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EXHIBIT 99.2
BAY APARTMENT COMMUNITIES AND AVALON PROPERTIES TO MERGE
-- RESULT WILL BE PREEMINENT LUXURY APARTMENT COMPANY IN THE U.S.
WITH $3.7 BILLION TOTAL CAPITALIZATION AND SIGNIFICANT PRESENCE IN EACH
OF THE TOP-TEN U.S. APARTMENT MARKETS --
-- AVALON ALSO ANNOUNCES PRESALE ACQUISITION OF EIGHT COMMUNITIES
IN THE PACIFIC NORTHWEST --
SAN JOSE, CA, AND ALEXANDRIA, VA, MARCH 9/PRNewswire/ -- Bay Apartment
Communities, Inc. (NYSE: BYA - news) and Avalon Properties, Inc. (NYSE: AVN -
news) announced today that they have signed a definitive merger agreement. The
surviving company, to be named Avalon Bay Communities, Inc., will be the
preeminent luxury apartment company in the U.S., with an immediate total market
capitalization of $3.7 billion, approximately 63 million shares and partnership
units outstanding, $2.7 billion of combined equity, including preferred stock,
and a portfolio of 140 communities with 40,506 apartment homes in 29 markets in
15 states and the District of Columbia.
Under the terms of the agreement, Avalon will be merged into Bay Apartment
Communities, with Bay Apartment Communities being the surviving entity, through
an exchange of shares in which Avalon common shareholders will receive 0.7683
shares of Bay Apartment Communities common stock for each share of Avalon common
stock they own. Avalon's preferred shareholders will receive comparable
preferred shares of Bay as a result of the merger.
The merger, which has been unanimously approved by the boards of directors of
both companies and is expected to close in June 1998, has been structured as a
tax-free transaction and will be accounted for as a purchase of Avalon by Bay
Apartment Communities.
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It is expected that upon completion of the transaction, the new company will
have an annual dividend of $2.04, an increase of $0.36 per share (or 21%) over
Bay Apartment Communities' current annual dividend of $1.68, and essentially
equivalent to Avalon's current annual dividend.
Avalon Bay Communities, Inc., will be listed on the New York Stock Exchange and
will be headquartered in Alexandria, VA, with super-regional offices in San
Jose, CA, and Wilton, CT.
Avalon Bay will be led by a highly experienced management team that will
include:
Gilbert M. Meyer as Executive Chairman;
Richard L. Michaux as Chief Executive Officer;
Charles H. Berman as President and Chief Operating Officer;
Bryce Blair as Senior Vice President-Development/Acquisitions;
Max L. Gardner as Senior Vice President-Merger Integration;
Morton L. Newman as Senior Vice President-Construction;
Thomas J. Sargeant as Senior Vice President and Chief Financial Officer;
Debra Lynn Shotwell as Senior Vice President-Administration;
Robert H. Slater as Senior Vice President-Property and Operations; and
Jeffrey B. Van Horn as Senior Vice President-Investments.
Gilbert M. Meyer, Chairman and President of Bay Apartment Communities, said, "It
is clear that larger, national REITs enjoy significant competitive advantages
that accrue from, among other things, a lower cost of capital and enhanced
operating efficiencies. This transaction between Avalon and Bay is an ideal
merger, and we believe that the benefits that the merger with Avalon will
provide will be very substantial."
"We are impressed by the strength and depth of Avalon's management team, its
state-of-the-art and scalable information systems, its community management
abilities, and its strategic focus on select high barrier-to-entry markets that
mirrors our own strategy."
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"Beyond a similar heritage as investment developers and builders, both companies
share a focus on superior resident service, both enjoy consistent asset quality
and resident profiles, and both have similar capital structures and financing
strategies. The extensive experience of senior management and the deep bench
strength of the entire management team will give us the best of both worlds: the
size and scope of a coast-to-coast competitor and the ability to have in place
seasoned "sharpshooters" in local and regional markets. Add to that the
complementary portfolios that will give Avalon Bay a significant presence in
each of the top-ten apartment markets and we see a transaction that holds great
promise for Avalon Bay Communities' shareholders."
Richard L. Michaux, Chairman and Chief Executive Officer of Avalon Properties,
said, "Bay and Avalon represent an ideal, complementary strategic fit which will
greatly benefit the shareholders, residents, and employees of both companies.
Geographically, we will combine Avalon's established presence in select high
barrier-to-entry markets in the Northeast, Mid-Atlantic and Midwestern states
with Bay's equally strong presence in select high barrier-to-entry markets of
Northern and Southern California and the Pacific Northwest. With this
transaction, we are equaling or exceeding the majority of the goals of our Plan
2002 by the end of 1998 with much less market risk. The merger will also provide
greater diversity in Avalon Bay Communities' mix of industries and businesses
that drive local economies."
"Functionally, Avalon Bay Communities will have unparalleled breadth of
abilities and experience within the entire spectrum of multifamily acquisition,
development, construction, reconstruction, and community management. The
complementary nature of the two companies' skill sets is compelling. Bay has
unique strengths and a proven record for construction, and particularly
reconstruction, within difficult urban environments. We see tremendous
opportunities to create incremental value not currently being realized by
applying Bay's reconstruction techniques within the Midwestern, Northeastern,
and Mid-Atlantic markets of Avalon."
