UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
February 14, 2003
Date of Report (Date of earliest event reported)
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 1-12762 62-1543819
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
6584 POPLAR AVENUE, SUITE 300
MEMPHIS, TENNEESSEE 38138
(Address of principal executive offices)
(901) 682-6600
(Registrant's telephone number, including area code)
(Former name or address, if changed since last report)
ITEM 9. Regulation FD
(a) Conference Call
Mid-America Apartment Communities, Inc. (NYSE: MAA)
4th Quarter 2002
Earnings Release Conference Call February 14, 2003
Eric Bolton:
Good morning. This is Eric Bolton, CEO of Mid-America Apartment Communities.
With me are Simon Wadsworth, our Chief Financial Officer, Al Campbell,
Vice-President of Financial Planning and Tom Grimes, Vice-President and
Operations Director in our Property Management group.
Before we start, I need to remind you that as part of our discussion this
morning we will make forward-looking statements. Please refer to the safe-harbor
language included in our press release and our 34-Act filings with the SEC which
describe risk factors that may impact future results. This call is being
recorded and the press may be participating. We will post a copy of the
transcript of this call on our web site at www.maac.net immediately after the
call. You may also access an audio copy of this call at our web site.
In our prepared comments this morning we will provide additional insights on
fourth quarter results. Tom will review property management operations for the
quarter. Al will recap portfolio performance by market and provide insights on
what we expect from our major markets for the remainder of the year. Simon will
discuss our balance sheet and forecast for 2003. We will then open the phone
lines for any questions that you may have. Our prepared comments will last
approximately 22 minutes.
Let me start by providing you with general insights on our fourth quarter
results, as well as a recap on the progress made to date on the business
strategy we laid out for you early last year. As you know, the apartment sector
has been under some fairly significant operating pressure for the last several
quarters. And while there seems to be general consensus that 2003 will be
another tough operating year, we expect that Mid-America's portfolio of
properties will continue to outperform our peers in the apartment sector.
It is worth noting that for the quarter just ended, as well as for all of 2002,
Mid-America's same store NOI performance exceeded our apartment REIT peer group.
And in addition, Mid-America's total shareholder return for all of 2002, just
like it was for 2001, exceeded the investment returns of our peer group
companies. Despite the well publicized pressures that converged throughout 2002
to create the weakness in apartment operating fundamentals, Mid-America was able
to generate earnings results for the year that were within 1 cent per share of
the earnings range we gave you early last year. As you will note, our FFO
earnings for 2002 were down only 1.4% for the entire year as compared to 2001.
This was clearly one of the best performances of the apartment REIT sector.
There's no question that our operation and portfolio, just like all other
apartment REITs, has been put to the test over the last few quarters. But, our
approach to this business has some unique characteristics to it that I believe
offer the opportunity for higher, risk-adjusted, investment returns over the
long haul, and provide the ability to withstand down cycles better than most. I
would summarize those differences as follows:
o First, we deploy capital in a diversified manner in large, middle and small
tier markets, focused in a stable and steady growth region of the county.
Each market segment provides different ways to create value for capital and
these differing characteristics collectively generate a more stable
earnings platform.
o Second, we focus on product that appeals to the largest segment of the
rental market; avoiding the narrow market band at the very upper end price
points, as well as the risky aspects of capital deployment at the lower end
price points.
o Thirdly, we deploy capital under a very disciplined approach and remain
very mindful of the cyclical nature of the real estate industry and
specific markets.
o And, finally, we remain, always, very hands on focused to property
operations and expense control. Company culture and constant focus on
operations and productivity is a key differentiator over the long haul in a
highly competitive industry such as ours.
We believe that our approach to this business and our investment strategy will
continue to deliver long-term investment returns for our owners that will exceed
comparative benchmarks.
Our focus in laying the foundation for improving dividend coverage during this
weak part of the economic cycle through:
1. completing lease up of our development pipeline,
2. protecting value and cash flows of our existing properties,
3. and 3, carefully deploying capital in partnership with private capital,
made steady progress during 2002.
Lease up of our development properties is virtually complete. Our company
culture that is based on a very hands on and intense property management
operation, has clearly continued to generate superior operating results as
compared to our peers and, importantly, protect shareholder value during this
down part of the operating cycle. And we remain very pleased with our
partnership with Crow Holdings. Despite a challenging acquisitions environment,
we've successfully launched this new growth initiative this past year and we
look forward to continuing to expand this opportunity in 2003.
Our operation, our properties and our balance sheet are all well positioned to
continue to ride out the current market weakness and we are poised to make
improvements in earnings performance as the economy and markets strengthen.
I'd now like to turn the call over to Tom to recap property management
performance for the quarter.
