consisted of the following at December 31, 1995 and 1994: </TABLE> <TABLE> <CAPTION> In thousands 1995 1994 - - ------------ ---- ---- <S> <C> <C> Conventional fixed-rate $ 56,368 $ 53,206 Tax-exempt fixed-rate 112,843 93,053 Total fixed-rate 169,211 146,259 --------- --------- Tax-exempt variable-rate 11,270 12,190 --------- --------- $ 180,481 $ 158,449 ======== ======== </TABLE> CONVENTIONAL FIXED-RATE MORTGAGE NOTES Conventional fixed-rate mortgage notes included 19 loans encumbering 13 properties at December 31, 1995 and 22 loans encumbering 17 properties at December 31, 1994. Mortgage notes are generally due in monthly installments of principal and interest and mature at various dates through 2020. At December 31, 1995 and 1994, this debt carried fixed rates of interest ranging from 7.00% to 9.625% (8.2% weighted average) and 7.00% to 12.50% (8.5% weighted average), respectively. During 1995, the Company prepaid five mortgage loans aggregating $10.3 million having a weighted average interest rate of 10.1%. TAX-EXEMPT MORTGAGE NOTES At December 31, 1995, 17 properties were encumbered by fixed-rate mortgage notes which secure related tax-exempt housing bond issues. Interest on these notes is generally payable in semi-annual installments and the notes mature at various dates through 2025. At December 31, 1995 and 1994, tax-exempt fixed-rate mortgage notes had interest rates ranging from 5.98% to 8.50% (weighted average 6.9%), and 5.91% to 10.235% (weighted average 7.2%), respectively. At December 31, 1995, three of the Company's properties were encumbered by variable-rate mortgage notes, which secure tax-exempt housing bond issues. Interest on these notes is generally payable in semi-annual installments and the notes mature at various dates through 2010. At December 31, 1995 and 1994, tax-exempt variable-rate notes had interest rates ranging from 5.00% to 7.29% (weighted average 5.8%) and 4.60% to 7.29% (weighted average 5.6%), respectively. The tax-exempt mortgage notes contain covenants which require the Company to lease or hold for lease 15% to 40% of the apartment homes for low to moderate income residents, as defined. Certain of the Company's tax-exempt notes contain covenants which require minimum rentals to individuals based upon income levels, as specified. The aggregate maturities of mortgage notes (conventional and bond related) for the five years subsequent to December 31, 1995 are as follows (in thousands): 1996 $ 7,878 1997 9,701 1998 7,201 1999 12,677 2000 2,261 Thereafter 140,763 ------- $180,481 =======
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS These payments include special principal curtailments and balloon payments of $5.6 million in 1996, $7.6 million in 1997, $4.8 million in 1998 and $10.0 million in 1999. 5. OTHER NOTES PAYABLE A summary of other notes payable at December 31, 1995 and 1994 is as follows: <TABLE> <CAPTION> Dollars in thousands 1995 1994 - - -------------------- ---- ---- <S> <C> <C> Commercial Banks Borrowings outstanding under revolving credit facilities $ 18,400 $ 14,150 Variable rate note due March, 1995 (a) -- 10,000 Insurance Companies--Senior Unsecured Notes 7.98% due March, 1997-2003 (b) 52,000 52,000 9.57% due July, 1996 35,000 35,000 7.89% due March, 1996 10,000 10,000 7.57% due March, 1995 -- 10,000 8.72% due November, 1996-1998 (c) 6,000 8,000 Other (d) 3,458 4,065 --------- --------- 124,858 143,215 Senior Unsecured Notes - Other 7 1/4% Notes due April 1, 1999 75,000 75,000 8 1/2% Debentures due September 15, 2024(e) 150,000 150,000 -------- -------- $ 349,858 $ 368,215 ======== ======== </TABLE> (a) The note had an interest rate of one month LIBOR plus 62 1/2 basis points. (b) Payable in seven equal annual principal installments of $7.4 million. (c) Payable in three equal annual principal installments of $2 million. (d) Includes $3.0 million and $3.5 million at December 31, 1995 and 1994, respectively, of deferred gain from interest rate hedge transaction discussed in Note 6. (e) Debentures include an investor put feature which grants the debentureholder a one time option to redeem debentures at the end of 10 years. Information concerning short-term bank borrowings is summarized in the table that follows: <TABLE> <CAPTION> In thousands 1995 1994 1993 - - ------------ ---- ---- ---- <S> <C> <C> <C> Total revolving credit facilities and lines of credit at December 31 $103,500 $103,500 $ 61,000 Borrowings outstanding at December 31 18,400 14,150 28,650 Weighted average daily borrowings during the year 8,198 33,787 11,313 Maximum daily borrowings during the year 35,300 79,300 43,200 Weighted average daily interest rate during the year 6.8% 5.1% 4.0% Weighted average daily interest rate at December 31 6.5% 6.5% 3.8% </TABLE> The underlying loan agreements contain certain covenants which, among other things, require the Company to maintain minimum consolidated tangible net worth, as defined, and maintain certain financial ratios.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At December 31, 1995, the Company had $70 million of unsecured revolving credit facilities with four commercial banks. These credit agreements currently expire in June, 1996 and 1997, but are renewable annually by mutual agreement between the Company and each bank. Interest on borrowings outstanding under these agreements are at varying rates depending on the level of the Company's debt and the term of the borrowing. Generally, loans for 30 days or more are priced at LIBOR plus 5/8% to 1%. Loans of shorter duration are priced at spreads of 5/8% to 11/8% over the applicable base rate. The Company is obligated to pay a fee equal to 1/4% per annum on the average daily amount of the unused portion of the commitment during the revolving loan period. None of these agreements have compensating balance requirements. At December 31, 1995, the Company had unsecured lines of credit with three commercial banks totalling $33.5 million. At December 1995, there were no borrowings outstanding under these lines. Each line is subject to periodic bank review and requires the Company to maintain a depository relationship with the respective bank, however, there are no formal compensating balance arrangements. Borrowings bear interest generally at negotiated rates in line with borrowings under the Company's revolving credit facilities. 6. FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures of estimated fair value of financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize upon disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts and estimated fair value of the Company's financial instruments at December 31, 1995, both on and off-balance sheet, are summarized as follows: <TABLE> <CAPTION> In thousands Carrying Amount Fair Value - - ------------ --------------- ---------- <S> <C> <C> Cash and cash equivalents $2,904 $2,904 Investment in equity securities 8,144 8,144 Conventional mortgage notes payable 56,368 58,180 Tax-exempt notes payable 124,113 131,486 Notes payable 349,858 376,347 Interest rate risk management agreements -- (3,996) </TABLE> The following methods and assumptions were used by the Company in estimating the fair values set forth above. MORTGAGE NOTES PAYABLE Estimated fair value is based on mortgage rates believed to be available to the Company for issuance of debt with similar terms and remaining maturities as of December 31, 1995. NOTES PAYABLE The carrying amounts of the Company's borrowings under short-term revolving credit agreements and lines of credit are variable rate and therefore, approximate their fair values. The fair value of the Company's fixed rate term debt are estimated using discounted cash flow analysis, based on the Company's estimated incremental borrowing rate at December 31, 1995, for similar types of borrowing arrangements. INTEREST RATE RISK MANAGEMENT AGREEMENTS Fair value is based on market quotations from investment banks. Disclosure about the fair value of financial instruments is based upon relevant information available to the Company at December 31, 1995. Although management is not aware of any factors that would have a material effect on the fair value amounts reported herein, such amounts have not been revalued since that date and current estimates of fair value may significantly differ from the amounts presented.
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INTEREST RATE SWAP AGREEMENTS Interest rate swap contracts with a notional amount of $10,000,000 and $20,000,000 matured during 1994 and 1993, respectively. At December 31, 1995, there were no interest rate swap agreements outstanding, nor were there any interest rate swap agreements entered into during 1995. For all periods presented, the Company had no deferred gains or losses relating to terminated swap contracts. Interest rate swap contracts did not have a material impact on interest expense or consolidated results of operations during the periods presented. INTEREST RATE RISK MANAGEMENT AGREEMENTS In 1995, the Company entered into a $50 million (notional amount) fixed pay forward starting swap agreement with a major Wall Street investment banking firm in order to reduce the interest rate risk associated with the anticipated refinancing of fixed-rate debt maturing in 1996. The transaction allowed the Company to lock-in a ten year Treasury rate of 6.544% on or before July 15, 1996. The Company anticipates unwinding the interest rate swap transaction upon refinancing of the $50 million debt in 1996. At December 31, 1995, the Company had a $2.6 million unrealized loss on this transaction. In anticipation of the issuance of approximately $50 million of medium-term notes during the first quarter of 1996, the Company entered into a $50 million interest rate lock agreement with one of its commercial banks. The transaction allowed the Company to lock-in a 10 year Treasury rate of 5.946% beginning on or before March 1, 1996. At December 31, 1995, the Company had a $1.4 million unrealized loss on this transaction. Any gain or loss from these transactions will be recognized at the transaction date and amortized into interest expense over the term of the new debt. While the Company is exposed to credit loss in the event of nonperformance by the counterparties, such nonperformance is not anticipated as the counterparties are highly rated, credit quality companies. By entering into these interest rate risk management agreements, the Company has reduced its interest rate risk associated with the near-term maturities and additional issuance of unsecured debt by effectively locking in an interest rate. There is no credit exposure to the Company under these agreements at December 31, 1995. During 1994, the Company entered into two interest rate hedge transactions involving futures contracts with a total principal amount of $150 million to hedge against possible interest rate fluctuations during the period prior to the issuance of the $150 million Debentures. These two transactions effectively reduced the interest rate on the Debentures from 8.50% to 8.22% for ten years. These contracts were terminated upon issuance of the Debentures. Gains from these contracts of $3.5 million were deferred as an adjustment to the carrying amount of the Debentures and will be amortized on a straight line basis as a reduction of interest expense over a ten year period. The Company does not obtain collateral or other security to support off-balance sheet financial instruments subject to credit risk, but monitors the credit standing of counterparties. 7. INCOME TAXES The differences between net income available to common shareholders for financial reporting purposes and taxable income before dividend deductions relate primarily to temporary differences, principally real estate depreciation, the accrual on the preferred stock dividend, and the deferral for tax purposes of certain gains on property sales. All realized gains (losses) on sales of investments are distributed to shareholders if and when recognized for income tax purposes. Since 1980, gains aggregating approximately $11.6 million have been deferred for income tax purposes and are undistributed at December 31, 1995. For income tax purposes, distributions paid to shareholders consist of ordinary income, capital gains, return of capital or a combination thereof. For the three years ended December 31, 1995, distributions paid per share were taxable as follows: <TABLE> <CAPTION> 1995 1994 1993 ---- ---- ---- <S> <C> <C> <C> Ordinary income $.715 $ .629 $ .493 Capital gains .003 .004 -- Return of capital .152 .127 .197 ---- ---- ---- $.870 $.760 $.690 ==== ==== ==== </TABLE>
