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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) June 7, 1999
IRVINE APARTMENT COMMUNITIES, L.P.
IAC CAPITAL TRUST
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-22569 33-0587829
Delaware 1-13721 91-6452946
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(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
550 Newport Center Drive, Suite 300, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 720-5500
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT
Irvine Apartment Communities, L.P. (the "Operating Partnership") is
a Delaware limited partnership formed in 1993. Prior to June 7,
1999, Irvine Apartment Communities, Inc., a Maryland corporation
(the "Company"), owned a 44.6% partnership interest in the
Operating Partnership and was the sole general partner in the
Operating Partnership. The Irvine Company ("TIC"), including its
affiliates, was the largest shareholder of the Company. TIC also
beneficially owns a 54.5% common limited partnership interest in
the Operating Partnership. IAC Capital Trust (the "Trust") is a
Delaware business trust that owns all of the Series A preferred
partnership units in the Operating Partnership. As of June 6, 1999,
the Company owned 45% of the common securities of the Trust.
On June 7, 1999 (the "Effective Date"), pursuant to an Agreement
and Plan of Merger dated February 1, 1999 (the "Merger Agreement")
between the Company and TIC Acquisition LLC (the "Acquiror"), a
Delaware limited liability company indirectly wholly owned by TIC,
the Company was merged with and into the Acquiror (the "Merger"),
with the Acquiror remaining as the surviving entity and renamed
Irvine Apartment Communities LLC ("IACLLC"). As a result of the
Merger and a related transaction in which TIC acquired an
additional 74,523 common limited partnership units, TIC
beneficially owns and controls substantially all of the outstanding
common partnership units in the Operating Partnership. In addition,
IACLLC became the sole general partner of the Operating Partnership
and a beneficial owner of 45% of the common securities of the
Trust.
The completion of the Merger was announced in a joint press release
made by the Company and IACLLC on June 8, 1999, a copy of which is
included as Exhibit 99.1 to this Current Report on Form 8-K and
incorporated herein by reference.
On the Effective Date, the Acquiror obtained control of all the
general partnership interests in the Operating Partnership through
the Merger. In the Merger, each outstanding share of the Company's
Common Stock was converted into the right to receive $34 in cash.
The aggregate consideration paid by the Acquiror to consummate the
Merger, before merger costs, was approximately $686 million
(approximately $569 million for the shares of the Company's common
stock not previously owned by TIC and approximately $117 million
for the shares previously owned by TIC). The funds used to pay the
merger consideration were obtained from cash on hand and from $350
million of capital contributions from TIC. TIC financed these
capital contributions through a $350 million term loan pursuant to
the Acquisition Term Loan Agreement between The Irvine Company and
Bank of America National Trust and Savings Association dated March
16, 1999 (the "Acquisition Term Loan"). The Acquisition Term Loan
(i) bears interest at LIBOR plus 0.95% for the first year of the
term and LIBOR plus 1.10% for the second year of the term; (ii)
matures on June 7, 2001 (subject to a one-year extension); and
(iii) is effectively secured by a portion of the common limited
partnership units in the Operating Partnership owned by TIC prior
to the Merger and TIC's membership interest in IACLLC. Repayment of
the Acquisition Term Loan will be funded primarily from TIC's other
operations and any cash distributions from the Operating
Partnership which may be made from time to time in the normal
course of business.
In conjunction with the Merger, the Company and the Operating
Partnership entered into a separate agreement whereby, on the
Effective Date, the Company agreed to reimburse the Operating
Partnership for all costs of the Merger incurred on the Company's
behalf during 1999. As a result, the Company has reimbursed the
Operating Partnership costs totaling $6.6 million, of which $2.6
million was incurred during the first quarter of 1999 and $4.0
million was incurred during the second quarter of 1999. Also, in
conjunction with the Merger, the Operating Partnership agreed to
settle in cash the vested stock options of the Company which were
outstanding on the Effective Date.