Tom Grimes:
Same store occupancy performance during the fourth quarter averaged 92.6%, which
is down from the 94.7% of the preceding third quarter and 93.2% of the same
quarter in the prior year. We saw a fall off in occupancy in December, with
year-end occupancy at 91.9%. Some of this trend is attributable to normal
seasonal patterns. While occupancy performances will of course vary quite a bit
based on local market conditions, we believe that overall portfolio occupancy
performance will hold in the 91% to 92% range during the first quarter, which is
typically the low point of the year, before picking up in the stronger leasing
season of the second and third quarters.
Leasing traffic during the fourth quarter was essentially flat, as compared to
the same quarter of last year up .23%.
In addition to the slightly weaker occupancy performance, revenues were
pressured by an increase in collection loss as job loss and the weak economy
took their toll. Measured as a percent of net potential rent, collection loss
rose from .9% from the fourth quarter of last year to 1.1% this year. We are
vigilant in our operation about not compromising leasing and credit standards,
despite any occupancy pressures and we are comfortable that the increase in
collection loss is attributable to the weak employment picture and slow economy.
We were pleased to see a decline in unit turnover as same store resident
move-outs declined 2.1% as compared to the same quarter last year and was 68.3%
for the preceding 12 months. This is the third consecutive quarter in which
turnover has improved. This progress was made despite the current robust home
buying environment.
Portfolio wide we were pleased to see concessions decrease by 10.4% in the
fourth quarter as compared to the same quarter last year and down a significant
17.3% from the prior quarter. This is primarily attributable to the improvement
in the Memphis portfolio. We continue to see high concession loss in Atlanta and
worsening conditions in Dallas. However, the positive performance in Memphis
partially offsets these two markets.
Various initiatives and programs associated with on-site operations productivity
continue to post solid results. Operating expenses, controllable at the property
level, posted only a 1.8% increase on a same store basis over the comparable
quarter of a year ago. Performance in this area is positively impacted by our
significant focus on resident retention and working to minimize the high cost
associated with obtaining new residents in this market environment.
Total property level expenses increased by 5.2% as our renewed property and
casualty insurance program was effective at the beginning of the third quarter.
Al Campbell:
As Eric mentioned, although the apartment sector continues to be under pressure
from the economic downturn, our portfolio has performed better than most over
the last year showing the strength of our diversification across large,
mid-sized, and smaller markets throughout the southeast region. Pressure during
the quarter was most evident in our larger markets, where significant job losses
and construction of new apartments continue, supported by record low interest
rates. Our same store revenues declined 5.7% for our portfolio in larger
markets, while our portfolio in mid-sized markets grew 0.3% and smaller markets
grew 1.7%.
Dallas continues to be our most challenging market as negative absorption of
over 8,000 apartment units over the last two years has put tremendous pressure
on occupancy and rents in the market. Occupancy for our portfolio ended the
quarter 4.3% below the prior year, while concession levels continued to
increase, producing a 10.4% decline in revenues. We expect continued difficult
conditions in the Dallas market throughout 2003, as apartment completions are
again expected to outpace demand, but long term we believe the Dallas market is
supported by strong fundamentals, which will eventually bring recovery to the
market.
We also saw continued weakness in our Atlanta and Austin portfolios during the
quarter, as both markets continue to work through the large number of new units
delivered over the last two years during the period of weakened demand.
Occupancy for our Atlanta portfolio declined to 87.6% at quarter end, 3.1% below
the prior year, while concessions remained at historically high levels.
Occupancy for our Austin market finished the quarter at a relatively strong
93.8%, but concession levels as a percentage of net potential rent grew 4.1%
over the prior year. Construction levels in both markets have shown slow
reaction to market weakness, but reduced multifamily permitting levels for the
last twelve months in both Atlanta (down 8.7%) and Austin (down 16.7%) provide
initial signs of slowing. We expect continued difficult conditions for both the
Atlanta and Austin markets throughout 2003, with recovery for both markets being
closely tied to the national economy.
We also began seeing some softness in our Tampa portfolio during the quarter as
occupancy slipped to 89.2% by quarter-end. We expect the Tampa market to remain
relatively soft throughout 2003, but our four properties represent only about 3%
of our total portfolio, which should not significantly affect overall results.
Our markets producing the strongest revenue growth during the quarter were
Memphis (6.3% growth), Jacksonville, (2.9% growth), Houston (.8% growth),
Columbus, GA (3.1% growth), and Jackson, MS (.9% growth).
We were encouraged by the continued improvement in our Memphis portfolio during
the quarter, as both concession and vacancy levels improved producing increased
revenues while controllable operating expenses were down over 8%, creating a
13.7% increase in NOI. While the Memphis market has seen significant levels of
new unit deliveries over the last two years, we expect deliveries for the
remaining part of the current year and into 2004 to be more in balance with the
absorption rate, allowing for continued progress toward recovery.
