-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KGzsE/mNOqvcNRZA/qx5W6q8y0/Z/Zlbge11AtIESLBOrP9DzreAs06A3l/ahPpV 2rMqfVlMFxHhEWVjbO1BAQ== 0000912595-02-000045.txt : 20020814 0000912595-02-000045.hdr.sgml : 20020814 20020814103955 ACCESSION NUMBER: 0000912595-02-000045 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020814 ITEM INFORMATION: FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MID AMERICA APARTMENT COMMUNITIES INC CENTRAL INDEX KEY: 0000912595 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 621543819 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12762 FILM NUMBER: 02732217 BUSINESS ADDRESS: STREET 1: 6584 POPLAR AVE STREET 2: STE 340 CITY: MEMPHIS STATE: TN ZIP: 38138 BUSINESS PHONE: 9016826600 MAIL ADDRESS: STREET 1: 6584 POPLAR AVE STREET 2: SUITE 340 CITY: MEMPHIS STATE: TN ZIP: 38138 8-K 1 invsld8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 Form 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 August 14, 2002 Date of Report (Date of earliest event reported) MID-AMERICA APARTMENT COMMUNITIES, INC. (Exact Name of Registrant as Specified in Charter) TENNESSEE 1-12762 62-1543819 (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number) 6584 POPLAR AVENUE, SUITE 340 MEMPHIS, TENNEESSEE 38138 (Address of principal executive offices) (901) 682-6600 (Registrant's telephone number, including area code) (Former name or address, if changed since last report) ITEM 9. Regulation FD On August 14, 2002, H. Eric Bolton, Jr. made the following slide presentation. Mid-America Apartment Communities, Inc. Investor Update August, 2002 Creating Great Places to Live Mid-America Apartment Communities [Map highlights market presence in the following states] Ohio Virginia Kentucky North Carolina Tennessee Arkansas South Carolina Georgia Alabama Mississippi Texas Florida Southeast Market Focus... Steady Growth Markets - Lower Volatility [X] MAA's focus is on the steady demand and more stable markets of the southeast US...higher job growth, household formations and immigration trends. [X] MAA's superior locations and disciplined capital investment practices strengthen ability to effectively compete with periodic "supply" side pressure and provide competitive advantages. [X] Strong regional focus advantages...in-depth market knowledge, operating economies and "hands on" attention to properties. Successful Operator [X] 25 years of experience in all phases of the value creation cycle [X] Strong emphasis on training, property maintenance and capital improvement, extensive support & monitoring systems [X] Long record of success in creating value >> Capital improvements >> Effective leasing and occupancy management >> Aggressive utility billing initiatives >> Ancillary income programs >> Creative operating efficiencies [X] MAA properties consistently outperform market occupancy levels and rent growth High Quality Assets [X] Among the newest portfolios of all apartment REITs (~12 years). [X] Portfolio continuously improved with steady capital infusion. [X] $300 million of new communities added in the last four years. [X] Sold $110 million of properties over the last two years; average age of 20 years. [X] Solid rental product appealing to largest segment of the renter market. Experienced In Capital Markets and M&A Activity [X] Founded in 1976 as the Cates Company; IPO in January of 1994 ("MAA") with 24 properties and 5,400 units. [X] Significant growth period through property acquisitions and redevelopment; 123 properties and 34,000 units. [X] Acquired America First REIT in 1995. [X] Completed acquisition of Flournoy Development and Construction Co. in 1997. Exited new development & construction in 2000..added over 4,600 new units. Experienced In Capital Markets and M&A Activity [X] $100 million JV with Blackstone Realty Advisors in 1999. [X] Sold $110 million of property at an average 8.6% cap rate. [X] Repurchased 1.8 million shares of common stock over the last 3 years..average price of $22.50. [X] Established a $150 million acquisition JV with Crow Holdings in Q2 of 2002. Asset Sales Create Value [X] Sold over $110 million of older assets since 11/99 >> Average age was 20 years, versus the 12 year average age of current portfolio >> Average cap rate achieved on disposition was 8.6% >> Net proceeds $5 million more than gross book value (original purchase price plus all capital improvements made) [X] Capital recycled into share repurchase and new development MAA Investment Features [X] Attractive, safe current dividend yield - 9.4% at $25.00 share price. [X] Share price backed by solid asset value of $26.50 to $28.50 per share. [X] Over 30% of the common dividend is not currently taxable...return of capital...generating very attractive after tax return. [X] Growth plan in place to improve growth of FFO, value per share and dividend coverage. [X] Stable history of 13% total return to owners. Shareholder Returns - Since IPO and Last 3 Years [Bar chart depicting the data below] Annualized 3-Year Returns (at August 1, 2002) MAA Since IPO 12.9% MAA 17.0% MS REIT Index 11.5% Dow Jones Index -7.4% NASDAQ -29.5% Current Market Pricing of MAA Offers Discount to Underlying Value
Current Stabilized Current Property Value $1,383,040 $ 1,383,040 NOI Stabilization Value 69,405 New Development at Cost 103,588 103,588 Cash 21,544 21,544 Other Assets (less goodwill) 34,094 34,094 Value of Below Market Cost Financing 21,555 21,555 Debt and Other Liabilities (827,703) (827,703) Preferred Stock (173,500) (173,500) Net Asset Value $ 562,618 $ 632,023 Common Equity Shares/Units 20,690 20,690 Net Asset Value Per Share $ 27.19 $ 30.55
Based on 8.6% cap rate - equal to the average pricing achieved on property sold over the last 3 years Current Market Pricing of MAA Offers Upside to Average Sector Pricing
Implied Price MAA MF Avg of MAA at Avg Enterprise Value/EBITDA Multiple 11.1x 12.0x $29.50 FFO Multiple 9.0x 10.0x $27.70
MAA Sells at a Discount to Value [X] Free Cash Flow covers dividend by $1 million (5 cents/share) [X] However, Funds Available for Distribution (FAD) short of dividend coverage by 16 cents/share ($3.3 million) [X] Active plans in place to increase FFO earnings and strengthen dividend coverage >> High quality assets, well maintained and in strong position to increase earnings as the economy recovers and interest rate environment changes >> New development pipeline becoming increasingly fully productive >> New acquisition initiative with Crow Holdings in place Historical Share Price Performance [Line graph depicting the data below]
