1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------------------- Date of Report (Date of earliest event reported): APRIL 18, 1997 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 (Registrant's telephone number, including area code) 2 ITEM 5. OTHER EVENTS. PROPERTY ACQUISITIONS. From January 3, 1997 through April 18, 1997, Bay Apartment Communities, Inc. (the "Company") acquired six additional properties (consisting of four apartment home communities and two land sites) for an aggregate purchase price of approximately $73.81 million. As of April 18, 1997 the Company's portfolio consisted of 38 apartment home communities and 3 communities under development. The properties acquired from January 3, 1997 through April 18, 1997 are described below. Except as noted 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 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. Rancho Penasquitos Racquet Club Apartments. On January 3, 1997, the Company purchased a 176 apartment home community located in San Diego, California ("Rancho Penasquitos") from First Allmerica Life Insurance Company for approximately $10.8 million. The Company intends to repair the community's roofs, refurbish its stucco exteriors, construct approximately 100 enclosed carports, renovate the community's leasing office and upgrade its landscaping and site drainage. In addition, the Company intends to add air conditioning units and upgrade the bathroom lighting in all of the community's apartment homes, install new kitchen appliances in approximately half of the apartment homes and install washers and dryers in the approximately one-third of the apartment homes that do not currently have them. The Village Apartments. On March 13, 1997, the Company purchased a 209 apartment home community located in West Covina, California ("The Village Apartments") from Tara Apartments, Ltd. for approximately $9.73 million. The Company intends to repair water intrusion to the community's roofs, wood exteriors, decks and patios, repaint its wood exteriors, improve the interiors of the community's apartment homes, renovate the leasing office and recreation facilities, upgrade the landscaping and install security gates. Banbury Cross Apartments. On April 1, 1997, the Company purchased a 400 apartment home community located in Huntington Beach, California ("Banbury Cross") from Hambly Company N.V. for approximately $28.0 million. The Company intends to replace the community's roofs and roof drainage, repaint the community's interiors and exterior, repair second floor decks, replace window trims, make structural seismic upgrades, create 230 new garages with automatic garage door openers through the conversion of existing carports, repair and repaint all kitchen and bath cabinets, and install new floor coverings, electrical fixtures and switch plates, appliances, countertops and plumbing in a number of units. Other improvements planned at the community include an upgraded gating system, a new fitness center, an expanded leasing facility, improvements to the pool areas and new landscaping and drainage. 2 3 Cardiff Gardens. On April 18, 1997, the Company purchased a 252 apartment home community located in Campbell, California ("Cardiff Gardens") from Stanford H. Atwood, Jr., Walter Donald Head, Trustee of The Walter Donald Head Revocable Living Trust, and Walter Donald Head, Trustee of The David Drake Hunt Living Trust dated 10/12/93, for approximately $18.9 million, which includes approximately $12.9 million of seller financing. The Company plans to reposition the community by installing new roofs and siding, making walkway repairs, repainting the exterior and adding private patios and balconies. In addition, the Company plans interior upgrades, such as renovating kitchens and bathrooms, installing new appliances and carpets and painting existing cabinetry. The Company also plans to add fitness and business centers, remodel existing carports, upgrade the entry and leasing office areas and make extensive courtyard landscape renovations. The Alameda Land Sites. The Company purchased a 7.44 acre land site on February 3, 1997 and a 1.43 acre adjacent land site on April 4, 1997. The two land sites (together, "The Alameda Land Sites") are both located on The Alameda in downtown San Jose, California, and were purchased from the S&P Company and J. Lohr Properties, respectively, for an aggregate purchase price of approximately $6.38 million. The Company plans to develop an apartment home community, to be known as Paseo Alameda, with approximately 305 apartment homes on The Alameda Land Sites. PROPOSED ACQUISITIONS. Villa Serena Acquisition Community. On April 18, 1997, the Company agreed to purchase a 301 apartment home community located in Rancho Santa Margarita, California from Tijeras Partnership. The purchase price for this community is anticipated to be approximately $17.9 million. This acquisition is expected to close in April, 1997. San Diego Acquisition Community. On March 24, 1997, the Company agreed to purchase a 200 apartment home community located in San Diego, California. The purchase price for this community is anticipated to be approximately $13.8 million. This acquisition is expected to close in May, 1997. Because the purchases of the proposed acquisition communities are still pending, there can be no assurance that the Company will consummate the acquisition of either or both of the proposed acquisition communities or, if acquired, that they will be purchased on the terms currently contemplated. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Pro Forma Financial Statements (b) Financial Statements under Rule 3-14 of Regulation S-X 3 4 (c) Exhibits 23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants. 4 5 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: April ___, 1997 By: ----------------------------------------- Gilbert M. Meyer Chairman of the Board and President 5 6 BAY APARTMENT COMMUNITIES, INC. PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (In thousands, except share and per share data) (Unaudited) 1997 Other Historical Acquisitions Transactions Pro Forma ------------- ------------- ------------- ------------- Real Estate Assets: Land $152,277 $15,150 A - $167,427 Buildings and Improvements 511,583 48,276 A - 559,859 Furniture, fixtures & equipment 35,542 3,058 A - 38,600 ------------- ------------- ------------- ------------- 699,402 66,484 - 765,886 Less Accumulated Depreciation (52,554) 0 - (52,554) ------------- ------------- ------------- ------------- Operating Real Estate Assets 646,848 66,484 - 713,332 Construction in progress 50,945 0 - 50,945 ------------- ------------- ------------- ------------- 697,793 66,484 - 764,277 Cash & cash equivalents 920 0 D 920 Restricted cash 960 0 - 960 Other assets, net 12,236 0 - 12,236 ------------- ------------- ------------- ------------- Total Assets $711,909 $66,484 0 $778,393 ============= ============= ============= ============= Liabilities and Shareholders' Equity Notes payable 273,688 66,182 B (108,110) E 231,760 Accounts payable and accrued expenses 5,450 0 - 5,450 Dividends payable 8,939 0 - 8,939 Other liabilities 4,553 302 C - 4,855 ------------- ------------- ------------- ------------- Total Liabilities 292,630 66,484 (108,110) 251,004 Minority Interest 7,002 - - 7,002 Preferred stock 27 0 - 27 Common stock 190 0 31 F 221 Paid in capital 435,723 0 108,079 G 543,802 Dividends in excess of accumulated earnings (23,663) 0 - (23,663) ------------- ------------- ------------- ------------- Total shareholders' equity 412,277 0 108,110 520,387 ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity $711,909 $66,484 $0 $778,393 ============= ============= ============= ============= F-1 7 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 Other Historical Acquisitions Transactions Pro Forma ------------- ------------- ------------- ------------- Revenues Rental $80,377 $9,084 H - $89,461 Other 2,216 183 H - 2,399 ------------- ------------- ------------- ------------- 82,593 9,267 - 91,860 ------------- ------------- ------------- ------------- Expenses Property operation 18,924 2,947 I - 21,871 Property taxes 6,353 841 I - 7,194 General and Administrative 3,895 389 I - 4,284 Interest and Financing 14,276 4,666 J (3,474) L 15,468 (4,148) M (4,148) Depreciation and Amortization 18,689 2,046 K - 20,735 ------------- ------------- ------------- ------------- 62,137 10,889 (7,622) 65,404 ------------- ------------- ------------- ------------- Income before minority interest and 20,456 (1,622) 7,622 26,456 extraordinary item Minority Interest (319) - - (319) ------------- ------------- ------------- ------------- Income before extraordinary item 20,137 (1,622) 7,622 26,137 Extraordinary Item (511) - - (511) ------------- ------------- ------------- ------------- Net Income 19,626 (1,622) 7,622 25,626 Preferred Dividend Requirement (4,264) - - (4,264) ------------- ------------- ------------- ------------- Earnings Available to common shares $15,362 ($1,622) $7,622 $21,362 ============= ============= ============= ============= Weighted average shares outstanding 15,126,242 18,188,242 Per share $1.02 $1.17 F-2 8 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 four apartment communities during the period from January 3, 1997 to April 18, 1997 (the "1997 Acquisition Communities"), an underwritten public offering in January 1997 (the "January Offering"), the offering to institutional investors in April 1997 (the "April Offering"), and related paydowns on the $200 million unsecured line of credit (the "Credit Facility"), had occurred on December 31, 1996. 