UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
___________________
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2006 | |
OR | |
o | 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: 1-12762
MID-AMERICA APARTMENT COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE | 62-1543819 |
(State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
6584 POPLAR AVENUE, SUITE 300 | |
MEMPHIS, TENNESSEE | 38138 |
(Address of principal executive offices) | (Zip Code) |
(901) 682-6600 | |
(Registrants telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act: | |
Title of each class | Name of each exchange on which registered |
Common Stock, par value $.01 per share | New York Stock Exchange |
Series F Cumulative Redeemable Preferred Stock, | |
Par value $.01 per share | New York Stock Exchange |
Series H Cumulative Redeemable Preferred Stock, | |
Par value $.01 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: [None]
Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes oNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. oYes xNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. xYes oNo
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 registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes xNo
As of June 30, 2006, the aggregate market value of the registrants common stock held by non-affiliates of the registrant was $1,302,258,285, based on the closing sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
Class | Outstanding at February 9, 2007 |
Common Stock, $.01 par value per share | 25,332,675 shares |
DOCUMENTS INCORPORATED BY REFERENCE
Document | Parts Into Which Incorporated | |
Certain portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2007 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. | Part III |
MID-AMERICA APARTMENT COMMUNITIES, INC.
TABLE OF CONTENTS
Item | Page | |||
PART I | ||||
1. | Business | 3 | ||
1A. | Risk Factors | 8 | ||
1B. | Unresolved Staff Comments | 13 | ||
2. | Properties | 13 | ||
3. | Legal Proceedings | 19 | ||
4. | Submission of Matters to Vote of Security Holders | 19 | ||
PART II | ||||
5. | Market for Registrants Common Equity, Related Stockholder Matters and | |||
Issuer Purchases of Equity Securities | 20 | |||
6. | Selected Financial Data | 22 | ||
7. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||
7A. | Quantitative and Qualitative Disclosures About Market Risk | 33 | ||
8. | Financial Statements and Supplementary Data | 34 | ||
9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 34 | ||
9A. | Controls and Procedures | 34 | ||
9B. | Other Information | 35 | ||
PART III | ||||
10. | Directors, Executive Officers and Corporate Governance | 35 | ||
11. | Executive Compensation | 35 | ||
12. | Security Ownership of Certain Beneficial Owners and Management and | |||
Related Stockholder Matters | 35 | |||
13. | Certain Relationships and Related Transactions, and Director Independence | 35 | ||
14. | Principal Accounting Fees and Services | 35 | ||
PART IV | ||||
15. | Exhibits, Financial Statement Schedules | 36 |
PART I
ITEM 1. BUSINESS
OVERVIEW OF MID-AMERICA
Founded in 1994, Mid-America Apartment Communities, Inc., or Mid-America, is a Memphis, Tennessee-based self-administered and self-managed umbrella partnership real estate investment trust, or REIT, that focuses on acquiring, owning and operating apartment communities. We, together with our subsidiaries, report as a single business segment. As of December 31, 2006, Mid-America owned 100% of 137 properties representing 39,771 apartment units. Mid-America has from time-to-time participated in various joint ventures. As of December 31, 2006, we participated in a joint venture with Crow Holdings named Mid-America CH/Realty II LP, which owned one property with 522 apartment units at December 31, 2006. Mid-America had a 33.33% ownership interest in the joint venture and was paid a management fee of 4% of revenues from the property owned by the joint venture as of and for the year ended December 31, 2006. In total, Mid-America owned or had an ownership interest in 138 properties with 40,293 apartment units at December 31, 2006. Subsequent to year end, the joint venture sold its sole property and Mid-America sold its ownership interest in the joint venture to Crow Holdings. Following these transactions in January 2007, Mid-America had no joint venture interests.
Mid-Americas business is conducted principally through Mid-America Apartments, L.P., which we refer to as our operating partnership. Mid-America is the sole general partner of the operating partnership, holding 258,990 common units of partnership interest, or common units, comprising a 1% general partnership interest in the operating partnership as of December 31, 2006. Mid-Americas wholly-owned qualified REIT subsidiary, MAC II of Delaware, Inc., a Delaware corporation, is a limited partner in the operating partnership and, as of December 31, 2006, held 23,028,923 common units, or 88.92% of all outstanding common units.
Mid-America operated apartment communities in 13 states in 2006, employing 1,164 full time and 105 part time employees at December 31, 2006.
OPERATING PHILOSOPHY
Mid-Americas primary objectives are to protect and grow existing property values, to maintain a stable and increasing cash flow that will fund its dividend through all parts of the real estate investment cycle, and to create new shareholder value by growing Mid-America in a disciplined manner. Mid-America focuses on growing shareholder value by effectively and efficiently operating its existing investments and, when accretive to shareholder value, through new investments.
Investment Focus
Mid-Americas primary investment focus is on apartment communities in the Sunbelt region of the United States. Between 1994 and 1997, Mid-America grew largely through the acquisition and redevelopment of existing communities. Between 1998 and 2002, its concentration was on development of new communities. Since 2003, we have focused on the acquisition of properties that we believe can be repositioned with appropriate use of capital and our operating management skills. We are currently focusing on increasing our investments in properties in larger and faster growing markets within our current geographic area, and intend to do this through acquiring apartment communities with the potential for above average growth. On a small scale, Mid-America is developing expansions at existing communities. We will continue our established process of selling mature assets, and will adapt our investment focus to opportunities and markets. In order to improve our return on investment, we have from time-to-time invested with joint venture partners and anticipate this will continue to be part of our strategy.
High Quality Assets
Mid-America strives to maintain its assets in excellent condition, believing that continuous maintenance will lead to higher long-run returns on investment. Mid-America believes that being recognized by civic and industry trade organizations for the high quality of its properties, landscaping, and property management will lead to higher
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rents and profitability and evidences the high quality of its properties and operations. Mid-America periodically and selectively sells assets to ensure that its portfolio consists primarily of high quality, well-located properties within its market area.
Diversified Market Focus
We believe the stability of our cash flow is enhanced and it will generate higher risk adjusted cash flow returns, with lower volatility, through our diversified strategy of investments over large, middle and small-tier markets throughout the Sunbelt region of the United States.
Intensive Property and Asset Management Focus
Mid-America has traditionally emphasized property management, and in the past three years we have deepened our asset management functions to provide additional support in marketing, training, ancillary income and, most recently, revenue management. At December 31, 2006, Mid-America employed approximately 106 Certified Apartment Managers, a designation established by the National Apartment Association which provides training for on-site manager professionals. We have enhanced our focus on asset management over the last several years by increasing regional staffing in the areas of maintenance, capital improvement oversight, landscaping, marketing and pricing management.
Decentralized Operational Structure
Mid-America operates in a decentralized manner. We believe that our decentralized operating structure capitalizes on specific market knowledge, provides greater personal accountability than a centralized structure and is beneficial in the acquisition and redevelopment processes. To support this decentralized operational structure, senior and executive management, along with various asset management functions, are proactively involved in supporting and reviewing property management through extensive reporting processes and frequent on-site visitations. In 2004, Mid-America completed the installation of the property and accounting modules of a new web-based property management system that increased the amount of information shared between senior and executive management and the properties on a real time basis, improving the support provided to on-site property operations. In 2005, we made significant improvements to our operating platform and we expect these enhancements will help capture more operating efficiencies, continue to support effective expense control and provide for various expanded revenue management practices. In 2006, we successfully completed an extensive test and evaluation of a new yield management pricing program that we plan to implement across the portfolio during 2007 which we expect will help our property managers to optimize rental revenues.
PROACTIVE BALANCE SHEET AND PORTFOLIO MANAGEMENT
Mid-America focuses on improving the value of each share of Mid-America common stock. We routinely evaluate each asset and from time-to-time sell those that no longer fit our strategy. Mid-America makes new investments and issues new equity when management believes it can add to value per share. In the past, Mid-America has sold assets to fund share repurchases when, in managements view, shareholder value would be enhanced.
STRATEGIES
Mid-America seeks to increase operating cash flow and earnings per share to maximize shareholder value through a balanced strategy of internal and external growth.
Operating Growth Strategy
Mid-Americas goal is to maximize our return on investment in each apartment community by increasing rental rates and reducing operating expenses while maintaining high occupancy levels. The steps taken to meet these objectives include:
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Joint Venture Strategy
One of Mid-Americas strategies is to co-invest with private capital partners in joint venture opportunities from time-to-time to the extent we believe that a joint venture will enable us to obtain a higher return on our investment through management and other fees, which leverage our skills in acquiring, repositioning, redeveloping and managing multifamily investments. In addition, the joint venture investment strategy can provide a platform for creating more capital diversification and lower investment risk for Mid-America.
Disposition Strategy
Mid-America from time-to-time disposes of mature assets, defined as those apartment communities that no longer meet our investment criteria and long-term strategic objectives. Typically, Mid-America selects assets for disposition that do not meet our present investment criteria including estimated future return on investment, location, market, potential for growth, and capital needs. Mid-America may from time-to-time also dispose of assets for which we receive an offer meeting or exceeding our return on investment criteria even though those assets may not meet the disposition criteria disclosed above. No apartment communities were sold during 2006.
Acquisition Strategy
One of Mid-Americas growth strategies is to acquire and redevelop apartment communities that meet our investment criteria and focus as discussed above. Mid-America has extensive experience and research-based skills in the acquisition and repositioning of multifamily communities. In addition, Mid-America will acquire newly built and developed communities that can be purchased on a favorable pricing basis. Mid-America will continue to evaluate opportunities that arise, and will utilize this strategy to increase the number of apartment communities in strong and growing markets in the Sunbelt region of the United States.
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The following apartment communities were purchased during 2006:
Number | ||||||
Property | Location | of Units | Date Purchased | |||
100% Owned Properties: | ||||||
Preserve at Brier Creek | Raleigh, NC | 250 | January 19, 2006 | |||
Silverado | Austin, TX | 312 | March 23, 2006 | |||
Grand Courtyard | Dallas, TX | 390 | April 27, 2006 | |||
Reserve at Woodwind Lakes | Houston, TX | 328 | September 6, 2006 | |||
Talus Ranch at Sonoran Foothills | Phoenix, AZ | 480 | September 29, 2006 | |||
Oaks at Wilmington Island | Savannah, GA | 306 | October 12, 2006 | |||
2,066 |
Development Strategy
In 2006, Mid-America began some expansion development projects at existing apartment communities on adjacent land already owned by us. We do not currently intend to expand into development in a significant way. We prefer to capture accretive new growth through opportunistically acquiring new properties.
COMMON AND PREFERRED STOCK
Mid-America continuously reviews opportunities for lowering our cost of capital, and increasing value per share. Mid-America evaluates opportunities to repurchase stock when we believe that our stock price is below the value of our assets and accordingly repurchased common stock, funded by asset sales, between 1999 and 2001. Mid-America also looks for opportunities where we can acquire or develop apartment communities, selectively funded or partially funded by stock sales, when it will add to shareholder value and the investment return is projected to substantially exceed our cost of capital. Mid-America will also opportunistically seek to lower our cost of capital through refinancing preferred stock as we did in 2003 and 2006.
In May 2006, Mid-America sold 1,150,000 shares of common stock through a public offering, receiving net proceeds of $59.5 million. Mid-America used $10 million to redeem all of our issued and outstanding 8 5/8% Series G Cumulative Redeemable Preferred Stock shares on May 26, 2006.
On November 3, 2006, Mid-America entered into a sales agreement with Cantor Fitzgerald & Co. to sell up to 2,000,000 shares of Mid-Americas common stock, from time-to-time in at-the-market offerings or negotiated transactions through a controlled equity offering program. From November 3, 2006, until the end of 2006, Mid-America sold 194,000 shares of common stock for net proceeds of $11.4 million after underwriting commissions and SEC fees.
Mid-America also has a direct stock purchase plan which allows for the optional purchase of common stock of at least $250, but not more than $5,000 in any given month, free of brokerage commissions and charges. We, in our absolute discretion, may grant waivers to allow for optional cash payments in excess of $5,000. Throughout 2006, we issued a total of 1,356,015 shares through our direct stock purchase plan at an average 1.5% discount.
SHARE REPURCHASE PROGRAM
In 1999, Mid-Americas Board of Directors approved an increase in the number of shares of Mid-Americas common stock authorized to be repurchased to 4 million shares. As of December 31, 2006, Mid-America had repurchased a total of approximately 1.86 million shares (8% of the shares of common stock and common units outstanding as of the beginning of the repurchase program). From time-to-time, we intend to sell assets based on our disposition strategy outlined in this Annual Report and use the proceeds to repurchase shares when we believe that shareholder value is enhanced. Factors affecting this determination include the share price, asset dispositions and pricing, financing agreements and rates of return of alternative investments. No shares were repurchased from 2002 through 2006 under this plan.
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COMPETITION
All of Mid-Americas apartment communities are located in areas that include other apartment communities. Occupancy and rental rates are affected by the number of competitive apartment communities in a particular area. The owners of competing apartment communities may have greater resources than Mid-America, and the managers of these apartment communities may have more experience than Mid-Americas management. Moreover, single-family rental housing, manufactured housing, condominiums and the new and existing home markets provide housing alternatives to potential residents of apartment communities.
Apartment communities compete on the basis of monthly rent, discounts, and facilities offered such as apartment size and amenities, and apartment community amenities, including recreational facilities, resident services, and physical property condition. Mid-America makes capital improvements to both our apartment communities and individual apartments on a regular basis in order to maintain a competitive position in each individual market.
ENVIRONMENTAL MATTERS
As part of the acquisition process, Mid-America obtains environmental studies on all of our apartment communities from various outside environmental engineering firms. The purpose of these studies is to identify potential sources of contamination at the apartment communities and to assess the status of environmental regulatory compliance. These studies generally include historical reviews of the apartment communities, reviews of certain public records, preliminary investigations of the sites and surrounding properties, visual inspection for the presence of asbestos, PCBs and underground storage tanks and the preparation and issuance of written reports. Depending on the results of these studies, more invasive procedures, such as soil sampling or ground water analysis, will be performed to investigate potential sources of contamination. These studies must be satisfactorily completed before Mid-America takes ownership of an acquisition community, however, no assurance can be given that the studies identify all significant environmental problems.
Under various Federal, state and local laws and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on properties. Such laws often impose such liability without regard to whether the owner caused or knew of the presence of hazardous or toxic substances and whether or not the storage of such substances was in violation of a residents lease. Furthermore, the cost of remediation and removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owners ability to sell such real estate or to borrow using such real estate as collateral.
Mid-America is aware of environmental concerns specifically relating to potential issues resulting from mold in residential properties and has in place an active management and preventive maintenance program that includes procedures specifically related to mold. Mid-America has established a policy requiring residents to sign a mold addendum to lease. Mid-America has also purchased a $2 million insurance policy that covers remediation and exposure to mold. The current policy expires in 2007 but is renewable at that time. Mid-America, therefore, believes that our exposure to this issue is limited and controlled.
The environmental studies received by Mid-America have not revealed any material environmental liabilities. Mid-America is not aware of any existing conditions that would currently be considered an environmental liability. Nevertheless, it is possible that the studies do not reveal all environmental liabilities or that there are material environmental liabilities of which Mid-America is unaware. Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents.
Mid-America believes that our apartment communities are in compliance in all material respects with all applicable Federal, state and local ordinances and regulations regarding hazardous or toxic substances and other environmental matters.
WEBSITE ACCESS TO REGISTRANTS REPORTS
Mid-America files annual and periodic reports with the Securities and Exchange Commission. All filings made by Mid-America with the SEC may be copied or read at the SECs Public Reference Room at 100 F Street NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling
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the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC as Mid-America does. The website is http://www.sec.gov.
Additionally, a copy of this Annual Report on Form 10-K, along with Mid-Americas Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to the aforementioned filings, are available on Mid-Americas website free of charge. The filings can be found on the Investor Relations page under SEC Filings. Mid-Americas website also contains our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the committees of the Board of Directors. These items can also be found on the Investor Relations page under Company Info and Governance. Mid-Americas website address is http://www.maac.net. Reference to Mid-Americas website does not constitute incorporation by reference of the information contained on the site and should not be considered part of this document. All of the aforementioned materials may also be obtained free of charge by contacting the Investor Relations Department at Mid-America Apartment Communities, Inc., 6584 Poplar Avenue, Suite 300, Memphis, TN 38138.
RECENT DEVELOPMENTS
Distribution
In February 2007, Mid-America announced a monthly distribution to our Series F Cumulative Redeemable Preferred Stock shareholders of $0.1927 per share, which is payable on March 15, 2007.
Dispositions
On January 12, 2007, the sole property in Mid-Americas joint venture with Crow Holdings, Verandas at Timberglen, a 522-unit community in Dallas, TX, was sold. In conjunction with the sale, Mid-America sold our ownership interest in the joint venture to Crow Holdings. As a result, Mid-America booked a gain on sale of $5.4 million and an incentive fee of $1 million, both of which will be recorded in Mid-Americas 2007 consolidated financial statements. Following these transactions, Mid-America had no joint venture interests.
ITEM 1A. RISK FACTORS
In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.
Failure to Generate Sufficient Cash Flows Could Limit our Ability to Pay Distributions to Shareholders
Mid-Americas ability to generate sufficient cash flow in order to pay common dividends to our shareholders depends on our ability to generate funds from operations in excess of capital expenditure requirements and preferred dividends, and/or to have access to the markets for debt and equity financing. Funds from operations and the value of Mid-Americas apartment communities may be insufficient because of factors which are beyond our control. Such events or conditions could include:
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At times, Mid-America relies on external funding sources to fully fund the payment of distributions to shareholders and our capital investment program (including our existing property expansion developments). While Mid-America has sufficient liquidity to permit distributions at current rates through additional borrowings if necessary, any significant and sustained deterioration in operations could result in our financial resources being insufficient to pay distributions to shareholders at the current rate, in which event Mid-America would be required to reduce the distribution rate. Any decline in Mid-Americas funds from operations could adversely affect Mid-Americas ability to make distributions to our shareholders or to meet our loan covenants and could have a material adverse effect on Mid-Americas stock price.