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. PROFIT SHARING PLAN The "United Dominion Realty Trust, Inc. Profit Sharing Plan" (the "Plan") is a defined contribution plan covering all full-time employees who have completed 1,000 hours of service and are age twenty-one or older at the time of enrollment. Under the plan, participants may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The Company may make matching contributions in an amount equal to a percentage of each participant's elective deferral contribution deduction for that Plan year as determined by the Compensation Committee. For the years ended December 31, 1995, 1994 and 1993, the Company matched 85%, 75% and 65%, respectively, of the first $1,000 annually contributed by each eligible participant. Expenses related to the Plan and included in the Company's consolidated statements of operations for the three years ended December 31, 1995, 1994 and 1993 were $136,000, $100,000, and $37,000, respectively. The Plan also allows the Company to make discretionary profit sharing contributions to the Plan as determined by the Compensation Committee of the Board of Directors. Contribu-tions, if any, are allocated to each participant based on the relative compensation of the participant to the compensation of all participants (maximum annual compensation in the determination is $50,000). Aggregate discretionary contributions of approximately $400,000, $250,000, and $150,000 were made for the years ended December 31, 1995, 1994 and 1993, respectively. 9. SHARE OPTIONS Under the Company's 1985 Share Option Plan (the "Plan"), as amended, a maximum of 2,400,000 options could be granted, at the discretion of the Board, to certain officers, directors and key employees of the Company, through 1997. On December 12, 1995, the Board granted 286,667 incentive stock options (ISO's)and 85,333 non-qualified options (NQO's) to certain officers and key employees of the Company at $14.63 per share. These options vest on December 31, 1996. Of the options outstanding at December 31, 1995, 705,480 options were not then exercisable under the provisions of the Plan. The Plan generally provides, among other things, that options be granted at exercise prices not lower than the market value of the shares on the date of grant. Shares under options which subsequently expire or are canceled are available for subsequent grant. For options granted prior to December 12, 1995, the optionee has up to five years from the date on which the options first become exercisable during which to exercise the options. For the options granted on December 12, 1995, the optionee has up to ten years from the date the options were granted during which to exercise the options. Activity in the Company's share option plan during the three years ended December 31, 1995 is summarized in the following table. <TABLE> <CAPTION> Shares Available for future Options Outstanding Option Grant Shares Price per Share ---------------- ------------------------------------ <S> <C> <C> <C> Balance, December 31, 1992 1,371,000 970,400 $7.44 - $11.56 Options granted (67,100) 67,100 $13.63 Options exercised -- (98,900) $7.44 - $11.56 Options expired 4,000 (4,000) $9.09 - $11.56 --------- --------- -------------- Balance, December 31, 1993 1,307,900 934,600 $7.44 - $13.63 Options granted (371,000) 371,000 $13.13 Options exercised -- (50,488) $7.44 - $11.56 Options expired 23,240 (23,240) $11.56 - $13.63 --------- --------- -------------- Balance, December 31, 1994 960,140 1,231,872 $7.44 - $13.63 Options granted (372,000) 372,000 $14.63 Options exercised -- (98,536) $7.44 - $13.63 Options expired 14,700 (14,700) $11.56 - $13.63 --------- --------- -------------- Balance, December 31, 1995 602,840 1,490,636 $7.44 - $14.63 ========= ========== =============== </TABLE>
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. SHAREHOLDERS' EQUITY PREFERRED STOCK In April, 1995, the Company sold 4,200,000 shares of 9 1/4% Cumulative Redeemable Preferred Stock in a public offering at $25 per share ("preferred stock"). Net proceeds of the offering, after deducting underwriting commissions and direct offering costs, aggregated approximately $101.5 million of which $33.1 million was used to repay then existing bank debt and $65.7 million was used to fund the acquisition of a portfolio of nine apartment communities. The remaining net proceeds were used to help fund subsequent apartment acquisitions. Dividends on the preferred stock are payable on a quarterly basis at an annual dividend rate of $2.3125 per share. The preferred stock has no par value, with a liquidation preference of $25 per share and is redeemable on or after April 24, 2000, solely from the proceeds from the sale of additional capital stock (common or preferred). The preferred stock has no voting rights, no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. COMMON STOCK In September, 1995, the Company completed a public offering of 4,550,000 shares of its common stock at $14.25 per share. Net proceeds of the offering, after deducting underwriting commissions and direct offering costs, aggregated approximately $61 million and were used to repay $26.8 million of bank debt. The remaining net proceeds were temporarily invested in short-term money market investments and were used primarily for the acquisition of additional apartment communities. In February, 1995, the Company sold 1,360,000 shares of its common stock to a group of institutional investors at a price of $131/8 per share. Net proceeds of $17.8 million were used to curtail then existing bank debt. All share and per share information in the accompanying financial statements has been adjusted to retroactively reflect a 2 for 1 stock split in 1993. OFFICERS' STOCK PURCHASE AND LOAN PLAN At December 31, 1995, 553,000 shares of common stock were issued under the Officer Stock Purchase and Loan Plan. Under the plan, certain officers have purchased common stock at the then current market price with financing provided by the Company at 7% interest only. The underlying notes mature beginning in November, 1998. A total of 47,000 shares are available for future issuance under this plan. