<PAGE> 1
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 31, 1997
BAY APARTMENT 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.)
4340 STEVENS CREEK BOULEVARD, SUITE 275, SAN JOSE, CA 95129
(Address of principal executive offices) (Zip Code)
(408) 983-1500
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS.
This Current Report on Form 8-K of Bay Apartment Communities, Inc. (the
"Company") contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements contained
herein are statements that involve risks and uncertainties, including, but not
limited to, the demand for apartment homes, the effects of economic conditions,
the impact of competition and competitive pricing, changes in construction
costs, the results of financing efforts, potential acquisitions under agreement,
the effects of the Company's accounting policies and other risks detailed in the
Company's filings with the Securities and Exchange Commission (the
"Commission").
PROPERTY ACQUISITION
Creekside. On October 31, 1997, the Company acquired a 294 apartment
home community located in Mountain View, California. This community was
purchased from Del Charro Properties, L.P. for approximately $29 million. The
Company has planned a repositioning program at this community, which will
include construction upgrades to exterior walls, patio decks and fencing, and
the repainting of the building exteriors and apartment home interiors. Other
aspects of the repositioning program will include apartment home upgrades,
including the addition of washers and dryers, dishwashers and air conditioning.
In addition, the Company intends to rebuild the leasing center, expand parking
areas and upgrade the community's landscaping.
Following this acquisition, the Company's portfolio consists of 48
communities containing 12,822 apartment homes (including apartment homes
delivered at Toscana, a partially developed community) and six land sites on
which it is building, or plans to commence building in the future, six
communities, which will contain an aggregate of approximately 1,698 apartment
homes (including the remaining apartment homes under construction at Toscana).
Except as noted below, substantially all of the purchase price for the
acquisition of Creekside was funded by drawing on the Company's $350 million
unsecured acquisition and construction line of credit from Union Bank of
Switzerland 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 0.90% per annum and matures
in May 2000. Neither the Company, any subsidiary of the Company nor any director
or officer of the Company was affiliated with or had a material relationship
with the seller of the acquired property described below.
PROPOSED ACQUISITIONS
The following are proposed acquisition communities. The Company
anticipates that these proposed acquisitions will be funded by drawing on the
Unsecured Credit Facility and working capital. Because the purchases of the
proposed acquisition communities are still pending, there can be no assurance
that the Company will consummate the acquisition of any or all of the proposed
acquisition communities or, if acquired, that they will be purchased on
2
<PAGE> 3
the 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 seller of the proposed acquisition properties
described below.
Governor's Square Acquisition Community. On October 10, 1997, the
Company agreed to purchase a 302 apartment home community located in Sacramento,
California from GSW Associates, Ltd. & GSE Associates, Ltd. The purchase price
for this community is anticipated to be approximately $24.8 million, which
includes approximately $14.4 million of assumed indebtedness. This acquisition
is expected to close in December 1997.
Warner Oaks Acquisition Community. On October 15, 1997, the Company
agreed to purchase a 227 apartment home community located in Woodland Hills,
California from De Anza Properties XII. The purchase price for this community is
anticipated to be approximately $20 million. This acquisition is expected to
close in January 1998.
Viewpointe Acquisition Community. On November 18, 1997, the Company
agreed to purchase a 663 apartment home community located in Woodland Hills,
California from CIIF Associates Limited Partnership. The purchase price for this
community is anticipated to be approximately $64.8 million. This acquisition is
expected to close in December 1997.
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 Statements
(c) Exhibits
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
3
<PAGE> 4
SIGNATURES
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.
BAY APARTMENT COMMUNITIES, INC.
Dated: December 11, 1997 By: /s/ Jeffrey B. Van Horn
---------------------------------------
Name: Jeffrey B. Van Horn
Title: Vice President, Chief Financial Officer
and Secretary
4
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Creekside Apartments, Mountain
View, California (the Property) for the year ended December 31, 1996. The
Historical Summary is the responsibility of the Property's owner. 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
basis of accounting 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 rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of Creekside Apartments, Mountain View, California, for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
October 20, 1997
F-1
<PAGE> 6
CREEKSIDE APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
-------
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Revenues:
Rental income $2,893,492
Other 182,425
----------
3,075,917
----------
Direct operating expenses:
On-site management 319,674
Real property tax 57,481
Utilities 217,841
Repairs and maintenance 475,778
Other 27,037
----------
1,097,811
----------
Revenue in excess of direct
operating expenses $1,978,106
==========
</TABLE>
The accompanying note is an integral
part of this Historical Summary.
