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As filed with the Securities and Exchange Commission on October 19, 1998
REGISTRATION STATEMENT NO. 333-62855
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AVALONBAY COMMUNITIES, INC.
(Exact name of Registrant as specified in its charter)
Maryland 77-0404318
(State of incorporation) (I.R.S. Employer Identification Number)
2900 EISENHOWER AVENUE, SUITE 300
ALEXANDRIA, VIRGINIA 22314
(703) 329-6300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-------------------------------
RICHARD L. MICHAUX
CHIEF EXECUTIVE OFFICER
AVALONBAY COMMUNITIES, INC.
2900 EISENHOWER AVENUE, SUITE 300
ALEXANDRIA, VIRGINIA 22314
(703) 329-6300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
WITH COPIES TO:
DAVID W. WATSON, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering.[ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
-----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Subject to Completion, dated October 19, 1998
PROSPECTUS
482,313 SHARES
AVALONBAY COMMUNITIES, INC.
COMMON STOCK
---------------
This Prospectus relates to the offer and sale of up to 482,313 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
AvalonBay Communities, Inc. (the "Company") that the Company may in the future
elect to issue to the holders of units of limited partnership interest (the
"Units") in Avalon DownREIT V, L.P., a Delaware limited partnership (the
"Partnership"), and which may be sold by the holders thereof (the holders of the
Shares are collectively referred to herein as the "Selling Stockholders"). The
Company is the surviving entity from the merger (the "Merger") of Avalon
Properties, Inc. ("Avalon") with and into Bay Apartment Communities, Inc.
(sometimes hereinafter referred to as "Bay" before the Merger and the "Company"
after the Merger) on June 4, 1998. Concurrently with the Merger, the Company
changed its name from Bay Apartment Communities, Inc. to Avalon Bay Communities,
Inc. and on October 2, 1998 changed its name to AvalonBay Communities, Inc.
Under the terms of the Agreement of Limited Partnership of the Partnership,
holders of Units in the Partnership have the right to require the Partnership to
redeem their Units for cash, subject to certain conditions. The Company may,
however, elect to deliver an equivalent number of shares of Common Stock to the
holders of Units in satisfaction of the Partnership's obligation to redeem the
Units for cash.
The Company is registering the Shares pursuant to the Company's obligations
under a registration rights agreement. The registration of the Shares does not
necessarily mean that all of the Shares will be issued by the Company in
satisfaction of the Unit holders' redemption rights or that any of the Shares
will be offered or sold by the Selling Stockholders. See "Plan of Distribution"
and "Selling Stockholders."
Each of the Selling Stockholders, directly or through agents, dealers or
underwriters, may offer and sell all or a portion of the Shares offered hereby
from time to time on terms to be determined at the time of sale. To the extent
required by law, the names of any such agent, dealer or underwriter, any
applicable commissions or discounts and any other required information with
respect to a particular offer will be set forth in an accompanying Prospectus
Supplement. See "Plan of Distribution." Each Selling Stockholder reserves the
right to accept and, together with such Selling Stockholder's agents, dealers or
underwriters, to reject, in whole or in part, any proposed purchase of Shares to
be made directly or through agents, dealers or underwriters. The Selling
Stockholders and any agents, dealers or underwriters that participate with the
Selling Stockholders in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), in which case any commissions received by them and any profit
on the resale of the Shares purchased by them may be deemed underwriting
commissions or discounts under the Securities Act. See "Registration Rights" for
indemnification arrangements between the Company and the Selling Stockholders.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") and
the Pacific Exchange (the "PCX") under the symbol "AVB." On October 16, 1998,
the last reported sale price for the Common Stock on the NYSE was $33.125 per
share. The Company will not receive any proceeds from the sale of Shares by the
Selling Stockholders, but has agreed to bear certain expenses of the
registration of such Shares under federal and state securities laws.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SHARES OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is October __, 1998.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits
thereto on file with the Commission pursuant to the Securities Act and the rules
and regulations of the Commission thereunder. The Registration Statement,
including exhibits thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies may be obtained at the prescribed rates from the Public Reference Section
of the Commission at its principal office in Washington, D.C. 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.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained via EDGAR or by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. In addition, the Company's Common Stock, 8.50% Series C
Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series C
Preferred Stock"), 8.00% Series D Cumulative Redeemable Preferred Stock, par
value $.01 per share (the "Series D Preferred Stock"), 9.00% Series F Cumulative
Redeemable Preferred Stock, par value $.01 per share (the "Series F Preferred
Stock"), and 8.96% Series G Cumulative Redeemable Preferred Stock, par value
$.01 per share (the "Series G Preferred Stock"), are listed on the NYSE and the
PCX, and such reports and information can be inspected at the NYSE, 20 Broad
Street, New York, New York 10005, and at the PCX, 301 Pine Street, San
Francisco, California 94104.