Debt Level, Refinancing and Loan Covenant Risk May Adversely Affect Financial Condition and Operating Results and Our Ability to Maintain Our Status as a REIT
At December 31, 2006, Mid-America had total debt outstanding of $1.2 billion. Payments of principal and interest on borrowings may leave Mid-America with insufficient cash resources to operate the apartment communities or pay distributions that are required to be paid in order for Mid-America to maintain our qualification as a REIT. Mid-America currently intends to limit our total debt to approximately 60% of the undepreciated book value of our assets, although our charter and bylaws do not limit our debt levels. Circumstances may cause Mid-America to exceed that target from time-to-time. As of December 31, 2006, Mid-Americas ratio of debt to undepreciated book value was approximately 52%. Mid-Americas Board of Directors can modify this policy at any time which could allow Mid-America to become more highly leveraged and decrease our ability to make distributions to our shareholders. In addition, Mid-America must repay its debt upon maturity, and the inability to access debt or equity capital at attractive rates could adversely affect Mid-Americas financial condition and/or our funds from operations. Mid-America relies on Fannie Mae and Freddie Mac, which we refer to as the agencies, for the majority of our debt financing and has agreements with the agencies and with other lenders that require us to comply with certain covenants. The breach of any one of these covenants would place Mid-America in default with our lenders and may have serious consequences on the operations of Mid-America.
Variable Interest Rates May Adversely Affect Funds from Operations
At December 31, 2006, effectively $226 million of Mid-Americas debt bore interest at a variable rate and was not hedged by interest rate swaps or caps. Mid-America may incur additional debt in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect Mid-Americas funds from operations and the amounts available to pay distributions to shareholders. Mid-Americas $1.0 billion secured credit facilities with Prudential Mortgage Capital, credit enhanced by Fannie Mae, are predominately floating rate facilities. Mid-America also has credit facilities with Freddie Mac totaling $300 million which are variable rate facilities. At December 31, 2006, a total of $988 million was outstanding under these facilities. These facilities represent the majority of the variable interest rates Mid-America was exposed to at December 31, 2006. Large portions of the interest rates on these facilities have been hedged by means of a number of interest rate swaps and caps. Upon the termination of these swaps and caps, Mid-America will be exposed to the risks of varying interest rates.
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Issuances of Additional Debt or Equity May Adversely Impact Our Financial Condition
Our capital requirements depend on numerous factors, including the occupancy rates of our apartment communities, dividend payment rates to our shareholders, development and capital expenditures, costs of operations and potential acquisitions. Mid-America cannot accurately predict the timing and amount of our capital requirements. If our capital requirements vary materially from our plans, Mid-America may require additional financing sooner than anticipated. Accordingly, Mid-America could become more leveraged, resulting in increased risk of default on our obligations and in an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt and equity capital markets in the future.
Increasing Real Estate Taxes and Insurance Costs May Negatively Impact Financial Condition
Because Mid-America has substantial real estate holdings, the cost of real estate taxes and insuring its apartment communities is a significant component of expense. Real estate taxes and insurance premiums are subject to significant increases and fluctuations which can be widely outside of the control of Mid-America. If the costs associated with real estate taxes and insurance should rise, Mid-Americas financial condition could be negatively impacted and Mid-Americas ability to pay our dividend could be affected.
Losses from Catastrophes May Exceed Our Insurance Coverage
Mid-America carries comprehensive liability and property insurance on our communities, and intends to obtain similar coverage for communities we acquire in the future. Some losses, generally of a catastrophic nature, such as losses from floods, hurricanes or earthquakes, are subject to limitations, and thus may be uninsured. Mid-America exercises our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our investments at a reasonable cost and on suitable terms. If Mid-America suffers a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement value of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed.
Property Insurance Limits May be Inadequate and Deductibles May be Excessive in the Event of a Catastrophic Loss or a Series of Major Losses, and May Cause a Breach of a Loan Covenant
Mid-America has a significant proportion of our assets in areas exposed to windstorms and to the New Madrid earthquake zone. A major wind or earthquake loss, or series of losses, could require that Mid-America pay significant deductibles as well as additional amounts above the $40 million per occurrence limit of Mid-Americas insurance for these risks. Mid-America may then be judged to have breached one or more of our loan covenants, and any of the foregoing events could have a material adverse effect on Mid-Americas assets, financial condition, and results of operation.
New Acquisitions May Fail to Perform as Expected and Failure to Integrate Acquired Communities and New Personnel Could Create Inefficiencies
Mid-America intends to actively acquire and improve multifamily communities for rental operations. Mid-America may underestimate the costs necessary to bring an acquired community up to standards established for our intended market position. Additionally, to grow successfully, Mid-America must be able to apply our experience in managing our existing portfolio of apartment communities to a larger number of properties. Mid-America must also be able to integrate new management and operations personnel as our organization grows in size and complexity. Failures in either area will result in inefficiencies that could adversely affect our overall profitability.
Mid-America May Not Be Able To Sell Communities When Appropriate
Real estate investments are relatively illiquid and generally cannot be sold quickly. Mid-America may not be able to change our portfolio promptly in response to economic or other conditions. This inability to respond promptly to changes in the performance of our investments could adversely affect our financial condition and ability to make distributions to our security holders.
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Environmental Problems are Possible and Can be Costly
Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at such community. The owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. All of our communities have been the subject of environmental assessments completed by qualified independent environmental consultant companies. These environmental assessments have not revealed, nor is Mid-America aware of, any environmental liability that our management believes would have a material adverse effect on our business, results of operations, financial condition or liquidity. Over the past four years, there have been an increasing number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in substantial monetary judgments or settlements. Mid-America cannot be assured that existing environmental assessments of our communities reveal all environmental liabilities, that any prior owner of any of our properties did not create a material environmental condition not known to Mid-America, or that a material environmental condition does not otherwise exist.
Compliance or Failure to Comply with Laws Requiring Access to Our Properties by Disabled Persons Could Result in Substantial Cost
The Americans with Disabilities Act, the Fair Housing Act of 1988 and other federal, state and local laws generally require that public accommodations be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require Mid-America to modify our existing communities. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require Mid-America to add other structural features that increase our construction costs. Legislation or regulations adopted in the future may impose further burdens or restrictions on Mid-America with respect to improved access by disabled persons. Mid-America cannot ascertain the costs of compliance with these laws, which may be substantial.
Our Ownership Limit Restricts the Transferability of Our Capital Stock
Our charter limits ownership of our capital stock by any single shareholder to 9.9% of the value of all outstanding shares of our capital stock, both common and preferred. The charter also prohibits anyone from buying shares if the purchase would result in our losing REIT status. This could happen if a share transaction results in fewer than 100 persons owning all of our shares or in five or fewer persons, applying certain broad attribution rules of the Internal Revenue Code of 1986, as amended, or the Code, owning 50% or more of our shares. If you acquire shares in excess of the ownership limit or in violation of the ownership requirements of the Code for REITs, we:
(a) | the price you paid for the shares; or |
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(b) | the average of the last reported sales prices on the New York Stock Exchange on the ten trading days immediately preceding the date fixed for redemption by our Board of Directors. |
If you acquire shares in violation of the limits on ownership described above:
Provisions of Our Charter and Tennessee Law May Limit the Ability of a Third Party to Acquire Control of Us
Ownership Limit
The 9.9% ownership limit discussed above may have the effect of precluding acquisition of control of us by a third party without the consent of our Board of Directors.
Preferred Stock
Our charter authorizes our Board of Directors to issue up to 20,000,000 shares of preferred stock. The Board of Directors may establish the preferences and rights of any preferred shares issued. The issuance of preferred stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders best interests. Currently, we have the following amounts of preferred stock issued and outstanding:
Tennessee Anti-Takeover Statutes
As a Tennessee corporation, we are subject to various legislative acts which impose restrictions on and require compliance with procedures designed to protect shareholders against unfair or coercive mergers and acquisitions. These statutes may delay or prevent offers to acquire us and increase the difficulty of consummating any such offers, even if our acquisition would be in our shareholders best interests.
Our Investments in Joint Ventures May Involve Risks
Investments in joint ventures may involve risks which may not otherwise be present in our direct investments such as:
Although each joint owner will have a right of first refusal to purchase the other owners interest, in the event a sale is desired, the joint owner may not have sufficient resources to exercise such right of first refusal.
Failure to Qualify as a REIT Would Cause Mid-America to be Taxed as a Corporation
If Mid-America fails to qualify as a REIT for federal income tax purposes, Mid-America will be taxed as a corporation. The Internal Revenue Service may challenge our qualification as a REIT for prior years, and new legislation, regulations, administrative interpretations or court decisions may change the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification. For any taxable year that Mid-America fails to qualify as a REIT, Mid-America would be subject to federal income tax on our taxable income at corporate
12
rates, plus any applicable alternative minimum tax. In addition, unless entitled to relief under applicable statutory provisions, Mid-America would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce our net earnings available for investment or distribution to shareholders because of the additional tax liability for the year or years involved. In addition, distributions would no longer qualify for the dividends paid deduction nor be required to be made in order to preserve REIT status. Mid-America might be required to borrow funds or to liquidate some of our investments to pay any applicable tax resulting from our failure to qualify as a REIT.
Failure to Make Required Distributions Would Subject Mid-America to Income Taxation
In order to qualify as a REIT, each year Mid-America must distribute to stockholders at least 90% of its REIT taxable income (determined without regard to the dividend paid deduction and by excluding net capital gains). To the extent that Mid-America satisfies the distribution requirement, but distributes less than 100% of taxable income, it will be subject to federal corporate income tax on the undistributed income. In addition, Mid-America will incur a 4% nondeductible excise tax on the amount, if any, by which the distributions in any year are less than the sum of:
Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require Mid-America to borrow money or sell assets to pay out enough of the taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in a particular year.
Complying with REIT Requirements May Cause Mid-America to Forgo Otherwise Attractive Opportunities or Engage in Marginal Investment Opportunities
To qualify as a REIT for federal income tax purposes, Mid-America must continually satisfy tests concerning, among other things, the sources of income, the nature and diversification of assets, the amounts distributed to shareholders and the ownership of Mid-Americas stock. In order to meet these tests, Mid-America may be required to forgo attractive business or investment opportunities or engage in marginal investment opportunities. Thus, compliance with the REIT requirements may hinder Mid-Americas ability to operate solely on the basis of maximizing profits.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Mid-America seeks to acquire apartment communities located in the Sunbelt region of the United States that are primarily appealing to middle income residents with the potential for above average growth and return on investment. Approximately 75% of Mid-Americas apartment units are located in Georgia, Florida, Tennessee and Texas markets. Mid-Americas strategic focus is to provide our residents high quality apartment units in attractive community settings, characterized by extensive landscaping and attention to aesthetic detail. We utilize our experience and expertise in maintenance, landscaping, marketing and management to effectively reposition many of the apartment communities we acquire to raise occupancy levels and per unit average rents.
The following table sets forth certain historical information for the apartment communities we owned or maintained an ownership interest in, including the property containing 522 apartment units owned through a joint venture, at December 31, 2006:
13
Monthly | Average | |||||||||||||||||||||||||||
Approximate | Average | Rent per | Occupancy | Encumbrances at December 31, 2006 | ||||||||||||||||||||||||
Year | Rentable | Unit Size | Unit at | Percent at | Mortgage/ | |||||||||||||||||||||||
Year | Management | Number | Area (Square | (Square | December | December | Bond Principal | Interest | ||||||||||||||||||||
Property | Location | Completed | Commenced | of Units | Footage) | Footage) | 31, 2006 | 31, 2006 | (000s) | Rate | Maturity Date | |||||||||||||||||
100% Owned | ||||||||||||||||||||||||||||
Eagle Ridge | Birmingham, AL | 1986 | 1998 | 200 | 181,400 | 907 | $ | 702.44 | 91.50 | % | $ | | (1) | (1) | (1) | |||||||||||||
Abbington Place | Huntsville, AL | 1987 | 1998 | 152 | 162,792 | 1,071 | $ | 578.13 | 100.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Huntsville | Huntsville, AL | 1989/98 | 1997 | 392 | 414,736 | 1,058 | $ | 682.31 | 92.09 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Montgomery | Montgomery, AL | 1999 | 1998 | 208 | 230,880 | 1,110 | $ | 749.62 | 94.71 | % | $ | | (1) | (1) | (1) | |||||||||||||
952 | 989,808 | 1,040 | $ | 684.61 | 93.80 | % | ||||||||||||||||||||||
Calais Forest | Little Rock, AR | 1987 | 1994 | 260 | 195,000 | 750 | $ | 630.23 | 96.92 | % | $ | | (1) | (1) | (1) | |||||||||||||
