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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): July 26, 1996
BAY APARTMENT 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.)
4340 Stevens Creek Boulevard, Suite 275, San Jose, CA 95129
-----------------------------------------------------------
(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 5. Other Events.
Property Acquisitions.
- ----------------------
From July 26, 1996 through August 7, 1996, Bay Apartment Communities, Inc.
(the "Company") acquired four properties for an aggregate purchase price of
approximately $77.8 million. As of August 7, 1996 the Company's portfolio
consisted of 33 properties. The properties acquired from July 26, 1996 through
August 7, 1996 are described below. Substantially all of the purchase price for
each of the properties acquired on July 26, 1996 was funded by drawing on the
Company's $200 million unsecured line of credit from Union Bank of Switzerland
and substantially all of the purchase price for each of the properties acquired
on August 7, 1996 was funded using the proceeds from the Company's underwritten
public offering of 5,750,000 shares of common stock on August 5, 1996. 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.
MILL CREEK. On July 26, 1996, the Company purchased from Transamerica
Realty Services, Inc. a 258 apartment home community located in Costa Mesa,
California ("Mill Creek") for approximately $17.5 million. The Company intends
to repair and repaint the community's exterior, add washers and dryers to the
apartment home interiors, rebuild its leasing facility and fitness center and
upgrade its landscaping.
THE FOUNTAINS. On July 26, 1996, the Company purchased from Keystone
California Corp. a 226 apartment home community located in San Jose, California
("The Fountains") for approximately $27.9 million. The Company intends to
repaint the entire exterior of this community and make other minor repairs.
CHANNING HEIGHTS. On August 7, 1996, the Company purchased from Channing
Heights Associates a 254 apartment home community located in San Rafael,
California ("Channing Heights") for approximately $24.5 million plus additional
transaction costs of approximately $400,000. The Company intends to replace the
community's roof, repair and repaint its exterior siding, upgrade its
interiors, replace its leasing facility and fitness center and substantially
upgrade its landscaping.
MARTINIQUE GARDENS. On August 7, 1996, the Company purchased from S & P
Company a 145 apartment home community located in Costa Mesa, California
("Martinique Gardens") for approximately $7.5 million. The Company expects to
substantially rebuild this community, including replacing its roof, repairing
and repainting its exterior siding, replacing all apartment home interiors,
rebuilding its leasing facility and fitness center, adding a substantial number
of new garages, repaving its roadways and replacing the swimming pool and all
of the landscaping. The pro forma impact of this acquisition was reported in the
Company's current report on Form 8-K/A, dated May 23, 1996, as filed with the
Securities and Exchange Commission on July 5, 1996.
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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.
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
23.1 Independent Accountants Consent.
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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: November 12, 1996 By: /s/ Gilbert M. Meyer
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Gilbert M. Meyer
Chairman of the Board and President
330184.c1
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BAY APARTMENT COMMUNITIES, INC.
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INDEX TO FINANCIAL STATEMENTS
PAGE
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PRO FORMA FINANCIAL STATEMENTS:
Unaudited pro forma consolidated balance sheet as of June 30, 1996 F-2
Unaudited pro forma consolidated statement of operations for the
six months ended June 30, 1996 F-3
Unaudited pro forma consolidated statement of operations for the
year ended December 31, 1995 F-4
Notes to the pro forma financial statements F-5
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES
STATEMENT FOR THE FOUNTAINS APARTMENTS:
Report of Independent Accountants F-7
Historical summary of revenues and direct operating expenses for the year
ended December 31, 1995 F-8
Note to historical summary of revenues and direct operating expenses F-9
HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES
STATEMENT FOR CHANNING HEIGHTS APARTMENTS:
Report of Independent Accountants F-10
Historical summary of revenues and direct operating expenses for the year
ended December 31, 1995 F-11
Note to historical summary of revenues and direct operating expenses F-12
F-1
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
_______________
1996
HISTORIC- ACQUISI- OTHER PRO
ASSETS AL TIONS TRANSACTIONS FORMA
-------- -------- -------- --------
Real estate assets:
Land $117,252 $ 16,685 A - $133,937
Buildings and improvements 412,599 49,815 A - 462,414
Furniture, fixtures and equipment 27,837 3,364 A - 31,201
-------- -------- -------- --------
557,688 69,864 627,552
Less accumulated depreciation (42,326) - (42,326)
-------- -------- --------
Operating real estate assets 515,362 69,864 - 585,226
Construction in progress 44,715 - - 44,715
-------- -------- -------- --------
560,077 69,864 - 629,941
Cash and cash equivalents 489 (69,516) B $ 69,516 D 489
Other assets 10,988 - - 10,988
-------- -------- -------- --------
Total assets $ 571,554 $ 348 $ 69,516 $641,418
========= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable 275,495 - (64,665) E 210,830
Accounts payable and accrued expenses 3,567 - - 3,567
Dividends payable 6,339 - - 6,339
Other liabilities 3,909 348 C - 4,257
-------- -------- -------- --------
Total liabilities 289,310 348 (64,665) 224,993
Preferred stock, $.01 par value; 25,000,000
shares authorized; 2,308,800 shares of Series
A outstanding at June 30, 1996 and June 30,
1996 pro forma; 405,022 shares of Series B
outstanding at June 30, 1996 and June 30,
1996 pro forma, respectively. 27 - - 27
Common stock, $.01 par value; 40,000,000
shares authorized; 13,226,851 shares
outstanding at June 30, 1996; 18,976,851
shares outstanding at June 30, 1996
pro forma. 132 - 58 F 190
Paid-in capital 300,953 - 134,123 G 435,076
Dividends in excess of accumulated earnings (18,868) - (18,868)
-------- -------- -------- --------
Total shareholders' equity 282,244 - 134,181 416,425
Total liabilities and shareholders'
equity $ 571,554 $ 348 $ 69,516 $641,418
========= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-2
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BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
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1996
HISTORICAL ACQUISITIONS PRO FORMA
---------- ------------ ---------
Revenues:
Rental $34,000 $3,864 H $37,864
Other 865 142 H 1,007
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Total revenue 34,865 4,006 38,871
Expenses:
Property operating 7,845 772 I 8,617
Property taxes 2,687 331 I 3,018
General and administrative 1,724 243 I 1,967
Interest and financing 7,107 - 7,107
Depreciation and amortization 8,197 1,071 J 9,268
------- ------ -------
27,560 2,417 29,977
------- ------ -------
Income before minority interest 7,305 1,589 8,894
Minority interest 27 - 27
------- ------ -------
Income before extraordinary item 7,278 1,589 8,867
Extraordinary item 511 - 511
------- ------ -------
Net income $ 6,767 $1,589 $ 8,356
======= ====== =======
The accompanying notes are an integral part of these financial statements.
