-----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, T1vT3m9wMEg0OuUAs4mm4SsC3wlTfvgMxZwIE6GdRcPnRwBSGFKpvKod7lWTiJx0 aYv8SWSVbzOhayWaAbRWag== 0000950135-98-005353.txt : 19981007 0000950135-98-005353.hdr.sgml : 19981007 ACCESSION NUMBER: 0000950135-98-005353 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981002 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981006 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVALON BAY COMMUNITIES INC CENTRAL INDEX KEY: 0000915912 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 770404318 STATE OF INCORPORATION: MD FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12672 FILM NUMBER: 98721093 BUSINESS ADDRESS: STREET 1: 2900 EISENHOWER AVENUE STREET 2: SUITE 300 CITY: ALEXANDRIA STATE: VA ZIP: 22314 BUSINESS PHONE: 7033296300 MAIL ADDRESS: STREET 1: 2900 EISENHOWER AVENUE STREET 2: STE 300 CITY: ALEXANDRIA STATE: VA ZIP: 22314 FORMER COMPANY: FORMER CONFORMED NAME: BAY APARTMENT COMMUNITIES INC DATE OF NAME CHANGE: 19931208 8-K 1 AVALON BAY COMMUNITIES, 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 ---------------------------------- Date of Report (Date of earliest event reported): October 2, 1998 AVALONBAY COMMUNITIES, INC. (Exact name of Registrant as specified in charter) MARYLAND 1-12672 77-0404318 (State or other jurisdiction (Commission file number) (IRS employer of incorporation) identification no.) 2900 EISENHOWER AVENUE, SUITE 300, ALEXANDRIA, VIRGINIA 22314 ------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (703) 329-6300 ---------------------------------------------------- (Registrant's telephone number, including area code) 2 ITEM 5. OTHER EVENTS. SPECIAL MEETING OF STOCKHOLDERS On October 2, 1998, the Company held a Special Meeting of Stockholders (the "Special Meeting") at which the holders of record of the Company's common stock, par value $.01 per share (the "Common Stock"), as of the close of business on August 26, 1998 (the "Record Date") were asked to vote on certain amendments to the Company's charter (the "Charter"). Specifically, the stockholders were asked to vote on (i) amendments to the Charter that would reduce the number of authorized shares of Common Stock which the Company may issue from 300,000,000 to 140,000,000, (ii) an amendment to the Charter which would enable the stockholders of the Company to remove a director from office with or without cause upon the affirmative vote of a majority of the shares then entitled to vote at a meeting of the stockholders called for such purpose, and (iii) an amendment to the Charter changing the name of the Company from "Avalon Bay Communities, Inc." to "AvalonBay Communities, Inc." Each of proposals (i) and (iii) was approved at the Special Meeting by the affirmative vote of the holders of the requisite number of shares of Common Stock outstanding as of the Record Date. Immediately following the Special Meeting on October 2, 1998, the Company caused Articles of Amendment to the Charter to be filed with, and accepted for record by, the State Department of Assessments and Taxation of the State of Maryland. Accordingly, the Company is now authorized to issue 140,000,000 shares of Common Stock and its name has been changed to "AvalonBay Communities, Inc." A copy of such Articles of Amendment to the Charter is being filed herewith as Exhibit 3.1(ii). PROPERTY ACQUISITION HANOVER HALL. On July 20 1998, the Company agreed to acquire Hanover Hall and Summer Terrace (a combined community known as Hanover Hall) consisting of 388 apartment homes in two adjacent 13-story buildings located in Stamford, Connecticut from Hanover Hall Limited Partnership and Summer Terrace Limited Partnership. The anticipated purchase price for this community is approximately $37 million. The purchase will be funded by drawing on the Company's $600 million unsecured revolving credit facility from Morgan Guarantee Trust Company of New York, Union Bank of Switzerland and Fleet National Bank, as co-agents, and other participating banks (the "Unsecured Credit Facility"). The Unsecured Credit Facility bears interest at the London Interbank Offered Rate (based on a maturity selected by the Company) plus 0.60% per annum and matures in June 2001. In addition, the Unsecured Credit Facility includes a competitive bid option for up to $400 million and two, one-year extension options. This acquisition is expected to close in November 1998. However, because the