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 stock
without certificates. In addition, the Company has the authority to designate
and issue more than one class or series of stock having various preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. See
"Description of Preferred Stock" and "Description of Common Stock." The
Company's Charter imposes limitations on the ownership and transfer of the
Company's stock. See "Restrictions on Transfers of Stock." The Company will
furnish a full statement of the relative rights and preferences of each class or
series of stock of the Company which has been so designated and any restrictions
on the ownership or transfer of 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.
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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 Report on Form 10-K for the fiscal year ended December 31, 1997, (ii)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, (iii)
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998, (iv)
Current Report on Form 8-K filed January 8, 1998, (v) Current Report on Form 8-K
filed January 21, 1998, (vi) Current Report on Form 8-K filed March 11, 1998,
(vii) Current Report on Form 8-K filed March 27, 1998, (viii) Current Report on
Form 8-K filed April 16, 1998, (ix) Current Report on Form 8-K filed April 22,
1998, (x) Current Report on Form 8-K filed June 19, 1998, as amended by Form
8-K/A filed June 26, 1998, (xi) Current Report on Form 8-K filed July 9, 1998,
(xii) Current Report on Form 8-K filed August 5, 1998, (xiii) Current Report on
Form 8-K filed October 6, 1998, (xiv) the description of the Company's Common
Stock contained in the Company's Registration Statement on Form 8-B dated June
7, 1995, and (xv) 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) 329-6300). 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 Public
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.
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FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this prospectus
under the captions "Risk Factors" and "The Company," and elsewhere in this
Prospectus or in documents incorporated by reference are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. Such forward-looking statements
include, without limitation, statements and information concerning the
acquisition, construction, reconstruction, development, redevelopment,
occupancy, and completion of our apartment communities and related cost and
EBITDA estimates. When we use the words "anticipate," "assume," "believe,"
"estimate," "expect," "intend," and other similar expressions in this Prospectus
Supplement, they are generally intended to identify forward-looking statements.
You should not rely on forward-looking statements since they involve known and
unknown risks, uncertainties and other factors which are, in some cases, beyond
our control and which could materially affect our actual results, performance or
achievements. Factors that could cause our actual results, performance or
achievements to differ materially from those expressed or implied by such
forward-looking statements include, but are not limited to, the following:
* we may fail to secure or may abandon development or redevelopment
opportunities;
* construction or reconstruction costs of a community may exceed
original estimates;
* construction or reconstruction and lease-up may not be completed on
schedule, resulting in increased debt service expense and construction
or reconstruction costs, and reduced rental revenues;
* occupancy rates and market rents may be adversely affected by local
economic and market conditions which are beyond our control;
* financing may not be available, or may not be available on favorable
terms;
* we may encounter unanticipated expenses or delays in resolving "Year
2000" issues either for the Company or by those with whom the Company
does business; and
* our cash flow may be insufficient to meet required payments of
principal and interest, and existing indebtedness may mature in an
unfavorable credit environment, preventing such indebtedness from
being refinanced, or if refinanced, causing such refinancing to occur
on terms that are not as favorable as the terms of existing
indebtedness.
In addition, the factors described under "Risk Factors" in this Prospectus may
result in such differences. Prospective purchasers of the Shares offered hereby
should carefully review all of these factors, which may not be an exhaustive
list of such factors.
RISK FACTORS
A purchase of the Shares of Common Stock involves various risks.
Prospective purchasers should consider the following risk factors:
THE COMPANY MAY FAIL TO MANAGE GROWTH AND INTEGRATE OPERATIONS AFTER THE MERGER
We have experienced a period of rapid growth as a result of the merger and
through the acquisition and development of additional apartment communities. We
currently own 146 apartment communities with approximately 42,563 apartment
homes (including those under development and redevelopment). This represents an
increase of 23,922 from the number of apartment homes in Bay's pre-merger
portfolio. In addition, the integration of the departments, systems, operating
procedures and information technologies of Bay and Avalon, as well as future
acquisitions, developments and redevelopments, will be challenging, and we
cannot assure you that we will be able to integrate and manage these operations
effectively. If we are unable to successfully manage our growth or integrate
these systems and procedures into one operating philosophy, it could materially
and adversely affect our results of operations and financial condition.