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN As of December 31, 1995, 92,544 shares of common stock had been issued under the Company's Dividend Reinvestment and Stock Purchase Plan. Shares in the amount of 907,456 are reserved for further issuance under this plan. During 1995, shares were purchased on the open market. EMPLOYEE STOCK PURCHASE PLAN As of December 31, 1995, 1,157 shares of common stock had been issued under the Company's Employee Stock Purchase Plan. Shares in the amount of 98,843 are reserved for future issuance under the plan. During 1995, shares were also purchased on the open market. 11. UNAUDITED SUMMARIZED CONSOLIDATED QUARTERLY FINANCIAL DATA Summarized unaudited consolidated quarterly financial data for the years ended December 31, 1995 and 1994 is as follows: (In thousands, except per share data): <TABLE> Three Months Ended <CAPTION> 1995 March 31 June 30* September 30 December 31** - - ---- -------- ------- ------------ ----------- <S> <C> <C> <C> Rental income $45,493 $47,747 49,842 $52,158 Income from property operations 17,874 18,584 18,058 20,143 Net income 6,150 11,569 7,504 7,904 Dividends to preferred shareholders -- 1,781 2,428 2,428 Net income available to common shareholders 6,150 9,788 5,076 5,476 Per share: Net income per common share .12 .19 .10 .10 Weighted average number of common shares outstandng 51,125 51,776 51,883 56,293 </TABLE> * For the quarter ended June 30, 1995, the Company recognized a $4.6 million aggregate book gain on the sales of real estate. ** For the quarter ended December 31, 1995, the Company recognized a $1.7 million impairment loss on real estate held for disposition (Note 2).
UNITED DOMINION REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <TABLE> <CAPTION> Three Months Ended 1994 March 31 June 30 September 30 December 31 - - ---- -------- ------- ------------ ----------- <S> <C> <C> <C> <C> Rental income $26,706 $29,673 $39,526 $44,066 Income from property operations 9,640 10,942 14,715 17,080 Net income 3,415 3,978 5,975 5,768 Dividends to preferred shareholders -- -- -- -- Net income available to common shareholders 3,415 3,978 5,975 5,768 Per share: Net income per common share .08 .09 .12 .11 Weighted average number of common shares outstanding 41,688 42,508 50,153 50,241 </TABLE> <TABLE> <CAPTION> SCHEDULE III. Summary of Real Estate Owned Cost of Improvements Capitalized Costs of Improvements Initial Cost to Capitalized Trust Subsequent to Land and Buildings Acquisition Land and (Net of Encumbrances Improvements Improvements Disposals) ------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Apartments: 2131 Apartments/Nashville, TN $ $ 869,860 $9,155,185 $1,885,836 Alafaya Woods/Orlando, FL -- 1,653,000 9,042,256 677,711 Alexander Glen/Charlotte, NC 5,490,273 698,860 6,488,061 191,044 Andover Place/Orlando, FL 5,620,000 1,732,406 3,943,184 119,804 Bay Cove/Clearwater, FL -- 2,928,847 6,578,257 1,193,572 Bayberry Commons/Portsmouth, VA -- 516,800 3,485,645 1,027,509 Beechwood/Greensboro, NC -- 1,409,377 6,086,677 338,460 Braeland Commons/Columbia, MD 4,955,000 1,564,942 7,006,574 298,101 Braeton Bay/ Richmond, VA -- 2,059,252 15,049,088 36,281 Bramblewood/Goldsboro, NC -- 401,538 3,150,912 946,532 Brantley Pines/Fort Myers, FL -- 841,400 5,914,766 738,168 Briar Club/Memphis, TN -- 1,214,400 6,928,959 633,837 Brittingham Square/Salisbury, MD -- 650,143 4,962,246 24,314 Brynn Marr/Jacksonville, NC -- 432,974 3,821,508 1,047,691 Canterbury Woods/Charlotte, NC -- 409,675 5,011,435 1,693,246 Cinnamon Ridge/Raleigh, NC 7,000,000 967,230 3,337,197 4,065,357 Clear Run/Wilmington, NC -- 874,830 8,586,978 803,448 Cleary Court/Fort Lauderdale, FL -- 2,399,848 7,913,450 214,893 Colonial Villa/Columbia, SC -- 1,014,181 5,100,269 1,060,785 Colony of Stone Mountain/Atlanta, GA -- 3,160,000 5,641,646 3,027,996 Colony Village/New Bern, NC -- 346,330 3,036,956 1,003,058 Copperfield/Fort Lauderdale, FL -- 4,424,128 20,428,969 192,416 Country Walk/Columbia, SC -- 422,113 3,133,623 1,164,098 Courthouse Green/Richmond, VA -- 732,050 4,702,353 1,314,310 Courtney Square/Raleigh, NC -- 1,114,600 5,119,259 1,105,031 The Cove at Lake Lynn/Raleigh, NC -- 1,723,363 5,303,760 534,936 Covington Crossing/Memphis, TN -- 1,296,240 3,792,590 791,425 Craig Manor/Salem,VA -- 282,200 2,419,570 607,073 The Creek/Wilmington, NC -- 417,500 2,506,206 845,450 Crescent Square/Atlanta, GA -- 1,057,000 6,865,036 4,281,851 Crossroads/Columbia, SC -- 2,074,800 13,710,803 852,600 Dover Country Club/Dover, DE -- 2,007,878 6,347,331 539,290 Dover Village/Orlando, FL -- 2,894,702 6,456,100 1,591,328 Dunwoody Pointe/Atlanta, GA 6,027,182 2,763,324 6,902,996 33,189 Eastwind/Virginia Beach, VA -- 155,000 5,316,738 1,296,863 Eden Commons/Columbia, MD 8,450,000 2,361,167 9,384,171 485,788 Emerald Bay/Charlotte, NC -- 626,070 4,722,862 2,106,220 English Hills/Richmond, VA -- 1,979,174 11,524,313 2,800,786 Excalibur/Charlotte, NC -- 1,115,261 8,629,877 384,157 Fisherman's Village/Orlando, FL -- 2,387,368 7,458,897 2,070 Forest Hills/Wilmington, NC -- 1,028,000 5,420,478 685,376 Forest Lakes at Oyster Point/ Newport News, VA -- 780,117 8,861,878 179,850 Forestbrook/Columbia, SC 5,000,000 395,516 2,902,040 1,180,092 Foxcroft/Tampa, FL -- 749,400 3,927,644 630,825 Franklin Mansions-Land/Nashville, TN -- 2,104,394 0 34,582 Gable Hill/Columbia, SC -- 824,847 5,307,194 713,648 Gatewater Landing/Glen Burnie, MD -- 2,078,422 6,084,526 701,153 Grand Oaks/Charlotte, NC -- 446,075 4,463,344 2,388,036 Great Oaks/Baltimore, MD -- 2,919,481 9,075,956 933,009 Greens at Cedar Chase/Dover, DE -- 1,528,667 4,830,738 61,963 Greens of Constant Friendship/ Baltimore, MD -- 903,122 4,668,956 19,896 Greens at Cross Court/Easton, MD -- 1,182,414 4,544,012 29,049 Greens at Falls Run/Fredericksburg, VA -- 2,730,722 5,300,203 24,678 Greens at Hilton Run/Lexington Park, MD -- 2,754,447 10,482,579 46,362 Greens at Hollymead/Charlottesville, VA -- 965,114 5,250,374 25,211 Greens at Schumaker Pond/Salisbury, MD -- 709,559 6,117,582 45,879 Greentree Place/Jacksonville, FL 12,455,000 1,634,330 11,226,990 683,250 Griffin Crossing/Atlanta, GA -- 1,509,633 7,544,018 438,413 The Groves/Daytona Beach, FL -- 789,953 4,767,055 5,565 Gwinnett Square/Atlanta, GA -- 1,924,325 7,376,454 221,285 Hampton Court/Alexandria, VA -- 7,388,420 4,811,937 405,764 Hampton Forest/Greenville, SC -- 454,140 2,578,103 339,651 Hampton