1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------------------------
Date of Report (Date of earliest event reported): MAY 23, 1996
BAY APARTMENT COMMUNITIES, INC.
(Exact name of Registrant as specified in charter)
MARYLAND 1-72612 77-0404318
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
4340 STEVENS CREEK BOULEVARD, SUITE 275, SAN JOSE, CA 95129
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 983-1500
---------------
(Registrant's telephone number, including area code)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 16, 1996, Bay Apartment Communities, Inc. (the "Company")
purchased from C. Gemma Hwang and K. Philip Hwang a 208 apartment home community
located in Union City, California ("Park Centre Apartments") for approximately
$11.4 million. The Company plans to invest approximately $2.9 million in a major
redevelopment program which will include exterior repairs (such as a new roof,
entry gate and exterior painting) and upgrades of apartment interiors (including
new appliances, plumbing fixtures, cabinet faces and floor and wall coverings).
In addition, the Company intends to add a new fitness center and upgrade the
community's leasing office, landscaping and lighting. The occupancy rate of Park
Centre Apartments was approximately 94% as of May 16, 1996.
On May 16, 1996, the Company purchased from TCR #706 Parkside,
Limited, a Texas limited partnership, a 192 apartment home community located in
Sunnyvale, California ("Parkside Commons") for approximately $25.5 million. The
occupancy rate of Parkside Commons was approximately 100% as of May 16, 1996.
On May 23, 1996, the Company purchased from Consolidated Sunset
Limited Partnership a 243 apartment home community located in San Francisco,
California ("Sunset Towers") for approximately $24.3 million. The Company plans
to invest approximately $2 million in a major redevelopment program which will
include upgrading of apartment interiors, community lobbies and hallways, the
replacement of some mechanical systems and the repair and improvement of the
structure's exterior. The occupancy rate of Sunset Towers was approximately
99% as of May 23, 1996.
The Company financed the acquisitions of Park Centre Apartments,
Parkside Commons and Sunset Towers through draws in the aggregate of
approximately $61.2 million from the Company's $150 million unsecured line of
credit (the "UBS Acquisition Loan") provided by Union Bank of Switzerland for
acquisition and construction purposes. The UBS Acquisition Loan is for a term
of three years and bears interest at the rate of 1.55% over LIBOR.
The Company has entered into contracts to acquire two apartment home
communities, Countrybrook in San Jose, CA and Villa Marguerite in Mission
Viejo, CA. Countrybrook has 360 apartment homes and Villa Marguerite has 166
apartment homes. There can be no assurance that the Company will acquire these
communities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements under Rule 3-14 of Regulation S-X
Financial Statements of Businesses Acquired. See Index to Financial
Statements (page F- 1).
(b) Pro Forma Financial Statements
Pro Forma Financial Information. See Index to Financial Statements
(page F-1).
(c) Exhibits
10.1 Purchase and Sale Agreement and Escrow Instructions, dated as
of March 22, 1996, by and between K. Philip Hwang and C. Gemma
Hwang and Bay Apartment Communities, Inc. The exhibits and
schedules to this Agreement are listed in, but not filed with,
this exhibit. Such exhibits and schedules have been omitted
for purposes of this filing, but will be furnished to the
Commission supplementally upon request.
10.2 Purchase and Sale Agreement and Escrow Instructions, dated as
of April 24, 1996, by and between TCR #706 Parkside Limited
Partnership and Bay Apartment Communities, Inc. The exhibits
and schedules to this Agreement are listed in, but not filed
with, this exhibit. Such exhibits and schedules have been
omitted for purposes of this filing, but will be furnished to
the Commission supplementally upon request.
10.3 Purchase and Sale Agreement and Escrow Instructions, dated as
of April 20, 1996, by and between Consolidated Sunset
Limited Partnership and Bay Apartment Communities, Inc. The
exhibits and schedules to this Agreement are listed in, but
not filed with, this exhibit. Such exhibits and schedules have
been omitted for purposes of this filing, but will be
furnished to the Commission supplementally upon request.
10.4 Revolving Loan Agreement, dated as of May 8, 1996, among Bay
Apartment Communities, Inc. as Borrower, Union Bank of
Switzerland (New York Branch) as Co-Agent and Bank, and Union
Bank of Switzerland (New York Branch) as Administrative Agent.