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THE COMPANY MAY NOT REALIZE THE EXPECTED BENEFITS OF THE MERGER
Based on anticipated savings in expenses and other factors related to the
merger, we expect that our FFO per share for the second half of fiscal year 1998
and for future periods will increase compared to FFO per share for Bay prior to
the merger. However, these anticipated savings may not be realized and
unanticipated costs may arise as a result of the merger. For example, although
we believe that we have reasonably estimated the likely costs of integrating the
operations of Bay and Avalon, as well as the incremental costs of operating as a
combined company, unexpected future operating expenses (such as increased
personnel costs, increased property taxes or increased travel expenses) could
materially and adversely affect our operations and financial condition. If we do
not realize the expected savings or if we incur unexpected costs, the merger
could significantly dilute our FFO per share. For a description of the manner in
which FFO is calculated, see "The Company--Business Strategy--Strong Earnings
Growth Record."
THE COMPANY MAY NOT BE ABLE TO CONTINUE ITS EXTERNAL GROWTH RATE
We now have a real estate asset base in excess of $3.7 billion. Our asset
base should allow us to access capital for the acquisition, development and
redevelopment of apartment communities on more favorable terms than would be
available with a smaller asset base. However, we may be forced to limit our
acquisition, development and redevelopment activities as we attempt to integrate
the operations of Bay and Avalon. Furthermore, we have increased our minimum
target returns, particularly for new community acquisitions that do not require
redevelopment. As a result of this increase, as well as current market
conditions, we anticipate that we will acquire significantly fewer apartment
communities during the remainder of 1998, and we believe that this is also
likely to be true in 1999. Accordingly, we cannot assure you that our external
growth rate will equal or exceed our recent historical external growth rates.
MARKET CONDITIONS AND THE COST OF FINANCING NEW ACQUISITIONS AND DEVELOPMENT MAY
LIMIT OUR GROWTH RATE
The cost of equity and debt financing for new acquisitions and development
has recently been increasing. The increased cost of financing, combined with
increases in the sales prices of existing apartment communities, results in a
lower margin of profit on new acquisitions. While these market conditions
continue, we expect that we will acquire fewer existing apartment communities.
If the current market conditions continue for an extended period, our current
earnings growth rates may decline. As a result, there could be material adverse
effects on our ability to pay distributions to our stockholders and on the
market prices of our equity securities.
RISKS RELATED TO ACQUISITIONS OF APARTMENT COMMUNITIES
The acquisition of apartment communities has historically been an important
component of our business strategy. When we acquire an apartment community, we
expose ourselves to the risk that our investment will fail to generate expected
returns, and that estimates of the costs of improvements to bring the acquired
community up to standards established for the market position intended for that
community, will prove inaccurate. Acquisitions also involve general investment
risks associated with any new real estate investment. Although we will undertake
an evaluation of the physical condition of each new community before it is
acquired, certain defects or necessary repairs may not be detected until after
the community is acquired, which could significantly increase our total
acquisition costs and reduce the profitability of the acquired community.
RISKS RELATED TO DEVELOPMENT AND REDEVELOPMENT OF APARTMENT COMMUNITIES
We intend to continue to develop and redevelop apartment home communities
using integrated development, redevelopment and underwriting policies derived
from the respective strengths of Bay and Avalon. In addition to the risk that we
will be unable to successfully integrate these policies, our development and
redevelopment activities may be exposed to the following risks:
* we may abandon development and redevelopment opportunities we have
already begun to explore;
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* we may incur construction or reconstruction costs for a community
which exceed our original estimates due to increased materials, labor
or other costs, which could make completion of the community
uneconomical;
* occupancy rates and rents at a newly completed development or
redevelopment community may fluctuate depending on a number of
factors, including market and economic conditions, and may not be
sufficient to make the original estimated unleveraged returns on cost
for the community;
* we may not be able to obtain financing with favorable terms for the
development or redevelopment of a community; and
* we may be unable to complete construction or reconstruction and
lease-up of a community on schedule, resulting in increased debt
service expense and construction or reconstruction costs.
Our development activities are also subject to the risk that we will be
unable to obtain, or will face delays in obtaining, necessary zoning, land-use,
building, occupancy, and other required governmental permits and authorizations.
If any of these events occurs, it could adversely affect our ability to achieve
our projected yields on communities under development or redevelopment and could
prevent us from making expected distributions to stockholders. See "--Real
Estate Investment Risks."
Construction costs have been increasing in our target markets, and the cost
to develop new communities and redevelop acquired communities has, in some
cases, exceeded our original estimates. We may experience similar cost increases
in the future. We cannot assure you that we will be able to charge rents upon
completing the development or redevelopment of communities that will be
sufficient to offset the effects of any increases in construction or
reconstruction costs.
