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UNITED STATES
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): October 2, 1998
AVALONBAY COMMUNITIES, INC.
(Exact name of Registrant as specified in charter)
MARYLAND 1-12672 77-0404318
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
2900 EISENHOWER AVENUE, SUITE 300, ALEXANDRIA, VIRGINIA 22314
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(Address of principal executive offices) (Zip Code)
(703) 329-6300
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
SPECIAL MEETING OF STOCKHOLDERS
On October 2, 1998, the Company held a Special Meeting of Stockholders
(the "Special Meeting") at which the holders of record of the Company's common
stock, par value $.01 per share (the "Common Stock"), as of the close of
business on August 26, 1998 (the "Record Date") were asked to vote on certain
amendments to the Company's charter (the "Charter"). Specifically, the
stockholders were asked to vote on (i) amendments to the Charter that would
reduce the number of authorized shares of Common Stock which the Company may
issue from 300,000,000 to 140,000,000, (ii) an amendment to the Charter which
would enable the stockholders of the Company to remove a director from office
with or without cause upon the affirmative vote of a majority of the shares then
entitled to vote at a meeting of the stockholders called for such purpose, and
(iii) an amendment to the Charter changing the name of the Company from "Avalon
Bay Communities, Inc." to "AvalonBay Communities, Inc."
Each of proposals (i) and (iii) was approved at the Special Meeting by
the affirmative vote of the holders of the requisite number of shares of Common
Stock outstanding as of the Record Date. Immediately following the Special
Meeting on October 2, 1998, the Company caused Articles of Amendment to the
Charter to be filed with, and accepted for record by, the State Department of
Assessments and Taxation of the State of Maryland. Accordingly, the Company is
now authorized to issue 140,000,000 shares of Common Stock and its name has been
changed to "AvalonBay Communities, Inc." A copy of such Articles of Amendment to
the Charter is being filed herewith as Exhibit 3.1(ii).
PROPERTY ACQUISITION
HANOVER HALL. On July 20 1998, the Company agreed to acquire Hanover Hall and
Summer Terrace (a combined community known as Hanover Hall) consisting of 388
apartment homes in two adjacent 13-story buildings located in Stamford,
Connecticut from Hanover Hall Limited Partnership and Summer Terrace Limited
Partnership. The anticipated purchase price for this community is approximately
$37 million. The purchase will be funded by drawing on the Company's $600
million unsecured revolving credit facility from Morgan Guarantee Trust Company
of New York, Union Bank of Switzerland and Fleet National Bank, as co-agents,
and other participating banks (the "Unsecured Credit Facility"). The Unsecured
Credit Facility bears interest at the London Interbank Offered Rate (based on a
maturity selected by the Company) plus 0.60% per annum and matures in June
2001. In addition, the Unsecured Credit Facility includes a competitive bid
option for up to $400 million and two, one-year extension options. This
acquisition is expected to close in November 1998. However, because the
purchase of this community is still pending, there can be no assurance that the
Company will consummate the acquisition or, if acquired, that it will be
purchased on terms currently contemplated. Neither the Company, any subsidiary
of the Company nor any director or officer of the Company is affiliated with or
has a material relationship with the sellers of this community.
In assessing the communities, the Company's management considered the existing
leases, which are the primary source of revenue, the occupancy rates, the
competitive nature of the markets and comparative rental rates. Furthermore,
current and anticipated maintenance and repair costs, real estate taxes and
capital improvement requirements were evaluated. Management is not aware of any
material factors that would cause the reported financial information in the
accompanying Historical Summaries of Operating Revenues and Expenses to be
misleading.
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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 Information. Unaudited pro forma financial information
as of and for the six months ended June 30, 1998 and for the year ended
December 31, 1997 are included as Exhibit 99.1 hereto.
(c) Exhibits
3.1(i) Articles of Amendment and Restatement of Articles of
Incorporation of the Company, dated as of June 4, 1998.
(Incorporated by reference to Exhibit 3.1(i) to the Company's
Form 10-Q for the quarter ended June 30, 1998).
3.1(ii) Articles of Amendment, dated as of October 2, 1998.
