-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LlRjN0wp4StevUfwwgEPjD+uY+RH6FQWqQhUvpD937iFTZCb6YvPQDhZmM7i+ebY apqjt8xH9osCZl1MFStZ3Q== 0000916641-99-000026.txt : 19990121 0000916641-99-000026.hdr.sgml : 19990121 ACCESSION NUMBER: 0000916641-99-000026 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DOMINION REALTY TRUST INC CENTRAL INDEX KEY: 0000074208 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 540857512 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10524 FILM NUMBER: 99508627 BUSINESS ADDRESS: STREET 1: 10 S 6TH ST STE 203 CITY: RICHMOND STATE: VA ZIP: 23219-3802 BUSINESS PHONE: 8047802691 MAIL ADDRESS: STREET 1: 10 SOUTH SIXTH STREET STREET 2: SUITE 203 CITY: RICHMOND STATE: VA ZIP: 23219-3802 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19850110 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REIT ONE DATE OF NAME CHANGE: 19770921 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION REAL ESTATE INVESTMENT TRUS DATE OF NAME CHANGE: 19741216 8-K 1 UNITED DOMINION REALTY TRUST, INC. 8-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): January 20, 1999 UNITED DOMINION REALTY TRUST, INC (Exact name of registrant as specified in its charter) Virginia 1-10524 54-0857512 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation of organization) Identification No.) 10 South Sixth Street, Virginia 23219-3802 ------------------------------------------------- (Address of principal executive offices - zip code) (804) 780-2691 -------------------------------------------------- Registrant's telephone number, including area code Item 5. Other Event Effective at the close of business on December 7, 1998, American Apartment Communities II, Inc. (AAC), merged with and into United Dominion Realty Trust, Inc. (United Dominion), pursuant to an Agreement and Plan of Merger (Merger Agreement) between United Dominion and AAC. Pursuant to the Merger Agreement, each share of AAC common and preferred stock is entitled to receive 7.812742 shares of United Dominion Series D Convertible Preferred Stock (Preferred Stock) and $46.1824 in cash. In exchange for the Preferred Stock and cash, United Dominion will acquire AAC's 79.1% interest in AAC II, LP. In addition, United Dominion entered into a Partnership Interest Purchase and Exchange Agreement (Partnership Exchange Agreement) between United Dominion, United Dominion Realty, L.P. (United Dominion's Operating Partnership) and American Apartment Communities Operating Partnership, L.P., AAC Management LLC and Schnitzer Investment Corporation (the Limited Partners). The Limited Partners own a combined 20.9% interest in AAC II, LP. In exchange for the Limited Partners 20.9% interest in AAC II, LP, United Dominion will issue 5,614,035 Operating Partnership Units (OP Units) and cash. The transaction has been structured as a tax-free merger (Merger) and exchange of OP Units and will be treated as a purchase for accounting purposes. AAC owns 54 communities with 14,141 apartment homes located in the West, Northwest, Midwest and Florida. In addition to the Merger, the Pro Forma Information presented in this Form 8-K assumes the following acquisition occurred on January 1, 1997: (i) 39 apartment communities with 7,550 apartment homes owned by ASR Investment Corporation that were merged with and into a wholly-owned subsidiary of the United Dominion, in a statutory merger on March 27, 1998 (ii) the 1998 acquisitions of 13 communities containing 4,318 apartment homes for an aggregate purchase price of approximately $144.0 million, including closing costs and (iii) the 1997 acquisition of 17 communities with 5,394 apartment homes for an aggregate purchase price of approximately $218.5 million, including closing costs. 2 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information 4 through 15 3 UNITED DOMINION REALTY TRUST, INC. UNAUDITED CONSOLIDATED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1998 BASIS OF PRESENTATION The accompanying Unaudited Consolidated Pro Forma Combined Balance Sheet gives effect to the Merger as if it had occurred on September 30, 1998. The Unaudited Consolidated Pro Forma Combined Balance Sheet gives effect to the Merger under the purchase method of accounting in accordance with Accounting Standards Board Opinion No. 16. In the opinion of management, all significant adjustments necessary to reflect the effects of the Merger have been made. Included in the AAC II, LP Historical Balance Sheet are two communities which will not be acquired by United Dominion. The Unaudited Consolidated Pro Forma Combined Balance Sheet is presented for comparative purposes only and is not necessarily indicative of what the actual combined financial position of United Dominion and AAC would have been at September 30, 1998, nor does it purport to represent the future combined financial position of United Dominion and AAC. This Unaudited Consolidated Pro Forma Combined Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the historical financial statements and notes thereto of United Dominion included in its Annual Report on Form 10-K for the year ended December 31, 1997, its Quarterly Report on Form 10-Q for the nine months ended September 30, 1998 and the pro forma financial statements and notes thereto of United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. 4 UNITED DOMINION REALTY TRUST, INC. UNAUDITED CONSOLIDATED PRO FORMA COMBINED BALANCE SHEET September 30, 1998 (In thousands, except for share data)
