[LETTERHEAD FOR GOODWIN, PROCTOR & HOAR LLP APPEARS HERE]
October 22, 1996
Avalon Properties, Inc.
11 Burtis Avenue
New Canaan, CT 06480
Ladies and Gentlemen:
These opinions are delivered to you in our capacity as counsel to Avalon
Properties, Inc. (the "Company") in connection with the offering and sale by the
Company of 4,600,000 shares of its 8.96% Series B Cumulative Redeemable
Preferred Stock, par value $.01 per share (the "Series B Preferred Shares"),
pursuant to a prospectus supplement dated October 17, 1996 (the "Prospectus
Supplement") which supplements the prospectus dated January 30, 1996 (the "Base
Prospectus") included in the registration statement on Form S-3 (File No. 333-
00766), as amended to date, filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the possible offering from time to time of an indeterminate amount of Debt
Securities, Preferred Shares, Common Shares and Warrants (as such terms are
defined in such registration statement) with an aggregate public offering price
of up to $327,670,000 (such registration statement, as amended when it became
effective is referred to herein as the "Registration Statement") This opinion
relates to (i) the Company's qualification for federal income tax purposes as a
real estate investment trust ("REIT") within the meaning of Sections 856-860 of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) the accuracy
of the section entitled "Certain Federal Income Tax Considerations" in the
Prospectus Supplement.
In rendering the following opinions, we have examined the Articles of
Incorporation and Bylaws of the Company and such other records, certificates and
documents as we have deemed necessary or appropriate for purposes of rendering
the opinions set forth herein.
We have reviewed the Registration Statement, the Base Prospectus and the
Prospectus Supplement and the descriptions set forth therein of the Company and
its investments and activities. We have relied upon the representations of
officers of the Company that the Company has been and will be owned and operated
in such a manner that the Company has and will continue to satisfy the
requirements for qualification as a REIT under the Code. We have neither
independently investigated nor verified such representations, and we assume that
such representations are true, correct and complete, and that all
representations made "to the best knowledge and belief of any person(s) or
party(ies) are and will be true, correct and complete as if made without such
qualification. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents. In addition, we have relied on certain additional facts and
assumptions described below.
In rendering the opinions set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We have
also assumed, without investigation, that all documents, certificates,
representations, warranties and covenants on which we have relied in rendering
the opinions set forth below and that were given or dated earlier than the date
of this letter continue to remain accurate, insofar as relevant to the opinions
set forth herein, from such earlier date through and including the date of this
letter.
The conclusions set forth below are based upon the Code, the Income Tax
Regulations and Procedure and Administration Regulations promulgated thereunder
and existing administrative and judicial interpretations thereof, all of which
are subject to change. No assurance can therefore be given that the federal
income tax consequences described below will not be altered in the future.
Based upon and subject to the foregoing, we are of the opinion that
1. Commencing with the Company's first taxable year ended December 31,
1993, the Company has been organized in conformity with the requirements for
qualification as a "real estate investment trust" under the Code, and its method
of operation, as described in the representations referred to above, will enable
it to continue to meet the requirements for qualification and taxation as a
"real estate investment trust" under the Code.
2. The statements in the Prospectus Supplement set forth under the caption
"Federal Income Tax Considerations" to the extent such information constitutes
matters of law, summaries of legal matters, or legal conclusions, have been
reviewed by us and are accurate in all material respects.
GOODWIN, PROCTER & HOAR LLP
Avalon Properties, Inc.
October 22, 1996
Page 2
We express no opinion with respect to the transactions described herein and
in the Registration Statement other than those expressly set forth herein. You
should recognize that our opinions are not binding on the Internal Revenue
Service ("the IRS") and that the IRS may disagree with the opinions contained
herein. Although we believe that our opinions will be sustained if challenged,
there can be no assurance that this will be the case. Except as specifically
discussed above, the opinions expressed herein are based upon the law as it
currently exists. Consequently, future changes in the law may cause the federal
income tax treatment of the transactions described herein to be materially and
adversely different from that described above.
We consent to being named as Counsel to the Company in the Prospectus
Supplement, to the references in the Prospectus Supplement to our firm and to
the inclusion of this opinion letter as an exhibit to the Prospectus Supplement.
Very truly yours,
Goodwin, Procter & Hoar LLP