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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Avalon Properties, Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
053469102
(CUSIP Number)
Gilbert M. Meyer
President and Chief Executive Officer
Bay Apartment Communities, Inc.
4340 Stevens Creek Boulevard, Suite 275
San Jose, California 95129
(408) 983-1500
(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-l(b)(3) or (4), check the
following box: [__]
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1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Bay Apartment Communities, Inc.
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
8,584,000 shares (1) (See Item 5)
8. SHARED VOTING POWER
0
9. SOLE DISPOSITIVE POWER
8,584,000 shares (1) (See Item 5)
10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,584,000 shares (1) (See Item 5)
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 Avalon Stock Option Agreement (as defined and described in Item 4 hereof).
The reporting person expressly disclaims any beneficial ownership of such shares
of Avalon Common Stock (as hereinafter defined) pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934, as amended (the "Act"), because the Option is
exercisable (and such shares are obtainable by the reporting person) only in
the circumstances set forth in Item 4, none of which has occurred as of the date
hereof.
(2) This percentage is calculated in accordance with Rule 13d-3(d)(1).
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Item 1. Security and Issuer
This statement relates to shares of common stock, par value $.01 per share
("Avalon Common Stock"), of Avalon Properties, Inc. ("Avalon"). The address of
Avalon's principal executive offices is 15 River Road, Wilton, Connecticut
06897.
Item 2. Identity and Background
(a) - (c) and (f). This Schedule 13D is being filed by Bay Apartment
Communities, Inc. ("Bay"), a Maryland corporation. Bay is a real estate
investment trust engaged in the business of acquiring, developing, constructing,
reconstructing, financing, marketing, leasing and managing multifamily apartment
communities in the United States. Bay's principal offices are located at 4340
Stevens Creek Boulevard, Suite 275, San Jose, California 95129.
Each executive officer and each director of Bay 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 Bay.
(d)- (e). During the last five years, neither Bay nor, to the best
knowledge of Bay, any executive officer or director of Bay, 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 Avalon Stock Option Agreement described in Item 4, Avalon
has granted to Bay an option (the "Option") to purchase up to 8,584,000
(which number is subject to adjustment under certain circumstances) shares of
Avalon Common Stock at a price of $28.8125 per share, exercisable only upon the
occurrence of certain events. The exercise of the Option to purchase the full
number of shares of Avalon Common Stock currently covered thereby would require
aggregate funds of $247,326,500. If Bay were to purchase shares of Avalon Common
Stock pursuant to the Avalon Stock Option Agreement, Bay currently anticipates
that such funds would be provided from Bay's working capital, dividends from Bay
subsidiaries and borrowings from sources yet to be determined.
Item 4. Purpose of Transaction
On March 9, 1998, Bay and Avalon entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Avalon will be merged with
and into Bay (the
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"Merger"), with Bay surviving (Bay, as the surviving corporation in the Merger,
the "Surviving Corporation").
As a result of the Merger, each outstanding share of Avalon Common Stock
(excluding treasury shares) will be converted into 0.7683 of a share of common
stock, $.01 par value per share ("Bay Common Stock"), of Bay. Each outstanding
share of 9% Series A Cumulative Redeemable Preferred Stock, par value $.01 per
share ("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. Each outstanding share
of Series B 8.96% Cumulative Redeemable Preferred Stock, par value $.01 per
share ("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. 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 99.1 to Bay's Current
Report on Form 8-K, dated March 11, 1998 (the "Bay 8-K"), and is hereby
incorporated herein by reference.
As a condition and inducement to Bay's entering into the Merger Agreement
(and granting Avalon a reciprocal stock option agreement), Avalon entered into a
Stock Option Agreement, dated as of March 9, 1998, by and between Avalon, as
issuer, and Bay, as grantee (the "Avalon Stock Option Agreement"). Pursuant to
the Avalon Stock Option Agreement, Avalon has granted to Bay the Option to
purchase up to 8,584,000 (which number is subject to adjustment under certain
circumstances) shares of Avalon Common Stock at a price of $28.8125 per share,
exercisable only upon the occurrence of certain events. Under the Avalon Stock
Option Agreement, the Total Profit (as defined therein) which Bay, as grantee,
may realize from the Option may not exceed $75 million. Pursuant to the Avalon
Stock Option Agreement, Bay has agreed for a period of two years following
exercise of the Option not to acquire or seek to acquire assets or securities of
Avalon, to seek to influence or control management or policies of Avalon or to
seek representation on Avalon's Board of Directors. The Avalon Stock Option
Agreement is included as Exhibit 99.4 to the Bay 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 Bay and six members of the Board of Directors of
Avalon, and such directors shall serve until the earlier of their resignation or
removal and 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
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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.