As mentioned, we were pleased with the continued stable performance of our
portfolios in Jacksonville and Houston during the quarter. Looking in to 2003,
we do expect our Houston portfolio to experience some softness as the market
comes off a very good year.
We were also pleased with the stable performance of our smaller market tier of
properties throughout the Southeast, as 68% of these markets produced growing
revenues compared to the prior year, while 48% produced growing NOI. This
stability during the tough economic environment underscores the strength of our
diversification strategy.
Looking at some of our portfolio wide initiatives, we essentially completed the
roll-out of our resident utility billing program during the current year (which
includes water/sewer and trash), obtaining nearly 95% portfolio penetration
which produced almost $6 million in resident reimbursements during the current
year and is expected to produce an additional $1 million in 2003.
Simon Wadsworth:
Our financial position has continued to strengthen as we've finished the
development properties. Of the three remaining, Grande View Nashville and Grande
Reserve Lexington are almost stabilized, with only Reserve at Dexter Lake Phase
III (in Memphis) still in lease-up at 72% occupancy, and this should be fully
leased by the end of the second quarter.
As a result, our balance sheet has gained flexibility: our debt service coverage
has improved to 2.41 from 2.36 a year ago, and our fixed charge coverage
improved to 2.44 from 2.35. This marks the sixth sequential quarterly
improvement on a year-over-year basis. At the end of the quarter approximately
84% of our debt was fixed, swapped, or capped.
We think that our balance sheet is well-positioned for our business strategy;
our portfolio and our business is proving to be less cyclical than others that
are in the much riskier development business or those with big concentrations in
some of the more volatile larger metro areas.
Similarly, our NAV per share has remained strong. We think our value remains in
the $26 to $28.50 range, and any weakness in NOI has been more than made up for
by improved cap rates.
Our joint venture with Crow Holdings, in which we have a 1/3 interest, completed
the purchase of The Preserve at Arbor Lakes in Jacksonville, FL for $22.1
million in mid-January. Freddie Mac provided a $14.9 million loan on the
property through the credit facility that we've set up with them within the
joint venture. As we announced in our press release last week, using funding
from our bank credit facility, we've purchased 100% of Green Oaks Apartments in
Dallas, TX for $18.9 million, and we expect this to be contributed to the joint
venture in the next 60 days. When we close the Green Oaks purchase into the
joint venture, with our partners we'll have invested about half of our $150
million plan for the joint venture, of which 2/3 will be debt. These latest two
acquisitions should add approximately 4 cents/share to this year's FFO, which is
included in our forecast.
We executed a contract to sell The Crossings, an 80-unit older property in
Memphis, for $4.6 million during the quarter; we will receive a sub-7 cap rate
for this asset from a buyer planning to redevelop the site. We expect this to
close in the second half of the year with the sale diluting this year's earnings
by around a penny/share, although we've considered this in our forecasts.
As we discussed in the third quarter conference call, in October we completed
some significant refinancings which helped to reduce our average interest cost
to 5.8% from 6.0% at the end of the third quarter. Using our Fannie Mae credit
facilities, we completed $29 million of conventional and $30 million of tax-free
bond refinancings; we also refinanced our 9.5% Series E preferred stock,
repurchasing it at a 7% premium, and issuing new preferred series with improved
terms.
We are close to finalizing the refinancing of almost $150 million of debt. We
expect to close this with Fannie Mae on March 3rd, and we've executed forward
swaps totaling $150 million to reduce our interest rate risk, with an average
life of 5 years. Including the impact of the deferred finance cost amortization,
the average rate on the replacement debt is 110 bp below the cost of the old
debt. We'll see these savings, almost 8 cents/share on an annualized basis,
begin to impact our P & L in March. Once this flurry of financing activity is
concluded, we have less than $15 million of refinancings scheduled for the next
15 months.
You will have noticed that our property management expenses for the quarter were
reduced compared to last year and the prior quarter. The primary reasons were
reduced bonuses and reduced Franchise and Excise Taxes; in the same quarter a
year ago we also incurred some one-time costs. This quarter you will see that
our non-real estate depreciation costs increased, of which $200,000 reflects a
one-time charge associated with discontinuing a landscaping business.
We're comfortable with First Call's current FFO projection for 2003 of
$2.75/share, just one cent below 2002. We're forecasting a modest start to the
year, with the first quarter's FFO in a range of $0.66 to $0.68 per share,
slightly down from a year ago. Compared to this past quarter, we're projecting
same store NOI to be reduced by about $500,000, from a combination of weaker
revenues and increased expenses (especially real estate taxes). This is offset
by improvements in our income from our joint venture properties and other
income/expense. We're projecting first quarter same-store NOI to be down by 5%
over the same first quarter of 2002; for the full-year we think same-store NOI
will drop by 2.5% with the trend improving steadily as the year progresses. By
the fourth quarter of 2003, we think we'll begin to see positive year over year
comparisons, partly because the fourth quarter of 2002 was relatively weak.
