UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Bay Apartment Communities, Inc.
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
072012107
(CUSIP Number)
Thomas J. Sargeant
Chief Financial Officer
Avalon Properties, Inc.
15 River Road
Wilton, Connecticut 06897
(203) 761-6500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 9, 1998
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b) (3) or (4),
check the following box: [__]
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Avalon Properties, Inc.
I.R.S. Identification No. 06-1379111
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [__]
(b) [__]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC, OO (See Item 3)
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT 'TO
ITEMS 2(d) OR 2(e) [__]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7. SOLE VOTING POWER
5,212,000 shares (1) (See Item 5)
8. SHARED VOTING POWER
0
9. SOLE DISPOSITIVE POWER
5,212,000 shares (1) (See Item 5)
10. SHARED DISPOSITIVE POWER
0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,212,000 shares (1) (See Item 5)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[--]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6% (2)
14. TYPE OF REPORTING PERSON
HC, CO
(1) Beneficial ownership of all such shares is being reported hereunder
solely as a result of the Option (as hereinafter defined) granted pursuant to
the Bay Stock Option Agreement (as defined and described in Item 4 hereof). The
reporting person expressly disclaims any beneficial ownership of such shares of
Bay Common Stock (as hereinafter defined) pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934, as amended, because the Option is exercisable
(and such shares are obtainable by Avalon) only in the circumstances set forth
in Item 4, none of which has occurred as of the date hereof.
(2) This percentage is obtained, in accordance with Rule 13d-3(d)(1)(i)(D),
by dividing the number of shares of Bay Common Stock issuable pursuant to the
Option by the sum of the currently outstanding number of shares of Bay Common
Stock, as represented to the reporting person in the Merger Agreement (as
hereinafter defined), and the shares underlying the Option. The shares of Bay
Common Stock represented by the Option are 19.9% of the currently outstanding
number of shares of Bay Common Stock, as represented to the reporting person in
the Merger Agreement.
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Item 1. Security and Issuer
This statement relates to shares of common stock, par value $.01 per
share (the "Bay Common Stock"), of Bay Apartment Communities, Inc. ("Bay") . The
address of Bay's principal executive offices is 4340 Stevens Creek Boulevard,
Suite 275, San Jose, CA 95129.
Item 2. Identity and Background
(a) - (c) and (f). This Schedule 13D is being filed by Avalon
Properties, Inc. ("Avalon"), a Maryland corporation. Avalon is a real estate
investment trust engaged in the business of developing, acquiring and managing
multifamily communities in the United States. Avalon's principal offices are
located at 15 River Road, Wilton, Connecticut 06897.
Each executive officer and each director of Avalon is a citizen of the
United States. The name, business address, and present principal occupation of
each executive officer and director is set forth in Annex A to this Schedule 13D
and specifically incorporated herein by reference.
Other than executive officers and directors, there are no persons or
corporations controlling or ultimately in control of Avalon.
(d) - (e). During the last five years, neither Avalon nor, to the best
knowledge of Avalon, any executive officer or director of Avalon, has been (i)
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
has been or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to the Bay Stock Option Agreement described in Item 4, Bay has
granted to Avalon an option (the "Option") to purchase up to 5,212,000 shares of
Bay Common Stock at a price of $37.00 per share, exercisable only upon the
occurrence of certain events. The exercise of the Option to purchase the full
number of shares of Bay Common Stock currently covered thereby would require
aggregate funds of $192,844,000. If Avalon were to purchase shares of Bay Common
Stock pursuant to the Bay Stock Option Agreement, Avalon currently anticipates
that such funds would be provided from Avalon's working capital and/or by
borrowings from sources yet to be determined.
Item 4. Purpose of Transaction
On March 9, 1998, Avalon and Bay entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Avalon will be merged with
and into Bay (the "Merger"), with Bay surviving (Bay, as the surviving
corporation in the Merger, the "Surviving Corporation").
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As a result of the Merger, each outstanding share of Avalon Common
Stock (excluding treasury shares) will be converted into 0.7683 shares of
common stock of Bay ("Bay Common Stock"). Each outstanding share of 9% Series A
Cumulative Redeemable Preferred Stock ("Avalon Series A Preferred Stock"), of
Avalon will be converted into one share of preferred stock of the Surviving
Corporation with substantially identical terms as the Avalon Series A Preferred
Stock which is converted. Each outstanding shares of Series B 8.96% Cumulative
Redeemable Preferred Stock ("Avalon Series B Preferred Stock") of Avalon will
be converted into one share of preferred stock of the Surviving Corporation with
substantially identical terms as the Avalon Series B Preferred Stock which is
converted. Consummation of the Merger would result in the Avalon Common Stock,
the Avalon Series A Preferred Stock and the Avalon Series B Preferred Stock
ceasing to be authorized to be listed on the New York Stock Exchange and the
termination of registration of such securities pursuant to the Act.