Napa Valley | Little Rock, AR | 1984 | 1996 | 240 | 183,120 | 763 | $ | 631.58 | 93.33 | % | $ | | (1) | (1) | (1) | |||||||||||||
Westside Creek I & II | Little Rock, AR | 1984/86 | 1997 | 308 | 320,936 | 1,042 | $ | 693.00 | 93.83 | % | $ | | (1) | (1) | (1) | |||||||||||||
808 | 699,056 | 865 | $ | 654.56 | 94.68 | % | ||||||||||||||||||||||
Talus Ranch | Phoenix, AZ | 2005 | 2006 | 480 | 437,280 | 911 | $ | 962.35 | 44.38 | % | $ | | ||||||||||||||||
480 | 437,280 | 911 | $ | 962.35 | 44.38 | % | ||||||||||||||||||||||
Tiffany Oaks | Altamonte Springs, FL | 1985 | 1996 | 288 | 234,144 | 813 | $ | 786.18 | 94.79 | % | $ | | (1) | (1) | (1) | |||||||||||||
Marsh Oaks | Atlantic Beach, FL | 1986 | 1995 | 120 | 93,240 | 777 | $ | 705.78 | 90.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Indigo Point | Brandon, FL | 1989 | 2000 | 240 | 194,640 | 811 | $ | 788.47 | 96.25 | % | $ | | (4) | (4) | (4) | |||||||||||||
Paddock Club Brandon | Brandon, FL | 1997/99 | 1997 | 440 | 516,120 | 1,173 | $ | 961.89 | 88.64 | % | $ | | (2) | (2) | (2) | |||||||||||||
Preserve at Coral Square | Coral Springs, FL | 1996 | 2004 | 480 | 528,480 | 1,101 | $ | 1,212.76 | 97.92 | % | $ | 30,888 | 4.240 | % | 9/28/2008 | |||||||||||||
Anatole | Daytona Beach, FL | 1986 | 1995 | 208 | 149,136 | 717 | $ | 722.46 | 97.60 | % | $ | 7,000 | (10) | 4.637 | %(10) | 10/15/2032 | (10) | |||||||||||
Paddock Club Gainesville | Gainesville, FL | 1999 | 1998 | 264 | 293,040 | 1,110 | $ | 901.58 | 96.21 | % | $ | | (2) | (2) | (2) | |||||||||||||
Coopers Hawk | Jacksonville, FL | 1987 | 1995 | 208 | 218,400 | 1,050 | $ | 832.47 | 96.63 | % | $ | | (2) | (2) | (2) | |||||||||||||
Hunters Ridge at Deerwood | Jacksonville, FL | 1987 | 1997 | 336 | 295,008 | 878 | $ | 808.49 | 89.88 | % | $ | | (8) | (8) | (8) | |||||||||||||
Lakeside | Jacksonville, FL | 1985 | 1996 | 416 | 344,032 | 827 | $ | 776.58 | 92.55 | % | $ | | (1) | (1) | (1) | |||||||||||||
Lighthouse at Fleming Island | Jacksonville, FL | 2003 | 2003 | 501 | 556,110 | 1,110 | $ | 947.82 | 97.21 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Jacksonville | Jacksonville, FL | 1989/96 | 1997 | 440 | 475,200 | 1,080 | $ | 855.45 | 97.05 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Mandarin | Jacksonville, FL | 1998 | 1998 | 288 | 330,336 | 1,147 | $ | 902.48 | 90.63 | % | $ | | (2) | (2) | (2) | |||||||||||||
St. Augustine | Jacksonville, FL | 1987 | 1995 | 400 | 304,400 | 761 | $ | 693.45 | 94.50 | % | $ | 13,235 | (20) | (20) | (20) | |||||||||||||
Woodbridge at the Lake | Jacksonville, FL | 1985 | 1994 | 188 | 166,004 | 883 | $ | 749.24 | 92.55 | % | $ | | (2) | (2) | (2) | |||||||||||||
Woodhollow | Jacksonville, FL | 1986 | 1997 | 450 | 342,000 | 760 | $ | 759.17 | 95.56 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Lakeland | Lakeland, FL | 1988/90 | 1997 | 464 | 505,296 | 1,089 | $ | 775.79 | 94.61 | % | $ | | (1) | (1) | (1) | |||||||||||||
Savannahs at James Landing | Melbourne, FL | 1990 | 1995 | 256 | 238,592 | 932 | $ | 779.86 | 90.63 | % | $ | | (2) | (2) | (2) | |||||||||||||
Paddock Park Ocala | Ocala, FL | 1986/88 | 1997 | 480 | 485,280 | 1,011 | $ | 804.37 | 87.92 | % | $ | 6,805 | (2)(3) | (2)(3) | (2) | (3) | ||||||||||||
Paddock Club Panama City | Panama City, FL | 2000 | 1998 | 254 | 283,972 | 1,118 | $ | 967.82 | 91.73 | % | $ | | (2) | (2) | (2) | |||||||||||||
Paddock Club Tallahassee | Tallahassee, FL | 1990/95 | 1997 | 304 | 329,232 | 1,083 | $ | 827.99 | 92.76 | % | $ | | (2) | (2) | (2) | |||||||||||||
Belmere | Tampa, FL | 1984 | 1994 | 210 | 202,440 | 964 | $ | 804.48 | 95.71 | % | $ | | (1) | (1) | (1) | |||||||||||||
Links at Carrollwood | Tampa, FL | 1980 | 1998 | 230 | 214,820 | 934 | $ | 830.96 | 96.96 | % | $ | | (1) | (1) | (1) | |||||||||||||
7,465 | 7,299,922 | 978 | $ | 848.79 | 93.85 | % |
14
Monthly | Average | |||||||||||||||||||||||||||
Approximate | Average | Rent per | Occupancy | Encumbrances at December 31, 2006 | ||||||||||||||||||||||||
Year | Rentable | Unit Size | Unit at | Percent at | Mortgage/ | |||||||||||||||||||||||
Year | Management | Number | Area (Square | (Square | December | December | Bond Principal | Interest | ||||||||||||||||||||
Property | Location | Completed | Commenced | of Units | Footage) | Footage) | 31, 2006 | 31, 2006 | (000s) | Rate | Maturity Date | |||||||||||||||||
High Ridge | Athens, GA | 1987 | 1997 | 160 | 186,560 | 1,166 | $ | 714.75 | 100.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Bradford Pointe | Augusta, GA | 1986 | 1997 | 192 | 156,288 | 814 | $ | 638.10 | 92.19 | % | $ | | (5) | (5) | (5) | |||||||||||||
Shenandoah Ridge | Augusta, GA | 1982 | 1994 | 272 | 222,768 | 819 | $ | 580.56 | 91.91 | % | $ | | (1) | (1) | (1) | |||||||||||||
Westbury Creek | Augusta, GA | 1984 | 1997 | 120 | 107,040 | 892 | $ | 657.31 | 89.17 | % | $ | 3,480 | (15) | (15) | 5/15/2033 | (15) | ||||||||||||
Fountain Lake | Brunswick, GA | 1983 | 1997 | 110 | 129,800 | 1,180 | $ | 768.28 | 98.18 | % | $ | | (5) | (5) | (5) | |||||||||||||
Park Walk | College Park, GA | 1985 | 1997 | 124 | 112,716 | 909 | $ | 639.64 | 95.16 | % | $ | | (1) | (1) | (1) | |||||||||||||
Whisperwood | Columbus, GA | 80/82/84/86/98 | 1997 | 1,008 | 1,220,688 | 1,211 | $ | 764.16 | 90.08 | % | $ | | (1) | (1) | (1) | |||||||||||||
Willow Creek | Columbus, GA | 1971/77 | 1997 | 285 | 246,810 | 866 | $ | 571.88 | 96.49 | % | $ | | (1) | (1) | (1) | |||||||||||||
Terraces at Fieldstone | Conyers, GA | 1999 | 1998 | 316 | 351,076 | 1,111 | $ | 801.52 | 95.25 | % | $ | | (1) | (1) | (1) | |||||||||||||
Prescott | Duluth, GA | 2001 | 2004 | 384 | 370,176 | 964 | $ | 805.11 | 97.66 | % | $ | | (6) | (6) | (6) | |||||||||||||
Lanier | Gainesville, GA | 1998 | 2005 | 344 | 395,944 | 1,151 | $ | 806.80 | 97.38 | % | $ | 20,144 | 5.300 | % | 3/1/2014 | |||||||||||||
Lake Club | Gainesville, GA | 2001 | 2005 | 313 | 359,950 | 1,150 | $ | 755.89 | 97.44 | % | $ | | (6) | (6) | (6) | |||||||||||||
Whispering Pines | LaGrange, GA | 1982/84 | 1997 | 216 | 223,128 | 1,033 | $ | 578.56 | 93.98 | % | $ | | (5) | (5) | (5) | |||||||||||||
Westbury Springs | Lilburn, GA | 1983 | 1997 | 150 | 137,700 | 918 | $ | 682.16 | 98.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Austin Chase | Macon, GA | 1996 | 1997 | 256 | 292,864 | 1,144 | $ | 720.48 | 91.80 | % | $ | | (8) | (8) | (8) | |||||||||||||
The Vistas | Macon, GA | 1985 | 1997 | 144 | 153,792 | 1,068 | $ | 631.42 | 96.53 | % | $ | | (1) | (1) | (1) | |||||||||||||
Walden Run | McDonough, GA | 1997 | 1998 | 240 | 271,200 | 1,130 | $ | 724.65 | 94.58 | % | $ | | (1) | (1) | (1) | |||||||||||||
Georgetown Grove | Savannah, GA | 1997 | 1998 | 220 | 239,800 | 1,090 | $ | 867.11 | 99.55 | % | $ | 10,024 | 7.750 | % | 7/1/2037 | |||||||||||||
Oaks at Wilmington Island | Savannah, GA | 1999 | 2006 | 306 | 300,492 | 982 | $ | 876.33 | 95.10 | % | $ | | (7) | (7) | (7) | |||||||||||||
Wildwood | Thomasville, GA | 1980/84 | 1997 | 216 | 223,128 | 1,033 | $ | 601.40 | 99.54 | % | $ | | (1) | (1 | (1) | (1) | ||||||||||||
Hidden Lake | Union City, GA | 1985/87 | 1997 | 320 | 342,400 | 1,070 | $ | 681.67 | 92.19 | % | $ | | (1) | (1 | (1) | (1) | ||||||||||||
Three Oaks | Valdosta, GA | 1983/84 | 1997 | 240 | 247,920 | 1,033 | $ | 625.75 | 96.25 | % | $ | | (1) | (1 | (1) | (1) | ||||||||||||
Huntington Chase | Warner Robins, GA | 1997 | 2000 | 200 | 218,400 | 1,092 | $ | 706.64 | 91.50 | % | $ | 8,741 | 6.850 | % | 11/1/2008 | |||||||||||||
Southland Station | Warner Robins, GA | 1987/90 | 1997 | 304 | 354,768 | 1,167 | $ | 703.25 | 93.42 | % | $ | | (1) | (1) | (1) | |||||||||||||
Terraces at Townelake | Woodstock, GA | 1999 | 1998 | 502 | 575,794 | 1,147 | $ | 743.04 | 94.02 | % | $ | | (1) | (1) | (1) | |||||||||||||
6,942 | 7,441,202 | 1,072 |
$ |
721.57 | 94.50 | % | ||||||||||||||||||||||
Fairways at Hartland | Bowling Green, KY | 1996 | 1997 | 240 | 251,280 | 1,047 | $ | 667.26 | 95.42 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Florence | Florence, KY | 1994 | 1997 | 200 | 207,000 | 1,035 | $ | 742.62 | 90.50 | % | $ | 9,530 | 5.875 | % | 1/1/2044 | |||||||||||||
Grand Reserve Lexington | Lexington, KY | 2000 | 1999 | 370 | 432,530 | 1,169 | $ | 849.02 | 86.49 | % | $ | | (1) | (1) | (1) | |||||||||||||
Lakepointe | Lexington, KY | 1986 | 1994 | 118 | 90,624 | 768 | $ | 624.47 | 85.59 | % | $ | | (1) | (1) | (1) | |||||||||||||
Mansion, The | Lexington, KY | 1989 | 1994 | 184 | 138,736 | 754 | $ | 627.68 | 99.46 | % | $ | | (1) | (1) | (1) | |||||||||||||
Village, The | Lexington, KY | 1989 | 1994 | 252 | 182,700 | 725 | $ | 604.14 | 95.63 | % | $ | | (1) | (1) | (1) | |||||||||||||
Stonemill Village | Louisville, KY | 1985 | 1994 | 384 | 324,096 | 844 | $ | 616.81 | 95.83 | % | $ | | (1) | (1) | (1) | |||||||||||||
1,748 | 1,626,966 | 931 |
$ |
687.12 | 92.85 | % | ||||||||||||||||||||||
Riverhills | Grenada, MS | 1972 | 1985 | 96 | 81,984 | 854 | $ | 416.36 | 97.92 | % | $ | | (1) | (1) | (1) | |||||||||||||
Crosswinds | Jackson, MS | 1988/90 | 1996 | 360 | 443,160 | 1,231 | $ | 713.45 | 96.67 | % | $ | | (1) | (1) | (1) | |||||||||||||
Pear Orchard | Jackson, MS | 1985 | 1994 | 389 | 338,430 | 870 | $ | 668.14 | 94.60 | % | $ | | (1) | (1) | (1) |
15
Monthly | Average | |||||||||||||||||||||||||||
Approximate | Average | Rent per | Occupancy | Encumbrances at December 31, 2006 | ||||||||||||||||||||||||
Year | Rentable | Unit Size | Unit at | Percent at | Mortgage/ | |||||||||||||||||||||||
Year | Management | Number | Area (Square | (Square | December | December | Bond Principal | Interest | ||||||||||||||||||||
Property | Location | Completed | Commenced | of Units | Footage) | Footage) | 31, 2006 | 31, 2006 | (000s) | Rate | Maturity Date | |||||||||||||||||
Reflection Pointe | Jackson, MS | 1986 | 1988 | 296 | 254,856 | 861 | $ | 678.61 | 92.23 | % | $ | 5,880 | (11) | 4.557% | (11) | 5/15/2031 | (11) | |||||||||||
Somerset | Jackson, MS | 1981 | 1995 | 144 | 126,864 | 881 | $ | 607.56 | 95.83 | % | $ | | (1) | (1) | (1) | |||||||||||||
Woodridge | Jackson, MS | 1987 | 1988 | 192 | 175,104 | 912 | $ | 592.10 | 94.79 | % | $ | | (1) | (1) | (1) | |||||||||||||
Lakeshore Landing | Ridgeland, MS | 1974 | 1994 | 196 | 171,108 | 873 | $ | 617.19 | 95.41 | % | $ | | (1) | (1) | (1) | |||||||||||||
Savannah Creek | Southaven, MS | 1989 | 1996 | 204 | 237,048 | 1,162 | $ | 709.38 | 96.57 | % | $ | | (1) | (1) | (1) | |||||||||||||
Sutton Place | Southaven, MS | 1991 | 1996 | 253 | 268,686 | 1,062 | $ | 685.71 | 97.63 | % | $ | | (1) | (1) | (1) | |||||||||||||
2,130 | 2,097,240 | 985 | $ | 656.30 | 95.49 | % | ||||||||||||||||||||||
Hermitage at Beechtree | Cary, NC | 1988 | 1997 | 194 | 169,750 | 875 | $ | 650.20 | 93.81 | % | $ | | (1) | (1) | (1) | |||||||||||||
Waterford Forest | Cary, NC | 1996 | 2005 | 384 | 344,448 | 897 | $ | 648.48 | 95.31 | % | $ | | (6) | (6) | (6) | |||||||||||||
Woodstream | Greensboro, NC | 1983 | 1994 | 304 | 217,056 | 714 | $ | 547.29 | 92.43 | % | $ | | (1) | (1) | (1) | |||||||||||||
Corners, The | Winston-Salem, NC | 1982 | 1993 | 240 | 173,520 | 723 | $ | 576.99 | 92.92 | % | $ | | (2) | (2) | (2) | |||||||||||||
Preserve at Brier Creek | Raleigh, NC | 2002 | 2006 | 250 | 270,750 | 1,083 | $ | 889.33 | 96.40 | % | $ | | (1) | (1) | (1) | |||||||||||||
1,372 | 1,175,524 | 857 | $ | 657.68 | 94.24 | % | ||||||||||||||||||||||
Fairways at Royal Oak | Cincinnati, OH | 1988 | 1994 | 214 | 214,428 | 1,002 | $ | 673.89 | 88.79 | % | $ | | (1) | (1) | (1) | |||||||||||||
214 | 214,428 | 1,002 | $ | 673.89 | 88.79 | % | ||||||||||||||||||||||
Colony at South Park | Aiken, SC | 1989/91 | 1997 | 184 | 174,800 | 950 | $ | 717.25 | 94.02 | % | $ | | (1) | (1) | (1) | |||||||||||||
Woodwinds | Aiken, SC | 1988 | 1997 | 144 | 165,168 | 1,147 | $ | 741.83 | 95.14 | % | $ | | (1) | (1) | (1) | |||||||||||||
Tanglewood | Anderson, SC | 1980 | 1994 | 168 | 146,664 | 873 | $ | 583.57 | 91.67 | % | $ | | (1) | (1) | (1) | |||||||||||||
Fairways, The | Columbia, SC | 1992 | 1994 | 240 | 213,840 | 891 | $ | 634.75 | 87.92 | % | $ | 7,735 | (12) | 4.605% | (12) | 5/15/2031 | (12) | |||||||||||
Paddock Club Columbia | Columbia, SC | 1989/95 | 1997 | 336 | 367,584 | 1,094 | $ | 745.68 | 90.77 | % | $ | | (1) | (1) | (1) | |||||||||||||
Highland Ridge | Greenville, SC | 1984 | 1995 | 168 | 143,976 | 857 | $ | 532.73 | 98.21 | % | $ | | (1) | (1) | (1) | |||||||||||||
Howell Commons | Greenville, SC | 1986/88 | 1997 | 348 | 292,668 | 841 | $ | 535.68 | 93.68 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Greenville | Greenville, SC | 1996 | 1997 | 208 | 212,160 | 1,020 | $ | 700.72 | 95.67 | % | $ | | (1) | (1) | (1) | |||||||||||||
Park Haywood | Greenville, SC | 1983 | 1993 | 208 | 156,832 | 754 | $ | 528.95 | 98.08 | % | $ | | (1) | (1) | (1) | |||||||||||||
Spring Creek | Greenville, SC | 1985 | 1995 | 208 | 182,000 | 875 | $ | 542.01 | 94.71 | % | $ | | (1) | (1) | (1) | |||||||||||||
Runaway Bay | Mt. Pleasant, SC | 1988 | 1995 | 208 | 177,840 | 855 | $ | 911.59 | 91.83 | % | $ | 8,365 | (9) | 4.690% | (9) | 11/15/2035 | (9) | |||||||||||
Park Place | Spartanburg, SC | 1987 | 1997 | 184 | 195,224 | 1,061 | $ | 635.68 | 91.30 | % | $ | | (1) | (1) | (1) | |||||||||||||
2,604 | 2,428,756 | 933 | $ | 649.28 | 93.32 | % | ||||||||||||||||||||||
Hamilton Pointe | Chattanooga, TN | 1989 | 1992 | 361 | 256,671 | 711 | $ | 541.19 | 94.46 | % | $ | | (1) | (1) | (1) | |||||||||||||
Hidden Creek | Chattanooga, TN | 1987 | 1988 | 300 | 259,200 | 864 | $ | 567.61 | 95.33 | % | $ | | (1) | (1) | (1) | |||||||||||||
Steeplechase | Chattanooga, TN | 1986 | 1991 | 108 | 98,604 | 913 | $ | 640.57 | 96.30 | % | $ | | (1) | (1) | (1) | |||||||||||||
Windridge | Chattanooga, TN | 1984 | 1997 | 174 | 238,728 | 1,372 | $ | 749.57 | 98.85 | % | $ | 5,465 | (16) | (16) | 5/15/2033 | (16) | ||||||||||||
Oaks, The | Jackson, TN | 1978 | 1993 | 100 | 87,500 | 875 | $ | 596.64 | 89.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Post House Jackson | Jackson, TN | 1987 | 1989 | 150 | 163,650 | 1,091 | $ | 663.23 | 96.67 | % | $ | 5,095 | 4.507 | % | 10/15/2032 | |||||||||||||
Post House North | Jackson, TN | 1987 | 1989 | 144 | 144,720 | 1,005 | $ | 641.45 | 93.75 | % | $ | 3,375 | (13) | 4.557% | (13) | 5/15/2031 | (13) | |||||||||||
Bradford Chase | Jackson, TN | 1987 | 1994 | 148 | 121,360 | 820 | $ | 587.49 | 97.97 | % | $ | | (1) | (1) | (1) | |||||||||||||
Woods at Post House | Jackson, TN | 1997 | 1995 | 122 | 118,950 | 975 | $ | 681.91 | 96.72 | % | $ | 4,936 | 6.070 | % | 9/1/2035 |
16
Monthly | Average | |||||||||||||||||||||||||||
Approximate | Average | Rent per | Occupancy | Encumbrances at December 31, 2006 | ||||||||||||||||||||||||
Year | Rentable | Unit Size | Unit at | Percent at | Mortgage/ | |||||||||||||||||||||||
Year | Management | Number | Area (Square | (Square | December | December | Bond Principal | Interest | ||||||||||||||||||||
Property | Location | Completed | Commenced | of Units | Footage) | Footage) | 31, 2006 | 31, 2006 | (000s) | Rate | Maturity Date | |||||||||||||||||
Cedar Mill | Memphis, TN | 1973/86 | 1982/94 | 276 | 297,804 | 1,079 | $ | 605.87 | 94.20 | % | $ | | (1) | (1) | (1) | |||||||||||||
Gleneagles | Memphis, TN | 1975 | 1990 | 184 | 189,520 | 1,030 | $ | 609.15 | 89.67 | % | $ | | (1) | (1) | (1) | |||||||||||||
Greenbrook | Memphis, TN | 1974/78/83/86 | 1988 | 1,037 | 939,522 | 906 | $ | 625.29 | 93.73 | % | $ | | (4) | (4) | (4) | |||||||||||||
Hickory Farm | Memphis, TN | 1985 | 1994 | 200 | 150,200 | 751 | $ | 573.94 | 91.00 | % | $ | | (1) | (1) | (1) | |||||||||||||
Kirby Station | Memphis, TN | 1978 | 1994 | 371 | 310,156 | 836 | $ | 657.23 | 96.23 | % | $ | | (1) | (1) | (1) | |||||||||||||
Lincoln on the Green | Memphis, TN | 1988/98 | 1994 | 618 | 535,188 | 866 | $ | 697.84 | 94.17 | % | $ | | (1) | (1) | (1) | |||||||||||||
Park Estate | Memphis, TN | 1974 | 1977 | 82 | 96,924 | 1,182 | $ | 922.39 | 91.46 | % | $ | | (4) | (4) | (4) | |||||||||||||
Reserve at Dexter Lake | Memphis, TN | 1999/01 | 1998 | 740 | 792,540 | 1,071 | $ | 800.00 | 95.00 | % | $ | | (5) | (5) | (5) | |||||||||||||
River Trace | Memphis, TN | 1981/85 | 1997 | 440 | 370,920 | 843 | $ | 595.73 | 91.36 | % | $ | | (1) | (1) | (1) | |||||||||||||
Paddock Club Murfreesboro | Murfreesboro, TN | 1999 | 1998 | 240 | 268,800 | 1,120 | $ | 823.36 | 84.58 | % | $ | | (1) | (1) | (1) | |||||||||||||
Brentwood Downs | Nashville, TN | 1986 | 1994 | 286 | 220,220 | 770 | $ | 738.29 | 98.95 | % | $ | | (1) | (1) | (1) | |||||||||||||
Grand View Nashville | Nashville, TN | 2001 | 1999 | 433 | 479,331 | 1,107 | $ | 859.66 | 91.69 | % | $ | | (1) | (1) | (1) | |||||||||||||