United Pro Forma United Dominion AAC II, LP AAC II, Inc. Merger Dominion Historical Historical Historical Adjustments Pro Forma (A) (B) (C) (D) Combined -------------- ------------- -------------- -------------- ------------- ASSETS Real estate owned: Real estate held for investment $ 2,918,192 $ 687,854 $ $ 90,022 (E) $ 3,696,068 Less: accumulated depreciation (269,659) (37,197) 37,197 (E) (269,659) -------------- ------------- -------------- -------------- ------------- 2,648,533 650,657 0 127,219 3,426,409 Real estate under development 76,011 76,011 Real estate held for disposition 105,350 105,350 Investment in AAC II, LP 165,835 (165,835) (F) -- Cash and cash equivalents 28,485 9,015 (187) (G) 37,313 Other assets 68,301 19,400 17,411 (20,657) (H) 84,455 -------------- ------------- -------------- -------------- ------------- Total assets $ 2,926,680 $ 679,072 $ 183,246 $ (59,460) $ 3,729,538 ============== ============= ============== ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable-secured $ 646,718 $ 465,712 $ 19,572 $ (21,412) (I) $ 1,110,590 Notes payable-unsecured 902,180 75,066 (J) 977,246 Distributions payable to common and preferred shareholders 30,181 30,181 Accounts payable, accrued expenses and other liabilities 82,888 15,773 65 (52) (K) 98,674 -------------- ------------- -------------- -------------- ------------- Total liabilities 1,661,967 481,485 19,637 53,602 2,216,691 Minority interest 45,164 5,723 67,411 (L) 118,298 Shareholders' equity: Preferred stock, no par value; $25 liquidation preference, 25,000,000 shares authorized; 4,200,000 shares 9.25% Series A Cumulative Redeemable 105,000 85,000 (85,000) (M) 105,000 6,000,000 shares 8.60% Series B Cumulative Redeemable 150,000 150,000 8,000,000 shares 7.50% Series D Convertible 175,000 (M) 175,000 103,206,581 shares issued and outstanding 103,207 9 (9) (M) 103,207 Additional paid-in capital 1,084,331 67,312 (67,312) (M) 1,084,331 Notes receivable from employee- shareholders (8,124) (8,124) Distributions in excess of net income (214,865) 11,288 (11,288) (M) (214,865) Partners capital 191,864 (191,864) (M) -- -------------- ------------- -------------- -------------- ------------- Total shareholders' equity 1,219,549 191,864 163,609 (180,473) 1,394,549 -------------- ------------- -------------- -------------- ------------- Total liabilities and shareholders' equity $ 2,926,680 $ 679,072 $ 183,246 $ (59,460) $ 3,729,538 ============== ============= ============== ============== =============
5 UNITED DOMINION REALTY TRUST, INC. NOTES TO UNAUDITED CONSOLIDATED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1998 (Amounts in thousands, except per share and OP Unit data) (A) Represents United Dominion's Historical Consolidated Balance Sheet contained in its Quarterly Report on Form 10-Q at September 30, 1998. (B) Represents the AAC II, LP Historical Balance Sheet at September 30, 1998. Certain reclassifications have been made to AAC II, LP's Historical Balance Sheet at September 30, 1998 to conform to United Dominion's balance sheet presentation. (C) Represents the AAC II, Inc. Historical Balance Sheet at September 30, 1998. Certain reclassifications have been made to AAC II, Inc.'s Historical Balance Sheet at September 30, 1998 to conform to United Dominion's balance sheet presentation. (D) Represents adjustments to record the Merger in accordance with the purchase method of accounting, based upon an assumed purchase price of $802.9 million, as follows (in thousands of dollars): Assumption of AAC secured notes payable $ 451,497 Adjustment to record AAC fixed-rate secured notes payable at fair value 12,375 Issuance of Series D Convertible Preferred Stock, at fair value 175,000 Issuance of 5,614,035 OP Units, at fair value 67,411 Assumption of AAC liabilities and minority interest 21,508 Cash paid to AAC Partners 57,316 Merger costs (See calculation below) 13,435 Net asset value** 4,316 --------- $ 802,858 =========
The following is a calculation of the fees and other expenses related to the Merger (in thousands of dollars): Advisory fees $ 9,804 Loan assumption fees 2,105 Legal and accounting costs 1,113 Recording costs 110 Other 303 --------- $ 13,435 ========= ** Pursuant to the Merger Agreement, if the Net Asset Value (as defined in the Merger Agreement) is greater than $336.5 million, then the aggregate consideration will be increased by the difference between the $336.5 million and the Net Asset Value, as calculated. 6 (E) Increase of $127.2 million in the book value of AAC's real estate assets based upon United Dominion's assumed purchase price of $802.9 and the adjustment to eliminate AAC's historical accumulated depreciation as follows (in thousands of dollars): Purchase price (See note (D)) $802,858 Less basis of AAC's assets assumed: Real estate held for investment 687,854 Cash and cash equivalents 8,829 Investment in Joint Venture 2,342 Other assets (see Note (H)) 13,811 712,836 ------------ ------- Pro forma adjustment 90,022 AAC historical accumulated depreciation 37,197 ------- Total pro forma adjustment to real estate held for investment $127,219 =======