Since our insurance renews in the third quarter, we are hopeful that the shock
of the 43% increase we experienced in the third quarter of 2002 will be
ameliorated once we roll into the third quarter of this year, when we're
projecting a 14% same-store increase in insurance costs.
In the second quarter, we pick up the full benefit of the interest rate
reduction from our March 3rd $150 million refinancing. We're forecasting
FFO/share of 71 cents for the second quarter, then 68 cents in the third quarter
and 71 cents in the fourth quarter. We've also forecast the completion of our
$150 million JV with Crow; with $75 million, or half, now invested, we think
that this is a realistic assumption.
We feel confident about our ability to execute our business plan and sustain our
dividend. Our concentrated focus is on improving our dividend coverage. As we've
noted in the supplemental data in our press release, our dividend is covered by
our free cash flow. Any threat to our dividend would come from either a
prolonged decline in our same-store NOI, or a drop in our FFO. We think the risk
of either of these events occurring is slight. Through our joint venture plans
we are actively working to protect the dividend further, and we have confidence
in this year's FFO projection. You will notice that our FAD for 2002 was
$2.17/share, just 2 cents below the level of 2001 and 17 cents ($3 1/2 million)
below our dividend of $2.34. Free cash flow (which adds back non-cash charges)
was $2.37 per share, 3 cents better than the prior year, and 3 cents ahead of
our dividend. So while we recognize that FFO needs to grow to improve our
dividend coverage, and this is our primary management focus, we do not feel
undue pressure. For 2003, FAD and free cash flow should be similar to 2002, but
we expect this to show improvement as our NOI starts to improve towards the end
of this year.
We spent $12.1 million, or $394/unit, on recurring capital expenditures in 2002,
up slightly from last year's $376/unit. In 2003, we plan to grow this slightly
to around $418/unit. We think that an average of around $400/unit is a good long
term average for our portfolio, and at 12 years, its age is amongst the youngest
of the REITs. We spent a total of $17.4 million last year on capital
improvements to the existing properties, and project that we'll increase this by
$1 million this year. We believe it is most important to continue to maintain
our properties in top condition through all phases of the cycle, and
particularly during tough times.
Eric Bolton:
To recap, I want to re-emphasize that despite the challenging operating
environment, we continue to post fairly stable operating results and
importantly, continue to improve the balance sheet and coverage ratios.
Our properties are in excellent shape and are poised for stronger revenue growth
as market conditions improve. As a result of our heavy focus on property
management operations and careful execution of our new acquisition initiative,
we believe that Mid-America is very well positioned for steady and growing
earnings as the economy strengthens.
We remain comfortable with our current dividend pay-out level. Current net asset
value for MAA is higher than where the stock is currently priced and we believe
that our operation and balance sheet are well positioned to continue to steadily
add to this value per share. In summary, our investment strategy is sound and
will, we believe, continue to provide a platform for long-term steady,
predictable and growing revenue and NOI performance.
That is all we have in the way of prepared comments and we will now be glad to
answer any questions that you may have.
(b) Press Release
Mid-America Apartment Communities, Inc.
A self-managed Equity REIT
From: Simon R. C. Wadsworth
Subject: MID-AMERICA FOURTH QUARTER RESULTS IN-LINE WITH FORECAST
Date: FEBRUARY 13, 2003
--------------------------------------------------------------------------------
Mid-America Fourth Quarter Results In-Line With Forecast
Memphis, TN, Mid-America Apartment Communities, Inc. (NYSE: MAA) reported Funds
From Operations ("FFO"), the generally accepted measure of performance for real
estate investment trusts, of $14,325,000 or $0.69 per share for the quarter
ended December 31, 2002. For all of 2002, FFO results were $56,838,000 or $2.76
per share. Both the fourth quarter and year results are in line with the
company's prior published guidance. The fourth quarter FFO performance
represents a slight decline of $0.01 per share from the $0.70 per share
performance for the same quarter of last year. The $2.76 per share FFO
performance for 2002 is a 1.4% decline from $2.80 per share for all of the prior
year. Net loss available for common shareholders for the fourth quarter was
$2,911,000 or -$0.16 per share largely due to $2,041,000 in amount paid to
retire preferred stock in excess of carrying values related to the buyback of
the Company's Series E Preferred Stock. This compares to net income available
for common shareholders of $2,117,000 or $0.12 per share for the fourth quarter
of 2001 when the company recorded a net gain of $1,869,000 related to insurance
settlement proceeds.