Monthaven Park | Nashville, TN | 2001 | 2004 | 456 | 427,728 | 938 | $ | 747.48 | 98.46 | % | $ | 22,422 | 3.600 | % | 1/11/2008 | |||||||||||||
Park at Hermitage | Nashville, TN | 1987 | 1995 | 440 | 392,480 | 892 | $ | 623.45 | 95.23 | % | $ | 6,645 | (17) | 4.657% | (17) | 2/15/2034 | (17) | |||||||||||
7,410 | 6,960,716 | 939 | $ | 678.87 | 94.25 | % | ||||||||||||||||||||||
Northwood | Arlington, TX | 1980 | 1998 | 270 | 224,100 | 830 | $ | 586.61 | 91.85 | % | $ | | (2) | (2) | (2) | |||||||||||||
Balcones Woods | Austin, TX | 1983 | 1997 | 384 | 313,728 | 817 | $ | 672.15 | 95.83 | % | $ | | (2) | (2) | (2) | |||||||||||||
Grand Reserve at Sunset | ||||||||||||||||||||||||||||
Valley | Austin, TX | 1996 | 2004 | 210 | 198,240 | 944 | $ | 1,002.71 | 96.19 | % | $ | 10,736 | 4.240 | % | 9/28/2008 | |||||||||||||
Silverado | Austin, TX | 2003 | 2006 | 312 | 303,264 | 972 | $ | 778.75 | 97.44 | % | $ | | (7) | (7) | (7) | |||||||||||||
Stassney Woods | Austin, TX | 1985 | 1995 | 288 | 248,832 | 864 | $ | 626.52 | 93.40 | % | $ | 4,050 | (18) | 4.657% | (18) | 10/15/2032 | (18) | |||||||||||
Travis Station | Austin, TX | 1987 | 1995 | 304 | 249,888 | 822 | $ | 566.08 | 94.08 | % | $ | 3,585 | (19) | 4.657% | (19) | 2/15/2034 | (19) | |||||||||||
Woods, The | Austin, TX | 1977 | 1997 | 278 | 214,060 | 770 | $ | 799.12 | 98.92 | % | $ | | (2) | (2) | (2) | |||||||||||||
Celery Stalk | Dallas, TX | 1978 | 1994 | 410 | 374,740 | 914 | $ | 690.89 | 94.88 | % | $ | | (6) | (6) | (6) | |||||||||||||
Courtyards at Campbell | Dallas, TX | 1986 | 1998 | 232 | 168,200 | 725 | $ | 663.09 | 96.12 | % | $ | | (2) | (2) | (2) | |||||||||||||
Deer Run | Dallas, TX | 1985 | 1998 | 304 | 206,720 | 680 | $ | 632.72 | 91.45 | % | $ | | (2) | (2) | (2) | |||||||||||||
Grand Courtyard | Dallas, TX | 2000 | 2006 | 390 | 341,250 | 875 | $ | 758.70 | 98.72 | % | $ | | (7) | (7) | (7) | |||||||||||||
Lodge at Timberglen | Dallas, TX | 1983 | 1994 | 260 | 226,200 | 870 | $ | 654.56 | 93.46 | % | $ | | (6) | (6) | (6) | |||||||||||||
Watermark | Dallas, TX | 2002 | 2004 | 240 | 205,200 | 855 | $ | 749.24 | 91.25 | % | $ | | (6) | (6) | (6) | |||||||||||||
Legacy Pines | Houston, TX | 1999 | 2003 | 308 | 283,360 | 920 | $ | 930.17 | 93.83 | % | $ | | (2) | (2) | (2) | |||||||||||||
Reserve at Woodwind Lakes | Houston, TX | 1999 | 2006 | 328 | 316,192 | 964 | $ | 777.87 | 93.60 | % | $ | 15,981 | 5.930 | % | 6/15/2015 | |||||||||||||
Westborough Crossing | Katy, TX | 1984 | 1994 | 274 | 197,280 | 720 | $ | 629.93 | 95.26 | % | $ | | (6) | (6) | (6) | |||||||||||||
Kenwood Club | Katy, TX | 2000 | 1999 | 320 | 318,080 | 994 | $ | 826.18 | 94.06 | % | $ | | (2) | (2) | (2) | |||||||||||||
Lane at Towne Crossing | Mesquite, TX | 1983 | 1994 | 384 | 277,632 | 723 | $ | 652.68 | 92.97 | % | $ | | (2) | (2) | (2) | |||||||||||||
Highwood | Plano, TX | 1983 | 1998 | 196 | 156,800 | 800 | $ | 729.97 | 95.41 | % | $ | | (4) | (4) | (4) | |||||||||||||
Los Rios Park | Plano, TX | 2000 | 2003 | 498 | 470,112 | 944 | $ | 770.80 | 92.77 | % | $ | | (2) | (2) | (2) | |||||||||||||
Boulder Ridge | Roanoke, TX | 1999 | 2005 | 478 | 429,244 | 898 | $ | 787.00 | 90.17 | % | $ | | (2) | (2) | (2) |
17
Monthly | Average | |||||||||||||||||||||||||||||||||
Approximate | Average | Rent per | Occupancy | Encumbrances at December 31, 2006 | ||||||||||||||||||||||||||||||
Year | Rentable | Unit Size | Unit at | Percent at | Mortgage/ | |||||||||||||||||||||||||||||
Year | Management | Number | Area (Square | (Square | December | December | Bond Principal | Interest | ||||||||||||||||||||||||||
Property | Location | Completed | Commenced | of Units | Footage) | Footage) | 31, 2006 | 31, 2006 | (000s) | Rate | Maturity Date | |||||||||||||||||||||||
Cypresswood Court | Spring, TX | 1984 | 1994 | 208 | 160,576 | 772 | $ | 642.03 | 97.60 | % | $ | | (6) | (6) | (6) | |||||||||||||||||||
Villages at Kirkwood | Stafford, TX | 1996 | 2004 | 274 | 244,682 | 893 | $ | 881.50 | 97.81 | % | $ | 13,849 | 4.240 | % | 9/28/2008 | |||||||||||||||||||
Green Tree Place | Woodlands, TX | 1984 | 1994 | 200 | 152,200 | 761 | $ | 698.56 | 96.50 | % | $ | | (6) | (6) | (6) | |||||||||||||||||||
7,350 | 6,280,580 | 855 | $ | 730.23 | 94.53 | % | ||||||||||||||||||||||||||||
Township | Hampton, VA | 1987 | 1995 | 296 | 248,048 | 838 | $ | 877.94 | 94.26 | % | $ | 10,800 | (14) | 4.637 | %(14) | 10/15/2032 | (14) | |||||||||||||||||
Subtotal 100% | 296 |
248,048 |
838 |
$ |
877.94 |
94.26 | % | |||||||||||||||||||||||||||
Owned | 39,771 | 37,899,526 | 953 | $ | 728.72 | 93.58 | % | 238,766 | ||||||||||||||||||||||||||
Joint Venture Properties | ||||||||||||||||||||||||||||||||||
Verandas at Timberglen | Dallas, TX | 1999 | 2004 | 522 | 500,076 | 958 | $ | 1,133.44 | 92.91 | % | N/A | |||||||||||||||||||||||
Subtotal Joint | ||||||||||||||||||||||||||||||||||
Venture Properties | 522 | 500,076 | 958 | $ | 1,133.44 | 92.91 | % | N/A | ||||||||||||||||||||||||||
Total 100% Owned and Joint | ||||||||||||||||||||||||||||||||||
Venture Properties | 40,293 | 38,399,602 | 953 | $ | 733.96 | 93.57 | % | $ | 238,766 |
(1) | Encumbered by a $691.8 million FNMA facility, with $691.8 million available and $565.8 million outstanding with a variable interest rate of 5.87% on which there exists in combination with the FNMA facility mentioned in note (2) thirteen interest rate swap agreements totaling $490 million at an average rate of 5.50% at December 31, 2006. | |
(2) | Encumbered by a $243.2 million FNMA facility, with $243.2 available and $168.6 million outstanding, $90 million with a fixed rate of 7.49% and $78.6 million of which had a variable interest rate of 5.87% on which there exists interest rate swaps as mentioned in note (1) at December 31, 2006. | |
(3) | Phase I of Paddock Park - Ocala is encumbered by $6.8 million in bonds on which there exists a $6.8 million interest rate cap of 6.000% which terminates on October 24, 2007. | |
(4) | Encumbered, along with one corporate property, by a term loan with a principal balance of $40 million at December 31, 2006, with a maturity of April 1, 2009 and an interest rate of 6.369% on which there is a $25 million interest rate swap agreement with a rate of 4.98%, maturing on March 1, 2009. | |
(5) | Encumbered by a credit line with AmSouth Bank, with an outstanding balance of $4.6 million at December 31, 2006. | |
(6) | Encumbered by a $100 million Freddie Mac facility, with $96.4 million available and an outstanding balance of $96.4 million and a variable interest rate of 5.89% on which there exists five interest rate swap agreements totaling $83 million at an average rate of 5.41% at December 31, 2006. | |
(7) | Encumbered by a $200 million Freddie Mac facility, with $47.3 million available and an outstanding balance of $47.3 million and a variable interest rate of 5.88% on which there exists two interest rate swap agreements totaling $20 million at an average rate of 6.34% at December 31, 2006. | |
(8) | Encumbered by a mortgage securing a tax-exempt bond amortizing over 25 years with a principal balance of $12.2 million at December 31, 2006, and an average interest rate of 5.23%. | |
(9) | Encumbered by $8.4 million in bonds on which there exists a $8.4 million interest rate swap agreement fixed at 4.73% and maturing on September 15, 2010. | |
(10) | Encumbered by $7.0 million in bonds on which there exists a $7.0 million interest rate swap agreement fixed at 3.94% and maturing on October 24, 2007. | |
(11) | Encumbered by $5.9 million in bonds on which there exists a $5.9 million interest rate swap agreement fixed at 5.05% and maturing on June 15, 2008. | |
(12) | Encumbered by $7.7 million in bonds on which there exists a $7.7 million interest rate swap agreement fixed at 5.05% and maturing on June 15, 2008. | |
(13) | Encumbered by $3.4 million in bonds on which there exists a $3.4 million interest rate swap agreement fixed at 5.05% and maturing on June 15, 2008. |
18
(14) |
Encumbered by $10.8 million in bonds on which there exists a $10.8 million interest rate swap agreement fixed at 3.95% and maturing on October 24, 2007. | ||
(15) | Encumbered by $3.5 million in bonds $0.5 million having a variable rate of 5.40% and $3.0 million with a variable rate of 4.64% on which there exists a $3.0 million interest rate swap agreement fixed at 3.23% and maturing on May 30, 2008. | ||
(16) | Encumbered by $5.5 million in bonds $0.5 million having a variable rate of 5.40% and $5.0 million with a variable rate of 4.64% on which there exists a $5.0 million interest rate swap agreement fixed at 3.23% and maturing on May 30, 2008. | ||
(17) | Encumbered by $6.6 million in bonds on which there exists a $6.6 million interest rate swap agreement fixed at 3.63% and maturing on March 15, 2009. Also encumbered by a $17.9 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 5.93% which there exists a $11.7 million and a $6.2 million interest rate cap of 6.0% and 6.5% respectively which terminates on March 1, 2009 and March 15, 2011 respectively. | ||
(18) | Encumbered by $4.0 million in bonds on which there exists a $4.0 million interest rate cap of 6.0% which terminates on March 15, 2009. Also encumbered by a $17.9 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 5.93% which there exists a $11.7 million and a $6.2 million interest rate cap of 6.0% and 6.5% respectively which terminates on March 1, 2009 and March 15, 2011 respectively. | ||
(19) | Encumbered by $3.6 million in bonds on which there exists a $3.6 million interest rate swap agreement fixed at 3.63% and maturing on March 15, 2009. Also encumbered by a $17.9 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 5.93% which there exists a $11.7 million and a $6.2 million interest rate cap of 6.0% and 6.5% respectively which terminates on March 1, 2009 and March 15, 2011 respectively. | ||
(20) | Encumbered by $13.2 million in bonds on which there exists a $13.2 million interest rate cap of 6.00% and maturing on March 15, 2011. Also encumbered by a $17.9 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 5.93% which there exists a $11.7 million and $6.2 million interest rate cap of 6.0% and 6.5% respectively which terminates on March 1, 2009 and March 1, 2011 respectively. |
ITEM 3. LEGAL PROCEEDINGS
Mid-America is not presently subject to any material litigation nor, to Mid-Americas knowledge, is any material litigation threatened against us. Mid-America is presently subject to routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and none of which is expected to have a material adverse effect on the business, financial condition, liquidity or results of operations of Mid-America.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
19
PART II
ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Mid-Americas common stock has been listed and traded on the New York Stock Exchange, or NYSE, under the symbol MAA since our initial public offering in February 1994. On February 9, 2007, the reported last sale price of Mid-Americas common stock on the NYSE was $59.80 per share, and there were approximately 1,400 holders of record of the common stock. Mid-America believes we have a significantly larger number of beneficial owners of our common stock. The following table sets forth the quarterly high and low sales prices of our common stock as reported on the NYSE and the dividends declared by Mid-America with respect to the periods indicated.
Sales Prices | Dividends | Dividends | ||||||
High | Low | Paid | Declared (1) | |||||
2006: | ||||||||
First Quarter | $58.750 | $48.130 | $0.595 | $1.190 | ||||
Second Quarter | $56.400 | $49.320 | $0.595 | $0.595 | ||||
Third Quarter | $62.240 | $53.910 | $0.595 | $0.595 | ||||
Fourth Quarter | $65.970 | $56.000 | $0.595 | $0.605 | ||||
2005: | ||||||||
First Quarter | $41.350 | $35.840 | $0.585 | $0.585 | ||||
Second Quarter | $46.520 | $35.620 | $0.585 | $0.585 | ||||
Third Quarter | $48.760 | $42.530 | $0.585 | $0.585 | ||||
Fourth Quarter | $50.190 | $43.050 | $0.595 | $0.595 |
(1) | In the first quarter of 2006, the Board of Directors began declaring the common dividend for the following quarter at their regularly scheduled board meeting. This timing change resulted in two dividend payments being declared in the same quarter. |
Mid-Americas quarterly dividend rate is currently $0.605 per common share. The Board of Directors reviews and declares the dividend rate quarterly. Actual dividends made by Mid-America will be affected by a number of factors, including the gross revenues received from the apartment communities, the operating expenses of Mid-America, the interest expense incurred on borrowings and unanticipated capital expenditures.
Mid-America expects to make future quarterly distributions to shareholders; however, future distributions by Mid-America will be at the discretion of the Board of Directors and will depend on the actual funds from operations of Mid-America, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as the Board of Directors deems relevant.
Mid-America has established the Direct Stock Purchase and Distribution Reinvestment Plan, or DRSPP, under which holders of common stock, preferred stock and limited partnership interests in Mid-America Apartments, L.P. can elect automatically to reinvest their distributions in additional shares of common stock. The plan also allows for the optional purchase of common stock of at least $250, but not more than $5,000 in any given month, free of brokerage commissions and charges. Mid-America, in our absolute discretion, may grant waivers to allow for optional cash payments in excess of $5,000. To fulfill our obligations under the DRSPP, Mid-America may either issue additional shares of common stock or repurchase common stock in the open market. Mid-America may elect to sell shares under the DRSPP at up to a 5% discount.
In 2004, Mid-America issued a total of 413,598 shares through our DRSPP and offered a 2% discount for optional cash purchases in the months of August through December. Throughout 2005, Mid-America issued a total of 803,251 shares through our DRSPP and offered an average 1.5% discount for optional cash purchases. Throughout 2006, Mid-America issued a total of 1,356,015 shares through our DRSPP and offered an average 1.5% discount for optional cash purchases.
20
The following table provides information with respect to compensation plans under which our equity securities are authorized for issuance as of December 31, 2006.
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Number of Securities to | Weighted Average | Future Issuance under | ||||||||||
be Issued upon Exercise | Exercise Price of | Equity Compensation | ||||||||||
of Outstanding Options, | Outstanding Options | Plans (excluding securities | ||||||||||
Warrants and Rights | Warrants and Rights | reflected in column (a)) | ||||||||||
(a)(1) | (b)(1) | (c)(2) | ||||||||||
Equity compensation plans approved by | ||||||||||||
security holders | 193,291 | $24.27 | 472,585 | |||||||||
Equity compensation plans not approved | ||||||||||||
by security holders | N/A | N/A | N/A | |||||||||
Total | 193,291 | $24.27 | 472,585 |
(1) | Columns (a) and (b) above do not include 86,216 shares of restricted stock that are subject to vesting requirements which were issued through Mid-Americas Fourth Amended and Restated 1994 Restricted Stock and Stock Option Plan, 99,291 shares of restricted stock that are subject to vesting requirements which were issued through Mid-Americas 2004 Stock Plan, or 54,961 shares of common stock which have been purchased by employees through the Employee Stock Purchase Plan. See Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 2 for more information on these plans. | |
(2) | Column (c) above includes 377,546 shares available to be issued under Mid-Americas 2004 Stock Plan and 95,039 shares available to be issued under Mid-Americas Employee Stock Purchase Plan. See Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 2 for more information on these plans. |
Mid-America has not granted any stock options since 2002.
The following graph compares the cumulative total returns of the shareholders of Mid-America since December 30, 2000 with the S&P 500 Index and the Equity REIT Total Return Index prepared by the National Association of Real Estate Investment Trusts, or NAREIT. The graph assumes that the base share price for Mid-Americas common stock and each index is $100 and that all dividends are reinvested. The performance graph is not necessarily indicative of future investment performance.