purchase of this community is still pending, there can be no assurance that the Company will consummate the acquisition or, if acquired, that it will be purchased on terms currently contemplated. Neither the Company, any subsidiary of the Company nor any director or officer of the Company is affiliated with or has a material relationship with the sellers of this community. In assessing the communities, the Company's management considered the existing leases, which are the primary source of revenue, the occupancy rates, the competitive nature of the markets and comparative rental rates. Furthermore, current and anticipated maintenance and repair costs, real estate taxes and capital improvement requirements were evaluated. Management is not aware of any material factors that would cause the reported financial information in the accompanying Historical Summaries of Operating Revenues and Expenses to be misleading. 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements under Rule 3-14 of Regulation S-X (b) Pro Forma Financial Information. Unaudited pro forma financial information as of and for the six months ended June 30, 1998 and for the year ended December 31, 1997 are included as Exhibit 99.1 hereto. (c) Exhibits 3.1(i) Articles of Amendment and Restatement of Articles of Incorporation of the Company, dated as of June 4, 1998. (Incorporated by reference to Exhibit 3.1(i) to the Company's Form 10-Q for the quarter ended June 30, 1998). 3.1(ii) Articles of Amendment, dated as of October 2, 1998. 12.1 Statements of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends and Ratios of Earnings to Fixed Charges 23.1 Consent of PricewaterhouseCoopers LLP 99.1 Unaudited pro forma financial information as of and for the six months ended June 30, 1998 and for the year ended December 31, 1997. 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be filed on its behalf by the undersigned thereunto duly authorized. AVALONBAY COMMUNITIES, INC. Dated: October 6, 1998 By: /s/ Thomas J. Sargeant -------------------------------- Name: Thomas J. Sargeant Title: Chief Financial Officer 5 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Avalon Bay Communities, Inc.: We have audited the accompanying historical summary of operating revenue and expenses, as defined in Note 2(a), of Hanover Hall and Summer Terrace for the year ended December 31, 1997. This historical summary is the responsibility of Hanover Hall and Summer Terrace's management. Our responsibility is to express an opinion on the historical summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the historical summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the historical summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the historical summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying historical summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the Registration Statements on Forms S-3 and S-8 of Avalon Bay Communities, Inc.) and is not intended to be a complete presentation of Hanover Hall and Summer Terrace's revenue and expenses. In our opinion, the historical summary referred to above presents fairly, in all material respects, the operating revenue and expenses described in Note 2(a) of Hanover Hall and Summer Terrace for the year ended December 31, 1997, in conformity with generally accepted accounting principles. PricewaterhouseCoopers LLP Washington, D.C. September 11, 1998 6 HANOVER HALL AND SUMMER TERRACE Historical Summaries of Operating Revenue and Expenses For the six months ended June 30, 1998 (unaudited) and the year ended December 31, 1997 (dollars in thousands) Six months ended Year ended June 30, 1998 December 31, 1997 (unaudited) (audited) Total revenue $ 2,390 $ 4,576 Operating expenses: Property operating 750 1,712 Real estate taxes 204 416 --------- --------- Total operating expenses 954 2,128 --------- --------- Operating revenue in excess of operating expenses $ 1,436 $ 2,448 ========= ========= See accompanying notes to historical summaries of operating revenue and expenses. 2 7 HANOVER HALL AND SUMMER TERRACE Notes to the Historical Summaries of Operating Revenue and Expenses Six months ended June 30, 1998 (unaudited) and year ended December 31, 1997 (dollars in thousands) (1) DESCRIPTION OF THE PROPERTY Hanover Hall and Summer Terrace (the Buildings) consists of two 13-story high-rise buildings located in Stamford, Connecticut, containing 388 studio, one, two, and three-bedroom apartment homes available for lease. The Buildings were constructed in 1962. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying historical summaries of operating revenue and expenses are not representative of the actual operations for the periods presented as certain revenues and expenses, which may not be comparable to those expected to be incurred by Avalon Bay Communities, Inc. in the future operations of the Buildings, have been excluded. Interest income has been excluded from revenue, and interest, depreciation and amortization, and other costs not directly related to the future operations of the Buildings have been excluded from expenses. (b) Revenue Recognition Rental income attributable to residential leases is recorded when due from tenants. (c) Interim Unaudited Financial Information The accompanying unaudited financial information for the six months ended June 30, 1998 has been prepared consistent with the rules and regulations of the Securities and Exchange Commission governing the preparation of the amounts for the year ended December 31, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the historical summaries of operating revenue and expenses for the six months ended June 30, 1998, have been included. The results of operations for the six-month period ended June 30, 1998 are not necessarily indicative of the results for the full year. 3 8 HANOVER HALL AND SUMMER TERRACE Notes to the Historical Summaries of Operating Revenue and Expenses (dollars in thousands) (3) PRO FORMA TAXABLE OPERATING RESULTS AND CASH AVAILABLE FROM OPERATIONS (UNAUDITED) The following unaudited table is a pro forma estimate of the taxable operating income and cash available from operations of Hanover Hall and Summer Terrace for the twelve months ended June 30, 1998, as adjusted for certain items which can be factually supported. For purposes of presenting pro forma taxable operating income, revenue is recognized when it is either collectible under the lease terms or collected. Tax depreciation for the buildings is computed on the modified accelerated cost recovery system method over a 27.5-year life. This statement does not purport to forecast actual operating results for any period in the future. Pro forma net operating income (exclusive of depreciation and amortization expense) $2,660 Less - estimated tax depreciation and amortization expense 1,089 -------- Pro forma taxable operating income $1,571 ======== Pro forma cash available from operations $2,660 ======== 4 EX-3.1(II) 2 ARTICLES OF AMENDMENT 10/2/98 1 Exhibit 3.1(ii) ARTICLES OF AMENDMENT AMENDING THE CHARTER OF AVALON BAY COMMUNITIES, INC. Avalon Bay Communities, Inc., a Maryland corporation (the "Corporation"), certifies as follows: FIRST: That the Corporation's Charter is hereby amended by: (A) deleting Article I, Section 1.3 in its entirety and inserting the following in lieu thereof: 1.3 The total number of shares of Stock which the Corporation has authority to issue is two hundred ten million (210,000,000) shares, consisting of (i) fifty million (50,000,000) shares of Preferred Stock; (ii) one hundred forty million (140,000,000) shares of Common Stock; and (iii) twenty million (20,000,000) shares of excess stock, par value $.01 per share ("Excess Stock"). The aggregate par value of all the shares of all classes of Stock is $2,100,000. (B) deleting Article II in its entirety and inserting the following in lieu thereof: ARTICLE II NAME The name of the Corporation is: "AvalonBay Communities, Inc." 2 (C) deleting the first two sentences of Article VII, Section 7.1 in their entirety and inserting the following in lieu thereof: 7.1 AUTHORIZED STOCK. The total number of shares of Stock which the Corporation has authority to issue is two hundred ten million (210,000,000) shares, consisting of (i) fifty million (50,000,000) shares of Preferred Stock, par value $.01 per share; (ii) one hundred forty million (140,000,000) shares of Common Stock, par value $.01 per share; and (iii) twenty million (20,000,000) shares of Excess Stock, par value $.01 per share. The aggregate par value of all the shares of all classes of Stock is $2,100,000. SECOND: The foregoing amendments to the Corporation's Charter were advised by the Board of Directors of the Corporation and were approved by the stockholders of the Corporation at a Special Meeting of Stockholders held on October 2, 1998. [Remainder of Page Left