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"Financially, we anticipate that shareholders of Avalon Bay Communities should
benefit from improved long-term earnings growth, greater value-creation
opportunities, enhanced liquidity, strengthened credit profile, and a
diversification of assets into additional high barrier-to-entry markets."
Charles H. Berman, President and Chief Operating Officer of Avalon Properties,
who will manage daily real estate operations, said: "We anticipate this
combination will add $0.07 per share during the remainder of 1998 and $0.15 per
share in 1999."
"The ability to integrate the substantial skills and best practices of both
companies is the key to delivering the value we expect to create for
shareholders with this merger. To ensure that we achieve a seamless integration
process and realize the full potential of this merger, we have hired two expert
merger integration consulting firms and, working with them, have initiated a
comprehensive merger integration effort. Max Gardner, one of Bay's most senior
and experienced executives, is heading this effort. Max is leading multiple task
forces comprising key leaders from both companies."
"These task forces will be charged with jointly identifying the 'best practices'
of both companies that will be implemented nationwide so that Avalon Bay
functions as a cohesive company immediately after the transaction closes. Max
and these task forces will work closely with the two merger integration
consulting firms to help ensure the successful combination of the two
organizations and the creation of one common culture within Avalon Bay.
Executives from both companies are expected to relocate to assist in the
blending of a common culture at Avalon Bay Communities."
The merger is subject to the approval of the shareholders of both companies and
other customary closing conditions. In connection with the execution of the
merger agreement, Bay and Avalon each issued to the other an option to buy 19.9%
of the issuer's outstanding common stock under certain circumstances. In
addition, Bay and Avalon each adopted shareholders' rights plans.
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Avalon Bay Communities will be governed by a twelve-member Board of Directors,
six of whom will be from Bay's Board of Directors and six of whom will be from
Avalon's Board of Directors. Nine of the twelve Board members will be
independent.
Concurrent with this transaction, Avalon announced that it has entered into a
definitive agreement to acquire selected assets on a presale basis from Trammell
Crow Residential-Pacific Northwest (TCR-NW), a leading, closely-held apartment
development and management company. The presale acquisitions are expected to be
completed during the next 24 to 36 months.
The acquisitions, which will involve a total investment of approximately $280
million, include seven communities in the Seattle market and one community in
the Portland market. The acquisitions will add significant presence in this
fast-growing, high barrier-to-entry region. Together, these eight communities
provide 2,411 apartment homes with state-of-the-art features and amenities. The
initial stabilized yield on Avalon's investment is expected to be 9.4 percent.
Several of these communities are currently in the entitlement process and no
assurance can be provided that all of these communities will be developed.
Bay Apartment Communities is a fully integrated, multifamily REIT focused on the
acquisition, development, construction, reconstruction and management of high
quality apartment home communities. The company's portfolio consists of 59
communities, containing 16,597 apartment homes, including homes delivered at
Toscana, a partially developed community in Sunnyvale, California.
The company's portfolio includes 37 apartment home communities in the San
Francisco Bay Area and Northern California, 19 communities in Southern
California, and 3 communities in the Pacific Northwest. The company also owns
five land sites in the San Francisco Bay Area on which it is building five
communities which will contain an aggregate of approximately 1,360 apartment
homes, including the remaining apartment
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homes under construction in Toscana. The company owns one additional land site
in the San Francisco Bay Area for future development. More information on Bay
Apartment Communities is available on Bay's website at
http://www.bayapartmt.com.
Avalon Properties, Inc. is an equity REIT in the business of developing,
acquiring and managing multifamily communities in the high barrier-to-entry
markets of the United States. Avalon, named the NAHB Property management Company
of the Year for 1996/1997, owns or holds an ownership interest in 66 stabilized
apartment communities containing 19,724 apartment homes in twelve states and the
District of Columbia. Eleven communities with 2,825 apartment homes are
presently under construction. More information on Avalon Properties may be found
on Avalon's Web site at http://www.avalonprop.com.
This announcement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934. The words "expect," "anticipate," "estimate" and other similar
expressions which are predictions of or indicate future events and trends and
which do not relate solely to historical matters, including information
concerning the companies' future FFO estimates, identify forward-looking
statements. Reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors which are
in some cases beyond the control of the companies and may cause the actual
results, performance or achievements of the companies to differ materially from
anticipated future results, performance or achievements expressed or implied by
such forward-looking statements.
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Factors that might cause such a difference include, but are not limited to, the
following: occupancy rates and market rents may be adversely affected by local
economic, interest rates and market conditions which are beyond management's
control; the companies may not be able to successfully integrate large portfolio
acquisitions in new markets with then current business operations; and
additional factors discussed in the companies' periodic reports filed with the
Securities and Exchange Commission.
Contacts:
Bay Apartment Communities Avalon Properties
Gilbert M. (Mike) Meyer Richard L. Michaux
Chairman of the Board and Chairman of the Board,
President Chief Executive Officer and Director
(408) 260-3715 (703) 317-4601
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