-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UgIYx1dkwbBpKJjfQfTMeCNort188j4h0bp/aEwYW5vPuFpuw6RgQdyaqEUU/3Rr 1f+y6/lm5kCvOCcIjYsvoA== 0000950133-97-003533.txt : 19971016 0000950133-97-003533.hdr.sgml : 19971016 ACCESSION NUMBER: 0000950133-97-003533 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971014 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971015 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVALON PROPERTIES INC CENTRAL INDEX KEY: 0000911536 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 061379111 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12452 FILM NUMBER: 97695991 BUSINESS ADDRESS: STREET 1: 15 RIVER ROAD STREET 2: SUITE 210 CITY: WILTON STATE: CT ZIP: 06897 BUSINESS PHONE: 2037616500 MAIL ADDRESS: STREET 1: 15 RIVER ROAD STREET 2: SUITE 210 CITY: WILTON STATE: CT ZIP: 06897 8-K 1 AVALON PROPERTIES, INC. 1 UNITED STATES 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 October 15, 1997 Date of Report (Date of earliest event reported) Commission File Number 1-12452 AVALON PROPERTIES, INC. (Exact name of registrant as specified in its charter) ------------------- Maryland 06-1379111 - ---------------------------------- ---------- State or other jurisdiction of (I.R.S. Employer incorporation) Identification No.) 15 River Road Wilton, Connecticut 06897 (Address of principal executive offices) - (Zip Code) (203) 761-6500 (Registrant's telephone number, including area code) ------------------- 2 AVALON PROPERTIES, INC. CURRENT REPORT ON FORM 8-K ITEM 5. OTHER. Since January 1, 1997, Avalon Properties, Inc. (the "Company") has purchased three communities. The transactions are described as follows: The Company acquired a 99% general partner interest in a "DownREIT" partnership which acquired Avalon at Ballston-Vermont and Quincy Towers, two high-rise apartment communities (formerly Ballston Place and Quincy Place), in Arlington, Virginia on January 9, 1997. Ballston Place and Quincy Place, completed in 1989, consist of 454 apartment homes. The communities were contributed to the DownREIT partnership by Quincy Station Apartments Limited Partnership, Aubrey's Road II Associates Limited Partnership and Ballston Place Associates Limited Partnership in exchange for a combination of (i) limited partnership interests in the newly-formed DownREIT partnership, (ii) cash drawn under the Company's unsecured bank credit facilities (the "Unsecured Facilities") and (iii) the assumption of certain existing indebtedness secured by the communities by the DownREIT partnership. The aggregate contribution value was approximately $45,698,000. These communities and a Company-owned community, Avalon at Ballston, are situated within walking distance of each other and are operated as two phases of one community. The Company acquired a fee simple interest in Avalon at Center Place (formerly Center Place), a high-rise apartment community in Providence, Rhode Island on May 16, 1997. Center Place, completed in late 1991, consists of 225 apartment homes. The property is subject to a 149 year ground lease that expires in 2141. The community was acquired from Parcel Five Limited Partnership for approximately $26,000,000 with cash proceeds drawn under the Company's Unsecured Facilities. This community was managed by the Company prior to its acquisition. The Company acquired a fee simple interest in Avalon at Providence Park, a garden-style community (formerly Providence Park) in Fairfax City, Virginia on June 27, 1997. Providence Park, built in 1988, contains a total of 140 apartment homes. This community was acquired from BDW Corporation for approximately $10,750,000 with cash proceeds drawn under the Company's Unsecured Facilities. Certain historical and pro forma financial information concerning these communities is as set forth in Item 7 of this report. 2 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Certain Communities Acquired PAGE ---- Report of Independent Accountants 4 Combined Statement of Revenue and Certain Operating Expenses for the Year Ended December 31, 1996 5 Notes to Combined Statement of Revenue and Certain Operating Expenses 6 Estimates of Net Income and Funds from Operations of Certain Acquired Communities (unaudited) 7 Notes to Estimates of Net Income and Funds from Operations of Certain Acquired Communities (unaudited) 8 (b) Unaudited Pro Forma Financial Information 9 Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 1997 10 Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1996 11 Notes to Pro Forma Condensed Consolidated Statements of Operations 12 (c) Exhibits N/A
3 4 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Avalon Properties, Inc. We have audited the accompanying combined statement of revenue and certain operating expenses of the Acquisition Communities, as defined in the accompanying Note 1, for the year ended December 31, 1996. This combined statement is the responsibility of the management of the Acquisition Communities. Our responsibility is to express an opinion on the combined statement 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 combined statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statement of revenue and certain operating expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2, and is not intended to be a complete presentation of the revenue and expenses of the Acquisition Communities. In our opinion, the combined statement referred to above presents fairly, in all material respects, the revenue and certain operating expenses described in Note 2 of the Acquisition Communities for the year ended December 31, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. New York, New York September 22, 1997 4 5 ACQUISTION COMMUNITIES COMBINED STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) REVENUE: Rental income $9,030 Other income 445 --------- Total revenue 9,475 --------- CERTAIN OPERATING EXPENSES: Operating and maintenance 2,675 Real estate taxes 855 --------- Total certain operating expenses 3,530 --------- Excess of revenue over certain operating expenses $5,945 =========