The exhibits and schedules to this Agreement are listed in,
but not filed with, this exhibit. Such exhibits and schedules
have been omitted for purposes of this filing, but will be
furnished to the Commission supplementally upon request.
10.5 Form of Agreement of Limited Partnership of Bay Countrybrook,
L.P., by and among, Bay GP, Inc., Bay Apartment
Communities, Inc. and certain other defined Persons. The
exhibits and schedules to this Agreement are listed in, but
not filed with, this exhibit. Such exhibits and schedules
have been omitted for purposes of this filing, but will be
furnished in the Commission supplementally upon request.
10.6 Agreement to Contribute, dated as of March 27, 1996, by
and between Countrybrook of Berryessa Associates and Bay
Apartment Communities, Inc. The exhibits and schedules to
this Agreement are listed in, but not filed with, this
exhibit. Such exhibits and schedules have been omitted for
purposes of this filing, but will be furnished to the
Commission supplementally upon request.
23.1 Independent Accountants Consent
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
BAY APARTMENT COMMUNITIES, INC.
Dated: July 5, 1996 By: /s/ Gilbert M. Meyer
-----------------------------------------
Gilbert M. Meyer
Chairman of the Board and President
4
BAY APARTMENT COMMUNITIES, INC.
_______________
C O N T E N T S
PAGE
PRO FORMA FINANCIAL STATEMENTS:
Unaudited pro forma consolidated balance sheet
as of March 31, 1996 F-3
Unaudited pro forma consolidated statement of operations
for the three months ended March 31, 1996 F-4
Unaudited pro forma consolidated statement of operations
for the year ended December 31, 1995 F-5
Notes to the pro forma financial statements F-6
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES STATEMENTS
FOR COUNTRYBROOK APARTMENTS:
Report of independent accountants F-9
Historical summary of revenues and direct operating expenses
for the year ended December 31,1995 and
for the three months ended March 31, 1996 F-10
Note to historical summary of revenues and direct operating expenses F-11
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES STATEMENTS
FOR PARKSIDE COMMONS APARTMENTS:
Report of independent accountants F-12
Historical summary of revenues and direct operating expenses
for the year ended December 31,1995 and
for the three months ended March 31, 1996 F-13
Note to historical summary of revenues and direct operating expenses F-14
5
BAY APARTMENT COMMUNITIES, INC.
_______________
C O N T E N T S, Continued
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES STATEMENTS
FOR VILLA MARGUERITE APARTMENTS:
Report of independent accountants F-15
Historical summary of revenues and direct operating expenses
for the year ended December 31,1995 and
for the three months ended March 31, 1996 F-16
Note to historical summary of revenues and direct operating expenses F-17
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES STATEMENTS
FOR SUNSET TOWERS APARTMENTS:
Report of independent accountants F-18
Historical summary of revenues and direct operating expenses
for the year ended December 31,1995 and
for the three months ended March 31, 1996 F-19
Note to historical summary of revenues and direct operating expenses F-20
See notes to the pro forma financial statements
F-2
6
BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
1996 OTHER
ACQUISI- TRANSAC-
ASSETS HISTORICAL TIONS TIONS PRO FORMA
------------ --------- ------------ ---------------
Real estate assets $ 493,564 $ 128,390 $ - $ 621,954
Less accumulated depreciation (38,280) - (38,280)
------------ --------- ------------ --------------
Real estate assets, net 455,284 128,390 A - 583,674
Construction in progress 11,676 - - 11,676
------------ --------- ------------ --------------
466,960 128,390 - 595,350
Cash and cash equivalents 1,214 (2,651)B 8,002 G 6,565
Other assets 13,408 71 C (288)H 13,191
------------ --------- ------------ --------------
Total assets $ 481,582 $ 125,810 $ 7,714 $ 615,106
============ ========= ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 233,934 $ 117,932 D $ (41,500)I $ 310,366
Accounts payable and accrued expenses 4,130 - - 4,130
Dividends payable 5,574 - - 5,574
Other liabilities 2,560 578 E - 3,138
------------ --------- ------------ --------------
Total liabilities 246,198 118,510 (41,500) 323,208
Minority interest - 7,300 F - 7,300
Preferred stock, $.01 par value; 25,000,000