F-2
<PAGE> 7
CREEKSIDE APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
-------
A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of Creekside Apartments, located in Mountain View, California
with 294 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
F-3
<PAGE> 8
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Viewpointe Apartments, Woodland
Hills, California (the Property) for the year ended December 31, 1996. The
Historical Summary is the responsibility of the Property's owner. 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
basis of accounting 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 rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of Viewpointe Apartments, Woodland Hills, California, for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
November 14, 1997
F-4
<PAGE> 9
VIEWPOINTE APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
-------
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Revenues:
Rental income $5,687,477
Other 139,051
----------
5,826,528
----------
Direct operating expenses:
On-site management 873,341
Real property tax 270,655
Utilities 415,848
Repairs and maintenance 740,683
Other 158,418
----------
2,458,945
----------
Revenue in excess of direct
operating expenses $3,367,583
==========
</TABLE>
The accompanying note is an integral
part of this Historical Summary.
F-5
<PAGE> 10
VIEWPOINTE APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
-------
A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of Viewpointe Apartments, located in Woodland Hills,
California with 663 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
F-6
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Warner Oaks Apartments, Woodland
Hills, California (the Property) for the year ended December 31, 1996. The
Historical Summary is the responsibility of the Property's owner. 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
basis of accounting 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 rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of Warner Oaks Apartments, Woodland Hills, California, for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
November 14, 1997
F-7
<PAGE> 12
WARNER OAKS APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
-------
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Revenues:
Rental income $2,232,016
Other 51,979
----------
2,283,995
----------
Direct operating expenses:
On-site management 285,819
Real property tax 154,501
Utilities 178,795
Repairs and maintenance 242,247
Other 62,648
----------
924,010
----------
Revenue in excess of direct
operating expenses $1,359,985
==========
</TABLE>
The accompanying note is an integral
part of this Historical Summary.
F-8
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WARNER OAKS APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
-------
A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of Warner Oaks Apartments, located in Woodland Hills,
California with 227 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
F-9
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bay Apartment Communities, Inc.:
We have audited the accompanying Historical Summary of Revenues and Direct
Operating Expenses (the Historical Summary) of Governor's Square East and West
Apartments, Sacramento, California (the Property) for the year ended December
31, 1996. The Historical Summary is the responsibility of the Property's owner.
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
basis of accounting 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 rules and regulations of the Securities and Exchange Commission, as
described in Note A, and is not intended to be a complete presentation of the
Property's revenues and expenses and may not be comparable to results from
proposed future operations of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the revenues and direct operating expenses, described in Note
A, of Governor's Square East and West Apartments, Sacramento, California, for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P
San Francisco, California
November 5, 1997
F-10
<PAGE> 15
GOVERNOR'S SQUARE EAST AND WEST APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND
DIRECT OPERATING EXPENSES
-------
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Revenues:
Rental income $2,564,505
Other 30,199
----------
2,594,704
----------
Direct operating expenses:
On-site management 300,374
Real property tax 189,402
Utilities 257,696
Repairs and maintenance 129,646
Other 25,438
----------
902,556
----------
Revenue in excess of direct
operating expenses $1,692,148
==========
</TABLE>
The accompanying note is an integral
part of this Historical Summary.
F-11
<PAGE> 16
GOVERNOR'S SQUARE EAST AND WEST APARTMENTS
NOTE TO HISTORICAL SUMMARY OF REVENUES
AND DIRECT OPERATING EXPENSES
-------
A. Property and Basis of Accounting:
The accompanying Historical Summary of Revenues and Direct Operating
Expenses has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission and relates to the
operations of Governor's Square East and West Apartments, located in
Sacramento, California with 302 apartment homes.
In accordance with Rule 3-14, direct operating expenses are presented
exclusive of depreciation, interest, management fees, and income taxes.
Rental income attributable to residential leases is recorded when due
from tenants.
F-12
<PAGE> 17
BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Acquisition
Historical Communities Pro Forma
---------- ------------ ---------
<S> <C> <C> <C>
Assets:
Real estate assets:
Land $ 152,277 $ 30,181 A $ 182,458
Buildings and improvements 511,583 101,395 A 612,978
Furniture, fixtures & equipment 35,542 7,044 A 42,586
--------- -------- ---------
699,402 138,620 838,022
Less: accumulated depreciation (52,554) 0 (52,554)
--------- -------- ---------
Operating real estate assets 646,848 138,620 785,468
Construction in progress 50,945 0 50,945
--------- -------- ---------
Net real estate assets 697,793 138,620 836,413
Cash & cash equivalents 920 0 920
Restricted cash 960 0 960