(F) Represents the elimination of AAC II, Inc's investment in AAC II, L.P which was not consolidated by AAC II, Inc. in its September 30, 1998 Historical Balance Sheet as AAC II, Inc. accounts for its investment in AAC II, LP under the equity method of accounting. Pursuant to the Merger Agreement, United Dominion issued Preferred Stock and cash in exchange for AAC II, Inc.'s 79.1% interest in AAC II, LP. (G) Represents the elimination of cash included in the AAC II, L.P. Historical Balance Sheet related to two communities which United Dominion did not acquire in connection with the Merger. (H) To adjust the historical basis of AAC's other assets in the aggregate amount of $20,657, which was eliminated in connection with the Merger. These assets consist primarily of deferred financing costs and related party receivables. (I) Represents the following adjustments to notes payable: (i) the $12,375 premium required to adjust the AAC notes payable to estimated fair value, (ii) the elimination of two notes payable aggregating $14,215 securing two communities included in the AAC II LP Historical Balance Sheet that will not be acquired by United Dominion in connection with the Merger and (iii) the elimination of the $19,572 AAC II, Inc. note payable which was paid off by the prior owners of AAC with proceeds from the Merger. (J) United Dominion issued debt in November 1998, prior to the effective date of the Merger on December 7, 1998. Proceeds of $75,066 from the debt issuance were used to fund the following costs in connection with the Merger (in thousands of dollars): Cash portion of purchase price $ 57,315 Merger costs (See Note (D)) 13,435 Net asset value (See Note (D)) 4,316 ------- $ 75,066 ======= (K) Represents the adjustment to eliminate other liabilities included in the AAC II, L.P. Historical Balance Sheet related to two communities which United Dominion did not acquire in connection with the Merger. (L) Adjustment to record the fair value of 5,614,035 OP Units which were issued in connection with the Merger. Pursuant to the Partnership Exchange Agreement, each OP Unit is convertible into one share of United Dominion common stock at a price of $14.25 per Unit. The fair value of the OP Units is estimated at a value of $12 per Unit. 7 (M) To adjust AAC's shareholders' equity to reflect the issuance of 8,000,000 shares of United Dominion Series D Convertible Preferred Stock and cash in exchange for all of AAC's outstanding common and preferred stock as follows (in thousands of dollars):
Preferred Common Additional Accumulated Partners Stock Stock Paid-in Capital Deficit Capital Total ------------------------------------------------------------------------------------ Issuance of Series D Convertible Preferred Stock $ 175,000 $ 175,000 AAC II, LP Historical Shareholders' Equity $ (191,864) $ (191,864) AAC II, Inc. Historical Shareholders' Equity (85,000) $ (9) (67,312) $ (11,288) $ (163,609) -------------------------------------------------------------------------------------- Pro forma adjustment $ 90,000 $ (9) $ (67,312) $ (11,288) $ (191,864) $ (180,473) ======================================================================================
8 UNITED DOMINION REALTY TRUST, INC. UNAUDITED CONSOLIDATED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 BASIS OF PRESENTATION The Unaudited Consolidated Pro Forma Combined Statements of Operations for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998 are presented as if the Merger had occurred on January 1, 1997. The Unaudited Consolidated Pro Forma Combined Statements of Operations give effect to the Merger under the purchase method of accounting in accordance with Accounting Standards Board Opinion No. 16, and the combined entity qualifying as a REIT, distributing at least 95% of its taxable income, and therefore, incurring no federal income tax liability for the periods presented. In addition to the Merger, the column titled "Previously Reported Transactions" is presented as if the following acquisitions occurred on January 1, 1997: (i) 39 apartment communities with 7,550 apartment homes owned by ASR Investment Corporation that were merged with and into a wholly-owned subsidiary of the United Dominion, in a statutory merger on March 27, 1998, (ii) the 1998 acquisitions of 13 communities containing 4,318 apartment homes for an aggregate purchase price of approximately $144.0 million, including closing costs and (iii) the 1997 acquisition of 17 communities containing 5,394 apartment homes for an aggregate purchase price of approximately $218.5 million, including closing costs (See Note (A) to the Unaudited Consolidated Pro Forma Combined Statements of Operations). In the opinion of management, all adjustments necessary to reflect the effects of these transactions have been made. The Unaudited Consolidated Pro Forma Combined Statements of Operations are presented for comparative purposes