shares authorized; 2,308,800 shares of Series A
outstanding at March 31, 1996 and March 31, 1996
pro forma, respectively; no shares and 405,022
shares of Series B outstanding at
March 31, 1996, and March 31, 1996
pro forma, respectively 23 - 4 J 27
Common stock, $.01 par value; 40,000,000 shares
authorized; 11,558,087 shares outstanding at
March 31, 1996; 13,219,501 shares outstanding
at March 31, 1996 pro forma 116 - 17 J 133
Paid-in capital 251,345 - 49,481 K 300,826
Dividends in excess of accumulated earnings (16,100) - (288)H (16,388)
------------ --------- ------------ --------------
Total shareholders' equity 235,384 - 49,214 284,598
Total liabilities and shareholders' equity $ 481,582 $ 125,810 $ 7,714 $ 615,106
============ ========= ============ =============
See notes to the pro forma financial statements
F-3
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
1996 OTHER
ACQUISI- TRANSAC-
HISTORICAL TIONS TIONS PRO FORMA
---------- -------- -------- ---------
Revenues:
Rental $ 16,094 $ 3,388 L $ - $ 19,482
Other 378 105 L - 483
---------- -------- -------- ---------
Total revenue 16,472 3,493 - 19,965
Expenses:
Property operating 3,737 798 M - 4,535
Property taxes 1,222 286 N - 1,508
General and administrative 860 122 O - 982
Interest and financing 3,472 1,724 P (437)R 4,759
Depreciation and amortization 3,971 802 Q - 4,773
---------- --------- -------- ---------
13,262 3,732 (437) 16,557
---------- --------- -------- ---------
Income before minority interest 3,210 (239) 437 3,408
Minority interest 15 - - 15
---------- --------- -------- ---------
Net income $ 3,195 $ (239) $ 437 $ 3,393
========== ========= ======== =========
Net income per share $ .17
=========
See notes to the pro forma financial statements
F-4
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
1996 OTHER
ACQUISI- TRANSAC-
HISTORICAL TIONS TIONS PRO FORMA
---------- --------- -------- ---------
Revenues:
Rental $ 52,110 $ 12,797 L $ - $ 64,907
Other 1,411 374 L - 1,785
---------- --------- -------- ---------
Total revenue 53,521 13,171 - 66,692
Expenses:
Property operating 12,452 2,962 M - 15,414
Property taxes 4,349 1,120 N - 5,469
General and administrative 2,467 600 O - 3,067
Interest and financing 11,472 6,896 P (64)R 18,304
Depreciation and amortization 13,714 3,224 Q - 16,938
---------- --------- -------- ---------
Total expenses 44,454 14,802 (64) 59,192
---------- --------- -------- ---------
Income before minority interest 9,067 (1,631) 64 7,500
Minority interest 19 - - 19
Income before gain on sale 9,048 (1,631) 64 7,481
Gain on sale 2,412 - - 2,412
---------- --------- -------- ---------
Net income $ 11,460 $ (1,631) $ 64 $ 9,893
========== ========= ======== =========
Net income per share $ .63
=========
See notes to the pro forma financial statements
F-5
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BAY APARTMENT COMMUNITIES, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
1. BASIS OF PRESENTATION:
The pro forma financial statements of Bay Apartment Communities (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 three apartment communities in May, 1996 (the "1996 Acquired
Communities"), the closing of the three probable acquisitions (the
"Acquisition Communities"), the acquisition of a land parcel (the
"Land Parcel"), the Company's private placement offering in May, 1996
(the "May 1996 Offering"), borrowings under the $150 million unsecured
line of credit (the "1996 Credit Facility"), and the retirement of the
$80 million and $47 million lines of credit (the "Acquisition Loans")
had occurred on March 31, 1996. The pro forma consolidated statements
of operations for the three months ended March 31, 1996, and the year
ended December 31, 1995, have been prepared as if the above mentioned
events had occurred on January 1, 1995. 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.
The pro forma financial statements are not necessarily indicative of
what the actual results of operations of the Company would have been
for the three months ended March 31, 1996 or for the year ended
December 31, 1995 had the 1996 Acquired Communities, the Acquisition
Communities, the May 1996 Offering, and the borrowings under the 1996
Credit Facility and corresponding retirement of the Acquisition Loans
occurred on January 1, 1995, nor do they purport to represent the
results of operations for future periods.