Blank Intentionally] 2 3 IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to the Charter of the Corporation to be executed in its name and on its behalf on this 2nd day of October 1998, by the President of the Corporation who acknowledges that these Articles of Amendment are the act of the Corporation and that to the best of his knowledge, information and belief and under penalties for perjury, all matters and facts contained in these Articles of Amendment are true in all material respects. AVALON BAY COMMUNITIES, INC. (seal) By: /s/ Charles H. Berman ---------------------------------- Charles H. Berman President ATTEST By: /s/ Jeffrey B. Van Horn ------------------------------ Jeffrey B. Van Horn Secretary 3 EX-12.1 3 STATEMENTS OF RATIOS OF EARNINGS 1 EXHIBIT 12.1 AVALONBAY COMMUNITIES, INC. RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Six months Year Year Year Year Ended Ended Ended Ended March 17- January 1- Ended June 30, December 31, December 31, December 31, December 31 March 16, December 31, 1998 1997 1996 1995 1994 1994 1993 ---------- ------------ ----------- ------------ ----------- ---------- ----------- Net Operating Income $ 31,221 $ 38,941 $ 19,626 $ 11,460 $ 7,486 $ (716) $ (447) (Less) Nonrecurring item: Gain on sale $ - $ - $ - $ (2,412) $ - $ - $ - (Plus) Extraordinary item: Unamortized loan fee write-off $ - $ - $ 511 $ - $ - $ - $ - (Plus) Fixed charges: Interest expense $ 17,363 $ 14,113 $ 14,276 $ 11,472 $ 4,782 $ 2,358 $ 10,932 Interest capitalized 6,525 6,985 2,567 3,641 2,096 - - Debt cost amortization 336 505 667 1,278 241 80 218 Preferred dividend 8,523 7,480 4,264 917 - - - -------- -------- -------- -------- -------- -------- -------- Total fixed charges (1) $ 32,747 $ 29,083 $ 21,774 $ 17,308 $ 7,119 $ 2,438 $ 11,150 (Less): Interest capitalized $ 6,525 $ 6,985 $ 2,567 $ 3,641 $ 2,096 $ - $ - Preferred dividend 8,523 7,480 4,264 917 - - - Adjusted earnings (2) $ 48,920 $ 53,559 $ 35,080 $ 21,798 $ 12,509 $ 1,722 $ 10,703 --------- --------- -------- -------- -------- -------- -------- Ratio (2 divided by 1) 1.49 1.84 1.61 1.26 1.76 0.71 0.96 ========= ========= ======== ======== ======== ======== ========
2 AVALONBAY COMMUNITIES, INC. RATIOS OF EARNINGS TO FIXED CHARGES
Six months Year Year Year Year Ended Ended Ended Ended March 17- January 1- Ended June 30, December 31, December 31, December 31, December 31 March 16, December 31, 1998 1997 1996 1995 1994 1994 1993 ---------- ------------ ------------ ------------ ----------- --------- ------------ Net Operating Income $ 31,221 $ 38,941 $ 19,626 $ 11,460 $ 7,486 $ (716) $ (447) (Less) Nonrecurring item: Gain on sale $ - $ - $ - $ (2,412) $ - $ - $ - (Plus) Extraordinary item: Unamortized loan fee write-off $ - $ - $ 511 $ - $ - $ - $ - (Plus) Fixed charges: Interest expense $ 17,363 $ 14,113 $ 14,276 $ 11,472 $ 4,782 $ 2,358 $ 10,932 Interest capitalized 6,525 6,985 2,567 3,641 2,096 - - Debt cost amortization 336 505 667 1,278 241 80 218 -------- -------- -------- -------- -------- -------- -------- Total fixed charges (1) $ 24,224 $ 21,603 $ 17,510 $ 16,391 $ 7,119 $ 2,438 $ 11,150 (Less): Interest capitalized $ 6,525 $ 6,985 $ 2,567 $ 3,641 $ 2,096 $ - $ - Adjusted earnings (2) $ 48,920 $ 53,559 $ 35,080 $ 21,798 $ 12,509 $ 1,722 $ 10,703 -------- -------- -------- -------- -------- -------- -------- Ratio (2 divided by 1) 2.02 2.48 2.00 1.33 1.76 0.71 0.96 ======== ======== ======== ======== ======== ======== ========
EX-23.1 4 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 Exhibit 23-1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements of AvalonBay Communities, Inc. on Form S-8 (File No. 333-16837), Form S-8 (File No. 333-56089), Form S-3 (File No. 333-16647), Form S-3 (File No. 333-15407), Form S-3 (File No. 333-41511) and Form S-3 (333-60875) of our report dated September 11, 1998 appearing on page 5 of this Form 8-K. /s/ PricewaterhouseCoopers LLP October 5, 1998 Washington, D. C. EX-99.1 5 UNAUDITED PRO FORMA FINANCIAL INFORMATION 1 Exhibit 99.1 UNAUDITED PRO FORMA FINANCIAL STATEMENTS AVALONBAY COMMUNITIES, INC. PRO FORMA CONDENSED BALANCE SHEET JUNE 30, 1998 (UNAUDITED) The following unaudited Pro Forma Condensed Balance Sheet of AvalonBay Communities, Inc. (the "Company") as of June 30, 1998 gives effect to (i) the acquisition and sale of apartment communities and land that have been consummated since June 30, 1998 and the acquisition of other