The Merger is subject to a number of conditions set forth in the Merger
Agreement. The Merger Agreement is included as Exhibit 1 hereto and as Exhibit
99.1 to Avalon's Current Report on Form 8-K, dated March 10, 1998, as amended
(the "Avalon 8-K"), and is hereby incorporated herein by reference.
As a condition and inducement to Avalon's entering into the Merger
Agreement (and a reciprocal stock option agreement), Bay entered into a Stock
Option Agreement, dated as of March 9, 1998, by and between Bay, as issuer, and
Avalon, as grantee (the "Bay Stock Option Agreement"). Pursuant to the Bay Stock
Option Agreement, Bay has granted to Avalon the Option to purchase up to
5,212,000 shares of Bay Common Stock at a price of $37.00 per share, exercisable
only upon the occurrence of certain events. Under the Bay Stock Option
Agreement, the Total Profit (as defined therein) which Avalon, as grantee, may
realize from the Option may not exceed $75 million. Pursuant to the Bay Stock
Option Agreement, Avalon has agreed for a period of two years following exercise
of the Option not to acquire or seek to acquire assets or securities of Bay, to
seek to influence or control management or policies of Bay or to seek
representation on Bay's Board of Directors. The Bay Stock Option Agreement is
included as Exhibit 2 hereto and as Exhibit 99.4 to the Avalon 8-K and is hereby
incorporated herein by reference.
Pursuant to the Merger Agreement, upon consummation of the Merger, the
Board of Directors of the Surviving Corporation will consist of six
members of the Board of Directors of Avalon and six members of the Board
of Directors of Bay, and such directors shall serve until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified.
Pursuant to the Merger Agreement, upon consummation of the Merger, (i)
the charter of the Surviving Corporation shall be the charter of Bay, as such
charter may be amended as agreed to by Bay and Avalon as set forth in the
Articles of Merger or any articles of amendment filed prior to the effective
time of the Merger (the "Effective Time") and (ii) the corporate name of the
Surviving Corporation shall be Avalon Bay Communities, Inc. The by-laws of the
Surviving Corporation shall be the by-laws of Bay in effect at the Effective
Time, which by-laws shall be agreed upon by Avalon and Bay prior to the
Effective Time.
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Pursuant to the Merger Agreement, the parties have agreed that Gilbert
M. Meyer, Chairman of the Board, Chief Executive Officer and President of Bay,
will be Executive Chairman of the Surviving Corporation, that Richard L.
Michaux, Chief Executive Officer of Avalon, will be Chief Executive Officer of
the Surviving Corporation, and that Charles H. Berman, President and Chief
Operating Officer of Avalon, will be President of the Surviving Corporation.
Pursuant to the Merger Agreement, Bay has agreed, during the period
prior to the Effective Time, that neither it nor its subsidiaries shall pay
dividends except for its regular quarterly cash dividends in the ordinary course
consistent with past practice (subject to an increase of $0.09 per share in such
dividend) on Bay Common Stock and certain intercompany dividends.
Except as set forth in this Item 4, Avalon has no plans or proposals
which relate to or would result in any of the matters set forth in clauses (a)
through (j) of Item 4 of Schedule 13D.
The preceding summary of certain provisions of the Merger Agreement and
the Bay Stock Option Agreement, copies of which are filed as exhibits hereto, is
not intended to be complete and is qualified in its entirety by reference to the
full text of such agreements.
Item 5. Interest in Securities of the Issuer
(a) and (b). Pursuant to the Bay Stock Option Agreement, Avalon has the
right, exercisable only in certain circumstances, none of which have occurred as
of the date hereof, to acquire up to 5,212,000 shares of Bay Common Stock, which
represents beneficial ownership of approximately 19.9% of the shares of Bay
Common Stock currently outstanding (or approximately 16.6% of the shares of the
outstanding Bay Common Stock after giving effect to the shares underlying the
Option). If Avalon were to acquire such shares, it would have sole voting and,
subject to certain restrictions set forth in the Bay Stock Option Agreement,
investment power with respect thereto. Because of the limited circumstances in
which the Option is exercisable, Avalon disclaims beneficial ownership of such
shares of Bay Common Stock subject to the Bay Stock Option Agreement.