Dec 01 | Dec 02 | Dec 03 | Dec 04 | Dec 05 | Dec 06 | ||||||||
Mid-America Apartment Communities, Inc. | $100.00 | $ | 102.04 | $152.79 | $200.23 | $249.30 | $307.29 | ||||||
S & P 500 | $100.00 | $ | 77.90 | $100.24 | $111.15 | $116.61 | $135.03 | ||||||
NAREIT Equity | $100.00 | $ | 103.82 | $142.37 | $187.33 | $210.12 | $283.78 |
21
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on an historical basis for Mid-America. This data should be read in conjunction with the consolidated financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K.
Mid-America Apartment Communities, Inc.
Selected Financial Data
(Dollars in thousands except per share data)
Year Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Operating Data: | ||||||||||||||||||||
Total revenues | $ | 325,999 | $ | 296,132 | $ | 266,129 | $ | 234,894 | $ | 226,676 | ||||||||||
Expenses: | ||||||||||||||||||||
Property operating expenses | 134,316 | 123,663 | 112,349 | 98,098 | 90,131 | |||||||||||||||
Depreciation | 79,388 | 74,413 | 68,010 | 57,433 | 53,657 | |||||||||||||||
Property management and general and | ||||||||||||||||||||
administrative expenses | 24,963 | 22,225 | 19,597 | 15,670 | 15,298 | |||||||||||||||
Income from continuing operations before non- | ||||||||||||||||||||
operating items | 87,332 | 75,831 | 66,173 | 63,693 | 67,590 | |||||||||||||||
Interest and other non-property income | 673 | 498 | 593 | 835 | 729 | |||||||||||||||
Interest expense | (63,512 | ) | (58,442 | ) | (50,683 | ) | (44,851 | ) | (48,226 | ) | ||||||||||
(Loss) gain on debt extinguishment | (551 | ) | (409 | ) | 1,095 | 111 | (1,441 | ) | ||||||||||||
Amortization of deferred financing costs | (2,036 | ) | (2,011 | ) | (1,753 | ) | (2,050 | ) | (2,700 | ) | ||||||||||
Minority interest in operating partnership | ||||||||||||||||||||
income | (1,590 | ) | (1,571 | ) | (2,264 | ) | (1,360 | ) | (388 | ) | ||||||||||
(Loss) income from investments in | ||||||||||||||||||||
unconsolidated entities | (114 | ) | 65 | (287 | ) | (949 | ) | (532 | ) | |||||||||||
Incentive fee from unconsolidated entity | | 1,723 | | | | |||||||||||||||
Net gain on insurance and other settlement | ||||||||||||||||||||
proceeds | 84 | 749 | 2,683 | 2,860 | 397 | |||||||||||||||
Gain on sale of non-depreciable assets | 50 | 334 | | | | |||||||||||||||
Gain on disposition within unconsolidated | ||||||||||||||||||||
entities | | 3,034 | 3,249 | | | |||||||||||||||
Income from continuing operations | 20,336 | 19,801 | 18,806 | 18,289 | 15,429 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||
Income (loss) from discontinued operations | ||||||||||||||||||||
before asset impairment, settlement | ||||||||||||||||||||
proceeds and gain on sale | 609 | 211 | 241 | (84 | ) | 712 | ||||||||||||||
Asset impairment of discontinued | ||||||||||||||||||||
operations | | (243 | ) | (200 | ) | | | |||||||||||||
Net gain (loss) on insurance and other | ||||||||||||||||||||
settlement proceeds of discontinued | ||||||||||||||||||||
operations | | (25 | ) | 526 | 82 | | ||||||||||||||
Gain on sale of discontinued operations | | | 5,825 | 1,919 | | |||||||||||||||
Net income | 20,945 | 19,744 | 25,198 | 20,206 | 16,141 | |||||||||||||||
Preferred dividend distribution | 13,962 | 14,329 | 14,825 | 15,419 | 16,029 | |||||||||||||||
Premiums and original issuance costs | ||||||||||||||||||||
associated with the redemption of preferred | ||||||||||||||||||||
stock | | | | 5,987 | 2,041 | |||||||||||||||
Net income (loss) available for common | ||||||||||||||||||||
shareholders | $ | 6,983 | $ | 5,415 | $ | 10,373 | $ | (1,200 | ) | $ | (1,929 | ) | ||||||||
Per Share Data: | ||||||||||||||||||||
Weighted average shares outstanding (in | ||||||||||||||||||||
thousands): | ||||||||||||||||||||
Basic | 23,474 | 21,405 | 20,317 | 18,374 | 17,561 | |||||||||||||||
Effect of dilutive stock options | 224 | 202 | 335 | | | |||||||||||||||
Diluted | 23,698 | 21,607 | 20,652 | 18,374 | 17,561 |
22
Year Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Net income (loss) available for common | ||||||||||||||||||||
shareholders | $ | 6,983 | $ | 5,415 | $ | 10,373 | $ | (1,200 | ) | $ | (1,929 | ) | ||||||||
Discontinued property operations | (609 | ) | 57 | (6,392 | ) | (1,917 | ) | (712 | ) | |||||||||||
Income (loss) from continuing operations | ||||||||||||||||||||
available for common shareholders | $ | 6,374 | $ | 5,472 | $ | 3,981 | $ | (3,117 | ) | $ | (2,641 | ) | ||||||||
Earnings per share - basic: | ||||||||||||||||||||
Income (loss) from continuing operations | ||||||||||||||||||||
available for common shareholders | $ | 0.27 | $ | 0.26 | $ | 0.20 | $ | (0.17 | ) | $ | (0.15 | ) | ||||||||
Discontinued property operations | 0.03 | (0.01 | ) | 0.31 | 0.10 | 0.04 | ||||||||||||||
Net income (loss) available for common | ||||||||||||||||||||
shareholders | $ | 0.30 | $ | 0.25 | $ | 0.51 | $ | (0.07 | ) | $ | (0.11 | ) | ||||||||
Earnings per share - diluted: | ||||||||||||||||||||
Income (loss) from continuing operations | ||||||||||||||||||||
available for common shareholders | $ | 0.27 | $ | 0.25 | $ | 0.19 | $ | (0.17 | ) | $ | (0.15 | ) | ||||||||
Discontinued property operations | 0.02 | | 0.31 | 0.10 | 0.04 | |||||||||||||||
Net income (loss) available for common | ||||||||||||||||||||
shareholders | $ | 0.29 | $ | 0.25 | $ | 0.50 | $ | (0.07 | ) | $ | (0.11 | ) | ||||||||
Balance Sheet Data: | ||||||||||||||||||||
Real estate owned, at cost | $ | 2,218,532 | $ | 1,987,853 | $ | 1,862,850 | $ | 1,695,111 | $ | 1,478,793 | ||||||||||
Real estate assets, net | $ | 1,669,539 | $ | 1,510,289 | $ | 1,459,952 | $ | 1,351,849 | $ | 1,192,539 | ||||||||||
Total assets | $ | 1,746,646 | $ | 1,580,125 | $ | 1,522,525 | $ | 1,406,666 | $ | 1,239,467 | ||||||||||
Total debt | $ | 1,196,349 | $ | 1,140,046 | $ | 1,083,473 | $ | 951,941 | $ | 803,703 | ||||||||||
Minority interest | $ | 32,600 | $ | 29,798 | $ | 31,376 | $ | 32,019 | $ | 33,405 | ||||||||||
Shareholders equity | $ | 449,066 | $ | 362,526 | $ | 347,325 | $ | 351,294 | $ | 328,171 | ||||||||||
Other Data (at end of period): | ||||||||||||||||||||
Market capitalization (shares and units) (1) | $ | 1,745,674 | $ | 1,358,725 | $ | 1,145,183 | $ | 939,581 | $ | 673,431 | ||||||||||
Ratio of total debt to total capitalization (2) | 40.7 | % | 45.6 | % | 48.6 | % | 50.3 | % | 54.4 | % | ||||||||||
Number of properties, including joint | ||||||||||||||||||||
venture ownership interest (3) | 138 | 132 | 132 | 127 | 123 | |||||||||||||||
Number of apartment units, including joint | ||||||||||||||||||||
venture ownership interest (3) | 40,293 | 38,227 | 37,904 | 35,734 | 33,923 |
(1) | Market capitalization includes all series of preferred shares (value based on $25 per share liquidation preference) regardless of classification on balance sheet, common shares and partnership units (value based on common stock equivalency). | |
(2) | Total capitalization is market capitalization plus total debt and market capitalization of preferred shares (value based on $25 per share liquidation preference). | |
(3) | Property and apartment unit totals have not been adjusted to exclude properties held for sale. |
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This and other sections of this Annual Report on Form 10-K contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These statements include, but are not limited to, statements about anticipated market conditions, expected growth rates of revenues and expenses, planned asset dispositions, disposition pricing, planned acquisitions, developments and renovations, property financings, expected interest rates, joint venture activity and planned capital expenditures. Although Mid-America believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements
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included in this report on Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Mid-America or any other person that the objectives and plans of Mid-America will be achieved.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following discussion and analysis of financial condition and results of operations are based upon Mid-Americas consolidated financial statements, and the notes thereto, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires Mid-America to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, Mid-America evaluates its estimates and assumptions based upon historical experience and various other factors and circumstances. Mid-America believes that our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates and assumptions.
Mid-America believes that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require the most subjective judgments, form the basis of accounting policies deemed to be most critical. These critical accounting policies include revenue recognition, capitalization of expenditures and depreciation of assets, impairment of long-lived assets, including goodwill, and fair value of derivative financial instruments.
Revenue recognition
Mid-America leases multifamily residential apartments under operating leases primarily with terms of one year or less. Rent and other property income is recorded when due from residents and is recognized monthly as it is earned. Other property income consists primarily of utility rebillings, other expense reimbursements, and administrative, application and other fees charged to residents. Interest, management fees, and all other sources of income are recognized as earned.
Mid-America records all gains and losses on real estate in accordance with Statement No. 66 Accounting for Sales of Real Estate.
Capitalization of expenditures and depreciation of assets
Mid-America carries real estate assets at depreciated cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from 8 to 40 years for land improvements and buildings, 5 years for furniture, fixtures, and equipment, and 3 to 5 years for computers and software, all of which are subjective determinations. Repairs and maintenance costs are expensed as incurred while significant improvements, renovations, and replacements are capitalized. The cost to complete any deferred repairs and maintenance at properties acquired by Mid-America in order to elevate the condition of the property to Mid-Americas standards are capitalized as incurred.
Impairment of long-lived assets, including goodwill
Mid-America accounts for long-lived assets in accordance with the provisions of Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or Statement 144, and evaluates its goodwill for impairment under Statement No. 142, Goodwill and Other Intangible Assets, or Statement 142. Mid-America evaluates goodwill for impairment on an annual basis in Mid-Americas fiscal fourth quarter, or sooner if a goodwill impairment indicator is identified. Mid-America periodically evaluates long-lived assets, including investments in real estate and goodwill, for indicators that would suggest that the carrying amount of the assets may not be recoverable. The judgments regarding the existence of such indicators are based on factors such as operating performance, market conditions, and legal factors.
In accordance with Statement 144, long-lived assets, such as real estate assets, equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected
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to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.
Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the assets fair value. This determination is made at the reporting unit level and consists of two steps. First, Mid-America determines the fair value of a reporting unit and compares it to its carrying amount. In the apartment industry, the primary method used for determining fair value is to divide annual operating cash flows by an appropriate capitalization rate. Mid-America determines the appropriate capitalization rate by reviewing the prevailing rates in a propertys market or submarket. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.
Fair value of derivative financial instruments
Mid-America utilizes certain derivative financial instruments, primarily interest rate swaps and caps, during the normal course of business to manage, or hedge, the interest rate risk associated with Mid-Americas variable rate debt or as hedges in anticipation of future debt transactions to manage well-defined interest rate risk associated with the transaction. The valuation of the derivative financial instruments under Statement No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended, requires Mid-America to make estimates and judgments that affect the fair value of the instruments.
In order for a derivative contract to be designated as a hedging instrument, the relationship between the hedging instrument and the hedged item must be highly effective. While Mid-Americas calculation of hedge effectiveness contains some subjective determinations, the historical correlation of the cash flows of the hedging instruments and the underlying hedged item are measured by Mid-America before entering into the hedging relationship and have been found to be highly correlated.
Mid-America measures ineffectiveness using the change in the variable cash flows method at the inception of the hedge and for each reporting period thereafter, through the term of the hedging instruments. Any amounts determined to be ineffective are recorded in earnings. The change in fair value of the interest rate swaps and caps designated as cash flow hedges are recorded to accumulated other comprehensive income in the statement of shareholders equity.
OVERVIEW OF THE YEAR ENDED DECEMBER 31, 2006
Mid-Americas results for 2006 were positively influenced by both improved operating performance from communities held throughout both the current and prior period, or same store, and the positive impact from acquisitions in recent years. Strong economic growth and job formation enabled Mid-America to improve our same store occupancy and average rental rates from the prior year.
Mid-America has grown externally during the past three years by following its acquisition strategy to invest in large and mid-sized growing markets in the Sunbelt region of the United States. Mid-America acquired six properties in 2004 and three properties in 2005 for which it benefited from full years of revenues in 2006. Mid-America acquired an additional six properties during 2006.
Mid-America experienced an increase in interest expense in 2006 as our total debt outstanding and average borrowing costs both increased from prior year levels.
The following is a discussion of the consolidated financial condition and results of operations of Mid-America for the years ended December 31, 2006, 2005, and 2004. This discussion should be read in conjunction with all of the consolidated financial statements included in this Annual Report on Form 10-K.
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As of December 31, 2006, the total number of apartment units Mid-America owned or had an ownership interest in, including the properties owned by the joint venture was 40,293 in 138 communities compared to 38,227 apartment units in 132 communities owned at December 31, 2005, and 37,904 apartment units in 132 communities owned at December 31, 2004. For communities owned 100% by Mid-America, the average monthly rental per apartment unit, excluding units in lease-up, increased to $726 at December 31, 2006 from $695 at December 31, 2005, and $680 at December 31, 2004. For these same units, overall occupancy at December 31, 2006, 2005, and 2004 was 94.2%, 94.6%, and 93.6%, respectively.
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2006, to the Year Ended December 31, 2005
Property revenues for the year ended December 31, 2006, increased by approximately $29,982,000 from the year ended December 31, 2005, due to (i) a $9,538,000 increase in property revenues from the six properties acquired in 2006, or the 2006 acquisitions, (ii) a $5,312,000 increase in property revenues from the three properties acquired in 2005, or the 2005 acquisitions, and (iii) a $15,132,000 increase in property revenues from the properties held throughout both periods. The increase in property revenues from properties held throughout both periods was generated primarily by Mid-Americas same store portfolio and was driven by an average 3.1% increase in average rent per unit in 2006 over 2005.
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for the year ended December 31, 2006, increased by approximately $10,653,000 from the year ended December 31, 2005, due primarily to increases of property operating expenses of (i) $4,438,000 from the 2006 acquisitions, (ii) $1,913,000 from the 2005 acquisitions, and (iii) $4,302,000 from the properties held throughout both periods. The increase in property operating expenses from the properties held throughout both periods consisted primarily of Mid-Americas same store portfolio and was driven by an increase in property insurance reflecting the increase in premiums effective July 1, 2006. The same store property operating expense increase also reflects increased utility rates as Mid-America experienced an increase in electricity, natural gas and water and sewer prices.
Depreciation expense increased by approximately $4,975,000 primarily due to the increases of depreciation expense of (i) $2,711,000 from the 2006 acquisitions, (ii) $1,183,000 from the 2005 acquisitions, and (iii) $4,101,000 from fixed asset additions at the communities held throughout both periods. These increases were partially offset by a decrease in depreciation expense of $3,020,000 from the expiration of the amortization of fair market value of leases of six communities acquired by Mid-America in 2004.
Property management expenses increased by approximately $1,206,000 from the year ended December 31, 2005, to the year ended December 31, 2006, partially due to increased incentive compensation as a result of improved property performance and increased franchise and excise taxes due to state tax law changes. General and administrative expenses increased by approximately $1,532,000 over this same period also partially related to increased incentive compensation due to improved performance.
Interest expense increased approximately $5,070,000 in 2006 from 2005 due primarily to the increase in the amount of debt outstanding from 2005 and the increase in Mid-Americas twelve-month average borrowing cost from 5.2% for 2005, to 5.5% for 2006.
For the year ended December 31, 2005, Mid-America recorded total gains of approximately $3,034,000 from the sale of two communities owned by a joint venture of Mid-America. The sales of these communities resulted in an additional incentive fee being paid to Mid-America of approximately $1,723,000 in 2005. Mid-America had no dispositions in 2006.
For the year ended December 31, 2005, Mid-America recorded net gains on insurance and other settlement proceeds totaling approximately $749,000 mainly related to insurance settlements from hurricane damage experienced at some of Mid-Americas communities. For the year ended December 31, 2006, Mid-America recorded net gains on insurance and other settlement proceeds of approximately $84,000.
Primarily as a result of the foregoing, net income increased by approximately $1,201,000 in 2006 over 2005.
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Comparison of the Year Ended December 31, 2005, to the Year Ended December 31, 2004
Property revenues for the year ended December 31, 2005, increased by approximately $30,260,000 from the year ended December 31, 2004, due to (i) a $12,871,000 increase in property revenues from the six properties acquired in 2004, or the 2004 acquisitions, (ii) a $8,204,000 increase in property revenues from the 2005 acquisitions, and (iii) a $9,185,000 increase in property revenues from the properties held throughout both periods.
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other property related costs. Property operating expenses for the year ended December 31, 2005, increased by approximately $11,314,000 from the year ended December 31, 2004, due primarily to increases of property operating expenses of (i) $5,410,000 from the 2004 acquisitions, (ii) $3,361,000 from the 2005 acquisitions, and (iii) $2,543,000 from the properties held throughout both periods.