Highlights for the fourth quarter were:
o Leasing remains challenging as a consequence of the weak job growth
environment and a strong home buying market.
o Same store occupancy at year end of 91.9% was down slightly from 92.7% at
the same point of the prior year.
o Despite the tough operating environment, the balance sheet continues to
strengthen as coverage ratios show steady improvement.
o Refinancings of $59 million were completed, with overall average interest
cost down to 5.84% from 6.35% a year ago.
o Shortly after year end we closed on the purchase of Preserve at Arbor
Lakes, a 284-unit community in Jacksonville, FL, which represents the
company's second acquisition through its joint venture with Crow Holdings.
The Company also closed on the purchase of Green Oaks, a 300-unit community
in Grand Prairie, TX, after year end which it expects to transfer to its
joint venture with Crow Holdings at a later date.
Eric Bolton, Chairman and CEO said, "The operating environment remains
competitive. Historically low mortgage rates, weak job growth and pockets of new
construction continue to pressure demand/supply factors for the apartment
industry. These pressures are more evident in larger metro markets as compared
to the secondary and small city markets. While our portfolio of properties is
clearly feeling the effect of the challenging leasing market, our diversified
investment strategy in markets across the more stable southeast region of the
country continues to perform in a relatively predictable and steady fashion. We
expect that the leasing environment will remain very competitive and challenging
throughout most of 2003.
"Despite the continued weakness in market conditions, we continue to believe
that our current FFO forecast for 2003 of $2.74 to $2.78 per share is
reasonable. Our projections for 2003 are based on a same store NOI performance
that is a 2% decline from the performance in 2002. We forecast FFO per share of
$0.66 to $0.68 in the first quarter. While the acquisition market remains very
competitive, we remain confident that we will be successful in completing our
Joint Venture investment program and have based our 2003 projections on an
assumed additional $80 million in new property acquisitions."
Simon Wadsworth, Executive Vice-President and CFO said, "Our coverage ratios
have improved this year as our cost of debt has dropped and our development
pipeline becomes increasingly productive. Our fixed charge coverage has
increased to 2.44 for the fourth quarter of 2002 from 2.35 for the same period
of a year ago. Our leverage, at 54% of undepreciated assets, remains steady. Our
dividend continues to be secure within our 2003 forecast range, but we remain
committed to enhancing coverage."
"During the quarter we completed the refinancing of $30 million of tax-free
bonds and refinanced $29 million of conventional mortgage debt using our Fannie
Mae credit facilities. We are making excellent progress towards refinancing the
$147 million of maturities in the first quarter of 2003 and have locked in the
interest rates on this refinancing at substantial savings over existing rates.
We are pleased with our new credit line that is now in place for our joint
venture and used it to finance 65% of the purchase price of its latest
acquisition."
Al Campbell, Vice-President and Director of Financial Planning said, "Our
performance was more stable than most in the multifamily sector due to our
diversified portfolio across small, mid-sized, and large markets throughout the
Southeast. Same store property revenues were down slightly at -0.2% for the
fourth quarter and -0.6% for the full year. Same store property operating
expenses, which excludes insurance and real estate taxes, were up only 1.8% for
the fourth quarter and 2.1% for the full year. A significant increase in
insurance costs associated with the renewal of our property and casualty
insurance on July 1st continues to have a significant impact as total property
level operating expenses were up 5.2% in the fourth quarter and 3.5% for the
full year. As a result, same store NOI performance was down -3.3% for the
quarter and -3.0% for the full year, with the weakest results coming from a few
of our large metropolitan markets."
"We are encouraged by the continued improvement in our Memphis market portfolio,
as both occupancy and concession levels improved during the quarter producing a
6.3% increase in revenues over the prior year. Dallas continues to be our most
challenging market, as revenues declined 10.4% from the prior year. We expect
the Dallas market to continue to struggle through most of 2003, as new apartment
deliveries continue to outpace demand in the short term; however we are bullish
on the long-term prospects for this market, and we will continue to look for
attractive investment opportunities during this down part of the cycle. We also
saw revenue declines in our Atlanta portfolio (4.4%) and Tampa portfolio (5.4%)
as compared to the prior year. We continue to post solid results from our
portfolios in Jacksonville, Houston, Columbus, GA, and Jackson, MS. In addition,
our smaller markets continue to produce stable results as a whole, generating
1.7% revenue growth over the same quarter last year.
Eric Bolton said, "The long term outlook for the multifamily housing market
remains encouraging, particularly in the southeastern region of the country. By
diversifying our investments over large, middle and small tier markets
throughout this solid growth region, we are able to deliver a more consistent
and steady earnings performance. Furthermore, at an average age of only twelve
years, our portfolio of properties is in great shape and well positioned to not
only compete in this tough leasing environment, but produce strong long term
results as the economy begins to strengthen."
"Our balance sheet is strengthening as our solid portfolio diversification
continues to deliver steady and predictable performance. Coverage ratios show
improvement and we are committed to the current level of cash dividends paid to
our owners. Our strategy focuses on generating a steady improvement to earnings
and per share value growth along with further strengthening dividend coverage,
and it remains solidly on track."
