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Filed pursuant to Rule 424(b)(3)
Registration No. 333-16647
PROSPECTUS
AVALONBAY LOGO
1,000,000 SHARES
AVALONBAY COMMUNITIES, INC.
COMMON STOCK
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DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
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AvalonBay Communities, Inc. (the "Company") hereby offers to the holders of
its shares of common stock, par value $.01 per share (the "Common Stock"), and
preferred stock, par value $.01 per share (the "Preferred Stock" and together
with the Common Stock, the "Capital Stock"), the opportunity to participate in
the Company's Dividend Reinvestment and Stock Purchase Plan (the "Plan"). The
Plan provides a simple and convenient method for stockholders to invest cash
dividends and optional cash payments in shares of Common Stock of the Company.
All holders of Capital Stock are eligible to participate in the Plan, including
stockholders whose shares of Capital Stock are held in the name of a nominee or
broker (each, a "Participant").
Participants may purchase additional shares of Common Stock by (i) having
the cash dividends on all, or part, of their shares of Capital Stock
automatically reinvested, (ii) receiving directly, as usual, their cash
dividends, if, as and when declared, on their shares of Capital Stock and
investing in the Plan by making cash payments of not less than $100 or more than
$25,000 (or such larger amount as the Company may approve) per quarter
("optional cash payments"), or (iii) investing both their cash dividends and
such optional cash payments.
A stockholder may begin participating in the Plan by completing an
Authorization Card and returning it to First Union National Bank, as Plan
administrator. Participants may terminate their participation in the Plan at any
time. Stockholders who do not wish to participate in the Plan need take no
action and will continue to receive their cash dividends, if, as and when
declared, as usual. It is suggested that this Prospectus be retained for future
reference.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is October 8, 1998
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, reports and other information
concerning the Company can be inspected and copied at the facilities maintained
by the Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and the Commission's Regional Offices in New York
(7 World Trade Center, 13th Floor, New York, New York 10048), and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511), and copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Company's Common
Stock is listed on the New York Stock Exchange (the "NYSE") and the Pacific
Exchange (the "PCX"), and such materials can be inspected and copied at the
NYSE, 20 Broad Street, New York, New York 10005, and at the PCX, 301 Pine
Street, San Francisco, California 94104. In addition, the Company is required to
file electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system,
and such electronic versions are available to the public at the Commission's
World-Wide Web Site, http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. This Prospectus does not contain all information
set forth in the Registration Statement and exhibits thereto which the Company
has filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), and to which reference is hereby made, which may be obtained
via EDGAR or by mail from the Public Reference Section of the Commission at its
principal office, at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the prescribed fees.
In accordance with Section 2-210 of the Maryland General Corporation Law,
as amended (the "MGCL"), the Board of Directors has authorized the issuance of
some or all of the shares of any or all of its classes or series of Capital
Stock without certificates. In addition, the Company has the authority to
designate and issue more than one class or series of Capital Stock having
various preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption. The Company's charter, as amended (the "Charter"), imposes
limitations on the ownership and transfer of the Company's Capital Stock. The
Company will furnish a full statement of the relative rights and preferences of
each class or series of Capital Stock of the Company which has been so
designated and any restrictions on the ownership or transfer of Capital Stock of
the Company to any stockholder upon request and without charge. Written requests
for such copies should be directed to: AvalonBay Communities, Inc., 2900
Eisenhower Avenue, Suite 300, Alexandria, Virginia 22314, Attention: Chief
Financial Officer.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(i) Annual Reports on Form 10-K for the fiscal years ended December 31, 1995,
December 31, 1996 and December 31, 1997, (ii) Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, 1996, June 30, 1996, September 30, 1996,
March 31, 1997, June 30, 1997, September 30, 1997, March 31, 1998 and June 30,
1998, (iii) Current Report on Form 8-K filed May 20, 1996, (iv) Current Report
on Form 8-K filed June 6, 1996, as amended by Current Report on Form 8-K/A filed
July 5, 1996, (v) Current Report on Form 8-K filed July 5, 1996, (vi) Current
Report on Form 8-K filed on November 14, 1996, (vii) Current Report on Form 8-K
filed January 21, 1997,
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(viii) Current Report on Form 8-K filed April 21, 1997, as amended by Current
Reports on Form 8-K/A filed April 21, 1997 and June 16, 1997, (ix) Current
Report on Form 8-K filed July 25, 1997, (x) Current Report on Form 8-K filed
August 14, 1997, (xi) Current Report on Form 8-K filed September 9, 1997, (xii)
Current Report on Form 8-K filed September 16, 1997, (xiii) Current Report on
Form 8-K filed October 28, 1997, (xiv) Current Report on Form 8-K filed December
11, 1997, (xv) Current Report on Form 8-K filed December 16, 1997, (xvi) Current
Report on Form 8-K filed December 22, 1997, (xvii) Current Report on Form 8-K
filed January 8, 1998, (xviii) Current Report on Form 8-K filed January 21,
1998, (xix) Current Report on Form 8-K filed March 11, 1998, (xx) Current Report
on Form 8-K filed March 27, 1998, (xxi) Current Report on Form 8-K filed April
16, 1998, (xxii) Current Report on Form 8-K filed April 22, 1998, (xxiii)
Current Report on Form 8-K filed June 19, 1998, as amended by Current Report on
Form 8-K/ A filed June 26, 1998, (xxiv) Current Report on Form 8-K filed July 9,
1998, (xxv) Current Report on Form 8-K filed August 5, 1998, (xxvi) Current
Report on Form 8-K filed October 6, 1998, (xxvii) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-B dated June 7, 1995, and (xxviii) the description of the Company's Rights to
purchase shares of the Company's Series E Junior Participating Cumulative
Preferred Stock par value $.01 per share, contained in the Company's
Registration Statement of Form 8-A filed March 11, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. The Company will provide, without charge, to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, at the request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits thereto, unless
such exhibits are specifically incorporated by reference into such documents).
Written requests for such copies should be directed to: AvalonBay Communities,
Inc., 2900 Eisenhower Avenue, Suite 300, Alexandria, Virginia 22314, Attention:
Chief Financial Officer (Tel. # (703) 329-2300). In addition, the public may
read and copy any materials filed by the Company with the Commission at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Pubic Reference
Room by calling the Commission at 1-800-SEC-0330.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in an applicable Prospectus Supplement) or in any subsequently filed
document that is incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus or any Prospectus Supplement, except as so
modified or superseded.