Depreciation expense increased by approximately $6,403,000 primarily due to the increases of depreciation expense of (i) $2,921,000 from the 2004 acquisitions, (ii) $2,084,000 from the 2005 acquisitions, and (iii) $4,596,000 from fixed asset additions at the communities held throughout both periods. These increases were partially offset by a decrease in depreciation expense of $3,198,000 from the expiration of the amortization of fair market value of leases of 13 communities acquired by Mid-America in 2003.
Property management expenses increased by approximately $1,514,000 from the year ended December 31, 2004, to the year ended December 31, 2005, partially due to increased personnel expenses and incentive compensation both related to property acquisitions. General and administrative expenses increased by approximately $1,114,000 over this same period. Property management expenses and general and administrative expenses for 2005 were both impacted by a cumulative charge to amortize four years of a ten year senior management incentive plan which Mid-America previously expected would expense from 2007 through 2011.
Interest expense increased approximately $7,759,000 in 2005 from 2004 due primarily to the increase in the amount of debt outstanding from 2004 and the increase in Mid-Americas twelve-month average borrowing cost from 5.1% for 2004, to 5.2% for 2005.
For the year ended December 31, 2005, Mid-America recorded total gains of approximately $3,034,000 from the sale of two communities owned by a joint venture of Mid-America. The sales of these communities resulted in an additional incentive fee being paid to Mid-America of approximately $1,723,000 in 2005. For the year ended December 31, 2004, Mid-America recorded a total of approximately $9,074,000 in gains from two community sales, of which approximately $3,249,000 represented Mid-Americas share of the gain from the sale of a community which was owned by a joint venture of Mid-America.
In 2005 and 2004, Mid-America refinanced the debt on several communities primarily to take advantage of the lower interest rate environment. In 2005, this resulted in a loss on debt extinguishment of approximately $409,000 due to the write-off of deferred financing costs and prepayment penalties. In 2004, Mid-America recorded a gain of approximately $1,095,000 related to the early extinguishment of debt.
For the years ended December 31, 2005, and 2004, Mid-America recorded net gains on insurance and other settlement proceeds totaling approximately $749,000 mainly related to insurance settlements from hurricane damage experienced at some of Mid-Americas communities and $2,683,000 mainly related to insurance settlements from fires at some of Mid-Americas communities, respectively.
Primarily as a result of the foregoing, net income decreased by approximately $5,454,000 in 2005 over 2004.
Funds From Operations
Funds from operations, or FFO, represents net income (computed in accordance with U.S. generally accepted accounting principles, or GAAP) excluding extraordinary items, minority interest in operating partnership income, gain on disposition of real estate assets, plus depreciation of real estate, and adjustments for joint ventures to reflect FFO on the same basis. This definition of FFO is in accordance with the NAREIT definition. Disposition of real estate assets includes sales of discontinued operations as well as proceeds received from insurance and other settlements from property damage.
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In response to the Securities and Exchange Commissions Staff Policy Statement relating to EITF Topic D-42 concerning the calculation of earnings per share for the redemption of preferred stock, Mid-America has included the amount charged to retire preferred stock in excess of carrying values in our FFO calculation.
Mid-Americas policy is to expense the cost of interior painting, vinyl flooring, and blinds as incurred for stabilized properties. During the stabilization period for acquisition properties, these items are capitalized as part of the total repositioning program of newly acquired properties, and, thus are not deducted in calculating FFO.
FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. Mid-America believes that FFO is helpful to investors in understanding Mid-Americas operating performance in that such calculation excludes depreciation expense on real estate assets. Mid-America believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. Mid-Americas calculation of FFO may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.
The following table is a reconciliation of FFO to net income for the years ended December 31, 2006, 2005, and 2004 (dollars and shares in thousands):
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Net income | $ | 20,945 | $ | 19,744 | $ | 25,198 | ||||||
Depreciation of real estate assets | 78,048 | 73,067 | 66,659 | |||||||||
Net gain on insurance and other settlement proceeds | (84 | ) | (749 | ) | (2,683 | ) | ||||||
Gain on disposition within unconsolidated entities | | (3,034 | ) | (3,249 | ) | |||||||
Net (gain) loss on insurance and other settlement proceeds of | ||||||||||||
discontinued operations | | 25 | (526 | ) | ||||||||
Depreciation of real estate assets of discontinued operations | 160 | 637 | 1,324 | |||||||||
Gain on sale of discontinued operations | | | (5,825 | ) | ||||||||
Depreciation of real estate assets of unconsolidated entities | 500 | 482 | 1,688 | |||||||||
Preferred dividend distribution | (13,962 | ) | (14,329 | ) | (14,825 | ) | ||||||
Minority interest in operating partnership income | 1,590 | 1,571 | 2,264 | |||||||||
Funds from operations | $ | 87,197 | $ | 77,414 | $ | 70,025 | ||||||
Weighted average shares and units: | ||||||||||||
Basic | 25,979 | 24,025 | 22,981 | |||||||||
Diluted | 26,204 | 24,227 | 23,316 |
FFO increases for both 2006 over 2005 and 2005 over 2004 were principally the result of improved community operations from Mid-Americas same store portfolio and the addition of communities from the 2004 acquisitions, 2005 acquisitions and 2006 acquisitions as previously reviewed in the net income discussion above.
Trends
In 2006, community performance showed the benefit of improving market conditions, which was strong throughout most of Mid-Americas markets. Areas that had been weak for several years, especially Atlanta, Dallas, and Austin, showed improved demand.
Mid-America believes that the primary driver of demand by apartment residents is job formation, and this continued to show solid momentum in most of Mid-Americas larger metro areas. Some of the smaller and mid-size markets in which Mid-America operates, such as Jackson, MS, Jacksonville, FL, and Columbus, GA remained reasonably strong during the market downturn that preceded this period, and continued to show solid performance. At the same time, Mid-America has noticed that in some of our markets, supply pressures have been surprisingly muted, and we believe that several factors are at work. In some markets, especially in Florida, some apartment communities
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have been taken off the rental market and converted to condominiums. Construction and development costs for new apartments also seem to have risen substantially for a variety of reasons, and this has made the economics of building apartments to compete with Mid-Americas communities less attractive. Rising interest rates have impacted developers costs, and this may also have reduced the amount of competition that we face from single-family homes. The cooling of housing markets may also have caused some first time home buyers to delay their purchases.
Mid-America faces cost pressures from increasing operating expenses, especially insurance and real estate tax costs, as well as increasing prices on materials that we use in maintaining our apartments.
Mid-America believes that the current conditions of improved demand, a reduced rate of increase in supply, and reduced competition from single family homes, while somewhat offset by rising expenses, will continue to contribute to better operating results in the near future.
Liquidity and Capital Resources
Net cash flow provided by operating activities increased by approximately $1,900,000 to $101,326,000 for 2006 compared to $99,426,000 for 2005 mainly related to the growth of Mid-America through acquisitions and improved operating results in 2006. Net cash flow provided by operating activities increased by approximately $11,724,000 to $99,426,000 for 2005 compared to $87,702,000 for 2004 mainly related to the growth of Mid-America through acquisitions and improved operating results in 2005.
Net cash used in investing activities increased by approximately $132,957,000 from $107,391,000 in 2005 to $240,348,000 in 2006. Net cash used in investing activities was $167,302,000 in 2004. The change in net cash used in investing activities resulted mainly from the varying levels of acquisition activity. A total of approximately $194,970,000 was invested in 2006 to acquire properties, this compares to approximately $105,643,000 in 2005, and $155,088,000 in 2004. Mid-America began limited development activities in 2006 which used net cash of approximately $10,919,000 and expanded our renovation activities using net cash of approximately $6,077,000 in 2006 compared to only $426,000 in 2005 and none in 2004.
Net cash provided by financing activities increased approximately $117,607,000 to $130,503,000 in 2006 from $12,896,000 in 2005. Net cash provided by financing activities was $79,938,000 in 2004. Cash provided from credit lines and notes payable increased approximately $29,449,000 from approximately $57,079,000 in 2005 to $86,528,000 in 2006. Cash provided from credit lines and notes payable was approximately $280,930,000 in 2004. Principal payments on notes payable increased to approximately $29,862,000 in 2006 from $10,921,000 in 2005. Principal payments on notes payable were approximately $152,046,000 in 2004. Mid-America had fewer refinancings in 2006 and 2005 than in 2004. Proceeds from issuances of common shares and units increased in 2006 to approximately $152,286,000 primarily due to Mid-Americas raising of funds through stock issuances through our direct stock purchase plan, a controlled equity plan and an overnight offering. Proceeds from issuances of common shares and units increased in 2005 from 2004 to approximately $38,759,000 mainly related to Mid-Americas use of our direct stock purchase plan.
The weighted average interest rate at December 31, 2006, for the $1.2 billion of debt outstanding was 5.6% compared to 5.4% on $1.1 billion of debt outstanding at December 31, 2005. Mid-America utilizes both conventional and tax exempt debt to help finance our activities. Borrowings are made through individual property mortgages and secured credit facilities. Mid-America utilizes fixed rate borrowings, interest rate swaps and interest rate caps to manage our current and future interest rate risk. More details on Mid-Americas borrowings can be found in the schedule on page 31.
At December 31, 2006, Mid-America had secured credit facilities relationships with Prudential Mortgage Capital which are credit enhanced by the Federal National Mortgage Association, or FNMA, Federal Home Loan Mortgage Corporation, or Freddie MAC, and a group of banks led by AmSouth Bank. Together, these credit facilities provided a total borrowing capacity of $1.4 billion at December 31, 2006, with an availability to borrow of $1.2 billion. At December 31, 2006, Mid-America had total borrowings outstanding under these credit facilities of $992 million.
Approximately 71% of Mid-Americas outstanding obligations at December 31, 2006, were borrowed through facilities with/or credit enhanced by FNMA, which we call the FNMA Facilities. The FNMA Facilities have a combined line limit of $1.0 billion, all of which was available to borrow at December 31, 2006. Various traunches of the facilities mature from 2010 through 2014. The FNMA Facilities provide for both fixed and variable rate
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borrowings. The interest rate on the majority of the variable portion renews every 90 days and is based on the FNMA Discount Mortgage Backed Security, or DMBS, rate on the date of renewal, which has typically approximated three-month LIBOR less an average spread of 0.05% over the life of the FNMA Facilities, plus a credit enhancement fee of 0.62% to 0.795%.
Each of Mid-Americas secured credit facilities is subject to various covenants and conditions on usage, and are subject to periodic re-evaluation of collateral. If Mid-America were to fail to satisfy a condition to borrowing, the available credit under one or more of the facilities could not be drawn, which could adversely affect Mid-Americas liquidity. In the event of a reduction in real estate values the amount of available credit could be reduced. Moreover, if Mid-America were to fail to make a payment or violate a covenant under a credit facility, after applicable cure periods one or more of our lenders could declare a default, accelerate the due date for repayment of all amounts outstanding and/or foreclose on properties securing such facilities. Any such event could have a material adverse effect on Mid-America.
On May 26, 2005, Mid-America gave the required one year notice to redeem all of the issued and outstanding shares of its 8 5/8% Series G Cumulative Redeemable Preferred Stock (Series G) on May 26, 2006, for the total redemption price of $10 million. As a result, in accordance with Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, Mid-America classified the Series G as a liability within notes payable as of May 26, 2005, on the accompanying consolidated financial statements. On May 26, 2006, Mid-America redeemed all of the issued and outstanding shares of Series G.
As of December 31, 2006, Mid-America had interest rate swaps in effect totaling a notional amount of approximately $679 million. To date, these swaps have proven to be highly effective hedges. Mid-America also had interest rate cap agreements totaling a notional amount of approximately $42 million in effect as of December 31, 2006.
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Summary details of the debt outstanding at December 31, 2006, follows in the table below:
Outstanding | ||||||||||||||||
Balance/ | Average | Average | Average | |||||||||||||
Notional | Interest | Rate | Contract | |||||||||||||
Line Limit | Line Availability | Amount | Rate | Maturity | Maturity | |||||||||||
COMBINED DEBT | ||||||||||||||||
Fixed Rate or Swapped | ||||||||||||||||
Conventional | $ | 855,252,207 | 5.6 | % | 8/15/2011 | 8/15/2011 | ||||||||||
Tax Exempt | 73,500,000 | 4.4 | % | 1/16/2012 | 1/16/2012 | |||||||||||
Subtotal Fixed Rate or | ||||||||||||||||
Swapped | 928,752,207 | 5.5 | % | 8/27/2011 | 8/27/2011 | |||||||||||
Variable Rate | ||||||||||||||||
Conventional | 214,716,008 | 5.9 | % | 2/25/2007 | 10/9/2012 | |||||||||||
Tax Exempt | 10,855,004 | 4.7 | % | 1/15/2007 | 5/30/2020 | |||||||||||
Conventional - Capped | 17,936,000 | 5.9 | % | 11/13/2009 | 11/13/2009 | |||||||||||
Tax Exempt - Capped | 24,090,000 | 4.6 | % | 11/27/2009 | 11/27/2009 | |||||||||||
Subtotal Variable Rate | 267,597,012 | 5.8 | % | 2/20/2007 | 3/31/2013 | |||||||||||
Total Combined Debt Outstanding | $ | 1,196,349,219 | 5.6 | % | 8/23/2010 | 1/4/2012 | ||||||||||
UNDERLYING DEBT | ||||||||||||||||
Individual Property Mortgages/Bonds | ||||||||||||||||
Conventional Fixed Rate | $ | 147,252,207 | 5.0 | % | 4/2/2015 | 4/2/2015 | ||||||||||
Tax Exempt Fixed Rate | 12,170,000 | 5.2 | % | 12/1/2028 | 12/1/2028 | |||||||||||
Tax Exempt Variable Rate | 4,760,004 | 4.7 | % | 1/15/2007 | 6/1/2028 | |||||||||||
FNMA Credit Facilities | ||||||||||||||||
Tax Free Borrowings | $ | 91,515,000 | $ | 91,515,000 | 91,515,000 | 4.6 | % | 1/15/2007 | 3/1/2014 | |||||||
Conventional Borrowings | ||||||||||||||||
Fixed Rate Borrowings | 90,000,000 | 90,000,000 | 90,000,000 | 7.5 | % | 7/1/2009 | 7/1/2009 | |||||||||
Variable Rate Borrowings | 862,914,000 | 862,914,000 | 662,318,000 | 5.9 | % | 2/26/2007 | 5/1/2013 | |||||||||
Subtotal FNMA Facilities | 1,044,429,000 | 1,044,429,000 | 843,833,000 | 5.9 | % | 5/23/2007 | 1/4/2013 | |||||||||
Freddie Mac Credit Facility | 300,000,000 | 143,729,000 | 143,729,000 | 5.9 | % | 2/25/2007 | 6/16/2012 | |||||||||
AmSouth Credit Facility | 40,000,000 | 22,939,605 | 4,605,008 | 7.3 | % | 1/31/2007 | 5/24/2007 | |||||||||
Regions Bank (formerly Union | ||||||||||||||||
Planters before | ||||||||||||||||
July 2004 merger) | 40,000,000 | 6.4 | % | 2/28/2007 | 4/1/2009 | |||||||||||
Total Underlying Debt Outstanding | $ | 1,196,349,219 | 5.8 | % | 7/15/2008 | 4/18/2013 | ||||||||||
HEDGING INSTRUMENTS | ||||||||||||||||
Interest Rate Swaps | ||||||||||||||||
LIBOR indexed | $ | 618,000,000 | 5.5 | % | 1/3/2011 | |||||||||||
BMA indexed | 61,330,000 | 4.2 | % | 9/10/2008 | ||||||||||||
Total Interest Rate Swaps | $ | 679,330,000 | 5.4 | % | 10/18/2010 | |||||||||||
Interest Rate Caps | ||||||||||||||||
LIBOR indexed | $ | 17,936,000 | 6.2 | % | 11/13/2009 | |||||||||||
BMA indexed | 24,090,000 | 6.0 | % | 11/27/2009 | ||||||||||||
Total Interest Rate Caps | $ | 42,026,000 | 6.1 | % | 11/21/2009 |
During 2006, Mid-America offered an average 1.5% discount through our DRSPP and issued approximately 1,340,000 shares of common stock through the direct stock purchase feature of this plan, generating approximately $77 million in proceeds. During 2005, Mid-America offered an average 1.5% discount through our DRSPP and issued approximately 784,000 shares of common stock through the direct stock purchase feature of this plan, generating approximately $32 million in proceeds. During 2004, Mid-America offered an average discount of 2.0% from August through December through our DRSPP. For the twelve months ended December 31, 2004, Mid-America issued approximately 392,000 shares of common stock through the direct stock purchase feature of this plan, generating approximately $15.1 million in proceeds.
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In May 2006, Mid-America sold 1,150,000 shares of common stock through a public offering generating net proceeds of approximately $59.5 million. Mid-America also sold 194,000 shares of common stock in December 2006 through our continuous equity offering plan generating approximately $11.4 million in net proceeds.
Mid-America believes that it has adequate resources to fund its current operations and annual refurbishment of our communities through our cash flow and credit facilities. Mid-America is relying on the efficient operation of the financial markets to finance debt maturities, and also is heavily reliant on the creditworthiness of FNMA, which provides credit enhancement for approximately $844 million of Mid-Americas debt. The interest rate market for FNMA DMBS, which in Mid-Americas experience is highly correlated with three-month LIBOR interest rates, is also an important component of Mid-Americas liquidity and interest rate swap effectiveness. In the event that the FNMA DMBS market becomes less efficient, or the credit of FNMA becomes impaired, Mid-America would seek alternative sources of debt financing.
For the year ended December 31, 2006, Mid-Americas net cash provided by operating activities fell short of covering improvements to existing real estate assets (excluding renovations), distributions to unitholders, and dividends paid on common and preferred shares by approximately $4.9 million. This compares to excess coverage in 2005 of approximately $2.7 million and a shortfall for 2004 of approximately $10.3 million. While Mid-America has sufficient liquidity to permit distributions at current rates, from time-to-time Mid-America may utilize additional borrowings to cover shortfalls if necessary. Any significant deterioration in operations could result in Mid-Americas financial resources to be insufficient to pay distributions to shareholders at the current rate, in which event Mid-America would be required to reduce the distribution rate.