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 $9.73 million acquisition of the Village Apartments, the $28 million acquisition of the Banbury Cross Apartments, the $10.8 acquisition of the Rancho Penasquitos Racquet Club, and the $17.9 million probable acquisition of Villa Serena 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 - There is no change in cash which is attributable to the $49.27 million in net proceeds from the January Offering and the $58.84 million in net proceeds from the April Offering which were used to paydown the Credit Facility by $108.11 million. E - Decrease in notes payable is attributable to the paydown of the Credit Facility. F - Increase in common stock is attributable to the issuance of shares in the January and April Offerings. G - Additional paid in capital is attributable to the net proceeds from the January and April Offerings. H - Additional rental and other revenue is attributable to the 1997 Acquisition Communities. F-3 9 I - Additional property operating expense, property tax expense, and general and administrative expense are attributable to the 1997 Acquisition Communities. J - 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. K - 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. L - Decrease in Interest and Financing is attributable to the net proceeds from the January Offering used to paydown the Credit Facility. M - Decrease in Interest and Financing is attributable to the net proceeds from the April Offering used to paydown the Credit Facility. F-4 10 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 Rancho Penasquitos Racquet Club, San Diego, 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 Rancho Penasquitos Racquet Club, San Diego, California, for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. San Francisco, California February 5, 1997 F-5 11 RANCHO PENASQUITOS RACQUET CLUB HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES for the year ended December 31, 1996 ------- Revenues: Rental income $ 1,423,223 Other 7,337 --------------- 1,430,560 --------------- Direct operating expenses: On-site management 162,379 Real property tax 88,369 Utilities 103,864 Repairs and maintenance 158,919 Other 102,324 --------------- 615,855 Revenues in excess of direct --------------- operating expenses $ 814,705 =============== The accompanying note is an integral part of this Historical Summary. F-6 12 RANCHO PENASQUITOS RACQUET CLUB 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 Rancho Penasquitos Racquet Club, San Diego, California with 176 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-7 13 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 Village Apartments, West Covina, 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 Village Apartments, West Covina, California, for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. San Francisco, California April 7, 1997 F-8 14 THE VILLAGE APARTMENTS HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES for the year ended December 31, 1996 ------- Revenues: Rental income $1,607,212 Other 51,293 ---------- 1,658,505 ---------- Direct operating expenses: On-site management and administration 173,420 Real property tax 68,855 Utilities 147,018 Repairs and maintenance 253,774 Other 45,763 ---------- 688,830 Revenues in excess of direct ---------- operating expenses $ 969,675 ========== The accompanying note is an integral part of this Historical Summary. F-9 15 THE VILLAGE 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 Village Apartments, an apartment community, located in West Covina, California with 209 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-10 16 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 Banbury Cross Apartments, Huntington Beach, 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 Banbury Cross Apartments, Huntington Beach, California, for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. San Francisco, California January 3, 1997 F-11 17 BANBURY CROSS APARTMENTS HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES for the year ended December 31, 1996 ------- Revenues: Rental income $3,380,680 Other 121,537 ---------- 3,502,217 ---------- Direct operating expenses: On-site management and administration 359,105 Real property tax 230,814 Utilities 124,785 Repairs and maintenance 586,064 Landscaping 96,655 Other 91,594 ---------- 1,489,017 Revenues in excess of direct ---------- operating expenses $2,013,200 ========== The accompanying note is an integral part of this Historical Summary. F-12 18 BANBURY CROSS 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 Banbury Cross Apartments, an apartment community, located in Huntington Beach, California with 400 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-13 19 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 Serena Apartments, Rancho Santa Margarita, 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 Villa Serena Apartments, Rancho Santa Margarita, California, for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. San Francisco, California March 14, 1997 F-14 20 VILLA SERENA APARTMENTS HISTORICAL SUMMARY OF REVENUES AND DIRECT OPERATING EXPENSES for the year ended December 31, 1996 ------- Revenues: Rental income $ 2,673,293 Other 3,082 --------------- 2,676,375 Direct operating expenses: On-site management and administration 198,084 Real property tax 453,377 Utilities 193,314 Repairs and maintenance 389,811 Advertising 69,086 Insurance 80,609 --------------- 1,384,281 --------------- Revenues in excess of direct operating expenses $ 1,292,094 =============== The accompanying note is an integral part of this Historical Summary. F-15 21 VILLA SERENA 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 Serena Apartments, an apartment community, located in Rancho Santa Margarita, California with 301 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-16