THE COMPANY
The Company is the surviving corporation from the merger (the "Merger") of
Avalon Properties, Inc. ("Avalon") with and into Bay Apartment Communities, Inc.
on June 4, 1998. In connection with the Merger, the Company changed its name to
"AvalonBay Communities, Inc."
The Company is a real estate investment trust ("REIT") that is focused
exclusively on the ownership of institutional-quality apartment communities in
high barrier-to-entry markets of the United States. These markets include
Northern and Southern California and selected states in the Mid-Atlantic,
Northeast, Midwest and Pacific Northwest regions of the country. The Company is
a fully-integrated real estate organization with in-house acquisition,
development, redevelopment, construction, reconstruction, financing,
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marketing, leasing and management expertise. With its experience and in-house
capabilities, the Company believes it is well-positioned to continue to take
advantage of opportunities to develop and acquire upscale apartment homes in its
target markets.
The Company elected to be taxed as a REIT for federal income tax purposes
for the year ending December 31, 1994 and has not revoked that election. The
Company was incorporated under the laws of the State of California in 1978 and
was reincorporated in the State of Maryland in July 1995. Its principal
executive offices are located at 2900 Eisenhower Avenue, Suite 300, Alexandria,
Virginia 22314 and its telephone number at that location is (703) 329-6300. The
Company also maintains super-regional offices in San Jose, California and
Wilton, Connecticut and acquisition, development, redevelopment, construction,
reconstruction or administrative offices in Boston, Massachusetts; Chicago,
Illinois; Minneapolis, Minnesota; Newport Beach, California; New York, New York;
Princeton, New Jersey; Richmond, Virginia; and Seattle, Washington.
DESCRIPTION OF THE DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
The terms of the Company's Plan are set forth below in question and answer
format.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The purpose of the Plan is to provide holders of record of shares of
Capital Stock with a simple and convenient method of investing in additional
shares of Common Stock, without paying any brokerage commissions, fees or
service charges, as more fully described below in Question 10. In addition to
reinvesting cash dividends, Participants may purchase shares of Common Stock
through quarterly optional cash payments. At the Company's election, shares of
Common Stock purchased under the Plan will be either original issue shares or
shares purchased in the open market by the Plan administrator, First Union
National Bank ("First Union"). The Plan also has the added benefit of providing
the Company with additional funds for general corporate purposes when the
Company elects to sell shares of its Common Stock to Participants in the Plan.
ADVANTAGES TO PARTICIPANTS
2. WHAT ARE THE OPTIONS AVAILABLE TO STOCKHOLDERS?
Participants in the Plan may purchase additional shares of Common Stock by
(i) having the cash dividends on all or part of their shares of Capital Stock
automatically reinvested, (ii) receiving directly, as usual, their cash
dividends, if, as and when declared, on their shares of Capital Stock and
investing in the Plan by making cash payments of not less than $100 or more than
$25,000 (or such larger amount as the Company may approve) per quarter, or (iii)
investing both their cash dividends and such optional cash payments in shares of
Common Stock.
3. WHAT ARE THE ADVANTAGES OF THE PLAN?
No brokerage commissions, fees or service charges are paid by Participants
in connection with purchases under the Plan; provided, however, that if shares
are registered in the name of a nominee or broker, such nominee or broker may
charge a commission or fee. Full investment of dividends is possible under the
Plan because the Plan permits fractions of shares, as well as whole shares, to
be purchased and credited to Participants' accounts. Regular statements of
account provide simplified record keeping. In addition, the free
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custodial services provided in connection with the Plan serve to protect against
loss, theft or destruction of certificates.
The price of shares of Common Stock purchased under the Plan from the
Company with reinvested cash dividends or optional cash payments will be 97% of
the closing price on the NYSE for such shares of Common Stock either on (a) the
dividend payment date, or (b) the applicable Investment Date (as defined in
Question 12), whichever is higher. For open market purchases, the purchase price
will be the weighted average price paid by First Union for all shares purchased
by it for Participants in the Plan with the proceeds of the cash dividend and/or
optional cash payments being invested on the applicable Investment Date.
ADMINISTRATION
4. WHO ADMINISTERS THE PLAN FOR PARTICIPANTS?
First Union, or such other bank or trust company as the Company may from
time to time designate as plan administrator for the participating stockholders,
administers the Plan for Participants, maintains records, delivers statements of
account to Participants and performs other duties relating to the Plan. Shares
of Common Stock purchased under the Plan are held by First Union as agent for
the Participants and are registered in the name of First Union or its nominee,
unless and until a Participant requests that a stock certificate for his or her
shares be issued, as more fully described below in Question 17.
All communications regarding the Plan should be sent to First Union at the
following address:
First Union National Bank
Attention: Client Services Group
1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
If you have any questions, please call toll free: 1-800-829-8432
PARTICIPATION
5. WHO IS ELIGIBLE TO PARTICIPATE?
All holders of record of shares of Capital Stock are eligible to
participate in the Plan ("Eligible Stockholders"). Beneficial owners of shares
of Capital Stock whose shares are registered in names other than their own (for
example, shares registered in the name of a broker, bank nominee or trustee) may
be able to arrange for the entity in whose name the shares are registered to
handle the reinvestment of dividends. If not, they must have the shares they
wish to enroll in the Plan transferred from the current registered owner to
their own names.
6. HOW DOES AN ELIGIBLE STOCKHOLDER PARTICIPATE?
An Eligible Stockholder may join the Plan by completing and signing an
Authorization Card and returning it to First Union. If shares are registered in
the name of a nominee or broker, Eligible Stockholders must have the nominee or
broker sign the Authorization Card and return it to First Union. When completing
the Authorization Card, an Eligible Stockholder should be careful to include his
or her social security number or taxpayer identification number. Failure to
supply this information may result in backup withholding of 31% of payments owed
to a Participant. Once enrolled in the Plan, Participants will continue to be
enrolled without further action on their part. Participants may change their
investment options at any time by completing, signing and returning to First
Union a new Authorization Card. If a Participant's shares are registered in more
than one name (e.g., joint tenants, trustees, etc.), all registered owners must
sign the Authorization Card.
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Additional Authorization Cards and additional copies of this Prospectus may
be obtained from First Union at any time by calling 1-800-829-8432 or by written
request to the address set forth in Question 4 above.