2. PRO FORMA ADJUSTMENTS:
A. Additional real estate assets are attributable to the 1996 Acquired
Communities, the Acquisition Communities, and the Land Parcel. The
1996 Acquired Communities consists of the $11.4 million acquisition of
the Park Centre Apartments, the $25.5 acquisition of Parkside
Apartments, and the $24.3 acquisition of Sunset Apartments. The
Acquisition Communities consists of the probable acquisitions of
Martinique Gardens for approximately $7.5 million, Countrybrook
Apartments for approximately $28.8 million, and Villa Marguerite
Apartments for approximately $10.1 million. The Land Parcel was
purchased in May, 1996 for approximately $20.7 million.
B. Decrease in cash and cash equivalents is attributable to cash used to
acquire the 1996 Acquired Communities, the Acquisition Communities,
and the Land Parcel.
F-6
10
BAY APARTMENT COMMUNITIES, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
2. PRO FORMA ADJUSTMENTS, continued:
C. Increase in other assets, net is attributable to prepaid property
taxes from the 1996 Acquired Communities.
D. Increase in notes payable is attributable to the $90 million draw on
the 1996 Credit Line and the $28 million increase in tax exempt debt
from the acquisition of the 1996 Acquired Communities, the Acquisition
Communities, and the Land Parcel. Two of the communities in the
Acquisition Communities are encumbered by first deeds of trust which
collateralize housing bond issues, totaling $28 million in aggregate.
E. Increase in other liabilities is attributable to resident deposits
from the 1996 Acquired Communities and the Acquisition Communities.
F. Increase due to partnership units issued to seller in acquisition of
Countrybrook Apartments.
G. Increase in cash and cash equivalents is attributable to $49.5 million
in net proceeds from the May, 1996 Offering offset by the $41.5
million retirement of the Acquisition Loans.
H. Decrease in other assets, net and corresponding increase in dividends
in excess of accumulated earnings is attributable to write-off of
capitalized loan fees related to the retirement of the Acquisition
Loans.
I. Decrease in notes payable is attributable to the retirement of the
Acquisition Loans.
J. Increase in preferred and common stock is attributable to the issuance
of shares from the May, 1996 Offering.
K. Additional paid in capital is attributable to the net proceeds from
the May 1996 Offering.
L. Additional rental and other revenue is attributable to the 1996
Acquired Communities and the Acquisition Communities.
M. Additional property operating expense is attributable to the 1996
Acquired Communities and the Acquisition Communities.
N. Additional property taxes expense is attributable to the 1996 Acquired
Communities, the Acquisition Communities, and the Land Parcel.
F-7
11
BAY APARTMENT COMMUNITIES, INC.
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
2. PRO FORMA ADJUSTMENTS, continued:
O. General and administrative expense is adjusted to reflect an increase
in staff at the corporate level as well as additional expense at the
1996 Acquired Communities and the Acquisition Communities.
P. Additional interest expense relating to the debt incurred in
connection with the acquisition of the 1996 Acquired Communities, the
Acquisition Communities, and the Land Parcel has been computed based
upon the 30-day London Interbank Offered Rate ("LIBOR") plus a 1.55%
margin on the $90 million aggregate draw on the Company's 1996 Credit
Facility.
Q. Depreciation expense attributable to the 1996 Acquired Communities and
the Acquisition Communities has been computed using the straight-line
method of cost recovery over 30 years for buildings and 7 years for
furniture, fixtures and equipment.
R. Decrease in interest expense reflects the reduction in historical
interest from the assumed retirement of the Acquisition Loans.
F-8
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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 Countrybrook Apartments, San
Jose, California (the Property) for the year ended December 31, 1995 and for
the three-month period ended March 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 Countrybrook Apartments, San Jose, California, for the year ended
December 31, 1995 and for the three-month period ended March 31, 1996, in
conformity with generally accepted accounting principles.