The principal business of IACLLC is the operation and development
(through the Operating Partnership) of apartment communities in
California. The address of the principal business and the principal
executive offices of IACLLC is 550 Newport Center Drive, Suite 900,
Newport Beach, California 92660; telephone (949) 720-2000.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
<TABLE>
<S> <C>
a. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1999........1
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 1999 ...............................................2
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Year Ended December 31, 1998.....................................................3
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.............4
b. Signatures...........................................................................7
c. Exhibits
Exhibit 99.1 - Press Release dated June 8, 1999......................................8
</TABLE>
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IRVINE APARTMENT COMMUNITIES, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
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Irvine Apartment
Irvine Apartment Pro Forma Communities, L.P.
Communities, L.P. Adjustments Pro Forma
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<S> <C> <C> <C>
ASSETS
Real estate assets, at cost
Land $ 253,449 $ 131,877 (A) $ 385,326
Buildings and improvements 1,191,020 379,874 (A) 1,570,894
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1,444,469 511,751 (A) 1,956,220
Accumulated depreciation (290,494) (290,494)
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1,153,975 511,751 1,665,726
Under development, including land 229,671 1,858 (C) 231,529
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1,383,646 513,609 1,897,255
Cash and cash equivalents 4,197 6,584 (B) 6,657
(4,124) (C)
Restricted cash 1,670 1,670
Deferred financing costs, net 11,707 11,707
Other assets 12,615 12,615
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$ 1,413,835 $ 516,069 $ 1,929,904
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LIABILITIES
Mortgages and notes payable
Tax-exempt mortgage bond financings $ 18,000 $ 18,000
Conventional mortgage financings 128,821 128,821
Mortgage notes payable to The Irvine Company 49,289 49,289
Tax-exempt assessment district debt 21,250 21,250
Unsecured tax-exempt bond financings 334,190 334,190
Unsecured term loan 100,000 100,000
Unsecured notes payable 99,295 99,295
Unsecured line of credit 28,000 28,000
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778,845 778,845
Accounts payable and accrued liabilities 50,034 4,018 (B) 54,052
Security deposits 9,798 9,798
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838,677 4,018 842,695
REDEEMABLE PREFERRED INTERESTS
Series A 144,113 144,113
Series B 48,693 48,693
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192,806 192,806
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PARTNERS' CAPITAL
45,203 common partnership units outstanding 382,352 $ 511,751 (A) 894,403
2,566 (B)
(2,266) (C)
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382,352 512,051 894,403
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$ 1,413,835 $ 516,069 $ 1,929,904
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</TABLE>
See accompanying notes.
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IRVINE APARTMENT COMMUNITIES, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
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Irvine Apartment
Irvine Apartment Pro Forma Communities, L.P.
Communities, L.P. Adjustments Pro Forma
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<S> <C> <C> <C>
REVENUES
Rental income $ 58,020 $ 58,020
Other income 1,629 1,629
Interest income 129 129
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59,778 59,778
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EXPENSES
Property expenses 12,374 12,374
Real estate taxes 4,570 4,570
Interest expense, net 6,948 6,948
Amortization of deferred financing costs 453 453
Depreciation and amortization 9,214 $ 2,713 (D) 11,927
General and administrative 4,348 (2,566) (E) 4,048
2,266 (F)
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37,907 2,413 40,320
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INCOME FROM CONTINUING OPERATIONS BEFORE
REDEEMABLE PREFERRED INTERESTS 21,871 (2,413) 19,458
Redeemable preferred interests 4,188 4,188
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INCOME FROM CONTINUING OPERATIONS $ 17,683 $ (2,413) $ 15,270
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</TABLE>
See accompanying notes.
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IRVINE APARTMENT COMMUNITIES, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
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Irvine Apartment
Irvine Apartment Pro Forma Communities, L.P.