7. WHEN MAY AN ELIGIBLE STOCKHOLDER JOIN THE PLAN?
An Eligible Stockholder may join the Plan at any time.
Reinvestment of dividends commences, for any Participant electing such
option, with the first dividend paid after such Participant joins the Plan,
provided that an Authorization Card is received for such Participant by First
Union at least one business day before the record date for such dividend. For
purposes of the Plan, a "business day" shall mean a day other than a Saturday or
Sunday or a day on which banking institutions in the City of New York, New York,
are authorized or obligated by law or executive order to close. If any
Participant delivers an Authorization Card specifying reinvestment of dividends
paid on such Participant's shares of Capital Stock to First Union on or after
the record date established for payment of a particular dividend on the Capital
Stock, reinvestment will commence with the dividend payment date following the
next such record date. See Question 13 below for information concerning the
investment of optional cash payments.
8. WHAT DOES THE AUTHORIZATION CARD SAY ABOUT DIVIDENDS AND OPTIONAL CASH
PAYMENTS?
Except with respect to dividends on shares of Common Stock in a
Participant's Plan account, which are reinvested automatically, a Participant
may elect to reinvest the dividends on all or part of the shares of Capital
Stock registered in his or her name by choosing one of the following options on
the Authorization Card.
(a) Full Dividend Reinvestment. If the "Full Dividend Reinvestment" box is
checked, First Union will apply cash dividends on all shares of Capital Stock
registered in the Participant's name, as well as on all shares of Common Stock
credited to the Participant's Plan account, to the purchase of additional shares
of Common Stock.
(b) Partial Dividend Reinvestment Only. If the "Partial Dividend
Reinvestment Only" box is checked, First Union will apply cash dividends on such
number and such class or series of shares of Capital Stock as specified by the
Participant on the Authorization Card, as well as on all shares of Common Stock
credited to the Participant's Plan account, to the purchase of additional shares
of Common Stock.
(c) Dividend Reinvestment and Optional Cash Payments. If the "Dividend
Reinvestment and Optional Cash Payments" box is checked, First Union will apply
cash dividends on such number and such class or series of shares of Capital
Stock as specified by the Participant on the Authorization Card, as well as on
all shares of Common Stock credited to the Participant's Plan account, and any
optional cash payments, to the purchase of additional shares of Common Stock.
(d) Optional Cash Payments Only. If the "Optional Cash Payments Only" box
is checked, First Union will apply only optional cash payments and cash
dividends on all shares of Common Stock credited to the Participant's Plan
account to the purchase of additional shares of Common Stock. Cash dividends on
shares of Capital Stock registered in the Participant's name, other than the
Common Stock in his or her Plan account, will be paid to the Participant in the
usual manner.
If a Participant signs and returns an Authorization Card without checking
the desired option, the Participant will be deemed to have selected to invest
all cash dividends on all Capital Stock registered in the Participant's name.
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If a stockholder elects to participate in the Plan, regardless of the
method of participation selected, all cash dividends paid on whole or fractional
shares of Common Stock in the Participant's Plan account will be automatically
reinvested in shares of Common Stock.
9. HOW MAY PARTICIPANTS CHANGE THEIR INVESTMENT OPTIONS?
A Participant may change his or her investment option at any time by
signing a new Authorization Card and returning it to First Union. A change in
investment option will be effective on the next dividend payment date if the
Authorization Card is received by First Union at least one business day before
the related dividend record date. If the Authorization Card is received by First
Union on or after the related dividend record date, the change will be effective
on the dividend payment date for the following quarter.
COSTS
10. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH PARTICIPATION
UNDER THE PLAN?
Participants incur no brokerage fees or other transaction costs with
respect to the purchase of original issue shares from the Company. The Company
will also pay all brokerage fees and transaction costs in connection with the
purchase of shares in the open market using dividend reinvestments to the extent
that such brokerage fees and transaction fees do not exceed 5% of the aggregate
amount of the dividends reinvested. Participants will be responsible for paying
their pro rata share of any brokerage fees in connection with open market
purchases using dividend reinvestments only to the extent that such brokerage
fees, together with any other transaction costs, exceed 5% of the aggregate
amount of the dividends reinvested.
Participants will be responsible for paying their pro rata share of the
brokerage fees in connection with open market share purchases using optional
cash payments. However, Participants generally will pay a reduced brokerage cost
as a result of the larger bulk purchase made on behalf of all Participants.
If a Participant's shares are registered in the name of a nominee or
broker, such nominee or broker may charge a commission or fee for both shares
purchased in the open market and original issue shares. Any such commissions or
fees will be the responsibility of the Participant.
The Company pays all fees of First Union for administering the Plan.
PURCHASES
11. HOW MANY SHARES OF COMMON STOCK WILL BE PURCHASED FOR EACH PARTICIPANT?
The number of shares to be purchased for a Participant's account under the
Plan will depend upon the amount of the Participant's dividend being reinvested,
the amount of any optional cash payments and the effective purchase price of the
Common Stock. Each Participant's account is credited with the number of shares,
including fractions computed to at least three decimal places, equal to the
total amount invested by him or her divided by the applicable purchase price.
12. AT WHAT PRICE AND WHEN WILL COMMON STOCK BE PURCHASED UNDER THE PLAN?
The price of shares of Common Stock purchased under the Plan from the
Company with reinvested cash dividends or optional cash payments will be 97% of
the closing price on the NYSE for such shares of Common Stock either on (a) the
dividend payment date, or (b) the applicable Investment Date, whichever is
higher. For open market purchases, the purchase price will be the weighted
average price paid by First Union for all shares purchased by it for
Participants in the Plan with the proceeds of the cash dividend and/or optional
cash payments being invested on the applicable Investment Date.
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Shares of Common Stock purchased from the Company with reinvested dividends
on a class or series of Capital Stock will be made on or promptly following the
dividend payment date for such class or series of Capital Stock or, if the
Common Stock is not traded on such day, the next trading day (the "Investment
Date"). Shares purchased from the Company with optional cash payments received
at least two business days prior to an Investment Date will be invested on or
promptly following such Investment Date. For purposes of the Plan, a "business
day" shall mean a day other than a Saturday, a Sunday or a day on which banking
institutions in the City of New York, New York are authorized or obligated by
law or executive order to close. Shares of Common Stock purchased in the open
market with either reinvested cash dividends or optional cash payments will be
invested as soon as practicable after the dividend payment date. See Question 13
below for additional details on the investment of optional cash payments. No
interest will be paid on funds held by First Union pending investment of
dividends or optional cash payments.