apartment communities that the Company expects to consummate in the near future; (ii) the investment by the Company in a participating mortgage note; (iii) the July 1998 sale of Fixed Rate Unsecured Senior Notes; and (iv) repayment of amounts outstanding under the Company's Variable Rate Unsecured Credit Facility (the " Unsecured Credit Facility"). The unaudited Pro Forma Condensed Balance Sheet is presented for informational purposes only and is not necessarily indicative of what the actual condensed financial position of the Company would have been as of June 30, 1998, nor does it purport to represent the future condensed financial position of the Company. This information should be read in conjunction with the unaudited condensed financial statements and other financial information contained in the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, including the notes thereto. 2 AVALONBAY COMMUNITIES, INC. PRO FORMA CONDENSED BALANCE SHEET JUNE 30, 1998 (Unaudited) (Dollars in thousands)
At June 30, 1998 (Unaudited) --------------------------------------------------------------------------------- Pro Forma Adjustments ----------------------------------------------------- Acquired Disposed Probable Priors Debt Pro Forma Historical Communities Communities Acquisitions Offering Consolidated ---------- ----------- ----------- ------------ ----------- ------------ ASSETS Real estate, net $3,655,967 $145,074 $(56,515) $37,450 $ - $3,781,976 Cash, cash equivalents and cash in escrow 21,752 - - - - 21,752 Other assets 87,466 23,874 (283) - 2,184 113,241 ---------- -------- -------- ------- ------ ---------- TOTAL ASSETS $3,765,185 $168,948 $(56,798) $37,450 $2,184 $3,916,969 ========== ======== ======== ======= ====== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Notes and unsecured credit facility $1,331,059 $167,184 $(56,490) $37,450 $2,184 $1,481,387 Payables for construction 32,848 - - - - 32,848 Accrued expenses and other liabilities 115,973 1,764 (459) - - 117,278 ---------- -------- -------- ------- ------ ---------- TOTAL LIABILITIES 1,479,880 168,948 (56,949) 37,450 2,184 1,631,513 Minority interest of unitholders in consolidated operating partnerships 32,323 - - - - 32,323 Stockholders' equity: Preferred stock 143 - - - - 143 Common stock 636 - - - - 636 Additional paid-in capital 2,317,749 - - - - 2,317,749 Deferred compensation (6,221) - - - - (6,221) Dividends in excess of accumulated earnings (59,325) - 151 - - (59,174) ---------- -------- -------- ------- ------ ---------- TOTAL STOCKHOLDERS' EQUITY 2,252,982 - 151 - - 2,253,133 ---------- -------- -------- ------- ------ ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,765,185 $168,948 $(56,798) $37,450 $2,184 $3,916,969 ========== ======== ======== ======= ====== ==========
See accompanying notes. 3 AVALONBAY COMMUNITIES, INC. NOTES TO PRO FORMA CONDENSED BALANCE SHEET (DOLLARS IN THOUSANDS) 1. BASIS OF PRESENTATION The pro forma adjustments for the Acquired Communities, Disposed Communities and Probable Acquisitions reflect the communities and land acquired (Prudential Center Apartments, Avalon Corners land, Avalon Fox Mill land and Avalon Court North land) or disposed (Aspen Meadows, Village Park of Troy and Arbor Park) by the Company subsequent to June 30, 1998, acquisitions that the Company expects to consummate in the near future (Hanover Hall) and the investment by the Company in a participating mortgage note secured by Fairlane Woods. The adjustments for Prior Debt Offering reflects the sale of $250 million in Fixed Rate Unsecured Senior Notes during July 1998, and the subsequent repayment of amounts outstanding under the Company's Unsecured Credit Facility. 2. ACQUIRED COMMUNITIES ADJUSTMENTS (i) total acquisition costs of $145,074 ($130,050 related to the Prudential Center Apartments, $6,220 related to Avalon Corners land, $2,804 related to Avalon Fox Mill land, $6,000 related to Avalon Court North land); (ii) the assumption of net liabilities totaling $1,890, and draws on the Company's Unsecured Credit Facility totaling $167,184; and (iii) the investment of $24,000 in a participating mortgage note secured by Fairlane Woods. 3. DISPOSED COMMUNITIES ADJUSTMENTS (i) total net real estate disposed of $56,515 ($12,300 related to Aspen Meadows, $31,815 related to Village Park of Troy and $12,400 related to Arbor Park); (ii) the transfer of net liabilities of $176 in connection with the sale of the communities; (iii) the repayment of $56,490 on the Company's Unsecured Credit Facility from the estimated sales proceeds; and (iv) the recognition of a net gain totaling $151 from the sale of the communities. 