Communities, L.P. Adjustments Pro Forma
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<S> <C> <C> <C>
REVENUES
Rental income $ 213,296 $ 213,296
Other income 6,077 6,077
Interest income 1,464 1,464
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220,837 220,837
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EXPENSES
Property expenses 49,398 49,398
Real estate taxes 17,209 17,209
Interest expense, net 27,822 27,822
Amortization of deferred financing costs 1,942 1,942
Depreciation and amortization 33,802 $ 10,854 (D) 44,656
General and administrative 9,352 2,266 (F) 11,618
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139,525 13,120 152,645
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INCOME FROM CONTINUING OPERATIONS BEFORE
REDEEMABLE PREFERRED INTERESTS 81,312 (13,120) 68,192
Redeemable preferred interests 12,317 12,317
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INCOME FROM CONTINUING OPERATIONS $ 68,995 $ (13,120) $ 55,875
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</TABLE>
See accompanying notes.
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IRVINE APARTMENT COMMUNITIES, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE/UNIT INFORMATION)
NOTE 1 - BASIS OF PRESENTATION
Irvine Apartment Communities, L.P. (the "Operating Partnership") is a Delaware
limited partnership formed in 1993. Prior to June 7, 1999, Irvine Apartment
Communities, Inc., a Maryland corporation (the "Company"), owned a 44.6%
partnership interest in the Operating Partnership and was the sole general
partner in the Operating Partnership. The Irvine Company ("TIC"), including its
affiliates, was the largest shareholder of the Company. TIC also beneficially
owns a 54.5% common limited partnership interest in the Operating Partnership.
The principal business of the Company is the operation and development (through
the Operating Partnership) of apartment communities in California.
On June 7, 1999, (the "Effective Date") pursuant to the Merger, as more fully
described in Item 1, the Company was merged with and into TIC Acquisition LLC,
an indirect wholly owned subsidiary of TIC. TIC Acquisition LLC (the "Acquiror")
was the surviving entity and changed its name to Irvine Apartment Communities
LLC. As a result of the Merger, the Acquiror became the sole general partner in
the Operating Partnership. Accordingly, TIC beneficially owns and controls
substantially all of the common partnership units in the Operating Partnership.
The Merger has been reflected on the accompanying unaudited condensed
consolidated pro forma financial statements of the Operating Partnership
utilizing push-down accounting.
The following unaudited pro forma condensed consolidated balance sheet of the
Operating Partnership as of March 31, 1999 gives effect to the Merger, as if the
Merger had occurred on March 31, 1999. The following unaudited pro forma
condensed consolidated statements of operations of the Operating Partnership for
the three months ended March 31, 1999 and the year ended December 31, 1998 give
effect to the Merger, as if the Merger had occurred on January 1, 1999 for
purposes of the March 31, 1999 unaudited pro forma condensed consolidated
statement of operations and January 1, 1998 for purposes of the December 31,
1998 unaudited pro forma condensed consolidated statement of operations.
The unaudited pro forma condensed consolidated financial statements are
presented for informational purposes only and are not necessarily indicative of
what the actual consolidated financial position and results of operations of the
Operating Partnership would have been as of March 31, 1999, and for the three
months ended March 31, 1999 or the year ended December 31, 1998, nor does it
purport to represent the future consolidated financial position and results of
operations of the Operating Partnership. This information should be read in
conjunction with the audited consolidated financial statements and other
financial information contained in the Operating Partnership's Annual Report on
Form 10-K/A for the year ended December 31, 1998 and the Operating Partnership's
Quarterly Report on Form 10-Q for the three months ended March 31, 1999,
including the notes thereto.
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IRVINE APARTMENT COMMUNITIES, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - PRO FORMA ADJUSTMENTS
Pro Forma Balance Sheet Adjustments
The pro forma adjustments to the unaudited pro forma consolidated balance sheet
as of March 31, 1999 are as follows:
(A) The step-up in basis related to the Acquiror's investment in the
Operating Partnership consists of the following:
<TABLE>
<S> <C>
Purchase of the Company's Common Stock held by TIC (16,745,480
shares at $34 per share) $ 569,346
Acquisition of minority interest units (74,523 units at $34 per unit) 2,534
Estimated costs associated with the Merger 13,742
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585,622
TIC's prior investment in the Company's Common Stock
and related costs 130,691
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716,313
Historical cost basis capital (204,562)
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Total Step-Up $ 511,751
===============
</TABLE>
The step-up in basis approximates the fair value of the net assets
acquired and was allocated to the assets of the Operating Partnership
based on the excess of their estimated fair value over their historical
carrying amount. As such, $131,877 of the step-up in basis was allocated
to land and $379,874 was allocated to buildings and improvements.