It is within the Company's discretion to determine whether it will sell new
shares or require open market purchases in connection with each investment under
the Plan. If the Company does not elect to sell shares of Common Stock to
Participants in the Plan for a particular Investment Date, First Union shall
purchase shares of Common Stock on or as soon as practicable after such
Investment Date on any securities exchange where such shares are traded, in the
over-the-counter market or in negotiated transactions, on such terms as First
Union may determine.
Since purchase prices for the Common Stock are established on the
applicable Investment Date or dividend payment date, as the case may be, a
Participant loses any advantages otherwise available from being able to select
the timing of investments. Participants should recognize that neither the
Company nor First Union can assure a profit or protect against a loss on shares
of Common Stock purchased under the Plan.
13. HOW MUCH CAN BE INVESTED THROUGH OPTIONAL CASH PAYMENTS AND HOW ARE THEY
MADE?
Optional cash payments may be made at any time and in varying amounts of
not less than $100 or more than $25,000 per quarter. Optional cash payments in
excess of $25,000 per quarter may be made by a Participant only upon the
acceptance by the Company of a written Request for Waiver from the Participant.
Optional cash payments of less than $100 and that portion of any optional cash
payment which exceeds the maximum quarterly purchase limit, unless such limit
has been waived by the Company, are subject to return to the Participant,
without interest.
Optional cash payments in excess of $25,000 may be made by a Participant
only upon acceptance by the Company of a written Request for Waiver from such
Participant. No pre-established maximum limit applies to optional cash payments
that may be made pursuant to a Request for Waiver. A Request for Waiver must be
obtained each calendar quarter prior to the respective Investment Date on which
a Participant would like to invest more than $25,000 per quarter. Participants
interested in obtaining a Request for Waiver should contact the Company's Chief
Financial Officer at (703) 329-6300.
A Request for Waiver will be considered on the basis of a variety of
factors, which may include: the Company's current and projected capital needs,
the alternatives available to the Company to meet those needs, prevailing market
prices for the Common Stock and other Company securities, general economic and
market conditions, expected aberrations in the price or trading volume of
Company securities, the number of shares of Capital Stock held by the
Participant submitting the Request for Waiver, the aggregate amount of optional
cash payments for which such waivers have been submitted and the administrative
constraints associated with granting such waivers. Grants of waivers will be
made in the sole discretion of the Company.
Unless it waives its rights to do so, the Company may establish for each
Investment Date a minimum price (the "Threshold Price") which applies only to
the investment of optional cash payments made pursuant to written Requests for
Waiver, as described above. The Threshold Price will initially be established by
the Company at least five business days prior to the Investment Date; provided,
however, that the Company
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reserves the right to change the Threshold Price at any time. The Threshold
Price will be established in the Company's sole discretion after a review of
current market conditions and other relevant factors. Participants may obtain
the Threshold Price applicable to the next Investment Date by telephoning the
Company's Chief Financial Officer at (703) 329-6300. The Threshold Price will be
a stated dollar amount that the closing price of the Common Stock on the NYSE
for the respective Investment Date must equal or exceed. In the event that the
Threshold Price is not satisfied for the respective Investment Date, at the
Company's discretion each Participant's optional cash payments made pursuant to
a written Request for Waiver may be returned, without interest, to such
Participant by check. This return procedure will apply regardless of whether
shares are purchased by the Agent in the open market or directly from the
Company. For any Investment Date, the Company may waive its right to set a
Threshold Price for optional cash payments in excess of $25,000. Setting a
Threshold Price for an Investment Date shall not affect the setting of a
Threshold Price for any subsequent Investment Date. Only optional cash payments
in excess of $25,000 are affected by the return procedure and the Threshold
Price provision described in this paragraph. All other optional cash payments
and all dividend reinvestments will be made without regard to the Threshold
Price provision.
A stockholder may make an optional cash payment when enrolling in the Plan
by enclosing a check (made payable to First Union) with the Authorization Card.
Thereafter, optional cash payments may be made through the use of optional cash
payment forms which will be sent to Participants by First Union.
In the event a broker, bank nominee or trustee holds shares of a beneficial
owner in the name of a major securities depository, optional cash payments must
be made on a Broker and Nominee Form (a "B & N Form"). The B & N Form is the
sole means by which a broker, bank nominee or trustee holding shares of a
beneficial owner in the name of a major securities depository may invest
optional cash payments on behalf of such beneficial owner. In such a case, the
broker, bank nominee or trustee must use the B & N Form for transmitting
optional cash payments on behalf of the beneficial owner. A B & N Form must be
delivered to First Union each time that such broker, bank nominee or trustee
transmits optional cash payments on behalf of a beneficial owner. B & N Forms
will be furnished at any time upon written request to First Union at the address
specified in question 4.
Optional cash payments received by the Company at least two business days
prior to an Investment Date will be invested on or promptly following the
Investment Date, if the shares will be purchased from the Company, or as soon as
practicable after the dividend payment date if the shares will be purchased in
the open market. However, optional cash payments received after the second
business day preceding the related quarterly Investment Date will not be
invested until after the following quarterly Investment Date. NO INTEREST WILL
BE PAID ON OPTIONAL CASH PAYMENTS. IT IS THEREFORE SUGGESTED THAT ANY OPTIONAL
CASH PAYMENTS A PARTICIPANT WISHES TO MAKE BE SENT SO AS TO REACH FIRST UNION AS
CLOSE AS POSSIBLE TO THE SECOND BUSINESS DAY PRECEDING THE QUARTERLY INVESTMENT
DATE. The same amount of money need not be sent each quarter, and there is no
obligation to make an optional cash payment each quarter.
A Participant may participate through the investment of optional cash
payments without the necessity of reinvesting cash dividends by checking the
"Optional Cash Payments Only" box on the Authorization Card. However, even if
the "Optional Cash Payments Only" box is checked, all dividends payable on
shares purchased with optional cash payments and retained in the Participant's
Plan account will be reinvested automatically in additional shares of Common
Stock.
