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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): SEPTEMBER 4, 1997
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BAY APARTMENT COMMUNITIES, INC.
(Exact name of Registrant as specified in charter)
MARYLAND 1-12672 77-0404318
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(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
4340 STEVENS CREEK BOULEVARD, SUITE 275, SAN JOSE, CA 95129
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(Address of principal executive offices) (Zip Code)
(408) 983-1500
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
In September, 1997, the Company acquired two apartment home communities and
one land site, which have not previously been disclosed in a Current Report on
Form 8-K, for an aggregate purchase price of approximately $80.09 million. As of
September 8, 1997, the Company's portfolio consists of 44 communities containing
11,840 apartment homes and five land sites on which it is building, or plans to
commence building in the future, communities, which will contain an aggregate of
approximately 1,793 apartment homes. The recently acquired properties are
described below. Substantially all of the purchase price for each property
acquired was funded by drawing on the Company's $200 million unsecured line of
credit from Union Bank of Switzerland and other participating banks. Neither the
Company, any subsidiary of the Company nor any director or officer of the
Company was affiliated with or had a material relationship with the seller of
any property described below.
THE PARK APARTMENTS. On September 4, 1997, the Company purchased a 351
apartment home community located in Hacienda Heights, California from Crimson
Real Estate Limited Partnership for approximately $20.9 million. The Company
intends to renovate the community's leasing office, landscaping and apartment
home interiors. In addition, the Company intends to convert 200 carport spaces
to garages and add stackable washers and dryers to the apartment homes.
LAKESIDE APARTMENTS. On September 5, 1997, the Company purchased a 750
apartment home community located in Burbank, California from Olympus/April Joint
Venture for approximately $50.26 million. The Company intends to replace the
community's roofs and existing galvanized plumbing, convert existing parking
facilities to garages, add stackable washers and dryers in the community's two
and three bedroom apartment homes, and renovate the interiors of the community's
apartment homes, including new carpeting, paint and fixtures. In addition, the
Company intends to add an exercise facility adjacent to the community's leasing
office.
MOUNTAIN VIEW LAND SITE. On September 8, 1997, the Company acquired a 1.917
acre land site in Mountain View, California which includes a 50% undivided
interest in an existing underground parking garage adjacent to this land site,
subject to agreements which specifically allocate parking rights between an
adjacent office building and this development, including 266 spaces reserved
exclusively for residents of the community planned for this site. The land site
was purchased in two separate parcels, one from View Tower One LLC for
approximately $3.93 million and the other from Starker Services, Inc. for
approximately $5.0 million. The Company intends to build two 12-story towers on
this land site, which will contain a total of 266 apartment homes and
approximately 10,000 square feet of ground level space for a recreation,
leasing and community center. The acquisition of this site includes
substantially all necessary public approvals and previously paid city fees
totaling approximately $800,000.
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ITEM 5. OTHER EVENTS.
In 1996, Bay Apartment Communities, Inc. (the "Company") engaged the
services of two consulting firms to compile and analyze data to be used in the
daily operational and long-term strategic decision-making of the Company's
management. Together, these studies provide the Company with general market
overviews, demographic trends, and analyses of effective rents, historical
vacancy rates and projects in planning, primarily for counties within the San
Francisco Bay Area (defined to include Alameda, Contra Costa, Marin, Napa, San
Francisco, San Mateo, Sonoma, Santa Clara and Solano Counties) rental market.
One report, completed by Ann Roulac and Company, is based on an analysis of
the research compiled by RealData, Inc., the current producer of the Bay Area
Apartment Market Report (BAAMR), a detailed reference guide to the San Francisco
Bay Area apartment market. The scope of Ann Roulac and Company's engagement was
to identify 100 plus investment grade apartment properties from the BAAMR
database of 450 properties for the Alameda, San Francisco, San Mateo and Santa
Clara Counties. The data presented by Ann Roulac and Company are based on
surveys with managers of 100 properties in the four subject counties.
The second report, completed by the Rosen Consulting Group, focused its
analyses on five counties (i.e., San Mateo, Santa Clara, Alameda, San Francisco
and Orange), four of which are located in the San Francisco Bay Area. In
preparing its report, the Rosen Consulting Group analyzed recent economic trends
and forecasted employment trends, demographic trends and the affordability and
demand for rental units.
The reports prepared for the Company by Ann Roulac and Company and the
Rosen Consulting Group were attached as exhibits to the Company's report on Form
8-K dated July 5, 1996, and an addendum to the report by the Rosen Consulting
Group was attached to the Company's report on Form 8-K dated January 21, 1997 as
an exhibit thereto. Attached as exhibits hereto are (i) a subsequent report by
Ann Roulac and Company dated February, 1997 and (ii) a subsequent addendum to
the report by the Rosen Consulting Group. The foregoing description of the
contents of the consulting reports does not purport to be complete and is
qualified in its entirety by reference to such exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements under Rule 3-14 of Regulation S-X
(b) Pro Forma Financial Statements
(c) Exhibits
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
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23.2 Consent of Ann Roulac and Company.
23.3 Consent of Rosen Consulting Group.
99.1 Report by Ann Roulac and Company entitled San Francisco Bay Area
Rental Analysis, dated February, 1997.
99.2 Addendum to the report by Rosen Consulting Group dated July 5, 1996.
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of The Park Apartments, Burbank,
California (the Property) for the year ended December 31, 1996. The Historical
Summary is the responsibility of the Property's owner. Our responsibility is to
express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the Historical Summary. An audit also includes assessing the
basis of accounting used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of The Park Apartments, Burbank, California, for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
September 6, 1997
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THE PARK APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
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Year Ended
December 31,
1996
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Revenues:
Rental income $2,668,530
Other 115,075
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2,783,605
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Direct operating expenses:
On-site management 318,491
Real property tax 178,709
Utilities 188,104
Repairs and maintenance 265,667
Other 82,812
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1,033,783
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Revenues in excess of direct
operating expenses $1,749,822
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The accompanying note is an integral
part of this Historical Summary.