See the accompanying notes to the Combined Statement of Revenue and Certain Operating Expenses. 5 6 ACQUISITION COMMUNITIES NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES 1. ACQUISITION COMMUNITIES The combined statement of revenue and certain operating expenses relates to the operations of three residential apartment communities prior to the acquisition by Avalon Properties, Inc. (the "Company"). These residential apartment communities are Avalon at Ballston-Vermont and Quincy Towers (formerly Ballston Place and Quincy Place), located in Arlington, Virginia and Avalon at Center Place (formerly Center Place), located in Providence, Rhode Island (the "Acquisition Communities"). Avalon purchased Avalon at Ballston-Vermont and Quincy Towers on January 9, 1997 and Avalon at Center Place on May 16, 1997. 2. BASIS OF PRESENTATION The combined statement has been prepared on the accrual method of accounting. Certain operating expenses include operating and maintenance costs, real estate taxes, and insurance expenses relating to the operation of the Acquisition Communities. In accordance with the regulations of the Securities and Exchange Commission, mortgage interest, depreciation and corporate expenses have been excluded from certain operating expenses, as they are dependent upon a particular owner, purchase price or other financial arrangement. Accordingly, the expenses reflected in the accompanying statement may not be comparable to the expenses to be incurred in the future operations of the Acquisition Communities. 3. REVENUE RECOGNITION Apartment homes are leased to individual residents on short-term leases. Rental income is recognized monthly as earned. 6 7 ACQUISITION COMMUNITIES ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED COMMUNITIES (UNAUDITED) (DOLLARS IN THOUSANDS) The following represents an estimate of the net income and Funds from Operations expected to be generated from the operation of the subject Acquisition Communities based upon the Combined Statement of Revenue and Certain Operating Expenses for the year ended December 31, 1996. These estimated results do not purport to represent results of operations for these communities in the future and were prepared on the basis described in the accompanying notes which should be read in conjunction herewith. ESTIMATED NET INCOME Excess of revenues over certain operating expenses $5,945 Less: Estimated depreciation (Note 1) (1,559) --------------- Estimated net income $4,386 =============== ESTIMATED FUNDS FROM OPERATIONS Estimated net income $4,386 Plus: Estimated depreciation (Note 1) 1,559 --------------- Estimated Funds from Operations $5,945 ===============
See the accompanying notes to unaudited Estimates of Net Income and Funds from Operations of Certain Acquired Communities. 7 8 ACQUISITION COMMUNITIES NOTES TO ESTIMATES OF NET INCOME AND FUNDS FROM OPERATIONS OF CERTAIN ACQUIRED COMMUNITIES (UNAUDITED) 1. BASIS OF PRESENTATION Depreciation has been estimated based upon an allocation of the purchase prices for the subject Acquisition Communities to furniture and fixtures, to land and to building. The allocation of the purchase price to fixtures is based on an estimated value of $1,500 per apartment home. The balance of the purchase price is then allocated 20% to land and 80% to building. Furniture and fixtures are depreciated on a straight line basis over 7 years, and buildings are depreciated on a straight line basis over 40 years. No income taxes have been provided because the Company is taxed as a Real Estate Investment Trust ("REIT") under the provisions of the Internal Revenue Code. Accordingly, the Company does not pay Federal income tax when income distributed to its stockholders is equal to at least 95% of REIT taxable income and when certain other conditions are met. 2. FUNDS FROM OPERATIONS Funds from Operations is determined in accordance with a resolution adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"), and is defined as net income (loss) (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation of real estate and after adjustments for unconsolidated partnerships and joint ventures. 3. ACQUISITION CONSIDERATIONS In assessing the communities acquired, 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 Combined Statement of Revenue and Certain Operating Expenses and Estimates of Net Income and Funds from Operations of Certain Acquired Communities to be misleading. 8 9 AVALON PROPERTIES, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION The following Unaudited Pro Forma Condensed Financial Information is based upon the historical financial statements of Avalon Properties, Inc. (the "Company"). The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 1997 and the year ended December 31, 1996 have been presented as if the acquisition of the Acquisition Communities as well as Avalon at Providence Park in June 1997, had occurred on January 1, 1996. The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended June 30, 1997 and the year ended December 31, 1996 are not necessarily indicative of what the actual results of operations of the Company would have been had the transactions been completed as of January 1, 1996 nor does it purport to represent the results of operations for future periods. 