MAA is a self-administered, self-managed apartment-only real estate investment
trust which currently owns or has ownership interest in 34,507 apartment units
throughout the southeast and southcentral U.S. For further details, please refer
to our website at www.maac.net or contact Simon R. C. Wadsworth at (901)
682-6668, ext. 105. 6584 Poplar Ave., Suite 300, Memphis, TN 38138.
Certain matters in this press release may constitute forward-looking statements
within the meaning of Section 27-A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934. Such statements include, but are not
limited to, statements made about anticipated market conditions, anticipated
acquisitions, redevelopment opportunities, and property financing. Actual
results and the timing of certain events could differ materially from those
projected in or contemplated by the forward-looking statements due to a number
of factors, including a downturn in general economic conditions or the capital
markets, competitive factors including overbuilding or other supply/demand
imbalances in some or all of our markets, shortage of acceptable property
acquisition candidates, changes in interest rates and other items that are
difficult to control, as well as the other general risks inherent in the
apartment and real estate businesses. Reference is hereby made to the filings of
Mid-America Apartment Communities, Inc., with the Securities and Exchange
Commission, including quarterly reports on Form 10-Q, reports on Form 8-K, and
its annual report on Form 10-K, particularly including the risk factors
contained in the latter filing.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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In thousands except per share data
Three months ended December 31, Twelve months ended December 31,
-------------------------------- --------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
Property revenues $ 56,562 $ 55,757 $ 226,951 $ 226,270
Property operating expenses 22,334 20,886 87,634 84,584
------------------------------------------------------------------------------------------------ --------------------------------
Net operating income 34,228 34,871 139,317 141,686
Interest and other non-property income 266 323 737 1,310
Management and fee income, net 205 186 775 755
FFO from real estate joint ventures 283 203 898 972
Property management expenses 1,851 2,521 8,633 9,561
General & administrative 1,557 1,612 6,665 6,522
Interest expense 12,067 12,272 49,448 52,598
Gain(loss) on disposition of non-depreciable assets (45) - (45) 229
Preferred dividend distribution 3,944 4,028 16,029 16,113
Depreciation and amortization non-real estate assets 492 113 1,357 594
Amortization of deferred financing costs 701 657 2,712 2,352
------------------------------------------------------------------------------------------------ --------------------------------
Funds from operations 14,325 14,380 56,838 57,212
Depreciation and amortization 13,363 12,931 53,906 51,457
Joint venture depreciation adjustment included in FFO 398 325 1,430 1,268
Gain(loss) on disposition of non-depreciable assets
included in FFO (45) - (45) 229
Preferred dividend distribution add back (3,944) (4,028) (16,029) (16,113)
------------------------------------------------------------------------------------------------ --------------------------------
Income before gain on disposition of assets,
minority interest and extraordinary items 4,553 5,152 17,576 20,371
Net gain(loss) on disposition of assets and
insurance settlement proceeds (40) 1,869 397 11,933
Minority interest in operating partnership income (127) (469) (493) (2,573)
------------------------------------------------------------------------------------------------ --------------------------------
Income before extraordinary items 4,386 6,552 17,480 29,731
Ex item - Loss on debt extinguishment, net of MI 1,312 407 1,339 1,033
Preferred dividend distribution 3,944 4,028 16,029 16,113
Amount paid to retire preferred stock in excess of carrying values 2,041 - 2,041 -
------------------------------------------------------------------------------------------------ --------------------------------
Net income(loss) available for common shareholders $ (2,911) $ 2,117 $ (1,929) $ 12,585
------------------------------------------------------------------------------------------------ --------------------------------
Weighted average common shares and units - Diluted 20,634 20,489 20,613 20,464
Funds from operations per share and units - Diluted $ 0.69 $ 0.70 $ 2.76 $ 2.80
Weighted average common shares - Diluted 17,709 17,568 17,561 17,532
Net income(loss) available for common shareholders
before extraordinary items - Diluted (1) $ (0.09) $ 0.14 $ (0.03) $ 0.78
Net income(loss) available for common shareholders
after extraordinary items - Diluted (1) $ (0.16) $ 0.12 $ (0.11) $ 0.72
(1) For periods where the Company reported a net loss available for common