San Francisco, California
July 3, 1996
F-9
13
COUNTRYBROOK APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
Year Ended Three Months
December 31, Ended
1995 March 31, 1996
------------ --------------
Revenues:
Rental income $3,512,640 $927,130
Other 33,708 14,024
---------- --------
3,546,348 941,154
---------- --------
Direct operating expenses:
On-site management 270,228 72,541
Real property tax 355,020 90,139
Utilities 171,987 39,185
Repairs and maintenance 406,973 128,443
Other 148,546 21,578
---------- --------
1,352,754 351,886
---------- --------
Revenue in excess of direct
operating expenses $2,193,594 $589,268
========== ========
The accompanying note is an integral
part of this Historical Summary.
F-10
14
COUNTRYBROOK APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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
Countrybrook Apartments, an apartment community, located in San Jose,
California with 208 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.
F-11
15
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 Parkside Commons Apartments,
Sunnyvale, California (the Property) for the year ended December 31, 1995 and
for the three-month period ended March 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 Parkside Commons Apartments, Sunnyvale, California, for the year
ended December 31, 1995 and for the three-month period ended March 31, 1996, in
conformity with generally accepted accounting principles.
San Francisco, California
July 3, 1996
F-12
16
PARKSIDE COMMONS APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
Year Ended Three Months
December 31, Ended
1995 March 31, 1996
------------ --------------
Revenues:
Rental income $2,722,758 $ 729,247
Other 87,194 29,002
---------- ----------
2,809,952 758,249
---------- ----------
Direct operating expenses:
On-site management 112,478 23,096
Real property tax 151,012 46,761
Utilities 116,381 28,470
Repairs and maintenance 212,883 51,011
Other 82,754 27,058
---------- ----------
675,508 176,396
---------- ----------
Revenue in excess of direct
operating expenses $2,134,444 $ 581,853
========== ==========
The accompanying note is an integral
part of this Historical Summary.
F-13
17
PARKSIDE COMMONS APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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
Parkside Commons Apartments, an apartment community, located in Sunnyvale,
California with 192 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.
F-14
18
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 Villa Marguerite Apartments,
Mission Viejo, California (the Property) for the year ended December 31, 1995
and for the three-month period ended March 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 Villa Marguerite Apartments, Mission Viejo, California, for the year
ended December 31, 1995 and for the three-month period ended March 31, 1996, in
conformity with generally accepted accounting principles.
San Francisco, California
July 3, 1996
F-15
19
VILLA MARGUERITE APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
Year Ended Three Months
December 31, Ended
1995 March 31, 1996
------------ --------------
Revenues:
Rental income $1,191,365 $317,688
Other 28,870 9,529
---------- --------
1,220,235 327,217
---------- --------
Direct operating expenses:
On-site management 63,882 17,757
Real property tax 121,745 25,937
Utilities 108,938 27,573
Repairs and maintenance 203,856 59,438
Other 75,805 18,154
---------- --------
574,226 148,859
---------- --------
Revenues in excess of direct
operating expenses $ 646,009 $178,358
========== ========
The accompanying note is an integral
part of this Historical Summary.
F-16
20
VILLA MARGUERITE APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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
Villa Marguerite Apartments, an apartment community, located in Mission
Viejo, California with 208 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.
F-17
21
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 Sunset Towers Apartments, San
Francisco, California (the Property) for the year ended December 31, 1995 and
for the three-month period ended March 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 Sunset Towers Apartments, San Francisco, California, for the year
ended December 31, 1995 and for the three-month period ended March 31, 1996, in
conformity with generally accepted accounting principles.
San Francisco, California
July 3, 1996
F-18
22
SUNSET TOWERS APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
Year Ended Three Months
December 31, Ended
1995 March 31, 1996
------------ --------------
Revenues:
Rental income $2,795,189 $722,901
Other 125,844 27,621
---------- --------
2,921,033 750,522
---------- --------
Direct operating expenses:
On-site management 114,689 24,393
Real property tax 210,419 52,894
Utilities 349,786 90,216
Repairs and maintenance 246,512 84,065
Other 208,574 32,296
---------- --------
1,129,980 283,864
---------- --------
Revenue in excess of direct
operating expenses $1,791,053 $466,658
========== ========
The accompanying note is an integral
part of this Historical Summary.
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23
SUNSET TOWERS APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
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
Sunset Towers Apartments, an apartment community, located in San
Francisco, California with 243 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.
F-20