RISKS ASSOCIATED WITH ENTERING NEW MARKETS
Although our historical management expertise is in Northern California, the
Mid-Atlantic and the Northeast, we have expanded our ownership and operation of
apartment communities into new markets in recent years. If appropriate
opportunities arise, we may also make other selective investments in high
barrier-to-entry markets outside of our current market areas. Our entry into new
market areas will require us to apply our experience to these new market areas,
but we cannot assure you that we will be able to successfully accomplish this or
that our historical expertise will assist us in our expansion into new markets.
If we expand into new markets in the future, we may be exposed to risks
associated with:
* a lack of market knowledge and understanding of the local economy;
* an inability to obtain land for development or to identify property
acquisition opportunities;
* an inability to obtain construction tradespeople;
* sudden adverse shifts in supply and demand factors; and
* an unfamiliarity with local governmental and permitting procedures.
DEPENDENCE ON MARKET CONDITIONS IN PRIMARY MARKETS
Of the 146 communities we currently own, 41 are located in Northern
California (primarily in the San Francisco Bay Area), 18 are located in Southern
California and 70 are located in the Mid-Atlantic and Northeast markets.
Consequently, economic conditions in these primary markets will significantly
influence our future performance. As a result of the merger, we have a more
geographically diverse portfolio than either Bay or Avalon had before the
merger. We believe that our increased geographical diversity will provide
additional stability in the event of adverse economic conditions in any one
region or market. However, a decline in the economy in one or more of our
primary markets, or in the United States generally, could materially and
adversely affect our operating results and our ability to make expected
distributions to stockholders.
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REAL ESTATE FINANCING RISKS
No Limitation on the Company's Debt. As of August 31, 1998, our ratio of
debt-to-total market capitalization was 37.9%. Debt covenants in our credit
facilities and our unsecured senior notes limit the amount of debt we can incur,
but our charter and bylaws do not contain any such limitations. Because we do
not have any debt incurrence restrictions in our charter or bylaws, we could
increase the amount of outstanding debt at any time.
Existing Debt Maturities, Balloon Payments and Refinancing Risks. We are
subject to the risks normally associated with debt financing, including the risk
that our cash flow will be insufficient to meet required payments of principal
and interest. We anticipate that only a small portion of the principal of our
debt will be repaid prior to maturity. Although we may be able to use cash flow
to make future principal payments, we cannot assure you that sufficient cash
flow will be available to make all required principal payments. Therefore, we
may need to refinance at least a portion of our outstanding debt as it matures.
Accordingly, there is a risk that we may not be able to refinance existing debt
or that the terms of any refinancing will not be as favorable as the terms of
the existing debt.
Risk of Rising Interest Rates. We expect to incur variable rate debt under
credit facilities or in connection with the acquisition, construction and
reconstruction of apartment communities in the future, as well as for other
purposes. Accordingly, if interest rates increase, so will our interest costs.
Bond Compliance Requirements. Some of our apartment communities are
financed with obligations issued by various local government agencies or
instrumentalities, the interest on which is exempt from federal income taxation.
These obligations are commonly referred to as "tax-exempt bonds." Compared to
unsecured debt, tax-exempt bonds are less cost competitive than in prior years
and, moreover, generally must be secured by communities. Since we plan to use
more unsecured debt in the future compared to prior experience, we expect that
our use of tax-exempt bonds to finance communities will decline.
Nevertheless, the bond compliance requirements for our current tax-exempt
bonds, and the requirements of any future tax-exempt bond financing, may have
the effect of limiting our income from communities subject to such financing.
Under the terms of our tax-exempt bonds, we must comply with various
restrictions on the use of the communities financed by such bonds, including a
requirement that a percentage of apartments be made available to low and middle
income households.
In addition, some of our tax-exempt bond financing documents require that a
financial institution guarantee payment of the principal of, and interest on,
the bonds (a "credit enhancement"). The credit enhancement may take the form of
a letter of credit, surety bond, guarantee agreement or other additional
collateral. If the financial institution defaults in its credit enhancement
obligations, or we are unable to renew the applicable credit enhancement or
otherwise post satisfactory collateral, a default will occur under the
applicable tax-exempt bonds and the community could be foreclosed upon.