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REPORTS TO PARTICIPANTS
14. WHAT KIND OF REPORTS ARE SENT TO PARTICIPANTS IN THE PLAN?
After an investment is made for a Participant's account, whether by
reinvestment of dividends or by optional cash payment, the Participant will be
sent a statement of his or her account. These statements of account will show
any cash dividends and optional cash payments received, the number of shares
purchased, the purchase price for the shares, the number of Plan shares held for
the Participant by First Union, the number of enrolled shares registered in the
name of the Participant, and an accumulation of the transactions for the
calendar year to date. Quarterly statements will be mailed as soon as
practicable after each dividend payment date. These statements are a
Participant's continuing record of the cost of his or her purchases and should
be retained for income tax purposes.
In addition, each Participant will receive the most recent Prospectus
constituting the Plan and copies of the same communications sent to every other
holder of shares of Common Stock, including the Company's Annual Report, Notice
of Annual Meeting and Proxy Statement, and income tax information for reporting
distributions (including dividends) paid by the Company.
DIVIDENDS
15. HOW ARE DIVIDENDS CREDITED TO PARTICIPANTS' ACCOUNTS UNDER THE PLAN?
On shares of Capital Stock for which a Participant has directed that
dividends be reinvested, cash dividends will automatically be credited to a
Participant's account and reinvested in additional shares of Common Stock. Cash
dividends also will be automatically reinvested on all shares which have been
purchased under the Plan and credited to a Participant's account; provided,
however, that no dividends will be earned on such shares purchased under the
Plan until the dividend payment for the first dividend record date which follows
the date of purchase of such shares. On shares of Capital Stock for which a
Participant has not directed that dividends be reinvested and on shares owned by
stockholders who are not participating in the Plan, cash dividends, if, as and
when declared, will be received by them by check as usual.
Stock dividends or stock splits distributed by the Company on the shares
purchased for and credited to the account of a Participant under the Plan will
be added to the Participant's account. Stock dividends or stock splits
distributed on shares owned and held outside the Plan by a Participant
(including shares for which a Participant has directed that cash dividends be
reinvested) will be mailed directly to such Participant.
16. WILL PARTICIPANTS BE CREDITED WITH DIVIDENDS ON FRACTIONS OF SHARES?
Yes. Account balances will be computed to three decimal places and
dividends will be paid on the fractional shares.
CERTIFICATES FOR SHARES
17. WILL CERTIFICATES BE ISSUED FOR SHARES OF COMMON STOCK PURCHASED UNDER THE
PLAN?
Unless requested by a Participant, certificates for shares of Common Stock
purchased under the Plan will not be issued. Shares will be held in the name of
First Union or its nominees. The number of shares credited to a Participant's
account under the Plan will be shown on his or her quarterly statement of
account. Certificates for any number of whole shares credited to an account
under the Plan will be issued upon the written request of a Participant.
The remaining whole shares and fractions of shares, if any, will continue
to be credited to the Participant's account. A request for issuance of Plan
shares, including issuance of all of the shares in a Participant's account, will
not constitute a termination of participation in the Plan by the Participant.
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A Participant's rights under the Plan and shares credited to the account of
a Participant under the Plan may not be pledged. A Participant who wishes to
pledge such shares must request that certificates for such shares be issued in
his or her name.
Certificates for fractional shares are not issued under any circumstances.
18. IN WHOSE NAME ARE ACCOUNTS MAINTAINED AND CERTIFICATES REGISTERED WHEN
ISSUED?
Accounts in the Plan are maintained in the names in which the certificates
of Participants were registered at the time they entered the Plan. When issued
out of the Plan, certificates for whole shares are similarly registered. Upon
written request, certificates may also be registered and issued in names other
than the name of the Participant, subject to compliance with any applicable laws
and the payment of any applicable taxes. Any such request must be made in
writing, signed by the Participant, and the Participant's signature must be
guaranteed by a qualified medallion guarantee member.
SALE OF PLAN SHARES
19. WHEN AND HOW MAY A PARTICIPANT SELL SHARES HELD IN THE PLAN?
Any Participant, including a Participant who is withdrawing from the Plan,
may sell some or all of his or her shares in the Plan in either of the following
ways.
A Participant may choose to sell all or a portion of his or her shares in
the Plan on the open market through the Participant's broker. If a Participant
elects to sell through a broker, he or she must first request First Union to
send the Participant a certificate or certificates representing the requested
number of shares in the Plan credited to the Participant's account. As soon as
practicable after receipt of such request, First Union will issue a certificate
or certificates representing the number of shares in the Participant's Plan
account for which the Participant has requested certificates, unless other
instructions are provided in writing as described in Question 18.
As an alternative, during any calendar quarter a Participant may request
First Union to sell up to 1,000 whole shares credited to his or her account
under the Plan. First Union will use its best efforts to make the sale in the
open market within ten trading days after receipt of the written request, and
the Participant will receive the proceeds of the sale less any brokerage
commissions, transfer taxes and other fees incurred by First Union that are
allocable to the sale of such Common Stock. A Participant who requests First
Union to sell up to 1,000 shares in a calendar quarter and wishes to have
additional shares sold during such calendar quarter through his or her broker
will receive a certificate in his or her name representing the whole shares that
he or she wishes to sell through a broker.
Any written instructions that do not clearly indicate the whole number of
shares to be sold, or that "all" Plan shares are to be sold, will be returned to
the Participant with no action taken. If all shares of Common Stock held in a
Participant's Plan account are sold, the account will be terminated and the
Participant will have to complete a new Authorization Card (see Question 6) in
order to again participate in the Plan.
A Participant who wishes to sell some or all of his or her shares in the
Plan should be aware of the risk under either selling option that the price of
the Common Stock may decrease between the time that the Participant determines
to sell shares in the Plan and the time that the sale is completed. This risk is
borne solely by the Participant. No check for the proceeds of such sale will be
mailed prior to the settlement of funds from the brokerage firm through which
shares in the Plan are sold. Settlement is three business days after the sale of
the shares.
All information relating to the sale of shares in the Plan will be reported
to the Internal Revenue Service pursuant to applicable legal requirements. In
addition, a statement of account which details the terms of the sale and the
remaining number of Plan shares held for the Participant by First Union will be
mailed as soon as practicable after each sale.
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WITHDRAWAL FROM THE PLAN
20. WHEN AND HOW MAY A PARTICIPANT WITHDRAW FROM THE PLAN?
A Participant may withdraw from the Plan by giving written notice to First
Union that he or she wishes to withdraw. When a Participant withdraws from the
Plan (or upon termination of the Plan by the Company) certificates for whole
shares in his or her account under the Plan are issued and a cash payment is
made for any fraction of a share in such account.
