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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): July 16, 1998
AVALON BAY 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.)
2900 EISENHOWER AVENUE, SUITE 300, ALEXANDRIA, VIRGINIA 22314
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(Address of principal executive offices) (Zip Code)
(703) 329-6300
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
PROPERTY ACQUISITION
PRUDENTIAL CENTER APARTMENTS. On July 16, 1998, the Company acquired a 781
apartment home community located in downtown Boston, Massachusetts from The
Prudential Insurance Company of America. The purchase price for this community
was approximately $130 million. The purchase was funded by drawing on the
Company's $600 million unsecured revolving credit facility from Morgan Guaranty
Trust Company of New York, Union Bank of Switzerland and Fleet National Bank,
as co-agents, and other participating banks (the "Unsecured Credit Facility").
The Unsecured Credit Facility bears interest at the London Interbank Offered
Rate (LIBOR) based on rating levels achieved on the Company's senior unsecured
debt and is based on a maturity selected by the Company. The current pricing is
LIBOR plus .60% per annum and matures in June 2001. In addition, the Unsecured
Credit Facility includes a competitive bid option for up to $400 million and
two, one-year extension options. 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 this community.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements under Rule 3-14 of Regulation S-X
(c) Exhibit
23.1 Consent of PricewaterhouseCoopers LLP
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SIGNATURE
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.
AVALON BAY COMMUNITIES, INC.
Dated: August 5, 1998 By: /s/ Thomas J. Sargeant
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Name: Thomas J. Sargeant
Title: Chief Financial Officer
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REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Avalon Bay Communities, Inc.:
We have audited the accompanying historical summary of operating revenue and
expenses, as defined in Note 2(a), of the Prudential Center Apartments for the
year ended December 31, 1997. This historical summary is the responsibility of
the Prudential Center Apartments' management. 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
accounting principles 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 the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Registration Statements on Forms S-3 and S-8 of Avalon Bay
Communities, Inc.) and is not intended to be a complete presentation of the
Prudential Center Apartments' revenue and expenses.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the operating revenue and expenses described in Note 2(a) of
the Prudential Center Apartments for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
PRICEWATERHOUSECOOPERS LLP
Washington, D.C.
August 5, 1998
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THE PRUDENTIAL CENTER APARTMENTS
Historical Summaries of Operating Revenue and Expenses
For the three months ended March 31, 1998 (unaudited) and the year ended
December 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, 1998 December 31, 1997
(unaudited) (audited)
------------------ -----------------
<S> <C> <C>
Total revenue $4,090 $15,304
Operating expenses:
Property operating 1,472 5,876
Real estate taxes 415 1,530
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Total operating expenses 1,887 7,406
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Operating revenue in excess of operating expenses $2,203 $ 7,898
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</TABLE>
See accompanying notes to historical summaries of operating revenue and
expenses.
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THE PRUDENTIAL CENTER APARTMENTS
Notes to the Historical Summaries of Operating Revenue and Expenses
Three months ended March 31, 1998 (unaudited)
and year ended December 31, 1997
(dollars in thousands)
(1) DESCRIPTION OF THE PROPERTY
The Prudential Center Apartments (the Buildings) consist of three
27-story high-rise buildings located in downtown Boston, Massachusetts,
containing 781 studio, one, two, and three-bedroom apartment homes
available for lease. The Buildings were constructed in 1968.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying historical summaries of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain revenues and expenses, which may not
be comparable to those expected to be incurred by Avalon Bay
Communities, Inc. in the future operations of the Prudential
Center Apartments, have been excluded. Interest income has been
excluded from revenue, and interest, depreciation and
amortization, and other costs not directly related to the future
operations of the Prudential Center Apartments have been excluded
from expenses.
(b) Revenue Recognition
Rental income attributable to residential leases is recorded when
due from tenants.
(c) Interim Unaudited Financial Information
The accompanying unaudited financial information for the three
months ended March 31, 1998 has been prepared consistent with the
rules and regulations of the Securities and Exchange Commission
governing the preparation of the amounts for the year ended
December 31, 1997. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the historical summaries of
operating revenue and expenses for the three months ended March
31, 1998, have been included. The results of operations for the
three-month period ended March 31, 1998 are not necessarily
indicative of the results for the full year.
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THE PRUDENTIAL CENTER APARTMENTS
Notes to the Historical Summaries of Operating Revenue and Expenses
(dollars in thousands)
(3) PRO FORMA TAXABLE OPERATING RESULTS AND CASH AVAILABLE FROM OPERATIONS
(UNAUDITED)
The following unaudited table is a pro forma estimate of the taxable
operating income and cash available from operations of the Prudential Center
Apartments for the twelve months ended March 31, 1998, as adjusted for certain
items which can be factually supported. For purposes of presenting pro forma
taxable operating income, revenue is recognized when it is either collectible
under the lease terms or collected. Tax depreciation for the buildings is
computed on the modified accelerated cost recovery system method over a
27.5-year life. This statement does not purport to forecast actual operating
results for any period in the future.
<TABLE>
<S> <C>
Pro forma net operating income (exclusive of
depreciation and amortization expense) $8,126
Less - estimated tax depreciation and
amortization expense 3,784
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Pro forma taxable operating income $4,342
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Pro forma cash available from operations $8,126
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</TABLE>
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements of Avalon Bay Communities, Inc. on Form S-8 (File No. 333-16837),
Form S-8 (File No. 333-56089), Form S-3 (File No. 333-16647), Form S-3 (File
No. 333-15407) and Form S-3 (File No. 333-41511) of our report dated August 5,
1998 appearing on page 5 of this Form 8-K.
/s/ PRICEWATERHOUSECOOPERS LLP
August 5, 1998
Washington, D. C.