(B) Represents cash reimbursement from the Company for costs of the Merger
incurred on the Company's behalf, $2,566 of which was incurred during the
first quarter of 1999, and $4,018 which was incurred during the second
quarter of 1999.
(C) Represents cash payments totaling $4,124 for vested stock options on June
7, 1999, the effective date of the Merger, of which $1,858 is capitalized
to real estate under development and $2,266 is charged to operations as
general and administrative expenses. Each holder of unvested stock
options is entitled to receive a cash settlement equal to the excess of
$34 over the exercise price for each share of common stock subject to the
stock options at the time of vesting, subject to continued employment and
other provisions.
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IRVINE APARTMENT COMMUNITIES, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
Pro Forma Statement of Operations Adjustments
The pro forma adjustments to the unaudited pro forma condensed consolidated
statements of operations for the three months ended March 31, 1999 and for the
year ended December 31, 1998 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
1999 1999
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<S> <C> <C>
(D) Increase in depreciation expense
resulting from the step-up in basis
utilizing the straight-line method
and an estimated remaining
useful life of approximately 35 years $ 2,713 $10,854
========= =======
</TABLE>
(E) Reimbursement of certain general and administrative expenses totaling
$2,566 related to the costs of the Merger incurred during the first
quarter of 1999 and reimbursed by the Company. Additional costs
associated with the Merger which were incurred during the second quarter
of 1999 and reimbursed by the Company totaled $4,018.
(F) Portion of cash payments made in 1999 for vested stock options which were
charged to operations totaling $2,266.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this Report to be signed on their behalf by the
undersigned hereunto duly authorized.
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities LLC
its sole general partner
Date: June 21, 1999 By: /s/ MICHAEL D. MCKEE
-------------------------------------
Michael D. McKee
Executive Vice President, Chief
Financial Officer and Secretary
IAC CAPITAL TRUST
Date: June 21, 1999 By: /s/ DAVID A. PATTY
-------------------------------------
David A. Patty
Regular Trustee
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INDEX TO EXHIBIT
Exhibit-99.1 - Press Release dated June 8, 1999
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EXHIBIT 99.1
Press Release dated June 8, 1999
Irvine Apartment Communities, Inc. and TIC Acquisition LLC Complete Merger
Transaction
NEWPORT BEACH, Calif. - (BUSINESS WIRE) - June 8, 1999 - Irvine Apartment
Communities, Inc. (NYSE:IAC) and TIC Acquisition LLC, a wholly owned subsidiary
of The Irvine Company, today announced that they have completed their previously
announced merger. The shareholders of Irvine Apartment Communities approved the
merger at a special meeting of shareholders held yesterday in Los Angeles.
In the merger, TIC Acquisition LLC will pay all of the common shareholders of
Irvine Apartment Communities $34 per share in cash. The total purchase price,
excluding the shares already owned by The Irvine Company, was approximately $569
million.
Irvine Apartment Communities, a Southern California-based real estate investment
trust, is the dominant owner and operator of apartment properties on the Irvine
Ranch, the nation's largest master-planned community. The Company also is active
in the Silicon Valley, San Diego County and Los Angeles. At March 31, 1999, IAC
owned or had under development 65 apartment communities with 19,479 units.
The Irvine Company is a century old, privately held real estate investment
company primarily engaged in the long-term development of its land in Orange
County, California, and elsewhere in California. Following a comprehensive
master plan created in the 1960s, The Irvine Company is building a series of
large-scale communities on the Irvine Ranch.
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