4. PROBABLE ACQUISITIONS ADJUSTMENTS (i) total acquisition costs of $37,450 related to Hanover Hall; and (ii) draws on the Company's Unsecured Credit Facility totaling $37,450. 5. PRIOR DEBT OFFERING ADJUSTMENTS Reflects the sale of $250,000 of Fixed Rate Unsecured Senior Notes in July 1998 at a net price of $247,816, after deduction of transaction costs. The Company used all of the proceeds to pay down amounts outstanding under its Unsecured Credit Facility. 4 AVALONBAY COMMUNITIES, INC. PRO FORMA CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) The following unaudited Pro Forma Condensed Statements of Operations of AvalonBay Communities, Inc. (the "Company") for the six months ended June 30, 1998 and for the year ended December 31, 1997 gives effect to (i) the June 1998 merger of Avalon Properties, Inc. with and into the Company (the "Merger"); (ii) the acquisition and sale of apartment communities and land that have been consummated since December 31, 1996 and the acquisition of other apartment communities that the Company expects to consummate in the near future; (iii) the investment by the Company in a participating mortgage note; (iv) the sale of Common Stock, Preferred Stock and Fixed Rate Unsecured Senior Notes since December 31, 1996; and (v) repayment of amounts outstanding under the Company's Variable Rate Unsecured Credit Facility (the "Unsecured Credit Facility"). The unaudited Pro Forma Condensed Statements of Operations are presented for informational purposes only and are not necessarily indicative of what the actual condensed operations of the Company would have been assuming the aforementioned transactions had been consummated as of the beginning of the respective periods, nor does it purport to represent the results of operations for future periods. This information should be read in conjunction with the unaudited condensed financial statements and other financial information contained in the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 1998, including the notes thereto. 5 AVALONBAY COMMUNITIES, INC. CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (Unaudited) (Dollars in thousands, except per share data)
For the six months ended June 30, 1998 --------------------------------------------------------------------------------- Pro Forma Adjustments ----------------------------------------------------- Acquired Disposed Probable Prior Pro Forma Historical Communities Communities Acquisitions Offerings Consolidated ---------- ----------- ----------- ------------ ----------- ------------ Total revenue $116,230 $106,187 $(1,429) $2,390 $ - $223,378 Expenses: Operating expenses 30,705 31,572 (628) 750 - 62,399 Property taxes 9,394 9,089 (106) 204 - 18,581 Interest expense 17,363 19,853 (874) 1,217 (571) 36,988 Depreciation and amortization 24,503 27,204 (264) 533 - 51,976 General and administrative 2,946 2,558 - - - 5,504 Provision for unrecoverable deferred development costs 400 433 - - - 833 -------- -------- ------- ------ ------ -------- Total expenses 85,311 90,709 (1,872) 2,704 (571) 176,281 -------- -------- ------- ------ ------ -------- Equity in income of unconsolidated joint ventures 238 1,112 - - - 1,350 Interest income 468 1,571 - - - 2,039 Minority interest (404) (583) - - - (987) -------- -------- ------- ------ ------ -------- Net income 31,221 17,578 443 (314) 571 49,499 Dividends attributable to preferred stock (8,523) (8,190) - - 1,174 (15,539) -------- -------- ------- ------ ------ -------- Net income available to common stockholders $ 22,698 $ 9,388 $ 443 $ (314) $1,745 $ 33,960 ======== ======== ======= ====== ====== ======== Per common share: Net income - basic $ .68 $ .53 ======== ======== Net income - diluted $ .66 $ .52 ======== ========
See accompanying notes. 6 AVALONBAY COMMUNITIES, INC. CONDENSED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (Unaudited) (Dollars in thousands, except per share data)