To the best of its knowledge, no executive officer or director of
Avalon beneficially owns any shares of Bay Common Stock.
(a) Except as set forth above, there have been no transactions in
shares of Bay Common Stock by Avalon, or, to the best knowledge of Avalon, any
of Avalon's executive officers and directors during the past 60 days.
(b) Not applicable.
(c) Not applicable.
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Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
A copy of the Bay Stock Option Agreement is included as Exhibit 2
hereto and as Exhibit 99.4 to the Avalon 8-K and is hereby incorporated herein
by reference. The rights and obligations of Bay and Avalon under the Bay Stock
Option Agreement are subject to all required regulatory approvals.
A copy of the Merger Agreement is included as Exhibit 1 hereto and as
Exhibit 99.1 to the Avalon 8-K and is hereby incorporated herein by reference.
The rights and obligations of Bay and Avalon under the Merger Agreement are
subject to all required regulatory approvals.
Except as set forth in Items 3, 4, 5 and 6 neither Avalon nor, to the
best knowledge of Avalon, any of its directors or executive officers, has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any other person with respect to any securities of Bay.
Item 7. Materials to be Filed as Exhibits
1 Agreement and Plan of Merger, dated as of March 9, 1998, by and
between Avalon Properties, Inc. and Bay Apartment Communities,
Inc. (incorporated by reference to Exhibit 99.1 of the Avalon
8-K).
2 Stock Option Agreement, dated as of March 9, 1998, by and between
Bay Apartment Communities, Inc., as issuer, and Avalon Properties,
Inc., as grantee (incorporated by reference to Exhibit 99.4 of the
Avalon 8-K).
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
March 18, 1998
AVALON PROPERTIES, INC.
By: /s/ Thomas J. Sargeant
Name: Thomas J. Sargeant
Title: Chief Financial Officer
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ANNEX A
Identity and Background
The following table sets forth the names, addresses and principal
occupations of the directors and executive officers of Avalon. Except as set
forth below, the principal business address of each such director and executive
officer is the address of Avalon, 15 River Road, Wilton, Connecticut 06897. Each
of such directors and executive officers is a citizen of the United States
DIRECTORS
Name and Business Address Present Principal Occupation or
Employment
Charles H. Berman President and Chief Operating Officer
of Avalon
Michael A. Futterman Chairman of American Realty Management
2187 Atlantic Street
7th Floor
Stamford, CT 06902
Christopher B. Leinberger Managing Director Robert Charles
142 Lincoln Avenue Lesser & Co.
Suite 501
Santa Fe, N.M. 87501
Richard L. Michaux Chief Executive Officer of Avalon
2900 Eisenhower Avenue
3rd Floor
Alexandria, VA 22314
Richard W. Miller Former Senior Executive Vice President
11 Oyster Watcha Road and Chief Financial Officer of AT&T
Edgartown, MA 02539
Allan D. Schuster Private investor
3937 Merriweather Woods
Alpharetta, GA 30202
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EXECUTIVE OFFICERS
Name and Business Address Present Principal Occupation or
Employment
Jeffrey B. Albert Vice President - Development of Avalon
David W. Bellman Vice President - Construction of Avalon
Bryce Blair Senior Vice President -
Development/Acquisitions of Avalon
Charles H. Berman President and Chief Operating Officer
of Avalon
Gwyneth J. Cote Vice President - Property Operations
of Avalon
Lili F. Dunn Vice President - Acquisitions and
Dispositions of Avalon
Samuel B. Fuller Regional Vice President - Development
of Avalon
Leo S. Horey Vice President - Property Operations
of Avalon
David J. Hubbard Vice President - Development
James R. Liberty Vice President - Construction
Joanne M. Lockridge Vice President - Finance
William M. McLaughlin Vice President - Development
Richard L. Michaux Chief Executive Officer of Avalon
Timothy J. Naughton Regional Vice President - Development
of Avalon
Thomas J. Sargeant Chief Financial Officer and Secretary
of Avalon
Robert H. Slater Senior Vice President - Property
Operations of Avalon
Alexander C. Twining Vice President - Development of Avalon
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Exhibit Number Description
1 Agreement and Plan of Merger, dated as
of March 9, 1998, by and between
Avalon Properties, Inc. and Bay
Apartment Communities, Inc.
(incorporated by reference to Exhibit
99.1 of the Avalon 8-K).
2 Stock Option Agreement, dated as of
March 9, 1998, by and between Bay
Apartment Communities, Inc., as issuer,
and Avalon Properties, Inc., as grantee
(incorporated by reference to Exhibit
99.4 of the Avalon 8-K).
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