9 10 AVALON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THE ACQUISITION OTHER COMPANY COMMUNITIES ACQUISITIONS PRO FORMA PRO FORMA (a) (b) (c) ADJUSTMENTS CONSOLIDATED -------------- ------------ ------------- -------------- -------------- Revenue Rental income $77,526 $1,501 $ 735 $ -- $79,762 Management fees 499 -- -- (34) (d) 465 Other income 273 149 -- -- 422 --------------- ------------ ------------- ------------- -------------- Total revenue 78,298 1,650 735 (34) 80,649 --------------- ------------ ------------- ------------- -------------- Expenses Operating expenses 27,761 742 243 -- 28,747 Interest expense 7,639 -- -- 1,013 (e) 8,652 Depreciation and amortization 13,527 -- -- 329 (f) 13,856 General and administrative 2,199 -- -- -- 2,199 --------------- ------------ ------------- ------------- -------------- Total expenses 51,126 742 243 1,342 53,454 --------------- ------------ ------------- ------------- -------------- Equity in income of joint ventures 2,346 -- -- -- 2,346 Interest income 495 -- -- -- 495 Minority interest 142 -- -- -- 142 --------------- ------------ ------------- ------------- -------------- Income before extraordinary item 30,155 907 492 (1,376) 30,179 Extraordinary item (1,183) -- -- -- (1,183) --------------- ------------ ------------- ------------- -------------- Net income 28,972 907 492 (1,376) 28,996 Dividends attributable to preferred stock (9,828) -- -- -- (9,828) --------------- ------------ ------------- ------------- -------------- Net income available to common stockholders $19,144 $907 $ 492 ($1,376) $19,168 =============== ============ ============= ============= ============== Income per share before extraordinary item $ .59 $ .59 =============== ============== Net income per share of common stock $ .55 $ .55 =============== ============== Weighted average number of shares of common stock 34,635,347 34,635,347 =============== ==============
See accompanying notes to unaudited Pro Forma Condensed Consolidated Statement of Operations. 10 11 AVALON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THE ACQUISITION OTHER COMPANY COMMUNITIES ACQUISITIONS PRO FORMA PRO FORMA (a) (b) (c) ADJUSTMENTS CONSOLIDATED --------------- ------------- ------------- -------------- ------------- Revenue Rental income $123,354 $9,030 $1,444 $ -- $133,828 Management fees 1,439 -- -- (90) (d) 1,349 Other income 420 445 1 -- 866 --------------- ------------- ------------- -------------- -------------- Total revenue 125,213 9,475 1,445 (90) 136,043 --------------- ------------- ------------- -------------- -------------- Expenses Operating expenses 47,155 3,530 461 -- 51,146 Interest expense 9,545 -- -- 5,036 (e) 14,581 Depreciation and amortization 20,956 -- -- 1,800 (f) 22,756 General and administrative 3,807 -- -- -- 3,807 --------------- ------------- ------------- -------------- -------------- Total expenses 81,463 3,530 461 6,836 92,290 --------------- ------------- ------------- -------------- -------------- Equity in income of joint ventures 1,025 -- -- -- 1,025 Interest income 887 -- -- -- 887 Minority interest 495 -- -- -- 495 --------------- ------------- ------------- -------------- -------------- Income before gain on sale of communities and extraordinary item 46,157 5,945 984 (6,926) 46,160 Gain on sale of communities 7,850 -- -- -- 7,850 Extraordinary item (2,356) -- -- -- (2,356) --------------- ------------- ------------- -------------- -------------- Net income 51,651 5,945 984 (6,926) 51,654 Dividends attributable to preferred stock (10,422) -- -- -- (10,422) --------------- ------------- ------------- -------------- -------------- Net income available to common stockholders $41,229 $5,945 $984 (6,926) $41,232 =============== ============= ============= ============== ============== Income per share before extraordinary item $ 1.42 $ 1.42 =============== ============== Net income per share of common stock $ 1.34 $ 1.34 =============== ============== Weighted average number of shares of common stock 30,739,504 30,739,504 =============== ==============
See accompanying notes to unaudited Pro Forma Condensed Consolidated Statement of Operations. 11 12 AVALON PROPERTIES, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS a) Reflects the Company's historical consolidated statements of operations for the six months ended June 30, 1997 and the year ended December 31, 1996. b) Reflects the combined statement of revenue and certain operating expenses of the Acquisition Communities for the six months ended June 30, 1997 prior to date of acquisition and the historical combined statement of revenue and certain operating expenses of the Acquisition Communities for the year ended December, 31, 1996. c) Reflects the historical combined statement of revenue and certain operating expenses of Avalon at Providence Park for the six months ended June 30, 1997 and for the year ended December, 31, 1996. d) Decrease relates to property management fee income earned from management of Avalon at Center Place for the five months ended May 31, 1997 and for the year ended December 31, 1996. e) Increase relates to additional borrowings under the revolving unsecured credit facilities to purchase the Acquisition Communities prior to date of the acquisition for the six months ended June 30, 1997 and for the year ended December 31, 1996. f) Increase in depreciation attributable to the increase in the basis of real estate resulting from the purchase of the Acquisition Communities prior to date of acquisition for the six months ended June 30, 1997 and the year ended December 31, 1996. 12 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AVALON PROPERTIES, INC. Date: October 10, 1997 By: /s/ THOMAS J. SARGEANT --------------------------- Thomas J. Sargeant, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) 13 -----END PRIVACY-ENHANCED MESSAGE-----