MAA Share Price Jan-94 $ 19.75 Dec-94 $ 26.75 Dec-95 $ 24.75 Dec-96 $ 28.88 Dec-97 $ 28.56 Sep-97 $ 30.43 Dec-98 $ 22.69 Dec-99 $ 22.63 Dec-00 $ 22.56 Dec-01 $ 26.30 Jun-02 $ 26.75
$30.19 High Strategy [X] Operate well what we have...protect value. [X] New development paid for and increasingly productive. [X] Strengthen dividend coverage through earnings growth...improving market conditions (same store) and full productivity from new development. [X] Execute new acquisition JV initiative...provides additional earnings potential, platform to recycle capital and to harvest full value from existing assets. [X] More portfolio diversification...allocate more capital to vibrant rent growth markets...while building operating mass in these select markets. Current Situation & Outlook [X] $2.34/year dividend, 9.4% yield based on current price. [X] Tough operating environment expected throughout 2002; long-term very good. [X] Capacity to purchase improving; very active in the acquisition market. [X] Remaining very disciplined with capital deployment. [X] Dividend coverage solid and improving. Balance Sheet Strength [X] New development complete...85% occupied [X] Leverage at the right level to optimize borrowing costs...development REITs must carry lower leverage levels [X] Low cost of borrowing with reduced exposure to rising interest rate environment >> Only 13% variable debt >> Most of 2003 financing is pre-locked >> Laddered maturities [X] Coverage ratios strong and improving >> Debt service coverage 2.34 versus 2.15 a year ago Increased Earnings Potential - New Development Reserve at Dexter Lake Memphis, TN 740 units Grande View Nashville, TN 433 units Increased Earnings Potential - New Development Grand Reserve Lexington, KY 370 units Kenwood Club Katy, TX 320 units Creating Value Through Redevelopment [X] Opportunities - - under-capitalized & turn around - - troubled lease-up - - institutional re-cycle [X] Value Creation - - Aggressive on site marketing & leasing practices - - On-site operating efficiencies - - Utility management - - Curb appeal and product presentation - - Portfolio purchasing efficiencies - - Employee development and training Successful Record in Acquisition and Redevelopment St. Augustine at the Lake Jacksonville, FL 400 Units 60% increase in value above gross book basis Kirby Station Memphis, TN 371 Units 20% increase in value above gross book basis Successful Record in Acquisition and Redevelopment Brentwood Downs Nashville, TN 286 Units 20% increase in value above gross book basis Acquisition JV With Crow Holdings [X] $50 MM Equity; $150 MM Acquisition [X] MAA one-third equity; Crow two-thirds [X] MAA providing acquisition, asset management, property management and financing structuring services [X] Pari-passu investment returns until hurdle achieved; 50/50 split thereafter [X] Joint governance; 50/50 representation Preston Hills Acquisition [X] Opportunity - - New development with troubled lease up; motivated seller. - - High quality asset located in high growth market and sub-market. [X] Value Creation - - Purchased at well below replacement cost. - - In need of "hands on operations" to provide stronger cash flows...lease expiration management, expense control. MAA Board of Directors Robert F. Fogelman President, Fogelman Investment Company John F. Flournoy Chairman and CEO, Flournoy Development Co. Alan B. Graf, Jr. Executive VP and CFO, FedEx Corporation John S. Grinalds President, The Citadel Ralph Horn Chairman and CEO, First Tennessee National Corp. Michael S. Starnes President, M.S. Carriers George E. Cates Chairman of the Board, Mid-America Apartments H. Eric Bolton, Jr. President and CEO, Mid-America Apartments Simon R.C. Wadsworth Executive VP and CFO, Mid-America Apartments Insiders currently own 12.3% of MAA and continue to buy. Mid-America Apartment Communities [X] Long term steady growth region...well diversified in large, middle and small tier markets; lower volatility and broad product appeal; no development risks. [X] Highly experienced "hands on" approach...successful operators through many cycles...experienced management and strong independent board of directors. [X] Improved position to harvest value from existing investments and capture new opportunities...growth plans centered around organization's strengths and successful track record. [X] Solid dividend return and strengthening coverage; positioned to generate earnings growth. [X} Current market pricing offers meaningful discount to underlying value. Mid-America Apartment Communities www.maac.net A PDF file of this presentation is available on our web site, www.maac.net Certain matters in this presentation may constitute forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such statements include, but are not limited to, statements about anticipated growth rate of revenues and expenses, anticipated lease-up (and rental concessions) at development properties, planned disposition, disposition pricing, and planned acquisitions and developments. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including a downturn in general economic conditions or the capital markets, competitive factors including overbuilding or other supply/demand imbalances in some or all of our markets, changes in interest rates, and other items that are difficult to control such as insurance rates, increases in real estate taxes, and other general risks inherent in the apartment business. Reference is hereby made to the filings of Mid-America Apartment Communities, Inc., with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K, and its annual report on Form 10-K, particularly including the risk factors contained in the latter filing. SIGNATURES Pursuant to the requirements of the Securities Exchnage 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: August 14, 2002 /s/Simon R.C. Wadsworth Simon R.C. Wadsworth Executive Vice President (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----