If the written request to withdraw is received by First Union at least five
business days before the record date for the next dividend, the withdrawal will
be duly processed and such dividend will not be reinvested on the next dividend
payment date. Any written notice of termination received fewer than five
business days before a dividend record date will not be effective until
dividends for such record date have been invested and the shares have been
allocated to the account of the respective Participant. After such dividends are
invested and allocated to the Participants' accounts, withdrawal requests will
be processed. Allocations may take up to two weeks after dividend payment.
Neither First Union nor the Company is responsible for losses during such
periods. Any optional cash payment sent to First Union prior to the request to
withdraw will be invested in shares of Common Stock unless the Participant
expressly requests in writing that the optional cash payment be returned and
First Union receives the Participant's written request at least five business
days before the next Investment Date.
A Participant may re-enroll in the Plan at any time by submitting an
Authorization Card as described in Question 6 above.
21. MAY A PARTICIPANT TERMINATE THE REINVESTMENT OF DIVIDENDS ON SHARES HELD IN
HIS OR HER NAME AND STILL REMAIN IN THE PLAN?
Yes. A Participant who terminates the reinvestment of dividends paid on
shares registered in his or her name may leave in the Plan the shares previously
purchased for his or her account in the Plan. Dividends paid on the shares left
in the Plan continue to be reinvested automatically for his or her account.
TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN
22. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN?
Under the current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the purchase of shares of Common Stock under the Plan will
generally result in the following federal income tax consequences:
(a) A dividend on shares of Capital Stock will be treated for federal
income tax purposes as a dividend received by the Participant
notwithstanding that it is used to purchase additional Common Stock
pursuant to the Plan. The full amount of cash dividends reinvested under
the Plan plus the 3% purchase discount (described in Question 12) on
reinvested dividends and optional cash payments used to purchase shares
from the Company represent dividend income to Participants. In addition,
the amount of any brokerage commissions, mark-ups, and other fees or
expenses incurred by the Company on behalf of a Participant in connection
with purchases on the open market will also constitute a dividend to such
Participant for federal income tax purposes.
(b) Dividends paid to corporate Participants, including amounts
taxable as dividends to corporate Participants under (a) above, will not be
eligible for the corporate dividends-received deduction under the Code.
(c) A Participant's tax basis in additional shares of Common Stock
acquired under the Plan with reinvested dividends will be equal to the
amount treated as a dividend for federal income tax purposes. A
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<PAGE> 13
Participant's tax basis in additional shares of Common Stock acquired under
the Plan with optional cash payments will be equal to the amount of the
optional cash payments. The Participant's holding period for shares of
Common Stock acquired with reinvested dividends or optional cash payments
will commence on the day after the Investment Date.
(d) A Participant will not realize any taxable income upon the receipt
of a certificate for full shares credited to the Participant's account. A
Participant will recognize gain or loss when a fractional share interest is
liquidated or when the Participant sells or exchanges shares received from
the Plan. Such gain or loss will equal the difference between the amount
which the Participant receives for such fractional share interest or such
shares and the tax basis therefor.
In the case of Participants whose dividends are subject to withholding of
federal income tax, dividends will be reinvested less the amount of tax required
to be withheld.
The above is intended only as a general discussion of the current federal
income tax consequences of participation in the Plan and is not tax advice.
Participants should consult their own tax advisers regarding the federal and
state income tax consequences (including the effects of any changes in law) of
their individual participation in the Plan.
OTHER INFORMATION
23. WHAT HAPPENS WHEN A PARTICIPANT SELLS OR TRANSFERS ALL OF THE SHARES
REGISTERED IN HIS OR HER NAME OTHER THAN SHARES UNDER THE PLAN?
If a Participant disposes of all of the shares of Capital Stock registered
in his or her name other than shares purchased for the Participant's account
under the Plan, First Union, until it is otherwise instructed, continues to
reinvest the dividends on the shares of Common Stock in the Participant's Plan
account. In the event of a Participant's death or incapacity, the personal
representative of his or her estate may provide First Union with a written
request of withdrawal of the Participant's Plan shares. The Company reserves the
right not to reinvest any additional dividends if a Participant has only a
fractional share of stock credited to his or her account under the Plan on the
record date for any cash dividend on the Capital Stock. If the Company exercises
this right, the Participant will receive a cash payment representing the
fractional share and a cash payment for the dividend. The cash payment for the
fractional share will be based on the closing price of the Common Stock on the
NYSE on the date on which the Company exercises this right.
24. IF THE COMPANY ISSUES RIGHTS TO PURCHASE SECURITIES TO THE HOLDERS OF
COMMON STOCK, HOW WILL THE RIGHTS ON PLAN SHARES BE HANDLED?
In the event that the Company makes available to the holders of its Common
Stock rights to purchase additional shares of Common Stock or any other
securities, First Union will sell such rights (if such rights are saleable and
detachable from the Common Stock) accruing to shares of Common Stock held by
First Union for Participants and invest the proceeds in additional shares of
Common Stock on the next dividend payment date for the Common Stock. In the
event that such rights are not saleable or detachable, the Plan will hold such
rights for the benefit of Participants. A Participant who wishes to receive
directly any such rights may do so by sending to First Union, at least five
business days before the rights offering record date, a written request that
certificates for shares in his or her account be sent to him or her.
25. WHAT HAPPENS IF THE COMPANY ISSUES A STOCK DIVIDEND OR DECLARES A STOCK
SPLIT?
Any shares representing stock dividends (payable in Common Stock) or stock
splits distributed by the Company on shares of Common Stock credited to the
account of a Participant under the Plan will be added to the Participant's
account. Shares representing stock dividends payable other than in Common Stock
or stock
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<PAGE> 14
splits distributed by the Company on shares of Common Stock credited to the
account of a Participant under the Plan shall be paid to First Union, which
shall distribute the shares in accordance with the interests of Participants in
the Plan. Shares representing stock dividends or split shares distributed on
shares registered in the name of the Participant will be mailed directly to such
Participant in the same manner as to stockholders who are not participating in
the Plan.
26. HOW ARE A PARTICIPANT'S SHARES HELD UNDER THE PLAN TO BE VOTED AT MEETINGS
OF STOCKHOLDERS?