only and are not necessarily indicative of what United Dominion Consolidated actual results would have been for the year ended December 31, 1997 and the nine months ended September 30, 1998 if the Merger and other acquisitions had occurred at the beginning of each period presented, nor do they purport to be indicative of the results of operations in future periods. The Unaudited Consolidated Pro Forma Combined Statements of Operations should be read in conjunction with, and are qualified in their entirety by, the historical financial statements and notes thereto of United Dominion included in its Annual Report on Form 10-K for the year ended December 31, 1997, its Quarterly Report on Form 10-Q for the nine months ended September 30, 1998 and the pro forma financial statements and notes thereto of United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. 9 UNITED DOMINION REALTY TRUST, INC. UNAUDITED CONSOLIDATED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
Previously Reported United Previously Transactions Dominion Reported Pro Forma Historical Transactions Adjustments (A) (B) (C) -------------- --------------- --------------- Revenues Rental income $ 386,672 $ 74,829 $ 15,240 Earnings from investments in real estate Interest and other non-property income 1,123 732 (162) -------------- --------------- --------------- 387,795 75,561 15,078 Expenses Rental expenses: Utilities 24,861 4,568 1,173 Repairs and maintenance 54,607 8,739 2,018 Real estate taxes 30,961 6,569 1,693 Property management 12,203 3,127 (654) Other rental expenses 41,099 10,599 1,689 Real estate depreciation 76,688 6,335 10,872 Interest 79,004 9,642 19,096 General and administrative 7,075 3,114 (2,487) Acquisition related expenses 6,684 Other depreciation and amortization 2,084 412 - Impairment loss on real estate held for disposition 1,400 -------------- --------------- --------------- 329,982 59,789 33,400 Income from gains on sales of mortgage assets 17,213 (17,213) Income before gains on sales of investments, minority interest and extraordinary items 57,813 32,985 (35,535) Gains on sales of investments 12,664 474 -------------- --------------- --------------- Income before minority interest and extraordinary item 70,477 33,459 (35,535) Minority interest (278) (355) (1,272) -------------- --------------- --------------- Income before extraordinary item 70,199 33,104 (36,807) Extraordinary items-early extinguishment of debt (50) -------------- --------------- --------------- Net income 70,149 33,104 (36,807) Dividends to preferred shareholders (17,345) -------------- --------------- --------------- Net income available to common shareholders 52,804 33,104 (36,807) ============== =============== =============== Basic earnings per common share $ 0.61 ============== Diluted earnings per common share $ 0.60 ============== Distributions declared per common share $ 1.01 ============== Weighted average number of common shares-basic 87,145 8,340 Weighted average number of common shares-diluted 87,339 11,024
Adjustments to United Dominion AAC Pre AAC Merger AAC II, LP AAC II, Inc. Historical Pro Forma Historical (D) Historical (E) Financials (F) --------------- --------------- --------------- --------------- Revenues Rental income $ 476,741 $ 90,444 Earnings from investments in real estate 14,360 Interest and other non-property income 1,693 6,969 264 (1,957) --------------- --------------- --------------- --------------- 478,434 97,413 14,624 (1,957) Expenses Rental expenses: Utilities 30,602 6,740 Repairs and maintenance 65,364 10,200 Real estate taxes 39,223 7,418 (152) Property management 14,676 2,786 Other rental expenses 53,387 11,710 (74) Real estate depreciation 93,895 14,618 (632) Interest 107,742 30,292 3,054 (1,098) General and administrative 7,702 3,937 243 Acquisition related expenses 6,684 Other depreciation and amortization 2,496 Impairment loss on real estate held for disposition 1,400 --------------- --------------- --------------- --------------- 423,171 87,701 3,297 (1,956) Income from gains on sales of mortgage assets - Income before gains on sales of investments, minority interest and extraordinary items 55,263 9,712 11,327 (1) Gains on sales of investments 13,138 --------------- --------------- --------------- --------------- Income before minority interest and extraordinary item 68,401 9,712 11,327 (1) Minority interest (1,905) 16 --------------- --------------- --------------- --------------- Income before extraordinary item 66,496 9,728 11,327 (1) Extraordinary items-early extinguishment of debt (50) --------------- --------------- --------------- --------------- Net income 66,446 9,728 11,327 (1) Dividends to preferred shareholders (17,345) --------------- --------------- --------------- --------------- Net income available to common shareholders 49,101 9,728 11,327 (1) =============== =============== =============== =============== Basic earnings per common share $ 0.51 =============== Diluted earnings per common share $ 0.50 =============== Distributions declared per common share $ 1.01 =============== Weighted average number of common shares-basic 95,485 Weighted average number of common shares-diluted 98,363