For the year ended December 31, 1997 --------------------------------------------------------------------------------- Pro Forma Adjustments ----------------------------------------------------- Acquired Disposed Probable Prior Pro Forma Historical Communities Communities Acquisitions Offerings Consolidated ---------- ----------- ----------- ------------ ----------- ------------ Total revenue $125,827 $268,321 $(706) $ 4,576 $ - $398,018 Expenses: Operating expenses 29,016 73,945 (139) 1,712 - 104,534 Property taxes 9,467 23,644 (64) 416 - 33,463 Interest expense 14,113 74,589 (307) 2,547 (29,408) 61,534 Depreciation and amortization 27,009 71,921 (112) 1,066 - 99,884 General and administrative 6,308 5,093 - - - 11,401 Provision for unrecoverable deferred development costs 710 650 - - - 1,360 -------- -------- ----- ------- -------- -------- Total expenses 86,623 249,842 (622) 5,741 (29,408) 312,176 -------- -------- ----- ------- -------- -------- Equity in income of unconsolidated joint ventures - 5,689 - - - 5,689 Interest income 207 3,554 - - - 3,761 Minority interest (470) (1,140) - - - (1,610) -------- -------- ----- ------- -------- -------- Net income 38,941 26,582 (84) (1,165) 29,408 93,682 Dividends attributable to preferred stock (7,480) (19,772) - - (3,827) (31,079) -------- -------- ----- ------- -------- -------- Net income available to common stockholders $ 31,461 $ 6,810 $ (84) $(1,165) $ 25,581 $ 62,603 ======== ======== ===== ======= ======== ======== Per common share: Net income - basic $ 1.40 $ .98 ======== ======== Net income - diluted $ 1.40 $ .97 ======== ========
See accompanying notes. 7 AVALONBAY COMMUNITIES, INC. NOTES TO PRO FORMA CONDENSED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1. BASIS OF PRESENTATION The pro forma adjustments for the Acquired Communities, Disposed Communities and Probable Acquisitions assumes that the Merger, all communities and land acquired or disposed by the Company subsequent to December 31, 1996, acquisitions that the Company expects to consummate in the near future and the investment by the Company in a participating mortgage note had occurred as of January 1, 1997. The adjustments for Prior Offerings assumes the sale of all Common Stock, Preferred Stock and Fixed Rate Unsecured Senior Notes (and the related repayment of amounts outstanding under the Company's Unsecured Credit Facility) subsequent to December 31, 1996 had occurred as of January 1, 1997. 2. ACQUIRED COMMUNITIES ADJUSTMENTS (i) the historical operating revenues and expenses of the communities acquired; (ii) the additional interest expense on debt at weighted average interest rates ranging from 6.5% to 6.8%, incurred for the acquisitions and interest expense on assumed debt; (iii) the depreciation expense based on the new accounting basis of the rental properties based on a 30 year useful life; and (iv) the historical general and administrative expenses, provision for unrecoverable deferred development costs, equity in income of unconsolidated joint ventures, interest income and minority interest of Avalon Properties, Inc. 3. DISPOSED COMMUNITIES ADJUSTMENTS (i) the elimination of historical operating revenues and expenses of the communities sold; (ii) the reduction of interest expense from the repayment of debt using the net proceeds; and (iii) the elimination of historical depreciation expense of the communities sold. 4. PROBABLE ACQUISITIONS ADJUSTMENTS (i) the historical operating revenues and expenses of the communities anticipated to be acquired; (ii) the additional interest expense on debt at weighted average interest rates ranging from 6.5% to 6.8%, incurred for the acquisitions; and (iii) the depreciation expense based on the new accounting basis of the rental properties based on a 30 year useful life. 5. PRIOR OFFERINGS ADJUSTMENTS Adjustments reflect the reduction in interest expense and additional preferred dividends associated with the paydown of amounts outstanding under the Company's Unsecured Credit Facility with the proceeds from the sale of Common Stock and Preferred Stock, and the change in interest expense associated with the sale of Fixed Rate Unsecured Senior Notes subsequent to December 31, 1996. 8 6. EARNINGS PER SHARE Based upon the following table of pro forma shares of common stock outstanding and common stock equivalents on a weighted average basis during the six months ended June 30, 1998 and for the year ended December 31, 1997.
For the For the six months year ended ended June 30 December 31 1998 1997 Weighted average Common Shares outstanding - basic 64,089,106 63,958,400 Weighted average Common Shares outstanding - diluted 64,791,092 64,515,021
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