12.1 Statements of Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends and Ratios of Earnings to Fixed Charges
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Unaudited pro forma financial information as of and for the six
months ended June 30, 1998 and for the year ended December 31,
1997.
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SIGNATURE
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.
AVALONBAY COMMUNITIES, INC.
Dated: October 6, 1998 By: /s/ Thomas J. Sargeant
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Name: Thomas J. Sargeant
Title: Chief Financial Officer
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Avalon Bay Communities, Inc.:
We have audited the accompanying historical summary of operating revenue and
expenses, as defined in Note 2(a), of Hanover Hall and Summer Terrace for the
year ended December 31, 1997. This historical summary is the responsibility of
Hanover Hall and Summer Terrace's management. 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
accounting principles 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 the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Registration Statements on Forms S-3 and S-8 of Avalon Bay
Communities, Inc.) and is not intended to be a complete presentation of Hanover
Hall and Summer Terrace's revenue and expenses.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the operating revenue and expenses described in Note 2(a) of
Hanover Hall and Summer Terrace for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
Washington, D.C.
September 11, 1998
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HANOVER HALL AND SUMMER TERRACE
Historical Summaries of Operating Revenue and Expenses
For the six months ended June 30, 1998
(unaudited) and the year ended
December 31, 1997
(dollars in thousands)
Six months ended Year ended
June 30, 1998 December 31, 1997
(unaudited) (audited)
Total revenue $ 2,390 $ 4,576
Operating expenses:
Property operating 750 1,712
Real estate taxes 204 416
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Total operating expenses 954 2,128
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Operating revenue in excess
of operating expenses $ 1,436 $ 2,448
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See accompanying notes to historical summaries of operating
revenue and expenses.
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HANOVER HALL AND SUMMER TERRACE
Notes to the Historical Summaries of Operating Revenue and Expenses
Six months ended June 30, 1998 (unaudited)
and year ended December 31, 1997
(dollars in thousands)
(1) DESCRIPTION OF THE PROPERTY
Hanover Hall and Summer Terrace (the Buildings) consists of two 13-story
high-rise buildings located in Stamford, Connecticut, containing 388
studio, one, two, and three-bedroom apartment homes available for lease.
The Buildings were constructed in 1962.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying historical summaries of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain revenues and expenses, which may not
be comparable to those expected to be incurred by Avalon Bay
Communities, Inc. in the future operations of the Buildings, have
been excluded. Interest income has been excluded from revenue, and
interest, depreciation and amortization, and other costs not
directly related to the future operations of the Buildings have
been excluded from expenses.
(b) Revenue Recognition
Rental income attributable to residential leases is recorded when
due from tenants.
(c) Interim Unaudited Financial Information
The accompanying unaudited financial information for the six
months ended June 30, 1998 has been prepared consistent with the
rules and regulations of the Securities and Exchange Commission
governing the preparation of the amounts for the year ended
December 31, 1997. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the historical summaries of
operating revenue and expenses for the six months ended June 30,
1998, have been included. The results of operations for the
six-month period ended June 30, 1998 are not necessarily
indicative of the results for the full year.
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HANOVER HALL AND SUMMER TERRACE
Notes to the Historical Summaries of Operating Revenue and Expenses
(dollars in thousands)
(3) PRO FORMA TAXABLE OPERATING RESULTS AND CASH AVAILABLE FROM OPERATIONS
(UNAUDITED)
The following unaudited table is a pro forma estimate of the
taxable operating income and cash available from operations of
Hanover Hall and Summer Terrace for the twelve months ended June
30, 1998, as adjusted for certain items which can be factually
supported. For purposes of presenting pro forma taxable operating
income, revenue is recognized when it is either collectible under
the lease terms or collected. Tax depreciation for the buildings
is computed on the modified accelerated cost recovery system
method over a 27.5-year life. This statement does not purport to
forecast actual operating results for any period in the future.
Pro forma net operating income (exclusive of
depreciation and amortization expense) $2,660
Less - estimated tax depreciation and
amortization expense 1,089
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Pro forma taxable operating income $1,571
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Pro forma cash available from operations $2,660
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