Greene/Columbia, SC 7,841,033 1,363,046 10,118,453 362,098 Harbour Town/Nashville, TN -- 572,567 3,522,092 347,367 Harris Pond/Charlotte, NC 5,138,798 886,788 6,714,647 141,351 Heather Lake/Hampton, VA -- 616,800 3,400,672 2,083,099 Heatherwood/Greenville, SC -- 354,566 3,234,105 612,300 Heritage Trace/Newport News, VA 3,900,000 880,000 2,312,285 1,602,989 Hickory Run/Nashville, TN -- 1,468,727 11,583,786 7,423 Hickory Pointe/Memphis, TN -- 1,074,424 6,052,020 209,528 The Highlands/Charlotte, NC -- 321,400 2,830,346 1,869,598 Holly Tree Park/Waldorf, MD -- 1,576,366 5,095,323 209,332 Hunters Ridge/Plant City, FL -- 2,461,548 10,942,434 380,594 Hunters Trace/Memphis, TN 5,890,000 888,440 6,676,552 620,810 Hunting Ridge/Greenville, SC 3,265,000 449,500 2,234,882 251,166 Indian Hills/Anniston, AL -- 338,335 3,715,585 131,859 Key Pines/Spartanburg, SC -- 601,693 3,773,304 995,721 Knolls at Newgate/Fairfax, VA -- 1,725,725 3,518,741 502,864 The Lakes/Nashville, TN -- 1,285,657 5,980,197 673,350 Lake Washington Downs/Melbourne, FL -- 1,434,450 4,940,166 643,691 Lakeside North/Orlando, FL 12,440,000 1,532,700 11,076,062 1,455,899 Lakewood Place/Tampa, FL -- 1,395,051 10,647,377 468,348 The Landing/Greenville, SC -- 685,000 5,622,454 343,643 Laurel Ridge/Roanoke, VA 2,960,000 445,400 2,531,357 1,087,345 Laurel Village/Richmond, VA -- 694,281 3,119,716 521,788 The Ledges/Winston-Salem, NC -- 492,283 1,561,947 4,608,575 Legacy Hill/Nashville, TN 5,223,854 1,147,660 5,867,567 14,243 Liberty Crossing/Jacksonville, NC 1,463,867 840,000 3,873,139 1,541,088 Mallard Green/Charlotte, NC -- 329,300 2,766,436 59,970 Mallards of Wedgewood/Lakeland, FL -- 959,283 6,864,666 269,595 Manor at England Run/Fredericksburg, VA -- 1,710,477 6,413,447 1,376,993 Marble Hill/Richmond, VA 3,317,218 825,760 5,147,968 43,290 Meadow Run/Richmond, VA -- 636,059 3,423,884 1,171,082 Meadowdale Lakes/Richmond, VA 920,431 1,581,671 6,717,237 2,940,350 Mediterranean Village/Miami, FL -- 2,064,788 11,939,113 203,754 The Melrose/Dumfries, VA 5,312,183 662,000 3,705,404 3,875,979 Mill Creek/Wilmington, NC -- 597,248 4,618,561 711,353 Northview/Salem, VA -- 171,600 1,238,501 558,122 Olde West Village/Richmond, VA 3,871,932 1,965,097 12,203,965 1,621,856 Orange Orlando/Orlando, FL -- 1,233,151 2,177,417 1,033,037 Overlook/Greenville, SC -- 824,600 5,079,443 1,269,184 Palm Grove/Tampa, FL -- 616,121 5,268,814 528,323 The Park/Columbia, SC -- 1,004,072 5,535,334 1,087,409 Park Green/Raleigh, NC -- 500,000 4,321,872 826,318 Parkwood Court/Alexandria, VA 6,125,000 2,482,633 3,813,116 1,487,638 Patriot Place/Florence, SC 2,200,000 212,500 1,600,757 5,324,114 Peppertree/Charlotte, NC -- 1,546,267 7,699,221 651,899 Pinebrook/Clearwater,FL -- 1,780,375 2,458,172 1,794,704 Plum Chase/Columbia, SC 7,000,000 802,750 3,149,607 4,495,788 Regatta Shores/Orlando, FL -- 757,008 6,607,367 897,071 River Place/Macon, GA -- 1,097,280 7,492,385 773,156 River Road/Ettrick, VA -- 229,699 1,648,394 852,288 Riverwind/Spartanburg, SC -- 802,484 6,386,212 435,996 Rollingwood/Richmond, VA 2,437,210 777,971 5,058,707 1,962,714 Royal Oaks/Savannah, GA 6,407,421 533,100 9,907,978 263,770 Santa Barbara Landing/Naples, FL 4,997,916 1,134,120 8,019,814 415,782 The Shire/Raleigh, NC -- 1,791,215 11,968,852 1,052,616 Somerset/Charleston, SC -- 485,160 4,053,792 354,292 St. Andrews/Columbia, SC -- 976,192 6,866,147 203,261 St. Andrews Commons/Columbia, SC -- 1,428,826 9,371,378 472,524 Spring Forest/Raleigh, NC -- 1,257,500 8,586,255 1,720,167 Stanford Village/Atlanta, GA -- 884,500 2,807,839 571,596 Summit West/Tampa, FL -- 2,176,500 4,709,970 1,283,882 Three Fountains/Montgomery, AL -- 1,075,009 6,853,156 296,991 Timbercreek/Richmond, VA -- 379,000 2,030,525 1,134,137 Twin Coves/Baltimore, MD 3,750,000 912,771 2,893,861 456,530 Twin Rivers/Hopewell, VA -- 149,200 885,671 1,168,191 University Club/Ft. Lauderdale, FL -- 1,390,220 6,992,620 68,216 Village at Old Tampa Bay/Oldsmar, FL -- 1,750,320 10,756,337 1,021,604 Vinyards/Orlando, FL 9,450,000 1,840,230 11,571,625 762,042 Walnut Creek/Raleigh, NC -- 3,170,290 21,718,401 1,001,894 Waterford/Columbia, SC -- 957,980 6,926,736 316,229 West Knoll/Newark, DE -- 305,138 3,564,067 53,563 Windsor Harbor/Charlotte, NC -- 475,000 3,928,113 1,960,573 Woodscape/Newport News, VA -- 798,700 7,209,525 1,795,276 Woodside/Baltimore, MD 13,645,000 3,112,881 8,864,762 2,043,322 Shopping Centers: Gloucester Exchange/Gloucester, VA -- 403,688 2,278,553 251,415 Office and Industrial Buildings: Franklin St./Richmond, VA -- 67,900 282,173 75,843 Meadowdale Offices/Richmond, VA -- 240,563 359,913 93,340 Statesman Park/Roanoke, VA -- 90,162 565,557 101,050 Tri-County Buildings/Bristol, TN -- 275,580 900,281 1,263,000 ------------------------------------------------------------------------------------- $172,554,318 $171,545,275 $829,663,874 $129,889,218 ===================================================================================== Real Estate Held for Disposition Apartments: Azalea/Richmond, VA -- 272,522 2,721,686 1,009,575 Cedar Point/Raleigh, NC -- 75,400 4,514,435 2,921,515 Mill Creek/Atlanta, GA -- 529,800 3,996,252 3,387,840 Summit-on-Park/Charlotte, NC -- 147,000 1,021,602 964,072 Towne Square/Hopewell, VA 1,246,067 109,500 909,897 782,567 Woodland Hollow/Charlotte, NC 3,230,710 755,000 5,393,023 1,462,042 Shopping Centers: Circle/Richmond, VA -- 885,964 1,836,464 1,627,917 Deerfield Plaza/Myrtle Beach, SC -- 883,767 2,182,509 646,872 Hanover Village-Land/Richmond, VA -- 1,623,910 0 0 Laburnum Park-Land/Richmond, VA -- 300,000 0 0 Meadowdale/Richmond, VA -- 1,099,620 3,875,145 1,106,516 The Village/Durham, NC -- 1,355,000 3,814,496 3,506,490 Village Square/Myrtle Beach, SC -- 3,070,000 6,428,614 183,638 Willow Oaks/Hampton, VA 3,450,000 934,220 1,211,045 7,040,401 ------------------------------------------------------------------------------------- $7,926,777 $12,041,703 $37,905,168 $24,639,445 ===================================================================================== </TABLE> <TABLE> <CAPTION> Gross Amount at Which Carried at Close of Period Land and Buildings Land and Total Accumulated Date of Improvements Improvements (a) Depreciation Construction -------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Apartments: 2131 Apartments/Nashville, TN $1,062,415 $10,848,466 $11,910,881 $1,121,296 1972 Alafaya Woods/Orlando, FL 1,844,091 9,528,876 11,372,967 418,403 1988/90 Alexander Glen/Charlotte, NC 773,128 6,604,837 7,377,965 323,093 1989 Andover Place/Orlando, FL 1,735,808 4,059,586 5,795,394 44,678 1988 Bay Cove/Clearwater, FL 3,102,629 7,598,047 10,700,676 959,209 1972 Bayberry Commons/Portsmouth, VA 709,610 4,320,344 5,029,954 1,559,058 1973/74 Beechwood/Greensboro, NC 1,563,537 6,270,977 7,834,514 505,188 1985 Braeland Commons/Columbia, MD 1,611,272 7,258,345 8,869,617 815,136 1983 Braeton Bay/ Richmond, VA 2,059,251 15,085,370 17,144,621 0 1989 Bramblewood/Goldsboro, NC 508,726 3,990,256 4,498,982 1,766,200 1980/82 Brantley Pines/Fort Myers, FL 1,299,078 6,195,256 7,494,334 323,441 1986 Briar Club/Memphis, TN 1,297,103 7,480,093 8,777,196 352,646 1987 Brittingham Square/Salisbury, MD 652,547 4,984,156 5,636,703 114,215 1991 Brynn Marr/Jacksonville, NC 548,205 4,753,968 5,302,173 2,100,186 1973/77 Canterbury Woods/Charlotte, NC 545,477 6,568,879 7,114,356 2,654,210 1968/70 Cinnamon Ridge/Raleigh, NC 1,262,601 7,107,183 8,369,784 2,708,510 1968/70 Clear Run/Wilmington, NC 1,080,927 9,184,329 10,265,256 471,906 1987/89 Cleary Court/Fort Lauderdale, FL 2,473,000 8,055,191 10,528,191 301,692 1984/85 Colonial Villa/Columbia, SC 1,375,899 5,799,336 7,175,235 797,087 1974 Colony of Stone Mountain/Atlanta, GA 3,876,604 7,953,038 11,829,642 2,545,917 1970/72 Colony Village/New Bern, NC 483,387 3,902,957 4,386,344 1,816,821 1972/74 Copperfield/Fort Lauderdale, FL 4,464,327 20,581,186 25,045,513 860,540 1991 Country Walk/Columbia, SC 648,953 4,070,881 4,719,834 1,018,092 1974 Courthouse Green/Richmond, VA 941,166 5,807,547 6,748,713 2,550,308 1974/78 Courtney Square/Raleigh, NC 1,262,896 6,075,994 7,338,890 566,746 1979/81 The Cove at Lake Lynn/Raleigh, NC 1,857,167 5,704,892 7,562,059 850,951 1986 Covington Crossing/Memphis, TN 1,351,759 4,528,496 5,880,255 235,304 1974 Craig Manor/Salem,VA 355,235 2,953,608 3,308,843 1,003,519 1975 The Creek/Wilmington, NC 456,598 3,312,558 3,769,156 550,140 1973 Crescent Square/Atlanta, GA 1,343,952 10,859,935 12,203,887 3,271,318 1970 Crossroads/Columbia, SC 2,121,539 14,516,664 16,638,203 782,180 1977/84 Dover Country Club/Dover, DE 2,168,760 6,725,739 8,894,499 352,676 1970 Dover Village/Orlando, FL 3,092,825 7,849,305 10,942,130 939,262 1981 Dunwoody Pointe/Atlanta, GA 2,763,324 6,936,185 9,699,509 46,546 1980 Eastwind/Virginia Beach, VA 291,688 6,476,913 6,768,601 2,188,093 1970 Eden Commons/Columbia, MD 2,436,429 9,794,698 12,231,127 1,121,640 1984 Emerald Bay/Charlotte, NC 1,131,773 6,323,379 7,455,152 2,061,112 1972 English Hills/Richmond, VA 2,428,574 13,875,699 16,304,273 2,741,039 1969/76 Excalibur/Charlotte, NC 1,159,881 8,969,414 10,129,295 483,960 1987 Fisherman's Village/Orlando, FL 2,387,368 7,460,967 9,848,335 0 1984 Forest Hills/Wilmington, NC 1,137,457 5,996,397 7,133,855 834,883 1964/69 Forest Lakes at Oyster Point/ Newport News, VA 790,464 9,031,380 9,821,844 107,497 1986 Forestbrook/Columbia, SC 541,808 3,935,840 4,477,648 465,784 1974 Foxcroft/Tampa, FL 912,892 4,394,977 5,307,869 565,121 1972 Franklin Mansions-Land/Nashville, TN 2,138,976 0 2,138,976 0 -- Gable Hill/Columbia, SC 1,053,085 5,792,604 6,845,689 1,470,965 1985 Gatewater Landing/Glen Burnie, MD 2,103,284 6,760,817 8,864,101 817,006 1970 Grand Oaks/Charlotte, NC 794,520 6,502,935 7,297,455 3,149,328 1966/67 Great Oaks/Baltimore, MD 3,102,786 9,825,660 12,928,446 558,796 1974 Greens at Cedar Chase/Dover, DE 1,533,892 4,887,476 6,421,368 113,804 1988 Greens of Constant Friendship/ Baltimore, MD 907,823 4,684,151 5,591,974 109,006 1990 Greens at Cross Court/Easton, MD 1,186,510 4,568,965 5,755,475 107,125 1987 Greens at Falls Run/Fredericksburg, VA 2,733,209 5,322,394 8,055,603 128,198 1989 Greens at Hilton Run/Lexington Park, MD 2,769,799 10,513,589 13,283,388 244,127 1988 Greens at Hollymead/Charlottesville, VA 967,686 5,273,013 6,240,699 122,986 1990 Greens at Schumaker Pond/Salisbury, MD 710,607 6,162,413 6,873,020 139,725 1988 Greentree Place/Jacksonville, FL 1,796,141 11,748,429 13,544,570 576,246 1986 Griffin Crossing/Atlanta, GA 1,589,778 7,902,286 9,492,064 491,590 1987/89 The Groves/Daytona Beach, FL 789,952 4,772,621 5,562,573 0 1989 Gwinnett Square/Atlanta, GA 1,933,560 7,588,504 9,522,064 202,189 1985 Hampton Court/Alexandria, VA 7,526,928 5,079,193 12,606,121 641,707 1967 Hampton Forest/Greenville, SC 554,486 2,817,408 3,371,894 160,103 1968 Hampton Greene/Columbia, SC 1,561,771 10,281,826 11,843,597 510,706 1990 Harbour Town/Nashville, TN 698,564 3,743,462 4,442,026 330,303 1974 Harris Pond/Charlotte, NC 903,859 6,838,927 7,742,786 355,554 1987 Heather Lake/Hampton, VA 781,743 5,318,828 6,100,571 3,278,373 1972/74 Heatherwood/Greenville, SC 428,725 3,772,246 4,200,971 386,223 1978 Heritage Trace/Newport News, VA 1,172,351 3,622,923 4,795,274 1,456,429 1973 Hickory Run/Nashville, TN 1,468,726 11,591,210 13,059,936 0 1989 Hickory Pointe/Memphis, TN 1,171,404 6,164,568 7,335,972 210,743 1985 The Highlands/Charlotte, NC 542,070 4,479,274 5,021,344 2,315,855 1970 Holly Tree Park/Waldorf, MD 1,607,351 5,273,670 6,881,021 288,373 1973 Hunters Ridge/Plant City, FL 2,643,760 11,140,816 13,784,576 204,753 1992 Hunters Trace/Memphis, TN 979,724 7,206,078 8,185,802 315,871 1986 Hunting Ridge/Greenville, SC 518,172 2,417,376 2,935,548 102,539 1972 Indian Hills/Anniston, AL 356,896 3,828,883 4,185,779 206,948 1975 Key Pines/Spartanburg, SC 693,915 4,676,803 5,370,718 718,008 1974 Knolls at Newgate/Fairfax, VA 1,758,439 3,988,891 5,747,330 248,963 1972 The Lakes/Nashville, TN 1,421,521 6,517,683 7,939,204 626,857 1986 Lake Washington Downs/Melbourne, FL 1,579,894 5,438,413 7,018,307 517,474 1984 Lakeside North/Orlando, FL 1,631,060 12,433,601 14,064,661 749,480 1984 Lakewood Place/Tampa, FL 1,492,758 11,018,018 12,510,776 736,132 1986 The Landing/Greenville, SC 778,256 5,872,841 6,651,097 320,790 1976 Laurel Ridge/Roanoke, VA 648,390 3,415,713 4,064,102 1,361,250 1970/72 Laurel Village/Richmond, VA 776,450 3,559,335 4,335,785 744,590 1972 The Ledges/Winston-Salem, NC 1,120,186 5,542,619 6,662,805 3,102,639 1959 Legacy Hill/Nashville, TN 1,145,660 5,883,810 7,029,470 0 1977 Liberty Crossing/Jacksonville, NC 1,147,544 5,106,683 6,254,227 