AAC United Pro Forma Dominion Merger Pro Forma Adjustments Combined --------------- --------------- Revenues Rental income $ 567,185 Earnings from investments in real estate (14,360) (G) - Interest and other non-property income (264) (H) 6,705 --------------- --------------- (14,624) 573,890 Expenses Rental expenses: Utilities 37,342 Repairs and maintenance 75,564 Real estate taxes 46,489 Property management 17,462 Other rental expenses 65,023 Real estate depreciation 5,172 (I) 113,053 Interest 972 (J) 140,962 General and administrative (2,961)(K) 8,921 Acquisition related expenses 6,684 Other depreciation and amortization 2,496 Impairment loss on real estate held for disposition 1,400 --------------- --------------- 3,183 515,396 Income from gains on sales of mortgage assets - Income before gains on sales of investments, minority interest and extraordinary items (17,807) 58,494 Gains on sales of investments 0 13,138 --------------- --------------- Income before minority interest and extraordinary item (17,807) 71,632 Minority interest (1,342)(L) (3,231) --------------- --------------- Income before extraordinary item (19,149) 68,401 Extraordinary items-early extinguishment of debt (50) --------------- --------------- Net income (19,149) 68,351 Dividends to preferred shareholders (15,000) (M) (32,345) --------------- --------------- Net income available to common shareholders (34,149) 36,006 =============== =============== Basic earnings per common share $ 0.38 =============== Diluted earnings per common share $ 0.38 =============== Distributions declared per common share $ 1.01 =============== Weighted average number of common shares-basic 95,485 Weighted average number of common shares-diluted 5,614 (N) 103,977
See accompanying notes. 10 UNITED DOMINION REALTY TRUST, INC. UNAUDITED CONSOLIDATED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PREVIOUSLY REPORTED PREVIOUSLY TRANSACTIONS UNITED DOMINION UNITED DOMINION REPORTED PRO FORMA PRE AAC MERGER HISTORICAL (A) TRANSACTIONS (B) ADJUSTMENTS (C) PRO FORMA ------------------ ------------------ ----------------- ---------------- INCOME Rental income $ 346,171 $ 16,648 $ 1,095 $ 363,914 Earnings from investments in real estate Interest and non-property income 2,735 252 2,987 -------------- ------------------ ----------------- ------------------ 348,906 16,900 1,095 366,901 EXPENSES Rental expenses: Utilities 19,204 998 52 20,254 Repairs and maintenance 45,107 1,712 144 46,963 Real estate taxes 29,802 1,610 86 31,498 Property management 11,855 564 (100) 12,319 Other rental expenses 37,241 2,561 138 39,940 Depreciation of real estate owned 73,376 2,613 770 76,759 Interest 75,784 3,452 1,848 81,084 General and administrative 7,306 1,273 (993) 7,586 Other depreciation and amortization 2,434 189 (18) 2,605 -------------- ------------------ ----------------- ------------------ 302,109 14,972 1,927 319,008 -------------- ------------------ ----------------- ------------------ Income before gains on sales of investments, minority interest, and extraordinary item 46,797 1,928 (832) 47,893 Gains on sales of investments 20,474 20,474 -------------- ------------------ ----------------- ------------------ Income before minority interest and extraordinary item 67,271 1,928 (832) 68,367 Minority interest (1,200) (363) (405) (1,968) -------------- ------------------ ----------------- ------------------ Income before extraordinary item 66,071 1,565 (1,237) 66,399 Extraordinary items (116) (7,053) 7,053 (116) -------------- ------------------ ----------------- ------------------ Net income 65,955 (5,488) 5,816 66,283 Dividends to preferred shareholders (16,953) (16,953) -------------- ------------------ ----------------- ------------------ Net income available to common shareholders $ 49,002 $ (5,488) $ 5,816 $ 49,330 ============== ================== ================= ================== Basic earnings per common share $ 0.50 $ 0.48 ============== ================== Diluted earnings per common share $ 0.50 $ 0.46 ============== ================== Distributions declared per common share $ 0.7875 $ 0.7875 ============== Weighted average number of common shares outstanding-basic 98,786 3,961 102,747 Weighted average number of common shares outstanding-diluted 101,352 5,313 106,665
AAC ADJUSTMENTS TO PRO FORMA AAC II, LP AAC II, INC. AAC HISTORICAL MERGER HISTORICAL (D) HISTORICAL (E) FINANCIALS (F) ADJUSTMENTS ------------------ ---------------- ------------------ --------------- INCOME Rental income $ 80,245 $ $(1,614) $ Earnings from investments in real estate 11,341 (11,341) (G) Interest and non-property income 5,378 13 (10) (13) (H) ------------ ------------------ -------------- ------------------ 85,623 11,354 (1,624) (11,354) EXPENSES Rental expenses: Utilities 6,188 Repairs and maintenance 10,587 Real estate taxes 5,973 (159) Property management 2,264 Other rental expenses 7,892 (16) Depreciation of real estate owned 13,213 (440) 4,887 (I) Interest 26,652 973 (769) 1,866 (J) General and administrative 4,632 236 (4,331)(K) Other depreciation and amortization ------------ ------------------ -------------- ------------------ 77,401 1,209 (1,384) 2,422 ------------ ------------------ -------------- ------------------ Income before gains on sales of investments, minority interest and extraordinary item 8,222 10,145 (240) (13,776) Gains on sales of investments ------------ ------------------ -------------- ------------------ Income before minority interest and extraordinary item 8,222 10,145 (240) (13,776) Minority interest (183) (1,849) (L) ------------ ------------------ -------------- ------------------ Income before extraordinary item 8,039 10,145 (240) (15,625) Extraordinary items ------------ ------------------ -------------- ------------------ Net income 8,039 10,145 (240) (15,625) Dividends to preferred shareholders (11,250) (M) ------------ ------------------ -------------- ------------------ Net income available to common shareholders $ 8,039 $10,145 $ (240) $ (26,875) ============ ================== ============== ================== Basic earnings per common share Diluted earnings per common share Distributions declared per common share Weighted average number of common shares outstanding-basic Weighted average number of common shares outstanding-diluted 5,614 (N)
UNITED DOMINION PRO FORMA COMBINED ------------------ INCOME Rental income $ 442,545 Earnings from investments in real estate -- Interest and non-property income 8,355 ------------------ 450,900 EXPENSES Rental expenses: Utilities 26,442 Repairs and maintenance 57,550 Real estate taxes 37,312 Property management 14,583 Other rental expenses 47,816 Depreciation of real estate owned 94,419 Interest 109,806 General and administrative 8,123 Other depreciation and amortization 2,605 ------------------ 398,656 ------------------ Income before gains on sales of investments, minority interest and extraordinary item 52,244 Gains on sales of investments 20,474 ------------------ Income before minority interest and extraordinary item 72,718 Minority interest (4,000) ------------------ Income before extraordinary item 68,718 Extraordinary items (116) ------------------ Net income 68,602 Dividends to preferred shareholders (28,203) ------------------ Net income available to common shareholders $ 40,399 ================== Basic earnings per common share $ 0.39 ================== Diluted earnings per common share $ 0.40 ================== Distributions declared per common share $ 0.7875 Weighted average number of common shares outstanding-basic 102,747 Weighted average number of common shares outstanding-diluted 112,279
11 UNITED DOMINION REALTY TRUST, INC. UNAUDITED NOTES TO CONSOLIDATED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (Amounts in thousands, except per share and OP Unit data) (A) Represents United Dominion's Historical Consolidated Statements of Operations contained in its Annual Report on Form 10-K for the twelve month period ended December 31, 1997 and its Quarterly Report on Form 10-Q for the nine month period ended September 30, 1998. (B) Represents the actual results of operations of the following 1998 and 1997 acquisitions by United Dominion (collectively, the Previously Reported Transactions): (i) 39 apartment communities with 7,550 apartment homes owned by ASR Investment Corporation (ASR Merger) that were merged with and into a wholly-owned subsidiary of the United Dominion, in a statutory merger on March 27, 1998, (as previously reported on Form 8-K dated March 27, 1998 and subsequently amended on Form 8-K/A No.1 dated March 27, 1998 which was filed with the Securities and Exchange Commission on June 12, 1998), (ii) a portfolio of three apartment communities (collectively the Tennessee Portfolio) acquired on January 9, 1998 which consists of The Trails at Kirby Parkway Apartments and The Trails at Mount Moriah Apartments (which run as one community under the name The Trails), and Cinnamon Trails Apartments (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998), (iii) Dogwood Creek Apartments acquired on February 6, 1998 (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998), (iv) a portfolio of eight apartment communities (collectively the San Antonio Portfolio) acquired on April 16, 1998 which consists of Audubon Apartments, Carmel Apartments, Cimarron Apartments, Grand Cypress Apartments, Kenton Place Apartments, Peppermill Apartments, The Crest Apartments and Villages of Thousand Oaks Apartments (as previously reported on Form 8-K dated June 9, 1998 which was filed with the Securities and Exchange Commission on June 24, 1998), (v) Rancho Mirage Apartments acquired on May 28, 1998 (as previously reported on Form 8-K dated May 28, 1998 which was filed with the Securities and Exchange Commission on October 19, 1998), (vi) Crosswinds Apartments (formerly Tradewinds Apartments), Stoney Pointe Apartments (formerly Stoneybrooke Apartments) and Dominion Trinity Place Apartments, (formerly Trinity Place Apartments) acquired on February 28, 1997, (collectively the "Option Properties) (as previously reported on Form 8-K dated July 1, 1997 and subsequently amended on Form 8-K/A No. 1 dated July 1, 1997 which was filed with the Securities and Exchange Commission on September 15, 1997), (vii) Anderson Mill Oaks Apartments acquired on March 25, 