Other assets, net 12,236 0 12,236
--------- -------- ---------
Total Assets $ 711,909 $138,620 $ 850,529
========= ======== =========
Liabilities and Shareholders' Equity:
Liabilities:
Notes payable $ 273,688 99,163 B $ 372,851
Accounts payable and accrued expenses 5,450 0 5,450
Dividends payable 8,939 0 8,939
Other liabilities 4,553 0 4,553
--------- -------- ---------
Total Liabilities 292,630 99,163 391,793
Minority interest 7,002 0 7,002
Shareholders' Equity:
Preferred stock 27 0 27
Common stock 190 10 C 200
Paid in capital 435,723 39,447 C 475,170
Dividends in excess of accumulated earnings (23,663) 0 (23,663)
--------- -------- ---------
Total Shareholders Equity 412,277 39,457 451,734
--------- -------- ---------
Total Liabilities and Shareholders' Equity $ 711,909 $138,620 $ 850,529
========= ======== =========
</TABLE>
F-13
<PAGE> 18
BAY APARTMENT COMMUNITIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Acquisition
Historical Communities Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Rental $ 80,377 $ 13,377 D $ 93,754
Other 2,216 404 D 2,620
------------ ----------- ------------
Total revenue 82,593 13,781 96,374
------------ ----------- ------------
Expenses:
Property operating 18,924 4,438 E 23,362
Property taxes 6,353 672 E 7,025
General and administrative 3,895 274 E 4,169
Interest and financing 14,276 6,925 F 21,201
Depreciation and amortization 18,689 4,386 G 23,075
------------ ----------- ------------
Total expenses 62,137 16,695 78,832
------------ ----------- ------------
Income before minority interest and
extraordinary item 20,456 (2,914) 17,542
Minority interest (319) -- (319)
------------ ----------- ------------
Income before extraordinary item 20,137 (2,914) 17,223
Extraordinary item (511) -- (511)
------------ ----------- ------------
Net income 19,626 (2,914) 16,712
Preferred dividend requirement (4,264) -- (4,264)
------------ ----------- ------------
Earnings available to common shares $ 15,362 $ (2,914) $ 12,448
============ =========== ============
Weighted average shares outstanding 15,126,242 1,026,187 H 16,152,429
============ ============
Per share $ 1.02 $ 0.77
============ ============
</TABLE>
F-14
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1. Basis of Presentation:
The pro forma financial statements of Bay Apartment Communities, Inc. (the
"Company"), which are unaudited, have been prepared based on the historical
financial statements of the Company. The pro forma consolidated balance sheet
has been prepared as if the acquisition of one apartment community October 31,
1997 and the probable acquisition of three additional apartment communities
during the period of December 1997 through January 1998 (the "Acquisition
Communities"), had occurred on December 31, 1996. The pro forma consolidated
statement of operations for the twelve months ended December 31, 1996, has been
prepared as if the above mentioned events had occurred on January 1, 1996. In
management's opinion, all adjustments necessary to reflect the effects of these
transactions have been made. The pro forma financial statements should be read
in conjunction with the historical financial statements of the Company.
2. PRO FORMA ADJUSTMENTS:
A - Additional real estate assets are attributable to the Acquisition
Communities which consist of the following acquisitions (000's):
<TABLE>
<S> <C>
Creekside, Mountain View, CA * $ 28,970
Warner Oaks, Woodland Hills, CA $ 20,020
Viewpointe, Woodland Hills, CA $ 64,840
Governors Square, Sacramento, CA $ 24,790
--------
$138,620
========
</TABLE>
* Community acquired October 31, 1997
B - Increase in notes payable is attributable to cash used to acquire the
Acquisition Communities which was drawn from the Credit Facility, the
assumption of an existing $14.436 million mortgage note payable on
Governors Square, and reduced by the proceeds of the Offering of
additional shares of common stock.
C - Increase in common stock and paid in capital is attributable to the
Offering of 1,026,187 additional shares of $.01 par value common stock
at a purchase price of $39.125 per share less transaction costs of
$692,992.
D - Additional rental and other revenue is attributable to the Acquisition
Communities.
E - Additional property operating expense, property tax expense, and
general and administrative expense are attributable to the Acquisition
Communities.
F-15
<PAGE> 20
F - Additional interest and financing expense is attributable to the
interest incurred on funds obtained from the Credit Facility, and the
assumed loan.
G - Depreciation expense attributable to the Acquisition Communities has
been computed using the straight-line method over 30 years for
buildings and 7 years for furniture, fixtures and equipment.
H - Additional weighted average shares outstanding attributable to the
Offering of 1,026,187 additional shares of common stock on December 12,
1997.
F-16
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Bay Apartment Communities, Inc. on Form S-8 (File No. 333-16809), Form S-8 (File
No. 333-16837), Form S-3 (File No. 333-16647), Form S-3 (File No. 333-15407),
Form S-3 (File No. 333-39037), and Form S-3 (File No. 333-41511) of our report
dated October 20, 1997, on our audit of the Historical Summary of Revenues and
Direct Operating Expenses of Creekside Apartments for the year ended December
31, 1996, of our report dated November 14, 1997, on our audit of the Historical
Summary of Revenues and Direct Operating Expenses of Warner Oaks Apartments for
the year ended December 31, 1996, of our report dated November 14, 1997, on our
audit of the Historical Summary of Revenues and Direct Operating Expenses of
Viewpointe Apartments for the year ended December 31, 1996, and of our report
dated November 5, 1997, on our audit of the Historical Summary of Revenues and
Direct Operating Expenses of Governor's Square East and West Apartments for the
year ended December 31, 1996, which reports are included in this Current Report
on Form 8-K.
COOPERS & LYBRAND L.L.P.
San Francisco, California
December 10, 1997