1,536,636 1972/74 Mallard Green/Charlotte, NC 363,283 2,792,423 3,155,706 150,891 1985 Mallards of Wedgewood/Lakeland, FL 988,894 7,104,649 8,093,543 101,421 1985 Manor at England Run/Fredericksburg, VA 3,020,706 6,480,211 9,500,917 150,515 1990 Marble Hill/Richmond, VA 828,620 5,188,398 6,017,018 56,700 1973 Meadow Run/Richmond, VA 834,395 4,396,630 5,231,025 2,128,682 1973/74 Meadowdale Lakes/Richmond, VA 2,193,200 9,046,058 11,239,258 4,385,577 1967/71 Mediterranean Village/Miami, FL 2,128,736 12,078,919 14,207,655 516,120 1989 The Melrose/Dumfries, VA 1,329,494 6,913,889 8,243,383 3,290,228 1951 Mill Creek/Wilmington, NC 786,991 5,140,171 5,927,162 978,398 1986 Northview/Salem, VA 216,569 1,751,654 1,968,223 1,087,848 1969 Olde West Village/Richmond, VA 2,216,484 13,574,434 15,790,918 4,689,698 1978/82/85/87 Orange Orlando/Orlando, FL 1,388,200 3,055,405 4,443,605 491,946 1971 Overlook/Greenville, SC 1,124,928 6,048,299 7,173,227 335,598 1976 Palm Grove/Tampa, FL 727,179 5,686,079 6,413,258 423,564 1969/71 The Park/Columbia, SC 1,250,402 6,376,413 7,626,815 315,569 1975/77 Park Green/Raleigh, NC 549,180 5,099,009 5,648,189 1,030,126 1987 Parkwood Court/Alexandria, VA 2,577,866 5,205,521 7,783,387 517,354 1964 Patriot Place/Florence, SC 1,355,659 5,781,712 7,137,371 2,303,536 1974 Peppertree/Charlotte, NC 1,622,411 8,274,976 9,897,387 681,938 1987 Pinebrook/Clearwater,FL 1,860,267 4,172,984 6,033,251 456,035 1977 Plum Chase/Columbia, SC 1,084,908 7,363,237 8,448,145 2,184,841 1974 Regatta Shores/Orlando, FL 992,064 7,269,382 8,261,446 431,756 1988 River Place/Macon, GA 1,393,689 7,969,132 9,362,821 583,704 1988 River Road/Ettrick, VA 316,464 2,413,917 2,730,381 1,389,984 1973/74 Riverwind/Spartanburg, SC 890,960 6,733,732 7,624,692 558,121 1987 Rollingwood/Richmond, VA 1,051,511 6,747,881 7,799,392 3,229,781 1974/78 Royal Oaks/Savannah, GA 556,206 10,148,642 10,704,848 546,921 1980 Santa Barbara Landing/Naples, FL 1,247,876 8,321,840 9,569,716 416,825 1987 The Shire/Raleigh, NC 1,978,587 12,834,096 14,812,683 823,801 1982/84 Somerset/Charleston, SC 536,990 4,356,254 4,893,244 226,962 1979 St. Andrews/Columbia, SC 1,023,055 7,022,545 8,045,600 385,681 1972 St. Andrews Commons/Columbia, SC 1,569,651 9,703,077 11,272,728 1,117,341 1986 Spring Forest/Raleigh, NC 1,408,066 10,155,856 11,563,922 2,207,645 1978/81 Stanford Village/Atlanta, GA 1,054,857 3,209,078 4,263,935 1,061,691 1985 Summit West/Tampa, FL 2,348,038 5,822,314 8,170,352 720,301 1972 Three Fountains/Montgomery, AL 1,094,419 7,130,737 8,225,156 430,211 1973 Timbercreek/Richmond, VA 516,962 3,026,700 3,543,662 1,715,738 1969 Twin Coves/Baltimore, MD 1,004,466 3,258,696 4,263,162 168,906 1974 Twin Rivers/Hopewell, VA 351,158 1,851,904 2,203,062 1,256,585 1972 University Club/Ft. Lauderdale, FL 1,430,079 7,020,977 8,451,056 64,175 1988 Village at Old Tampa Bay/Oldsmar, FL 2,007,013 11,521,248 13,528,261 911,846 1986 Vinyards/Orlando, FL 2,080,739 12,093,158 14,173,897 538,874 1984/86 Walnut Creek/Raleigh, NC 3,342,023 22,548,562 25,890,585 1,337,751 1985/86 Waterford/Columbia, SC 1,030,567 7,170,378 8,200,945 397,939 1985 West Knoll/Newark, DE 305,138 3,617,630 3,922,768 185,318 1964 Windsor Harbor/Charlotte, NC 892,976 5,470,710 6,363,686 1,822,128 1971 Woodscape/Newport News, VA 1,006,107 8,797,394 9,803,501 2,832,621 1974/76 Woodside/Baltimore, MD 3,329,380 10,691,585 14,020,965 609,255 1966 Shopping Centers: Gloucester Exchange/Gloucester, VA 492,475 2,441,181 2,933,656 702,939 1974 Office and Industrial Buildings: Franklin St./Richmond, VA 67,900 358,016 425,916 129,929 1890 Meadowdale Offices/Richmond, VA 258,144 435,674 693,818 292,043 1983 Statesman Park/Roanoke, VA 147,996 608,773 756,769 410,485 1974 Tri-County Buildings/Bristol, TN 364,120 2,074,738 2,438,859 716,173 1976/79 -------------------------------------------------------------------------------- $193,672,389 $937,425,977 $1,131,098,366 $129,454,008 ================================================================================ Real Estate Held for Disposition Apartments: Azalea/Richmond, VA 403,786 3,599,997 4,003,783 1,650,368 1967 Cedar Point/Raleigh, NC 231,347 7,280,003 7,511,350 3,455,287 1972 Mill Creek/Atlanta, GA 857,665 7,056,227 7,913,892 2,318,840 1972 Summit-on-Park/Charlotte, NC 245,650 1,887,024 2,132,674 1,091,746 1963 Towne Square/Hopewell, VA 326,080 1,475,884 1,801,964 853,610 1967 Woodland Hollow/Charlotte, NC 968,333 6,641,732 7,610,065 2,720,964 1974/76 Shopping Centers: Circle/Richmond, VA 949,970 3,400,375 4,350,345 2,069,506 1956/62/67 Deerfield Plaza/Myrtle Beach, SC 1,267,012 2,446,136 3,713,148 841,228 1979 Hanover Village-Land/Richmond, VA 1,623,910 0 1,623,910 5,090 -- Laburnum Park-Land/Richmond, VA 300,000 0 300,000 0 -- Meadowdale/Richmond, VA 1,288,237 4,793,044 6,081,281 1,770,793 1976/82 The Village/Durham, NC 2,175,372 6,500,614 8,675,986 2,138,586 1965 Village Square/Myrtle Beach, SC 3,726,673 5,956,579 9,683,252 1,946,883 1978/79 Willow Oaks/Hampton, VA 3,102,314 6,083,352 9,185,666 2,709,294 1968/74 -------------------------------------------------------------------- $17,466,349 $57,120,967 $74,587,316 $23,572,195 ==================================================================== </TABLE> <TABLE> <CAPTION> Depreciable Life of Date Building Acquired Component ---------------------------------------- <S> <C> <C> Apartments: 2131 Apartments/Nashville, TN 12/16/92 35 yrs. Alafaya Woods/Orlando, FL 10/21/94 35 yrs. Alexander Glen/Charlotte, NC 08/16/94 35 yrs. Andover Place/Orlando, FL 09/29/95 35 yrs. Bay Cove/Clearwater, FL 12/16/92 35 yrs. Bayberry Commons/Portsmouth, VA 04/07/88 35 yrs. Beechwood/Greensboro, NC 12/22/93 35 yrs. Braeland Commons/Columbia, MD 12/29/92 35 yrs. Braeton Bay/ Richmond, VA 12/28/95 35 yrs. Bramblewood/Goldsboro, NC 12/31/84 35 yrs. Brantley Pines/Fort Myers, FL 08/11/94 35 yrs. Briar Club/Memphis, TN 10/14/94 35 yrs. Brittingham Square/Salisbury, MD 05/04/95 35 yrs. Brynn Marr/Jacksonville, NC 12/31/84 35 yrs. Canterbury Woods/Charlotte, NC 12/18/85 35 yrs. Cinnamon Ridge/Raleigh, NC 12/01/89 35 yrs. Clear Run/Wilmington, NC 07/22/94 35 yrs. Cleary Court/Fort Lauderdale, FL 11/30/94 35 yrs. Colonial Villa/Columbia, SC 09/16/92 35 yrs. Colony of Stone Mountain/Atlanta, GA 06/12/90 35 yrs. Colony Village/New Bern, NC 