1997, Oak Ridge Apartments (formerly Post Oak Ridge Apartments) acquired on March 27, 1997, Green Oaks Apartments (formerly Pineloch Apartments) and Skyhawk Apartments (formerly Seahawk Apartments) acquired on May 8, 1997, (collectively the "Texas Portfolio") (as previously reported on Form 8-K dated July 1, 1997 and subsequently amended on Form 8-K/A No. 1 dated July 1, 1997 which was filed with the Securities and Exchange Commission on September 15, 1997), (viii) a portfolio of five apartment communities containing 934 apartment homes acquired on July 1, 1997 (the "Florida Portfolio") which consist of Lakeside Apartments, Mallards of Brandywine Apartments, Lotus Landing Apartments , Orange Oaks Apartments and Forest Creek Apartments, (as previously reported on Form 8-K dated July 1, 1997 and subsequently amended on Form 8-K/A No. 1 dated July 1, 1997 which was filed with the Securities and Exchange Commission on September 15, 1997), (ix) a portfolio of four apartment communities (collectively the "Houston Portfolio") which consist of Greenhouse Patio Apartments (formerly Pecan Grove Apartments) and Braesridge Apartments acquired on September 26, 1997, Bammelwood Apartments acquired on October 30, 1997 and Camino Village Apartments acquired on November 20, 1997, (as previously reported on Form 8-K dated October 21, 1997 and subsequently amended on Form 8-K/A No. 1 dated October 21, 1997 which was filed with the Securities and Exchange Commission on December 31, 1997) and (x) Waterside at Ironbridge Apartments acquired on September 29, 1997, (as previously reported on Form 8-K dated October 21, 1997 and subsequently amended on Form 8-K/A No. 1 dated October 21, 1997 which was filed with the Securities and Exchange Commission on December 31, 1997). The acquisitions described in (i) through (x) above are shown in detail in United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. 12 (C) Represents the aggregate pro forma adjustments for United Dominion's 1998 and 1997 Previously Reported Transactions as described in Note B above. The pro forma adjustments for these acquisitions are shown in detail in United Dominion's Form 8-K dated May 28, 1998 as filed with the Securities and Exchange Commission on October 19, 1998. (D) Represents the AAC II, LP Historical Consolidated Statement of Operations for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998. Certain reclassifications have been made to AAC II, LP Historical Consolidated Statements of Operations to conform to United Dominion's presentation. (E) Represents the AAC II, Inc. Historical Consolidated Statement of Operations for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998. Certain reclassifications have been made to AAC II, Inc.'s Historical Consolidated Statements of Operations to conform to United Dominion's presentation. (F) Represents the elimination of rental income and rental expenses related to the results of operations of two properties included in the AAC II, LP Historical Statements of Operations for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998. Pursuant to the Merger Agreement, there are two properties that were not acquired by United Dominion in connection with the Merger. (G) Represents the elimination of AAC II, Inc's equity earnings in AAC II, LP. Pursuant to the Merger Agreement, United Dominion issued Preferred Stock and cash in exchange for AAC II, Inc.'s 79.1% interest in AAC II, LP. (H) Represents the elimination of other income included in AAC II, Inc's Historical Statements of Operations Operations for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998. The other income is eliminated since this income will not have a continuing impact on the results of operations for the combined entity. (I) Represents the estimated net increase in depreciation of real estate owned as a result of recording the AAC real estate at fair value versus historical cost and using United Dominion's depreciable lives. Depreciation is computed on a straight line basis over the estimated useful lives of the related assets which have an estimated weighted average useful life of approximately 27.6 years. Buildings have been depreciated over 35 years and other assets over 5, 10 or 20 years depending on the useful life of the related asset. Calculation of the fair value of depreciable real estate assets as of September 30, 1998 (in thousands of dollars): Purchase price $802,858 Less: Purchase price allocated to cash and cash equivalents 8,829 Purchase price allocated to other assets 13,811 Purchase price allocated to land 117,384 Purchase price allocated to investment in joint venture 2,342 -------- Pro forma basis of AAC's depreciable real estate held for investment at fair value $660,492 ========
13 Calculation of pro forma adjustment to depreciation of real estate owned for the twelve months ended December 31,1997 and the nine months ended September 30, 1998 (in thousands of dollars):
Twelve Months Nine Months Ended Ended December 31, 1997 ** Sept. 30, 1998 ----------------- --------------- Depreciation expense based upon an estimated weighted average useful life of approximately 27.6 years $ 19,790 $ 17,963 Less: AAC's depreciation of real estate owned (14,618) (13,076) --------- -------- Pro forma adjustment $ 5,172 $ 4,887 ========= ========