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THE PARK APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of The Park Apartments, located in Burbank, California with
351 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Lakeside Apartments, Hacienda
Heights, California (the Property) for the year ended December 31, 1996. The
Historical Summary is the responsibility of the Property's owner. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the Historical Summary. An audit also includes assessing the
basis of accounting used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of Lakeside Apartments, Hacienda Heights, California, for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
September 6, 1997
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LAKESIDE APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
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Year Ended
December 31,
1996
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Revenues:
Rental income $6,140,017
Other 198,273
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6,338,290
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Direct operating expenses:
On-site management 682,353
Real property tax 412,969
Utilities 315,046
Repairs and maintenance 1,188,274
Other 206,740
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2,805,382
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Revenues in excess of direct
operating expenses $3,532,908
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The accompanying note is an integral
part of this Historical Summary.
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LAKESIDE APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of Lakeside Apartments, located in Hacienda Heights,
California with 750 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(In thousands)
(Unaudited)
1997
Historical Acquisitions Pro Forma
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Assets:
Real estate assets:
Land $152,277 $25,467 A $177,744
Buildings and improvements 511,583 42,263 A 553,846
Furniture, fixtures & equipment 35,542 3,426 A 38,968
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699,402 71,156 770,558
Less: accumulated depreciation (52,554) 0 (52,554)
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Operating real estate assets 646,848 71,156 718,004
Construction in progress 50,945 0 50,945
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Net real estate assets 697,793 71,156 768,949
Cash & cash equivalents 920 0 920
Restricted cash 960 0 960
Other assets, net 12,236 0 12,236
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Total Assets $711,909 $71,156 $783,065
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Liabilities and Shareholders' Equity:
Liabilities:
Notes payable $273,688 $70,103 B $343,791
Accounts payable and accrued expenses 5,450 0 5,450
Dividends payable 8,939 0 8,939
Other liabilities 4,553 1,053 C 5,606
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Total Liabilities 292,630 71,156 363,786
Minority interest 7,002 0 7,002
Shareholders' Equity:
Preferred stock 27 0 27
Common stock 190 0 190
Paid in capital 435,723 0 435,723
Dividends in excess of accumulated earnings (23,663) 0 (23,663)
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Total Shareholders' Equity 412,277 0 412,277
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Total Liabilities and Shareholders' Equity $711,909 $71,156 $783,065
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1996
(In thousands, except share
and per share data)
(Unaudited)
1997
Historical Acquisitions Pro Forma
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Revenue:
Rental $80,377 $8,809 D $89,186
Other 2,216 313 D 2,529
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Total revenue 82,593 9,122 91,715
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Expenses:
Property operating 18,924 3,047 E 21,971
Property taxes 6,353 592 E 6,945
General and administrative 3,895 201 E 4,096
Interest and financing 14,276 4,398 F 18,674
Depreciation and amortization 18,689 1,898 G 20,587
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Total expenses 62,137 10,136 72,273
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Income before minority interest and
extraordinary item 20,456 (1,014) 19,442
Minority interest (319) - (319)
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Income before extraordinary item 20,137 (1,014) 19,123
Extraordinary item (511) - (511)
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Net income 19,626 (1,014) 18,612
Preferred dividend requirement (4,264) - (4,264)
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Earnings available to common shares $15,362 ($1,014) $14,348
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Weighted average shares outstanding 15,126,242 15,126,242
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Per share $1.02 $0.95
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1. Basis of Presentation:
The pro forma financial statements of Bay Apartment Communities, Inc. (the
"Company"), which are unaudited, have been prepared based on the historical
financial statements of the Company. The pro forma consolidated balance sheet
has been prepared as if the acquisition of the two apartment communities as of
September 5, 1997 (the "1997 Acquisition Communities"), had occurred on December
31, 1996. The pro forma consolidated balance sheet does not reflect the
acquisition of two land site parcels for $8.93 million described herein. The pro
forma consolidated statement of operations for the twelve months ended December
31, 1996, has been prepared as if the above mentioned events had occurred on
January 1, 1996. In management's opinion, all adjustments necessary to reflect
the effects of these transactions have been made. The pro forma financial
statements should be read in conjunction with the historical financial
statements of the Company.
2. PRO FORMA ADJUSTMENTS:
A - Additional real estate assets are attributable to the 1997 Acquisition
Communities which consist of the $50.3 million acquisition of the Lakeside
Apartments, and the $20.9 million acquisition of the The Park Apartments.
B - Increase in notes payable is attributable to cash used to acquire the 1997
Acquisition Communities which was drawn from the Credit Facility.
C - Increase in other liabilities is attributable to resident deposits and
accrued property taxes from the 1997 Acquisition Communities.
D - Additional rental and other revenue is attributable to the 1997
Acquisition Communities.
E - Additional property operating expense, property tax expense, and general
and administrative expense are attributable to the 1997 Acquisition
Communities.
F - Additional interest and financing expense is attributable to the interest
incurred on funds obtained from the Credit Facility which were used to
acquire the 1997 Acquisition Communities.
G - Depreciation expense attributable to the 1997 Acquisition Communities has
been computed using the straight-line method over 30 years for buildings
and 7 years for furniture, fixtures and equipment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
BAY APARTMENT COMMUNITIES, INC.
Dated: September 8, 1997 By: /s/ Jeffrey B. Van Horn
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Jeffrey B. Van Horn
Vice President, Chief Financial Officer
and Secretary
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