12/31/84 35 yrs. Copperfield/Fort Lauderdale, FL 09/21/94 35 yrs. Country Walk/Columbia, SC 12/19/91 35 yrs. Courthouse Green/Richmond, VA 12/31/84 35 yrs. Courtney Square/Raleigh, NC 07/08/93 35 yrs. The Cove at Lake Lynn/Raleigh, NC 12/01/92 35 yrs. Covington Crossing/Memphis, TN 10/14/94 35 yrs. Craig Manor/Salem,VA 11/06/87 35 yrs. The Creek/Wilmington, NC 06/30/92 35 yrs. Crescent Square/Atlanta, GA 03/22/89 35 yrs. Crossroads/Columbia, SC 07/01/94 35 yrs. Dover Country Club/Dover, DE 07/01/94 35 yrs. Dover Village/Orlando, FL 03/31/93 35 yrs. Dunwoody Pointe/Atlanta, GA 10/24/95 35 yrs. Eastwind/Virginia Beach, VA 04/04/88 35 yrs. Eden Commons/Columbia, MD 12/29/92 35 yrs. Emerald Bay/Charlotte, NC 02/06/90 35 yrs. English Hills/Richmond, VA 12/06/91 35 yrs. Excalibur/Charlotte, NC 07/01/94 35 yrs. Fisherman's Village/Orlando, FL 12/29/95 35 yrs. Forest Hills/Wilmington, NC 06/30/92 35 yrs. Forest Lakes at Oyster Point/ Newport News, VA 08/15/95 35 yrs. Forestbrook/Columbia, SC 07/01/93 35 yrs. Foxcroft/Tampa, FL 01/28/93 35 yrs. Franklin Mansions-Land/Nashville, TN 12/08/95 35 yrs. Gable Hill/Columbia, SC 12/04/89 35 yrs. Gatewater Landing/Glen Burnie, MD 12/16/92 35 yrs. Grand Oaks/Charlotte, NC 05/01/84 35 yrs. Great Oaks/Baltimore, MD 07/01/94 35 yrs. Greens at Cedar Chase/Dover, DE 05/04/95 35 yrs. Greens of Constant Friendship/ Baltimore, MD 05/04/95 35 yrs. Greens at Cross Court/Easton, MD 05/04/95 35 yrs. Greens at Falls Run/Fredericksburg, VA 05/04/95 35 yrs. Greens at Hilton Run/Lexington Park, M 05/04/95 35 yrs. Greens at Hollymead/Charlottesville, V 05/04/95 35 yrs. Greens at Schumaker Pond/Salisbury, MD 05/04/95 35 yrs. Greentree Place/Jacksonville, FL 07/22/94 35 yrs. Griffin Crossing/Atlanta, GA 06/08/94 35 yrs. The Groves/Daytona Beach, FL 12/13/95 35 yrs. Gwinnett Square/Atlanta, GA 03/29/95 35 yrs. Hampton Court/Alexandria, VA 02/19/93 35 yrs. Hampton Forest/Greenville, SC 08/16/94 35 yrs. Hamtpon Greene/Columbia, SC 08/19/94 35 yrs. Harbour Town/Nashville, TN 12/10/93 35 yrs. Harris Pond/Charlotte, NC 07/01/94 35 yrs. Heather Lake/Hampton, VA 03/01/80 35 yrs. Heatherwood/Greenville, SC 09/30/93 35 yrs. Heritage Trace/Newport News, VA 06/30/89 35 yrs. Hickory Run/Nashville, TN 12/29/95 35 yrs. Hickory Pointe/Memphis, TN 02/10/95 35 yrs. The Highlands/Charlotte, NC 01/17/84 35 yrs. Holly Tree Park/Waldorf, MD 07/01/94 35 yrs. Hunters Ridge/Plant City, FL 06/30/95 35 yrs. Hunters Trace/Memphis, TN 10/14/94 35 yrs. Hunting Ridge/Greenville, SC 11/01/94 35 yrs. Indian Hills/Anniston, AL 07/01/94 35 yrs. Key Pines/Spartanburg, SC 09/25/92 35 yrs. Knolls at Newgate/Fairfax, VA 07/01/94 35 yrs. The Lakes/Nashville, TN 09/15/93 35 yrs. Lake Washington Downs/Melbourne, FL 09/24/93 35 yrs. Lakeside North/Orlando, FL 04/14/94 35 yrs. Lakewood Place/Tampa, FL 03/10/94 35 yrs. The Landing/Greenville, SC 07/01/94 35 yrs. Laurel Ridge/Roanoke, VA 05/17/88 35 yrs. Laurel Village/Richmond, VA 09/06/91 35 yrs. The Ledges/Winston-Salem, NC 08/13/86 35 yrs. Legacy Hill/Nashville, TN 11/06/95 35 yrs. Liberty Crossing/Jacksonville, NC 11/30/90 35 yrs. Mallard Green/Charlotte, NC 07/01/94 35 yrs. Mallard of Wedgewood/Lakeland, FL 07/27/95 35 yrs. Manor at England Run/Fredericksburg, VA 05/04/95 35 yrs. Marble Hill/Richmond, VA 09/28/95 35 yrs. Meadow Run/Richmond, VA 12/31/84 35 yrs. Meadowdale Lakes/Richmond, VA 12/31/84 35 yrs. Mediterranean Village/Miami, FL 09/30/94 35 yrs. The Melrose/Dumfries, VA 12/11/85 35 yrs. Mill Creek/Wilmington, NC 09/30/91 35 yrs. Northview/Salem, VA 09/29/78 35 yrs. Olde West Village/Richmond, VA 12/31/84 & 8/27/91 35 yrs. Orange Orlando/Orlando, FL 01/21/93 35 yrs. Overlook/Greenville, SC 07/01/94 35 yrs. Palm Grove/Tampa, FL 04/15/94 35 yrs. The Park/Columbia, SC 07/01/94 35 yrs. Park Green/Raleigh, NC 09/27/91 35 yrs. Parkwood Court/Alexandria, VA 06/30/93 35 yrs. Patriot Place/Florence, SC 10/23/85 35 yrs. Peppertree/Charlotte, NC 12/14/93 35 yrs. Pinebrook/Clearwater,FL 09/28/93 35 yrs. Plum Chase/Columbia, SC 01/04/91 35 yrs. Regatta Shores/Orlando, FL 06/30/94 35 yrs. River Place/Macon, GA 04/08/94 35 yrs. River Road/Ettrick, VA 08/31/81 35 yrs. Riverwind/Spartanburg, SC 12/31/93 35 yrs. Rollingwood/Richmond, VA 12/31/84 35 yrs. Royal Oaks/Savannah, GA 07/01/94 35 yrs. Santa Barbara Landing/Naples, FL 09/01/94 35 yrs. The Shire/Raleigh, NC 03/04/94 35 yrs. Somerset/Charleston, SC 07/01/94 35 yrs. St. Andrews/Columbia, SC 07/01/94 35 yrs. St. Andrews Commons/Columbia, SC 05/20/93 35 yrs. Spring Forest/Raleigh, NC 05/21/91 35 yrs. Stanford Village/Atlanta, GA 09/26/89 35 yrs. Summit West/Tampa, FL 12/16/92 35 yrs. Three Fountains/Montgomery, AL 07/01/94 35 yrs. Timbercreek/Richmond, VA 08/31/83 35 yrs. Twin Coves/Baltimore, MD 08/16/94 35 yrs. Twin Rivers/Hopewell, VA 01/06/82 35 yrs. University Club/Ft. Lauderdale, FL 09/26/95 35 yrs. Village at Old Tampa Bay/Oldsmar, FL 12/08/93 35 yrs. Vinyards/Orlando, FL 10/31/94 35 yrs. Walnut Creek/Raleigh, NC 05/17/94 35 yrs. Waterford/Columbia, SC 07/01/94 35 yrs. West Knoll/Newark, DE 07/01/94 35 yrs. Windsor Harbor/Charlotte, NC 01/13/89 35 yrs. Woodscape/Newport News, VA 12/29/87 35 yrs. Woodside/Baltimore, MD 08/16/94 35 yrs. Shopping Centers: Gloucester Exchange/Gloucester, VA 11/12/87 35 yrs. Office and Industrial Buildings: Franklin St./Richmond, VA 07/01/86 35 yrs. Meadowdale Offices/Richmond, VA 12/31/84 35 yrs. Statesman Park/Roanoke, VA 05/22/75 33 yrs. Tri-County Buildings/Bristol, TN 01/21/81 33 yrs. Real Estate Held for Disposition Apartments: Azalea/Richmond, VA 12/31/84 35 yrs. Cedar Point/Raleigh, NC 12/18/85 35 yrs. Mill Creek/Atlanta, GA 11/11/88 35 yrs. Summit-on-Park/Charlotte, NC 01/17/84 35 yrs. . Towne Square/Hopewell, VA 08/27/85 35 yrs. Woodland Hollow/Charlotte, NC 11/03/86 35 yrs. Shopping Centers: Circle/Richmond, VA 11/01/73 25/35 yrs Deerfield Plaza/Myrtle Beach, SC 01/17/84 35 yrs. Hanover Village-Land/Richmond, VA 06/30/86 35 yrs. Laburnum Park-Land/Richmond, VA 09/28/90 35 yrs. Meadowdale/Richmond, VA 12/31/84 35 yrs. The Village/Durham, NC 08/28/86 35 yrs. Village Square/Myrtle Beach, SC 05/25/88 35 yrs. Willow Oaks/Hampton, VA 08/01/84 35 yrs. </TABLE> (a) The aggregate cost for federal income tax purposes was approximately $1.192 billion at December 31, 1995 and $987 million at December 31, 1994.