** During the twelve months ended December 31, 1997, AAC acquired 17 communities throughout the period for an aggregate purchase price of $318 million. Consequently, the pro forma depreciation expense calculation for the twelve months ended December 31, 1997 is based upon AAC's average depreciable assets for the twelve months ended December 31, 1997 of $497,805, a proportionate increase of fair value of 9.6%. (J) Represents the estimated net adjustment to interest expense for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998 associated with the Merger, as follows (in thousands of dollars):
Twelve Months Nine Months Ended Ended December 31, 1997 Sept, 30, 1998 ----------------- -------------- To adjust amortization of AAC's deferred financing costs which will be eliminated in the Merger $ (745) $ (740) To reflect amortization of the adjustment required to record AAC's mortgage notes payable at fair value (1,406) (1,054) To eliminate the interest expense related to the $19,572 secured note payable on AAC II, Inc's Historical Balance Sheet which was paid off by the prior owners of AAC with proceeds from the Merger (3,054) (973) To reflect interest expense associated with United Dominion's issuance of debt at a weighted average interest rate of 8.23%. (See Note J to the Consolidated Pro Forma Combined Balance Sheet) 6,177 4,633 ---------- -------- Pro forma adjustment $ 972 $ 1,866 ========== ========
(K) Reflects the net estimated reduction of general and administrative expenses of $2,961 and $4,331 for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998, respectively, based upon the identified historical costs of certain items which were eliminated or reduced as a result of the Merger, as follows (in thousands of dollars):
Twelve Months Nine Months Ended Ended December 31, 1997 Sept. 30, 1998 ----------------- -------------- Net reduction in salary, benefits, severance and other compensation due to the termination of AAC employees prior to the Merger in accordance with the Merger Agreement $ 2,809 $4,212 Net reduction in office rent as a result of the Merger 152 119 --------- ------ Pro forma adjustment $ 2,961 $4,331 ========= ======
14 (L) Reflects the increase in minority interest expense assuming the consummation of the Merger on January 1, 1997. A percentage of net income was allocated to Minority Interest representing interests not owned by United Dominion. The pro forma allocation to Minority Interest is based upon the percentage estimated to be owned by such Minority Interests as a result of the Merger. In connection with the Merger Agreement, United Dominion Realty, LP will issue 5,614,035 OP Units to the Limited Partners in exchange for their 20.9% interest in AAC II, LP. As a result, the pro forma weighted average OP Units outstanding, including the pro forma effect of the Merger (as a percentage of all common stock and Operating Partnership Units) was 8.28% and 8.42% for and the twelve months ended December 31, 1997 and the nine months ended September 30, 1998, respectively. The Minority Interest ownership in United Dominion is calculated as follows (Shares and OP Units in thousands):
Twelve Months Nine Months Ended Ended December 31, 1997 Sept. 30, 1998 ----------------- -------------- United Dominion historical weighted average common shares outstanding 87,145 98,786 Common shares issued in connection with the Previously Reported Transactions 8,340 3,961 ----- --------- Total pro forma weighted average common shares 95,485 102,747 United Dominion historical weighted average OP Units outstanding 317 2,482 OP Units issued in connection with the Previously Reported Transactions 2,684 1,352 OP Units issued in connection with the Merger 5,614 5,614 ----- ----- Total pro forma weighted average OP Units 8,615 9,448 Total weighted average common shares and OP Units 104,100 112,195 Pro forma Minority Interest ownership of United Dominion's Operating Partnership 8.28% 8.42%
(M) Reflects the increase in dividends to preferred shareholders of $15,000 and $11,250 for the twelve months ended December 31, 1997 and the nine months ended September 30, 1998. Based upon the Merger Agreement, United Dominion issued 8,000,000 shares of 7.5% Convertible Preferred Stock (Preferred Stock) for an aggregate stated value of $200 million to AAC II, Inc. in exchange for their 79.1% interest in AAC II, LP. (N) Represents the adjustment to United Dominion's weighted average number of common shares outstanding to reflect the Merger as if it had occurred on January 1, 1997. In connection with the Merger, United Dominion Realty, LP issued 5,614,035 OP Units to the AAC Limited Partners in exchange for their 20.9% ownership interest in AAC, which are included in diluted earnings per share. 15 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED DOMINION REALTY TRUST, INC. Date: January 20, 1999 /s/ Robin R. Flanagan ----------------- ------------------------------ Robin R. Flanagan, Assistant Vice President and Chief Accounting Officer 16 -----END PRIVACY-ENHANCED MESSAGE-----