All shares of Common Stock credited to the account of a Participant under
the Plan are voted by First Union as record holder in accordance with
instructions of the Participant given to First Union on an instruction form or
proxy furnished to the Participant. If the Participant desires to vote in person
at a meeting, a proxy to vote the number of shares credited to his or her
account under the Plan may be obtained upon written request received by First
Union at least 15 business days before the meeting.
27. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY AND FIRST UNION UNDER THE
PLAN?
Neither the Company nor First Union will be liable for any act done in good
faith or for any good faith omission to act, including, without limitation, any
claims of liability arising out of a failure to terminate a Participant's
account upon such Participant's death or adjudicated incompetency prior to the
receipt of notice in writing of such death or adjudicated incompetency, the
prices at which shares are purchased for the Participant's account, the times
when purchases are made or fluctuations in the market value of the Common Stock.
Neither the Company nor First Union has any duties, responsibilities or
liabilities except those expressly set forth in the Plan.
THE PARTICIPANT SHOULD RECOGNIZE THAT THE COMPANY CANNOT ASSURE A PROFIT OR
PROTECT AGAINST A LOSS ON THE SHARES PURCHASED BY A PARTICIPANT UNDER THE PLAN.
28. MAY THE PLAN BE AMENDED, SUSPENDED OR TERMINATED?
While the Plan is intended to continue indefinitely, the Company reserves
the right to amend, suspend or terminate the Plan at any time, but such action
shall have no retroactive effect that would prejudice the interests of the
Participants. To the extent practicable, notice of such suspension, termination
or amendment will be sent to all Participants at least 30 days prior to its
effective date.
The Company intends to use its best efforts to maintain the effectiveness
of the registration statement filed with the Commission covering the offer and
sale of Common Stock under the Plan (the "Registration Statement"). However, the
Company has no obligation to offer, issue or sell Common Stock to Participants
under the Plan if, at the time of the offer, issuance or sale, such Registration
Statement is for any reason not effective. Also, the Company may elect not to
offer or sell Common Stock under the Plan to Participants residing in any
jurisdiction or foreign country where, in the judgment of the Company, the
burden or expense of compliance with applicable blue sky or securities laws
makes such offer or sale there impracticable or inadvisable. In any of these
circumstances, dividends, if, as and when declared, will be paid in the usual
manner to the stockholders and any optional cash payments received from any such
stockholder will be returned to him or her.
29. WHO INTERPRETS AND REGULATES THE PLAN?
The Company is authorized to issue such interpretations, adopt such
regulations and take such action as it may deem reasonably necessary to
effectuate the Plan. Any action to effectuate the Plan taken by the Company or
First Union in the good faith exercise of its judgment will be binding on
Participants.
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RESALE RESTRICTIONS
30. ARE THERE ANY RESTRICTIONS ON THE RESALE OF COMMON STOCK ACQUIRED UNDER THE
PLAN?
Participants who are not "affiliates" of the Company are free to sell at
any time the Common Stock acquired under the Plan. Participants who are
"affiliates" of the Company, as that term is defined in Rule 405 promulgated by
the Commission under the Securities Act, may not publicly reoffer shares
acquired under the Plan except pursuant to Rule 144 of the Securities Act or
pursuant to an effective registration statement. Rule 405 defines an "affiliate"
as a person who directly, or indirectly through one or more intermediaries,
controls, is controlled by or under common control with the Company. Directors
and certain officers of the Company may be "affiliates" of the Company under
this definition.
Directors and certain executive officers of the Company participating in
the Plan are also subject to the reporting obligations of Section 16(a) and the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act with
respect to purchases of the Common Stock made under the Plan with optional cash
payments. While such directors and officers are not subject to the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act with respect to
purchases of Common Stock made under the Plan with reinvested dividends, such
purchases must be disclosed on annual reports filed pursuant to Section 16(a) of
the Exchange Act.
LIMITATIONS ON PARTICIPATION
31. ARE THERE LIMITATIONS ON PARTICIPATION IN THE PLAN OTHER THAN THOSE
DESCRIBED ABOVE?
The Company reserves the right to limit participation in the Plan for any
reason, even if a stockholder is otherwise eligible to participate. To ensure
that the Company remains a qualified REIT, the Company's Charter provides,
subject to certain exceptions, that no stockholder may own beneficially more
than 9.8% (the "Ownership Limit") of any class or series of the Company's
outstanding Capital Stock, and certain pension plans and mutual funds registered
under the Investment Company Act of 1940 may not own beneficially more than 15%
(the "Look-Through Ownership Limit") of any class or series of the Company's
outstanding Capital Stock. Stockholders may not acquire any shares pursuant to
the Plan that exceed the Ownership Limit or the Look-Through Ownership Limit, as
applicable.
In addition, some stockholders may be residents of jurisdictions in which
the Company determines that it may not be legally or economically feasible to
offer its shares under the Plan, and accordingly residents of such jurisdictions
may be precluded from participating in the Plan. The Company has no present
plans to limit participation in the Plan by any stockholder of record for
reasons other than those set forth above, but it reserves such right in the
event that it determines in its sole discretion that such limitation may be in
the best interests of the Company.
32. WHAT LAW GOVERNS THE PLAN?
The terms and conditions of the Plan and its operation shall be governed by
the laws of the State of Maryland.
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USE OF PROCEEDS
The Company will receive proceeds from the sale of Common Stock purchased
by First Union directly from the Company. The Company intends to use the
proceeds from the sale of its Common Stock for general corporate purposes,
including the repayment of indebtedness, the acquisition and development of
additional apartment home communities, and the repositioning of currently owned
apartment communities.
The Company has no basis for estimating either the number of shares of
Common Stock that ultimately will be sold pursuant to the Plan or the prices at
which such shares will be sold. The Company will not receive any proceeds under
the Plan from the purchase of shares of Common Stock in the open market by First
Union.
COMMON STOCK
GENERAL
Under the Charter, the Company has authority to issue 140,000,000 shares of
Common Stock. The Common Stock is listed on the NYSE and the PCX under the
symbol "AVB." The shares of Common Stock issued or to be issued upon receipt of
full payment therefor by the Company in accordance with the terms set forth in
the Plan will be validly issued, fully paid and non-assessable.