shareholders, the effect of dilutive shares has been excluded from net loss
available for common shareholders per common shares computations because
including such shares would be anti-dilutive
----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------------------------------------------------------------------
In thousands
December 31, December 31,
2002 2001
--------------- ---------------
Assets
Gross real estate assets $ 1,452,362 $ 1,433,525
Accumulated depreciation (283,593) (229,913)
Non-rental real estate assets, net 23,454 13,321
------------------------------------------------------------------------------------------------
Real estate assets, net 1,192,223 1,216,933
Cash and cash equivalents, including restricted cash 18,057 23,432
Other assets 29,187 23,123
------------------------------------------------------------------------------------------------
Total assets $ 1,239,467 $ 1,263,488
------------------------------------------------------------------------------------------------
Liabilities
Bonds and notes payable $ 803,703 $ 779,664
Other liabilities 64,188 41,564
------------------------------------------------------------------------------------------------
Total liabilities 867,891 821,228
Shareholders' equity and minority interest 371,576 442,260
------------------------------------------------------------------------------------------------
Total liabilities & shareholders' equity $ 1,239,467 $ 1,263,488
------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OPERATING RESULTS
--------------------------------------------------------------------------------
Dollars and shares in thousands except per share data
ROA Annualized Trailing
4Q02 4 Quarters
------------ ------------
Gross Real Estate Assets, Average $1,478,792 $1,472,107
EBITDA $ 124,704 $ 124,999
EBITDA/Gross Real Estate Assets 8.4% 8.5%
Three Months Ended December 31,
----------------------------------
2002 2001
---------------- ----------------
Common and Preferred Dividends as % of FFO (12 month rolling) 88% 87%
EBITDA/Debt Service 2.41x 2.36x
EBITDA/Fixed Charges 2.44x 2.35x
Total Debt as % of Gross Real Estate Assets 54% 54%
MAA portion of JV debt (1) $36,747 $27,107
Capitalized Interest YTD $ 239 $ 1,382
Twelve Months Ended December 31,
----------------------------------
FAD 2002 2001
---------------- ----------------
FFO $56,838 $57,212
Recurring Capex $12,123 $12,348
FAD $44,715 $44,864
Free Cash Flow (2) $48,784 $47,810
Average Common Shares and Units - Diluted 20,613 20,464
PER SHARE (DILUTED)
FFO $ 2.76 $ 2.80
FAD $ 2.17 $ 2.19
Free Cash Flow (2) $ 2.37 $ 2.34
Distribution $ 2.340 $ 2.340
(1) 2002 includes new joint venture with Crow Holdings
(2) Includes addback of other non-cash items, primarily non-real estate
depreciation and amortization.
------------------------------------------------------------------------------------------------------------------------
OTHER DATA
------------------------------------------------------------------------------------------------------------------------
Shares and units in thousands except per share data
Three Months Ended December 31, Twelve Months Ended December 31,
-------------------------------- -------------------------------
2002 2001 2002 2001
------------------ ------------ ---------------- -------------
Weighted average common shares and units - Basic 20,449 20,348 20,415 20,359
Weighted average common shares and units - Diluted 20,634 20,489 20,613 20,464
Number of apartment units with ownership interest
(excluding development units not delivered) 33,923 33,411 33,923 33,411
Apartment units added(sold) during period, net - 120 512 (201)
PER SHARE DATA
Funds from operations per share and units - Basic $ 0.70 $ 0.71 $ 2.78 $ 2.81
Funds from operations per share and units - Diluted $ 0.69 $ 0.70 $ 2.76 $ 2.80
Net income(loss) available for common shareholders
before extraordinary items - Diluted (3) $ (0.09) $ 0.14 $ (0.03) $ 0.78
Net income(loss) available for common shareholders
after extraordinary items - Diluted (3) $ (0.16) $ 0.12 $ (0.11) $ 0.72
Dividend declared per common share $ 0.585 $ 0.585 $ 2.340 $ 2.340
DIVIDEND INFORMATION (latest declaration) Payment Payment Record
per Share Date Date
-------------- -------------- -------------
Common Dividend - quarterly $0.5850 1/31/2003 1/24/2003
Preferred Series A - monthly $0.1979 2/14/2003 1/31/2003
Preferred Series B - monthly $0.1849 2/14/2003 1/31/2003
Preferred Series C - quarterly $0.5859 1/15/2003 1/2/2003
Preferred Series F - monthly $0.1927 2/14/2003 1/31/2003
(3) For periods where the Company reported a net loss available for common
shareholders, the effect of dilutive shares has been excluded from net loss
available for common shareholders per common shares computations because
including such shares would be anti-dilutive