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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 PRO
HISTORICAL ACQUISITIONS FORMA
------- ------ -------
Revenues:
Rental $52,110 $7,728 H $59,838
Other 1,411 285 H 1,696
------- ------ -------
Total revenue 53,521 8,013 61,534
Expenses:
Property operating 12,452 1,544 I 13,996
Property taxes 4,349 661 I 5,010
General and administrative 2,467 486 I 2,953
Interest and financing 11,472 - 11,472
Depreciation and amortization 13,714 2,141 J 15,855
------- ------ -------
Total expenses 44,454 4,832 49,286
------- ------ -------
Income before minority interest and gain on sale 9,067 3,181 12,248
Minority interest 19 - 19
------- ------ -------
Income before gain on sale 9,048 3,181 12,229
Gain on sale 2,412 - 2,412
------- ------ -------
Net income $11,460 $3,181 $14,641
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The accompanying notes are an integral part of these financial statements.
F-4
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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, 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 three apartment communities in
July and August, 1996 (the "1996 Acquisition Communities"), the Company's
second public offering in August, 1996 (the "Offering"), and paydowns on the
$200 million unsecured line of credit (the "1996 Credit Facility"), had
occurred on June 30, 1996. The pro forma consolidated statements of operations
for the six months ended June 30, 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 six months
ended June 30, 1996 or for the year ended December 31, 1995 had the 1996
Acquisition Communities, the Offering, and paydowns on the 1996 Credit Facility
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
Acquisition Communities which consist of the $27.9 million
acquisition of The Fountains Apartments, the $24.5 million
acquisition of Channing Heights Apartments, and the $17.5 million
acquisition of Mill Creek Apartments.
B. Decrease in cash and cash equivalents is attributable to cash used
to acquire the 1996 Acquisition Communities.
C. Increase in other liabilities is attributable to resident deposits
and accrued property taxes from the 1996 Acquisition Communities.
D. Increase in cash and cash equivalents is attributable to $134.2
million in net proceeds from the Offering offset by the $64.7
million paydown of the 1996 Credit Facility.
E. Decrease in notes payable is attributable to the paydown of the
1996 Credit Facility.
F. Increase in common stock is attributable to the issuance of shares
in the Offering.
Continued
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)
__________________
2. Pro Forma Adjustments, continued:
G. Additional paid in capital is attributable to the net proceeds
from the Offering.
H. Additional rental and other revenue is attributable to the 1996
Acquisition Communities.
I. Additional property operating expense, property tax expense, and
general and administrative expense are attributable to the 1996
Acquisition Communities.
J. Depreciation expense attributable to the 1996 Acquisition
Communities has been computed using the straight-line method over
30 years for buildings and 7 years for furniture, fixtures and
equipment.
F-6
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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 Fountains Apartments, San
Jose, California (the Property) for the year ended December 31, 1995. 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 Fountains Apartments, San Jose, California, for the year
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
San Francisco, California
July 30, 1996
F-7
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THE FOUNTAINS APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
for the year ended December 31, 1995
Revenues:
Rental income $2,808,953
Other 169,632
----------
2,978,585
----------
Direct operating expenses:
On-site management 126,728
Real property tax 282,570
Utilities 126,743
Repairs and maintenance 232,734
Other 137,950
----------
906,725
----------
Revenues in excess of direct
operating expenses $2,071,860
==========
The accompanying note is an integral
part of this Historical Summary.
F-8
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THE FOUNTAINS 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
The Fountains Apartments, an apartment community, located in San Jose,
California, with 226 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-9
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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 Channing Heights Apartments, San
Rafael, California (the Property) for the year ended December 31, 1995. 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 Channing Heights Apartments, San Rafael, California, for the year
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
San Francisco, California
September 17, 1996
F-10
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CHANNING HEIGHTS APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
for the year ended December 31, 1995
Revenues:
Rental income $2,564,131
Other 37,940
----------
2,602,071
----------
Direct operating expenses:
On-site management 81,381
Real property tax 226,306
Utilities 141,410
Repairs and maintenance 246,168
Other 117,419
----------
812,684
----------
Revenues in excess of direct
operating expenses $1,789,387
==========
The accompanying note is an integral
part of this Historical Summary.
F-11
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CHANNING HEIGHTS 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
Channing Heights Apartments, an apartment community, located in San
Rafael, California, with 254 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-12