TERMS
Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Company's Charter regarding Excess Stock, holders
of shares of Common Stock will be entitled to receive dividends on shares of
Common Stock if, as and when authorized and declared by the Board of Directors
of the Company out of assets legally available therefor and to share ratably in
the assets of the Company legally available for distribution to its stockholders
in the event of its liquidation, dissolution or winding-up after payment of, or
adequate provision for, all known debts and liabilities of the Company.
Subject to the provisions of the Company's Charter regarding excess stock,
par value $.01 per share ("Excess Stock"), each outstanding share of Common
Stock entitles the holder to one vote on all matters submitted to a vote of
stockholders, including the election of directors, and, except as otherwise
required by law or except as provided with respect to any other class or series
of Capital Stock, the holders of Common Stock will possess the exclusive voting
power. There is no cumulative voting in the election of directors, which means
that, subject to any rights to elect directors that are granted to the holders
of any class or series of Preferred Stock, a plurality of the votes cast at a
meeting of stockholders duly called and at which a quorum is present shall be
sufficient to elect a director.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
Subject to the provisions of the Company's Charter regarding Excess Stock,
all shares of Common Stock will have equal dividend, distribution, liquidation
and other rights, and will have no preference, appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the
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shares entitled to vote on the matter unless a lesser percentage is set forth in
the Company's Charter, which percentage shall not in any event be less than a
majority of all of the shares entitled to vote on such matter. The Company's
Charter provides that whenever any vote of the holders of voting stock is
required to amend or repeal any provision of the Charter, then in addition to
any other vote of the holders of voting stock that is required by the Charter,
the affirmative vote of the holders of a majority of the outstanding shares of
Capital Stock of the Company entitled to vote on such amendment or repeal,
voting together as a single class, and the affirmative vote of the holders of a
majority of the outstanding shares of each class entitled to vote thereon as a
class, shall be required to amend or repeal any provision of the Charter;
provided, however, that the affirmative vote of the holders of not less than
two-thirds of the outstanding shares entitled to vote on such amendment or
repeal, voting together as a single class, and the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of each class
entitled to vote thereon as a class, shall be required to amend or repeal any of
the provisions relating to the resignation or removal of directors, vacancies on
the Board of Directors, independent directors, the rights and powers of the
Company, the Board of Directors and Officers (including amendments to the
Charter), and the limitation of liability of directors and officers.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities.
SHAREHOLDER RIGHTS AGREEMENT
The Company has adopted a Shareholder Rights Agreement (the "Rights
Agreement"), the purpose of which is, among other things, to enable stockholders
to receive fair and equal treatment in the event of any proposed acquisition of
the Company. The Rights Agreement may have the effect of delaying, deferring or
preventing a change in control of the Company and, therefore, could adversely
affect the stockholders' ability to realize a premium over the then-prevailing
market price for the Common Stock in connection with such a transaction. The
following summary description of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company's Rights
Agreement, which was previously filed with the Commission on March 11, 1998 as
an exhibit to the Company's Registration Statement on Form 8-A.
In connection with the adoption of the Rights Agreement, the Board of
Directors declared a dividend distribution of one Preferred Stock Purchase Right
(a "Right") for each outstanding share of the Company's Common Stock to
stockholders of record as of the close of business on March 10, 1998 (the
"Record Date"). Each Right entitles the registered holder thereof to purchase
from the Company a unit ("Unit") consisting of one one-thousandth of a share of
Series E Junior Participating Cumulative Preferred Stock, par value $0.01 per
share, of the Company, at a cash exercise price of $160.00 per Unit, subject to
adjustment.
The Rights are currently not exercisable and are attached to and trade with
all shares of Common Stock outstanding as of, and issued subsequent to, the
Record Date. The Rights will separate from the Common Stock and will become
exercisable upon the earlier of (i) the close of business on the tenth calendar
day following the first public announcement that a person or group of affiliated
or associated persons has acquired beneficial ownership of 10% or more of the
outstanding shares of Common Stock (an "Acquiring Person"), or (ii) the close of
business on the tenth business day following the commencement of a tender offer
or exchange offer that would result upon its consummation in a person or group
becoming the beneficial owner of 10% or more of the outstanding shares of Common
Stock.
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In the case of certain stockholders of the Company who beneficially owned
10% or more of the outstanding shares of Common Stock as of March 9, 1998 (such
stockholders are referred to in the Rights Agreement as "grandfathered
persons"), the Rights generally will be distributed only if any such stockholder
acquires or proposes to acquire additional shares of Company Common Stock. In
addition, a "grandfathered person" generally will become an Acquiring Person
only if such person acquires additional shares of Common Stock.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock, and the rights agent
for the Rights, is First Union National Bank, Charlotte, North Carolina.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of the Company (formerly Bay
Apartment Communities, Inc.) for the year ended December 31, 1997 and the Annual
Report on Form 10-K of Avalon Properties, Inc. for the year ended December 31,
1997, the audited historical summary of revenues and direct operating expenses
included on pages F-1 through F-6 of the Company's Form 8-K dated March 27, 1998
and the audited historical summary of operating revenue and expenses included on
pages 5 through 8 of the Company's Form 8-K dated August 5, 1998, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
CORRESPONDENCE
All correspondence concerning the Plan should be addressed to:
First Union National Bank
Attention: Client Services Group
1525 West W.T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
(Tel. 1-800-829-8432)
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TABLE OF CONTENTS
PAGE
----
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Description of the Dividend Reinvestment and Stock Purchase Plan.......... 4
Purpose................................................................. 4
Advantages to Participants.............................................. 4
Administration.......................................................... 5
Participation........................................................... 5
Costs................................................................... 7
Purchases............................................................... 7
Reports to Participants................................................. 10
Dividends............................................................... 10
Certificates for Shares................................................. 10
Sale of Plan Shares..................................................... 11
Withdrawal from the Plan................................................ 12
Tax Consequences of Participation in the Plan........................... 12
Other Information....................................................... 13
Resale Restrictions..................................................... 15
Limitations on Participation............................................ 15
Use of Proceeds........................................................... 16
Common Stock.............................................................. 16
Experts................................................................... 18
Legal Matters............................................................. 18
Correspondence............................................................ 18
------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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[AvalonBay LOGO]
1,000,000 SHARES OF
COMMON STOCK
DIVIDEND REINVESTMENT
AND
STOCK PURCHASE PLAN
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PROSPECTUS
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OCTOBER 8, 1998
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