-----------------------------------------------------------------------------------------------------------------------
COMMUNITY STATISTICS
-----------------------------------------------------------------------------------------------------------------------
Properties are grouped by operational responsibilty and exclude properties in lease-up
At December 31, 2002
-------------------------------------------------------------
Average
Number of Portfolio Rental Rate
Units Concentration Occupancy Per Unit
------------ ---------------- ------------- --------------
Tennessee
Memphis 4,429 13.5% 93.8% $ 620.25
Nashville 966 2.9% 91.0% $ 685.96
Chattanooga 943 2.9% 91.4% $ 567.35
Jackson 664 2.0% 88.4% $ 610.96
Florida
Jacksonville 2,846 8.6% 93.6% $ 692.50
Tampa 1,120 3.4% 89.2% $ 758.16
Other 2,518 7.6% 93.0% $ 716.61
Georgia
Atlanta 2,116 6.4% 87.6% $ 783.83
Columbus / LaGrange 1,509 4.6% 92.5% $ 651.30
Augusta / Aiken / Savannah 1,132 3.4% 93.6% $ 626.92
Other 1,742 5.3% 90.1% $ 659.19
Texas
Dallas 2,056 6.2% 86.8% $ 647.66
Austin 1,254 3.8% 93.8% $ 670.71
Houston 1,002 3.0% 96.4% $ 674.15
South Carolina
Greenville 1,492 4.5% 89.2% $ 552.70
Other 784 2.4% 91.6% $ 677.38
Kentucky
Lexington 924 2.8% 93.1% $ 708.20
Other 624 1.9% 91.7% $ 618.60
Mississippi 1,673 5.1% 93.3% $ 584.10
Alabama 952 2.9% 89.9% $ 643.27
Arkansas 808 2.4% 95.9% $ 614.19
North Carolina 738 2.2% 90.9% $ 562.79
Ohio 414 1.3% 84.3% $ 695.90
Virginia 296 0.9% 94.3% $ 715.71
------------ ---------------- ------------- --------------
Total 33,002 100.0% 91.7% $ 658.13
-----------------------------------------------------------------------------------------------------------------------
SAME STORE STATISTICS
-----------------------------------------------------------------------------------------------------------------------
Dollars in thousands except Average Rental Rate
Three Months Ended December 31, Twelve Months Ended December 31,
----------------------------------------- -----------------------------------------
Percent Percent
2002 2001 Change 2002 2001 Change
---------- ------------- -------------- ------------ ------------- ------------
Revenues $52,085 $52,175 -0.2% $210,372 $211,731 -0.6%
Property Operating Expenses 13,593 13,354 1.8% 54,332 53,231 2.1%
RE Taxes and Insurance 6,815 5,967 14.2% 25,752 23,907 7.7%
Other Expenses 88 171 -48.5% 438 690 -36.5%
---------- ------------- -------------- ------------ ------------- ------------
Total Operating Expenses 20,496 19,492 5.2% 80,522 77,828 3.5%
---------- ------------- -------------- ------------ ------------- ------------
NOI $31,589 $32,683 -3.3% $129,850 $133,903 -3.0%
---------- ------------- -------------- ------------ ------------- ------------
Units (1) 28,803 28,803 28,803 28,803
Average Rental Rate (1) $656.00 $657.27 -0.2% $ 656.00 $ 657.27 -0.2%
Average Physical Occupancy (1) 91.9% 92.7% -0.9% 91.9% 92.7% -0.9%
(1) Values are at December 31, 2002 and 2001
--------------------------------------------------------------------------------
DEBT AS OF DECEMBER 31, 2002
--------------------------------------------------------------------------------
Dollars in thousands
Principal Average Years Average
Balance to Maturity Rate
------------ -------------- ---------
Conventional - Fixed Rate or Swapped $ 541,918 7.4 6.9%
Tax-free - Fixed Rate or Swapped 122,783 24.0 5.5%
Conventional - Variable Rate 122,342 10.6 2.1%
Tax-free - Variable Rate 16,660 28.6 2.5%
------------ -------------- ---------
Total $ 803,703 10.9 5.8%
FUTURE PAYMENTS Average
Scheduled Rate for
Amortization Maturities Total Maturities
------------- ------------- ---------- ----------
2003 $ 3,512 $ 160,972 $ 164,484 6.3%
2004 3,650 71,671 75,321 7.0%
2005 3,891 - 3,891
2006 3,980 36,010 39,990 6.4%
2007 3,427 - 3,427
Thereafter 107,180 409,410 516,590 5.5%
------------- ------------- ---------- ----------
Total $ 125,640 $ 678,063 $ 803,703 5.8%
---------------------------------------------------------------------------------------------------------------------------
DEVELOPMENT PIPELINE
---------------------------------------------------------------------------------------------------------------------------
Units Percentage of Available
-------------------------------------------------
Available Units to Lease
-----------------------
Total to Lease Occupied Leased Occupied Leased
-------------- ----------- ----------- ---------- ----------- ----------
Properties in Lease-up
Grande View Nashville Nashville, TN 433 433 381 387 88% 89%
Reserve at Dexter Lake Phase II Memphis, TN 244 244 232 234 95% 96%
Reserve at Dexter Lake Phase III Memphis, TN 244 244 168 176 69% 72%
-------------- ----------- ----------- ---------- ----------- ----------
Total 921 921 781 797 85% 87%
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-AMERICA APARTMENT COMMUNITIES, INC.
Date: February 14, 2003 /s/Simon R.C. Wadsworth
Simon R.C. Wadsworth
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)