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 C. 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, Avalon 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 payable on Avalon
Common Stock in the ordinary course consistent with past practice and certain
intercompany dividends.
Except as set forth in this Item 4, Bay 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
Avalon Stock Option Agreement, copies of which were previously filed as Exhibit
99.1 and Exhibit 99.4, respectively, to the Bay 8-K and which are incorporated
by reference 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 Avalon Stock Option Agreement, Bay has the
right, exercisable only in certain circumstances, none of which have occurred as
of the date hereof, to acquire up to 8,584,000 (which number is subject to
adjustment under certain circumstances) shares of Avalon Common Stock, which,
following issuance of such shares, will represent beneficial ownership of
approximately 16.6% of the shares of Avalon Common Stock currently outstanding.
If Bay were to acquire such shares, it would have sole voting and, subject to
certain restrictions set forth in the Avalon Stock Option Agreement, investment
power with respect thereto. Because of the limited circumstances in which the
Option is exercisable, Bay disclaims beneficial ownership of such shares of
Avalon Common Stock subject to the Avalon Stock Option Agreement.
Max L. Gardner, an executive officer and director of Bay, beneficially owns
500 shares of Avalon Common Stock. To Bay's knowledge, no executive officer or
director of Bay other than Mr. Gardner beneficially owns any shares of Avalon
Common Stock.
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(c) Except as set forth above, there have been no transactions in shares of
Avalon Common Stock by Bay, or, to Bay's knowledge, any of Bay's executive
officers or directors, during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
A copy of the Avalon Stock Option Agreement is included as Exhibit 99.4 to
the Bay 8-K and is hereby incorporated herein by reference.
A copy of the Merger Agreement is included as Exhibit 99.1 to the Bay 8-K
and is hereby incorporated herein by reference.
Except as set forth in Items 3, 4, 5 and 6 hereof, neither Bay nor, to the
best knowledge of Bay, any or 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 Avalon.
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 Bay 8-K).
2. Stock Option Agreement, dated as of March 9,1998, by and between Avalon
Properties, Inc., as issuer, and Bay Apartment Communities, Inc., as
grantee (incorporated by reference to Exhibit 99.4 of the Bay 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 19, 1998
BAY APARTMENT COMMUNITIES, INC.
/s/ Gilbert M. Meyer
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Name: Gilbert M. Meyer
Title: President and Chief
Executive 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 Bay. Except as set forth
below, the principal business address of each such director and executive
officer is the address of Bay, 4340 Stevens Creek Boulevard, Suite 275, San
Jose, California 95129. Each of such directors and executive officers is a
citizen of the United States.
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DIRECTORS
Name and Business Address Present Principal Occupation or Employment
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Gilbert M. Meyer Chairman of the Board, Chief Executive Officer
and President of Bay
Max L. Gardner Executive Vice President and Chief Operating
Officer of Bay
Bruce A. Choate Chief Financial Officer of Watson Land Company
22010 South Wilmington Avenue
Carson, California 90745
John J. Healy, Jr. President of Hyde Street Holdings, Inc.
550 California Street, 12th Floor
San Francisco, California 94104
Brenda J. Mixson Chief Investment Officer and Managing Director of
230 Park Avenue, Suite 1000 Prime Capital Holding
New York, New York 10169
Thomas H. Nielsen Self-employed consultant
3 Monaco
Newport Beach, California 92660
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EXECUTIVE OFFICERS
Name and Business Address Present Principal Occupation or Employment
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Gilbert M. Meyer Chairman of the Board, Chief Executive Officer and
President of Bay
Max L. Gardner Executive Vice President and Chief Operating Officer
of Bay
Jeffrey B. Van Horn Vice President and Chief Financial Officer of Bay
Morton L. Newman Vice President - Construction of Bay
Daniel E. Murphy Vice President - Northern California of Bay
John H. Pringle Vice President - Property Operations of Bay
Debra Lynn Shotwell Vice President - Human Resources of Bay
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Exhibit Number Description
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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 to the Current Report on Form 8-K of Bay Apartment
Communities, Inc., dated March 11, 1998).
2 Stock Option Agreement dated as of March 9, 1998, by and
between Avalon Properties, Inc., as issuer, and Bay
Apartment Communities, Inc., as grantee (incorporated by
reference to Exhibit 99.4 to the Current Report on Form 8-K
of Bay Apartment Communities, Inc., dated March 11, 1998).
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