The following table reflects Mid-Americas total contractual cash obligations which consist of our long-term debt and operating leases as of December 31, 2006, (dollars in 000s):
Payments Due by Period | |||||||||||||||||||||
Contractual Obligations | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | ||||||||||||||
Long-Term Debt(1) | $ | 9,132 | $ | 110,496 | $ | 106,830 | $ | 121,933 | $ | 217,076 | $ | 630,882 | $ | 1,196,349 | |||||||
Operating Lease | 12 | 12 | 3 | | | | 27 | ||||||||||||||
Total | $ | 9,144 | $ | 110,508 | $ | 106,833 | $ | 121,933 | $ | 217,076 | $ | 630,882 | $ | 1,196,376 |
(1) | Represents principal payments. |
Off-balance Sheet Arrangements
At December 31, 2006, and 2005, Mid-America did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Mid-Americas joint venture with Blackstone (terminated in 2003) was established in order to raise capital through asset sales to fund development (while acquiring management fees to help offset the reduction in FFO from the sale), share repurchases, and other capital requirements. Mid-Americas two joint ventures with Crow Holdings (one terminated in 2005 and one in 2007) were established to acquire approximately $200 million of multifamily properties and to enhance Mid-Americas return on investment through the generation of fee income. In addition, Mid-America does not engage in trading activities involving non-exchange traded contracts. As such, Mid-America is not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships. Mid-America does not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with Mid-America or our related parties other than what is disclosed in Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 14.
Mid-Americas investments in our real estate joint ventures are unconsolidated and are recorded on the equity method as Mid-America does not have a controlling interest.
Insurance
Management believes that the property and casualty insurance program in place provides appropriate insurance coverage for financial protection against insurable risks. Mid-America renegotiated our insurance programs July 1, 2006, and because of the significant reduction in available insurance for windstorm events and resulting large
32
increase in cost, purchased property insurance with limits reduced from prior years. Mid-America self-insures the first $500,000 of individual property losses, and, if greater, the first 10% of property losses caused by named windstorms and earthquakes, with a limit per event of $40 million for windstorm and earthquake damage. According to Mid-Americas risk consultant, approximately 20% of Mid-Americas property value is located in Wind Tier 1 risk areas (predominately certain parts of Florida) and 12% in the New Madrid earthquake risk zone. Mid-America does not own any direct coastal frontage property. The largest loss event from windstorm damage (tornado) Mid-America has experienced was $3.9 million in 1999. Mid-America experienced combined total losses of $2.2 million from windstorms in 2004 and 2005, with the biggest loss ($1.1 million) from Hurricane Francis in 2004. Mid-Americas insurance program is subject to review by our principal lenders.
Inflation
Substantially all of the resident leases at the apartment communities allow, at the time of renewal, for adjustments in the rent payable there under, and thus may enable Mid-America to seek rent increases. Almost all leases are for one year or less. The short-term nature of these leases generally serves to reduce the risk to Mid-America of the adverse effects of inflation.
Impact of Recently Issued Accounting Standards
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or Interpretation 48. Interpretation 48 provides clarification concerning the accounting for uncertainty in income taxes in an enterprises financial statement in accordance with FASB Statement No. 109, Accounting for Income Taxes. Interpretation 48 is effective for fiscal years beginning after December 15, 2006. Mid-America does not believe the adoption of Interpretation 48 will have a material impact on Mid-Americas consolidated financial condition or results of operations taken as a whole.
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, or Statement 157. Statement 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Statement 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Mid-America does not believe the adoption of Statement 157 will have a material impact on Mid-Americas consolidated financial condition or results of operations taken as a whole.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Mid-Americas primary market risk exposure is to changes in interest rates obtainable on our secured and unsecured borrowings. At December 31, 2006, 41% of Mid-Americas total capitalization consisted of borrowings. Mid-Americas interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve this objective, Mid-America manages its exposure to fluctuations in market interest rates for borrowings through the use of fixed rate debt instruments and interest rate swaps and caps which mitigate our interest rate risk on a related financial instrument and effectively fix the interest rate on a portion of our variable debt or on future refinancings. Mid-America uses our best efforts to ladder fixed rate maturities thereby limiting our exposure to interest rate changes in any one year. Mid-America does not enter into derivative instruments for trading purposes. Approximately 81% of Mid-Americas outstanding debt was subject to fixed rates after considering related derivative instruments with a weighted average of 5.5% at December 31, 2006. Mid-America regularly reviews interest rate exposure on outstanding borrowings in an effort to minimize the risk of interest rate fluctuations.
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The table below provides information about Mid-Americas financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For Mid-Americas interest rate swaps and caps, the table presents the notional amount of the swaps and caps and the years in which they expire. Weighted average variable rates are based on rates in effect at the reporting date (dollars in 000s).
Total | Fair | ||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | Value | ||||||||||||||||||||||||
Long-term Debt | |||||||||||||||||||||||||||||||
Fixed Rate (1) | | $ | 111,637 | $ | 65,000 | | | $ | 72,785 | $ | 249,422 | $ | 227,905 | ||||||||||||||||||
Average interest rate | | 4.92 | % | 7.71 | % | | | 5.89 | % | 5.93 | % | ||||||||||||||||||||
Variable Rate (1) | $ | 4,605 | | $ | 40,000 | $ | 120,000 | $ | 215,033 | $ | 567,289 | $ | 946,927 | $ | 946,927 | ||||||||||||||||
Average interest rate | 7.25 | % | | 6.37 | % | 5.87 | % | 5.88 | % | 5.66 | % | 5.77 | % | ||||||||||||||||||
Interest Rate Swaps | |||||||||||||||||||||||||||||||
Variable to Fixed | $ | 92,800 | $ | 74,935 | $ | 35,230 | $ | 98,365 | $ | 133,000 | $ | 245,000 | $ | 679,330 | $ | 11,328 | |||||||||||||||
Average Pay Rate | 5.15 | % | 4.70 | % | 3.60 | % | 4.64 | % | 4.57 | % | 4.45 | % | 4.58 | % | |||||||||||||||||
Interest Rate Cap | |||||||||||||||||||||||||||||||
Variable to Fixed | $ | 6,805 | | $ | 15,770 | | $ | 19,451 | | $ | 42,026 | $ | 30 | ||||||||||||||||||
Average Pay Rate | 6.00 | % | | 6.00 | % | | 6.16 | % | | 6.07 | % |
(1) | Excluding the effect of interest rate swap and cap agreements. |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Registered Public Accounting Firms, Consolidated Financial Statements and Selected Quarterly Financial Information are set forth on pages F-1 to F-36 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On September 19, 2005, and effective October 31, 2005, upon the filing of our Form 10-Q for the third quarter of 2005, the Audit Committee of the Board of Directors of Mid-America dismissed KPMG LLP as Mid-Americas independent registered public accounting firm and engaged Ernst & Young LLP as our new independent registered public accounting firm to conduct the audit of Mid-Americas financial statements as of and for the year ended December 31, 2005.
The report of KPMG LLP on the financial statements for the year ended December 31, 2004, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principle.
There have been no disagreements with Mid-Americas independent accountants on any matter of accounting principles or practices or financial statement disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
MANAGEMENTS EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The management of Mid-America, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, including ensuring that such information is accumulated and communicated to Mid-America management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of December 31, 2006, (the end of the period covered by this Annual Report on Form 10-K).
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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Managements report on our internal control over financial reporting is presented on page F-1 of this Annual Report on Form 10-K. The reports of Ernst & Young LLP relating to the consolidated financial statements, financial statement schedule, managements assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting are presented on pages F-2 and F-4 of this Annual Report on Form 10-K.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the three months ended December 31, 2006, there were no significant changes in Mid-Americas internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, Mid-Americas internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information contained in Mid-Americas 2006 Proxy Statement in the sections entitled Proposal 1 - Election of Directors, Executive Officers and Section 16(a) Beneficial Ownership Reporting Compliance, is incorporated herein by reference in response to this item.
Our Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors and employees, which can be found on Mid-Americas website at http://www.maac.net, on the Investors page under Company Info and Governance. Mid-America will provide a copy of this document to any person, without charge, upon request, by writing to the Investor Relations Department at Mid-America Apartment Communities, Inc., 6584 Poplar Avenue, Suite 300, Memphis, TN 38138. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on our website at the address and the locations specified above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in Mid-Americas 2006 Proxy Statement in the section entitled Executive Compensation and Compensation Discussion and Analysis is incorporated herein by reference in response to this item.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information contained in Mid-Americas 2006 Proxy Statement in the sections entitled Security Ownership of Management and Security Ownership of Certain Beneficial Owners, is incorporated herein by reference in response to this item.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information contained in Mid-Americas 2006 Proxy Statement in the sections entitled Certain Relationships and Related Transactions is incorporated herein by reference in response to this item.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information contained in Mid-Americas 2006 Proxy Statement in the section entitled Proposal 2 - Ratification of Independent Registered Public Accounting Firm, is incorporated herein by reference in response to this item.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. | Managements Report on Internal Controls Over Financial Reporting | F | 1 | |
Reports of Independent Registered Public Accounting Firms | F | 2 | ||
Consolidated Balance Sheets as of December 31, 2006, and 2005 | F | 5 | ||
Consolidated Statements of Operations for the years ended | ||||
December 31, 2006, 2005, and 2004 | F | 6 | ||
Consolidated Statements of Shareholders Equity for the years ended | ||||
December 31, 2006, 2005, and 2004 | F | 7 | ||
Consolidated Statements of Cash Flows for the years ended | ||||
December 31, 2006, 2005, and 2004 | F | 8 | ||
Notes to Consolidated Financial Statements for the years ended December 31, 2006, 2005, and 2004 | F | 9 | ||
2. | Financial Statement Schedule required to be filed by Item 8 and Paragraph (b) of this Item 15: | |||
Schedule III - Real Estate Investments and Accumulated Depreciation as of December 31, 2006 | F | 32 | ||
3. | The exhibits required by Item 601 of Regulation S-K, except as otherwise noted, have been filed with previous reports by the registrant and are herein incorporated by reference. |
Exhibit |
||
Number | Exhibit Description | |
3.1 | Amended and Restated Charter of Mid-America Apartment Communities, Inc. dated as of January 10, 1994, as filed with the Tennessee Secretary of State on January 25, 1994 (Filed as Exhibit 3.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). | |
3.2 | Articles of Amendment to the Charter of Mid-America Apartment Communities, Inc. dated as of January 28, 1994, as filed with the Tennessee Secretary of State on January 28, 1994 (Filed as Exhibit 3.2 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). | |
3.3 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Preferred Stock dated as of October 9, 1996, as filed with the Tennessee Secretary of State on October 10, 1996 (Filed as Exhibit 1 to the Registrants Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). | |
3.4 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter dated November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 3.6 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). | |
3.5 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of November 17, 1997, as filed with the Tennessee Secretary of State on November 18, 1997 (Filed as Exhibit 4.1 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). | |
3.6 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of June 25, 1998, as filed with the Tennessee Secretary of State on June 30, 1998 (Filed as Exhibit 4.3 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). |
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Exhibit | ||
Number |
Exhibit Description | |
3.7 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of A Series of Shares of Preferred Stock dated as of December 24, 1998, as filed with the Tennessee Secretary of State on December 30, 1998 (Filed as Exhibit 3.7 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
3.8 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 11, 2002, as filed with the Tennessee Secretary of State on October 14, 2002 (Filed as Exhibit 4.3 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). | |
3.9 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of October 28, 2002, as filed with the Tennessee Secretary of State on October 28, 2002 (Filed as Exhibit 3.9 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
3.10 | Mid-America Apartment Communities, Inc. Articles of Amendment to the Amended and Restated Charter Designating and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock dated as of August 7, 2003, as filed with the Tennessee Secretary of State on August 7, 2003 (Filed as Exhibit 3.10 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
3.11 | Bylaws of Mid-America Apartment Communities, Inc. (Filed as an Exhibit to the Registrants Registration Statement on Form S-11 (File Number 33-69434) and incorporated herein by reference). | |
3.12 | First Amendment to the Bylaws of Mid-America Apartment Communities, Inc. dated May 2, 2006 (Filed as Exhibit 3.12 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference). | |
4.1 | Form of Common Share Certificate (Filed as Exhibit 4.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference). | |
4.2 | Form of 9.5% Series A Cumulative Preferred Stock Certificate (Filed as Exhibit 2 to the Registrants Registration Statement on Form 8-A filed with the Commission on October 11, 1996 and incorporated herein by reference). | |
4.3 | Form of 8 7/8% Series B Cumulative Preferred Stock Certificate (Filed as Exhibit 4.3 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on November 19, 1997 and incorporated herein by reference). | |
4.4 | Form of 9 3/8% Series C Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on June 26, 1998 and incorporated herein by reference). | |
4.5 | Form of 9.5% Series E Cumulative Preferred Stock Certificate (Filed as Exhibit 4.5 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
4.6 | Form of 9 ¼% Series F Cumulative Preferred Stock Certificate (Filed as Exhibit 4.2 to the Registrants Registration Statement on Form 8-A/A filed with the Commission on October 11, 2002 and incorporated herein by reference). | |
4.7 | Form of 8.30% Series G Cumulative Preferred Stock Certificate (Filed as Exhibit 4.7 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
4.8 | Form of 8.30% Series H Cumulative Preferred Stock Certificate (Filed as Exhibit 4.8 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
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Exhibit | |||
Number | Exhibit Description | ||
10.1 | Second Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P., a Tennessee limited partnership (Filed as Exhibit 10.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and incorporated herein by reference). | ||
10.2 | | Employment Agreement between the Registrant and H. Eric Bolton, Jr. (Filed as Exhibit 10.8 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). | |
10.3 | | Employment Agreement between the Registrant and Simon R.C. Wadsworth (Filed as Exhibit 10.9 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference). | |
10.4 | | Fourth Amended and Restated 1994 Restricted Stock and Stock Option Plan (Filed as Exhibit A to the Registrants Proxy Statement filed on April 24, 2002 and incorporated herein by reference). | |
10.5 | AmSouth Revolving Credit Agreement (Amended and Restated) dated July 17, 2003 (Filed as Exhibit 10.10 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | ||
10.6 | First Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 19, 2004 (Filed as Exhibit 10.10 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.7 | Second Amendment to Amended and Restated Revolving Credit Agreement (AmSouth) dated May 23, 2005. | ||
10.8 | Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 30, 2004. | ||
10.9 | First Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2004 (Filed as Exhibit 10.13 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.10 | Second Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated April 30, 2004 (Filed as Exhibit 10.14 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.11 | Third Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 3, 2004 (Filed as Exhibit 10.15 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.12 | Fourth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated August 31, 2004 (Filed as Exhibit 10.16 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.13 | Fifth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated October 1, 2004 (Filed as Exhibit 10.17 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.14 | Sixth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 1, 2004 (Filed as Exhibit 10.18 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). |
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Exhibit | ||
Number | Exhibit Description | |
10.15 | Seventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 15, 2004 (Filed as Exhibit 10.19 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | |
10.16 | Eighth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated March 31, 2005. | |
10.17 | Ninth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated September 23, 2005. | |
10.18 | Tenth Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated December 16, 2005. | |
10.19 | Eleventh Amendment to Second Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P., dated February 22, 2006. | |
10.20 | Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P., dated March 30, 2004. | |
10.21 | First Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2004. | |
10.22 | Second Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of August 3, 2004 (Filed as Exhibit 10.21 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | |
10.23 | Third Amendment to the Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated as of December 1, 2004 (Filed as Exhibit 10.22 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | |
10.24 | Fourth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated March 31, 2005. | |
10.25 | Fifth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated September 23, 2005. | |
10.26 | Sixth Amendment to Third Amended and Restated Master Credit Facility Agreement by and among Prudential Multifamily Mortgage, Inc., Mid-America Apartment Communities, Inc., Mid-America Apartments, L.P. and Mid-America Apartments of Texas, L.P. dated February 22, 2006. | |
10.27 | Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways- Columbia, L.P. dated June 1, 2001 (Filed as Exhibit 10.17 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | |
10.28 | Amendment No. 1 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated December 24, 2002 (Filed as Exhibit 10.18 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). |
39
Exhibit | |||
Number | Exhibit Description | ||
10.29 | Amendment No. 2 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P. and Fairways-Columbia, L.P. dated May 30, 2003 (Filed as Exhibit 10.19 to the Registrants Registration Statement on Form S-3/A (File Number 333-112469) and incorporated herein by reference). | ||
10.30 | Amendment No. 3 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated March 2, 2004. | ||
10.31 | Amendment No. 4 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated November 17, 2005. | ||
10.32 | Amendment No. 5 to Master Reimbursement Agreement by and among Fannie Mae, Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc. and Mid-America Apartments of Texas, L.P. dated February 23, 2006. | ||
10.33 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Sunset Valley Apartments, Texas) (Filed as Exhibit 10.28 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.34 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004 (Village Apartments, Texas) (Filed as Exhibit 10.29 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.35 | Consent, Modification, Assumption of Indemnity Obligations and Release Agreement dated November 4, 2004, (Coral Springs Apartments, Florida) (Filed as Exhibit 10.30 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.36 | Credit Agreement dated September 28, 1998 by and among Jefferson Village, L.P., Jefferson at Sunset Valley, L.P. and JPI Coral Springs, L.P. (Filed as Exhibit 10.31 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | ||
10.37 | Credit Agreement by and among Mid-America Apartment Communities, Inc., Mid-America Apartments L.P. and Mid- America Apartments of Texas, L.P. and Financial Federal Savings Bank dated June 29, 2004 (Filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 and incorporated herein by reference). | ||
10.38 | Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated March 2, 2004. | ||
10.39 | Amendment No. 1 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated November 17, 2005. | ||
10.40 | Amendment No. 2 to Master Credit Facility Agreement by and among Mid-America Apartments, L.P., Mid-America Apartment Communities, Inc., Mid-America Apartments of Texas, L.P. and Prudential Multifamily Mortgage, Inc. dated February 23, 2006. | ||
10.41 | | Mid-America Apartment Communities Non-Qualified Deferred Compensation Retirement Plan as Amended Effective January 1, 2005 (Filed as Exhibit 10.34 to the Registrants Annual Report on Form 10-K/A for the fiscal year ended December 31, 2004 and incorporated herein by reference). | |
10.42 | | Mid-America Apartment Communities 2005 Key Management Restricted Stock Plan (Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 20, 2005 and incorporated herein by reference). | |
10.43 | | 2005 Executive Annual Bonus Program (Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on March 25, 2005 and incorporated herein by reference). |
40
Exhibit | |||
Number | Exhibit Description | ||
10.44 | | Form of Restricted Stock Agreement (Filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on March 11, 2005 and incorporated herein by reference). | |
10.45 | | Amendment for the Non-Qualified Deferred Compensation Plan for Outside Directors (Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on August 24, 2006 and incorporated herein by reference). | |
11 | Statement re: computation of per share earnings (included within the Form 10-K). | ||
14 | Code of Ethics (Filed as Exhibit 14.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference). | ||
21 | List of Subsidiaries | ||
23.1 | Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP | ||
23.2 | Consent of Independent Registered Public Accounting Firm, KPMG LLP | ||
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
____________________ | |||
| Management contract or compensatory plan or arrangement. | ||
(b) | Exhibits: | ||
See Item 15(a)(3) above. | |||
(c) | Financial Statement Schedule: | ||
See Item 15(a)(2) above. |
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MID-AMERICA APARTMENT COMMUNITIES, INC. | ||||
Date: February 27, 2007 | /s/ H. ERIC BOLTON, JR. | |||
H. ERIC BOLTON, JR. | ||||
Chairman of the Board of Directors, | ||||
President and Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. | ||||
Date: February 27, 2007 | /s/ H. ERIC BOLTON, JR. | |||
H. ERIC BOLTON, JR. | ||||
Chairman of the Board of Directors, | ||||
President and Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Date: February 27, 2007 | /s/ SIMON R.C. WADSWORTH | |||
SIMON R.C. WADSWORTH | ||||
Executive Vice President and Chief Financial Officer | ||||
(Principal Financial and Accounting Officer) | ||||
Date: February 27, 2007 | /s/ GEORGE E. CATES | |||
GEORGE E. CATES | ||||
Director | ||||
Date: February 27, 2007 | /s/ ROBERT F. FOGELMAN | |||
ROBERT F. FOGELMAN | ||||
Director | ||||
Date: February 27, 2007 | /s/ ALAN B. GRAF, JR. | |||
ALAN B. GRAF, JR. | ||||
Director | ||||
Date: February 27, 2007 | /s/ JOHN S. GRINALDS | |||
JOHN S. GRINALDS | ||||
Director | ||||
Date: February 27, 2007 | /s/ RALPH HORN | |||
RALPH HORN | ||||
Director | ||||
Date: February 27, 2007 | /s/ MARY E. MCCORMICK | |||
MARY E. MCCORMICK | ||||
Director | ||||
Date: February 27, 2007 | /s/ WILLIAM B. SANSOM | |||
WILLIAM B. SANSOM | ||||
Director |
42
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Mid-America is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Mid-Americas consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Mid-America; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Mid-America are being made only in accordance with appropriate authorizations of management and directors of Mid-America; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Mid-Americas assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of Mid-Americas internal control over financial reporting as of December 31, 2006 using the framework specified in Internal Control - Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such assessment, management has concluded that Mid-Americas internal control over financial reporting was effective as of December 31, 2006.
Managements assessment of the effectiveness of Mid-Americas internal control over financial reporting as of December 31, 2006, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated balance sheets of Mid-America Apartment Communities, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders equity, and cash flows for each of the years then ended. Our audits also included the information as of and for the years ended December 31, 2006 and 2005 contained in the financial statement schedule listed in the Index at Item 15(a). These consolidated financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 Mid-America Apartment Communities, Inc. at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with U.S. 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, present fairly in all material respects the information as of and for the years ended December 31, 2006 and 2005 set forth therein.
As discussed in Note 2 of the Notes to Consolidated Financial Statements, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Mid-America Apartment Communities, Inc.s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2007 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP |
Memphis, Tennessee
February 27, 2007
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Mid-America Apartment Communities, Inc.
We have audited the accompanying consolidated statements of operations, shareholders equity, and cash flows of Mid-America Apartment Communities, Inc. and subsidiaries for the year ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the 2004 information included in the accompanying financial statement Schedule III: Real Estate and Accumulated Depreciation. These consolidated financial statements and the financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule 2004 information based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Mid-America Apartment Communities, Inc. and subsidiaries for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the 2004 information included in the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/S/ KPMG LLP |
Memphis, Tennessee
March 8, 2005, except as to note 13,
which is as of February 28, 2007
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Mid-America Apartment Communities, Inc.
We have audited managements assessment, included in the accompanying Managements Report on Internal Control over Financial Reporting, that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Mid-America Apartment Communities, Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Mid-America Apartment Communities, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Mid-America Apartment Communities, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders equity, and cash flows for the years then ended of Mid-America Apartment Communities, Inc. and our report dated February 27, 2007 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP |
Memphis, Tennessee
February 27, 2007
F-4
MID-AMERICA APARTMENT COMMUNITIES, INC.
Consolidated Balance Sheets
December 31, 2006 and 2005
(Dollars in thousands, except per share data)
December 31, 2006 | December 31, 2005 | |||||||||
Assets: | ||||||||||
Real estate assets: | ||||||||||
Land | $ | 206,635 | $ | 179,523 | ||||||
Buildings and improvements | 1,921,462 | 1,740,818 | ||||||||
Furniture, fixtures and equipment | 51,374 | 46,301 | ||||||||
Capital improvements in progress | 20,689 | 4,175 | ||||||||
2,200,160 | 1,970,817 | |||||||||
Less accumulated depreciation | (543,802 | ) | (473,421 | ) | ||||||
1,656,358 | 1,497,396 | |||||||||
Land held for future development | 2,360 | 1,366 | ||||||||
Commercial properties, net | 7,103 | 7,345 | ||||||||
Investments in and advances to real estate joint venture | 3,718 | 4,182 | ||||||||
Real estate assets, net | 1,669,539 | 1,510,289 | ||||||||
Cash and cash equivalents | 5,545 | 14,064 | ||||||||
Restricted cash | 4,145 | 5,534 | ||||||||
Deferred financing costs, net | 16,033 | 15,338 | ||||||||
Other assets | 38,865 | 29,849 | ||||||||
Goodwill | 5,051 | 5,051 | ||||||||
Assets held for sale | 7,468 | | ||||||||
Total assets | $ | 1,746,646 | $ | 1,580,125 | ||||||
Liabilities and Shareholders Equity: | ||||||||||
Liabilities: | ||||||||||
Notes payable | $ | 1,196,349 | $ | 1,140,046 | ||||||
Accounts payable | 2,773 | 3,278 | ||||||||
Accrued expenses and other liabilities | 57,919 | 38,048 | ||||||||
Security deposits. | 7,670 | 6,429 | ||||||||
Liabilities associated with assets held for sale | 269 | | ||||||||
Total liabilities | 1,264,980 | 1,187,801 | ||||||||
Minority interest | 32,600 | 29,798 | ||||||||
Shareholders equity: | ||||||||||
Preferred stock, $.01 par value per share, 20,000,000 shares authorized, | ||||||||||
$166,863 or $25 per share liquidation preference; | ||||||||||
9 1/4% Series F Cumulative Redeemable Preferred Stock, 3,000,000 shares | ||||||||||
authorized, 474,500 shares issued and outstanding | 5 | 5 | ||||||||
8.30% Series H Cumulative Redeemable Preferred Stock, 6,200,000 shares | ||||||||||
authorized, 6,200,000 shares issued and outstanding | 62 | 62 | ||||||||
Common stock, $.01 par value per share, 50,000,000 shares authorized; 25,093,156 | ||||||||||
and 22,048,372 shares issued and outstanding at December 31, 2006, and 2005, | ||||||||||
respectively | 251 | 220 | ||||||||
Additional paid-in capital | 815,941 | 671,885 | ||||||||
Other | | (2,422 | ) | |||||||
Accumulated distributions in excess of net income | (378,090 | ) | (314,352 | ) | ||||||
Accumulated other comprehensive income | 10,897 | 7,128 | ||||||||
Total shareholders equity | 449,066 | 362,526 | ||||||||
Total liabilities and shareholders equity | $ | 1,746,646 | $ | 1,580,125 |
See accompanying notes to consolidated financial statements.
F-5
MID-AMERICA APARTMENT COMMUNITIES, INC.
Consolidated Statements of Operations
Years Ended December 31, 2006, 2005, and 2004
(Dollars in thousands, except per share data)
2006 | 2005 | 2004 | ||||||||||
Operating revenues: | ||||||||||||
Rental revenues | $ | 311,524 | $ | 283,650 | $ | 254,902 | ||||||
Other property revenues | 14,265 | 12,157 | 10,645 | |||||||||
Total property revenues | 325,789 | 295,807 | 265,547 | |||||||||
Management fee income | 210 | 325 | 582 | |||||||||
Total operating revenues | 325,999 | 296,132 | 266,129 | |||||||||
Property operating expenses: | ||||||||||||
Personnel | 38,022 | 35,423 | 31,782 | |||||||||
Building repairs and maintenance | 12,072 | 10,965 | 9,838 | |||||||||
Real estate taxes and insurance | 40,878 | 37,341 | 34,752 | |||||||||
Utilities | 19,704 | 17,686 | 15,374 | |||||||||
Landscaping | 8,649 | 7,885 | 7,176 | |||||||||
Other operating | 14,991 | 14,363 | 13,427 | |||||||||
Depreciation | 79,388 | 74,413 | 68,010 | |||||||||
Total property operating expenses | 213,704 | 198,076 | 180,359 | |||||||||
Property management expenses | 13,077 | 11,871 | 10,357 | |||||||||
General and administrative expenses | 11,886 | 10,354 | 9,240 | |||||||||
Income from continuing operations before non-operating items | 87,332 | 75,831 | 66,173 | |||||||||
Interest and other non-property income | 673 | 498 | 593 | |||||||||
Interest expense | (63,512 | ) | (58,442 | ) | (50,683 | ) | ||||||
Loss on debt extinguishment | (551 | ) | (409 | ) | 1,095 | |||||||
Amortization of deferred financing costs | (2,036 | ) | (2,011 | ) | (1,753 | ) | ||||||
Minority interest in operating partnership income | (1,590 | ) | (1,571 | ) | (2,264 | ) | ||||||
(Loss) income from investments in real estate joint ventures | (114 | ) | 65 | (287 | ) | |||||||
Incentive fee from real estate joint ventures | | 1,723 | | |||||||||
Net gain on insurance and other settlement proceeds | 84 | 749 | 2,683 | |||||||||
Gain on sale of non-depreciable assets | 50 | 334 | | |||||||||
Gain on disposition within real estate joint ventures | | 3,034 | 3,249 | |||||||||
Income from continuing operations | 20,336 | 19,801 | 18,806 | |||||||||
Discontinued operations: | ||||||||||||
Income from discontinued operations before asset impairment, | ||||||||||||
settlement proceeds and gain on sale | 609 | 211 | 241 | |||||||||
Asset impairment on discontinued operations | | (243 | ) | (200 | ) | |||||||
Net gain (loss) on insurance and other settlement proceeds on discontinued operations | | (25 | ) | 526 | ||||||||
Gain on sale of discontinued operations | | | 5,825 | |||||||||
Net income | 20,945 | 19,744 | 25,198 | |||||||||
Preferred dividend distribution | 13,962 | 14,329 | 14,825 | |||||||||
Net income available for common shareholders | $ | 6,983 | $ | 5,415 | $ | 10,373 | ||||||
Weighted average shares outstanding (in thousands): | ||||||||||||
Basic | 23,474 | 21,405 | 20,317 | |||||||||
Effect of dilutive stock options | 224 | 202 | 335 | |||||||||
Diluted | 23,698 | 21,607 | 20,652 | |||||||||
Net income available for common shareholders | $ | 6,983 | $ | 5,415 | $ | 10,373 | ||||||
Discontinued property operations | (609 | ) | 57 | (6,392 | ) | |||||||
Income from continuing operations available for common shareholders | $ | 6,374 | $ | 5,472 | $ | 3,981 | ||||||
Earnings per share - basic: | ||||||||||||
Income from continuing operations available for common shareholders | $ | 0.27 | $ | 0.26 | $ | 0.20 | ||||||
Discontinued property operations | 0.03 | (0.01 | ) | 0.31 | ||||||||
Net income available for common shareholders | $ | 0.30 | $ | 0.25 | $ | 0.51 | ||||||
Earnings per share - diluted: | ||||||||||||
Income from continuing operations available for common shareholders | $ | 0.27 | $ | 0.25 | $ | 0.19 | ||||||
Discontinued property operations | 0.02 | | 0.31 | |||||||||
Net income available for common shareholders | $ | 0.29 | $ | 0.25 | $ | 0.50 | ||||||
Dividends declared per common share (1) | $ | 2.985 | $ | 2.350 | $ | 2.340 |
(1) | The Company declared and paid $2.38 per common share during the twelve months ended December 31, 2006.During this same period the Company also declared an additional $0.605 per common share that will not be paid until January 31, 2007. |
See accompanying notes to condensed consolidated financial statements.
F-6
MID-AMERICA APARTMENT COMMUNITIES, INC.
Consolidated Statements of Shareholders Equity
Years Ended December 31, 2006, 2005, and 2004
(Dollars and Shares in thousands)
Accumulated | Accumulated | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional | Distributions | Other | |||||||||||||||||||||||||||
Paid-In | in Excess of | Comprehensive | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Other | Net Income | Income (Loss) | Total | |||||||||||||||||||||||
BALANCE DECEMBER 31, 2003 | 6,675 | $ | 67 | 20,032 | $ | 200 | $ | 612,410 | $ | (3,711 | ) | $ | (232,224 | ) | $ | (25,448 | ) | $ | 351,294 | ||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||
Net income | | | | | | | 25,198 | | 25,198 | ||||||||||||||||||||||
Other comprehensive income - derivative | |||||||||||||||||||||||||||||||
instruments (cash flow hedges) | | | | | | | | 10,711 | 10,711 | ||||||||||||||||||||||
Comprehensive income | 35,909 | ||||||||||||||||||||||||||||||
Issuance and registration of common shares | | | 420 | 5 | 15,958 | | | | 15,963 | ||||||||||||||||||||||
Exercise of stock options | | | 343 | 3 | 8,888 | | | | 8,891 | ||||||||||||||||||||||
Stock issued to employee stock ownership plan | 15 | | 554 | 554 | |||||||||||||||||||||||||||
Repurchase of common shares | | | (2 | ) | | (54 | ) | | | | (54 | ) | |||||||||||||||||||
Restricted shares issued to officers and directors | |||||||||||||||||||||||||||||||
(Note 2, Note 12) | | | 2 | | 104 | (104 | ) | | | | |||||||||||||||||||||
Amortization of LESOP provision employee | |||||||||||||||||||||||||||||||
advances (Note 12) | | | | | | 293 | | | 293 | ||||||||||||||||||||||
Shares issued in exchange for units | | | 47 | 1 | 511 | | | | 512 | ||||||||||||||||||||||
Adjustment for Minority Interest Ownership in | |||||||||||||||||||||||||||||||
operating partnership | | | | | (3,851 | ) | | | | (3,851 | ) | ||||||||||||||||||||
Amortization of unearned compensation | | | | | | 270 | | | 270 | ||||||||||||||||||||||
Cash dividends on common stock ($2.34 per share) | | | | | | | (47,631 | ) | | (47,631 | ) | ||||||||||||||||||||
Dividends on preferred stock | | | | | | | (14,825 | ) | | (14,825 | ) | ||||||||||||||||||||
BALANCE DECEMBER 31, 2004 | 6,675 | 67 | 20,857 | 209 | 634,520 | (3,252 | ) | (269,482 | ) | (14,737 | ) | 347,325 | |||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||||
Net income | | | | | | | 19,744 | | 19,744 | ||||||||||||||||||||||
Other comprehensive income - derivative | |||||||||||||||||||||||||||||||
instruments (cash flow hedges) | | | | | | | | 21,865 | 21,865 | ||||||||||||||||||||||
Comprehensive income | 41,609 | ||||||||||||||||||||||||||||||
Issuance and registration of common shares | | | 800 | 8 | 33,136 | | | | 33,144 | ||||||||||||||||||||||
Exercise of stock options | | | 240 | 2 | 5,613 | | | | 5,615 | ||||||||||||||||||||||
Stock issued to employee stock ownership plan | 16 | | 700 | 700 | |||||||||||||||||||||||||||
Restricted shares issued to officers and directors | |||||||||||||||||||||||||||||||
(Note 2, Note 12) | | | 23 | | 939 | (939 | ) | | | | |||||||||||||||||||||
Amortization of LESOP provision employee | |||||||||||||||||||||||||||||||
advances (Note 12) | | | | | | 360 | | | 360 | ||||||||||||||||||||||
Shares issued in exchange for units | | | 112 | 1 | 1,254 | | | | 1,255 | ||||||||||||||||||||||
Adjustment for Minority Interest Ownership in | |||||||||||||||||||||||||||||||
operating partnership | | | | | (4,277 | ) | | | | (4,277 | ) | ||||||||||||||||||||
Amortization of unearned compensation | | | | | | 1,409 | | | 1,409 | ||||||||||||||||||||||
Cash dividends on common stock ($2.35 per share) | | | | | | | (50,285 | ) | | (50,285 | ) | ||||||||||||||||||||
Dividends on preferred stock | | | | | | | (14,329 | ) | | (14,329 | ) | ||||||||||||||||||||
BALANCE DECEMBER 31, 2005 | 6,675 | 67 | 22,048 | 220 | 671,885 | (2,422 | ) | (314,352 | ) | 7,128 | 362,526 | ||||||||||||||||||||
Comprehensive income: |