REAL ESTATE INVESTMENT RISKS
General Real Estate Ownership Risks. If our communities do not generate
revenues sufficient to meet our operating expenses, including debt service and
capital expenditures, our cash flow and ability to pay distributions to our
stockholders will be adversely affected. The following factors, among others,
may adversely affect the revenues generated by our apartment communities:
* the national economic climate;
* the perceptions by prospective residents of the safety, convenience
and attractiveness of the communities;
* our ability to provide adequate management, maintenance and insurance;
* increased operating costs (including real estate taxes and utilities);
and
* other market and economic conditions that may affect the local
economy, which are described below.
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Certain significant expenditures associated with each equity investment
(such as mortgage payments, if any, real estate taxes, insurance and maintenance
costs) are generally not reduced when circumstances cause a reduction in income
from the investment. For example, if we mortgage a community to secure payment
of debt and are unable to meet the mortgage payments, we could sustain a loss as
a result of foreclosure on the community or the exercise of other remedies by
the mortgagee. In addition, real estate values and income from communities are
also affected by such factors as the cost of compliance with government
regulations, including zoning and tax laws, interest rate levels and the
availability of financing.
Risks Associated with Local Market Conditions. Local market and economic
conditions may significantly affect apartment home occupancy or rental rates in
that market. Occupancy and rental rates, in turn, may significantly affect our
profitability and our ability to satisfy our financial obligations. These risks
include:
* the local economic climate (which may be adversely impacted by plant
closings, industry slowdowns and other factors);
* local real estate conditions (such as an oversupply of, or a reduced
demand for, apartment homes);
* a decline in household formation that adversely affects occupancy or
rental rates;
* the inability or unwillingness of residents to pay rent increases;
* the potential effect of rent control or rent stabilization laws, or
other laws regulating housing, on some of our communities, which could
prevent us from raising rents to offset increases in operating costs;
and
* the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy
rates.
Any of these risks could adversely affect our ability to achieve our desired
yields on our communities and to make expected distributions to stockholders.
Difficulty of Selling Apartment Communities. Real estate can be hard to
sell, especially if local market conditions are poor. This may limit our ability
to change our portfolio promptly in response to changes in economic or other
conditions. In addition, federal tax laws limit our ability to sell communities
that we have owned for fewer than four years, and this may affect our ability to
sell communities without adversely affecting returns to stockholders.
Competition. Our apartment communities compete with numerous housing
alternatives in attracting residents, including other rental apartments and
single-family homes that are available for rent, as well as new and existing
single-family homes for sale. Competitive residential housing in a particular
area could adversely affect our ability to lease apartment homes and increase or
maintain rents.
In addition, competitors for acquisitions and development communities may
have greater resources than us, putting us at a competitive disadvantage.
RISK OF EARTHQUAKE DAMAGE IN CALIFORNIA MARKETS
Many of our West Coast communities are located in the general vicinity of
active earthquake faults. In July 1998, we obtained a seismic risk analysis from
an engineering firm which estimated the probable maximum damage ("PMD") for each
of the 60 West Coast communities that we owned at that time and for each of the
five West Coast communities under development, individually and for all of those
communities combined. To establish a PMD, the engineers first define a severe
earthquake event for the applicable geographic area, which is an earthquake that
has only a 10% likelihood of occurring over a 50-year period. The PMD is
determined as the structural and architectural damage and business interruption
loss that has a 10% probability of being exceeded in the event of such an
earthquake. Because a significant number of our communities are located in the
San Francisco Bay Area, the engineers' analysis defined an earthquake on the
Hayward Fault with a Richter Scale magnitude of 7.1 as a severe earthquake with
a 10% probability of occurring within a 50-year period. The engineers then
established an aggregate PMD at that time of $113 million for the 60 West Coast
communities that we owned at that time and the five West Coast communities under
development. The $113 million PMD for those communities was a PMD level that the
engineers expected to
8
<PAGE> 10
be exceeded only 10% of the time in the event of such a severe earthquake. The
actual aggregate PMD could be higher or lower as a result of variations in soil
classification and structural vulnerabilities. For each community, the
engineers' analysis calculated an individual PMD as a percentage of the
community's replacement cost and projected revenues. We cannot assure you that
an earthquake would not cause damage or losses greater than the PMD assessments
indicate, that future PMD levels will not be higher than the current PMD levels
for our communities located on the West Coast, or that future acquisitions or
developments will not have PMD assessments indicating the possibility of greater
damages or losses than currently indicated.
In August 1998, we renewed our earthquake insurance, both for physical
damage and lost revenue, with respect to all of the communities we owned at that
time and all of the communities under development. For any single occurrence, we
self-insure the first $25 million of loss, and we have in place $75 million of
coverage above this amount. In addition, our general liability and property
casualty insurance provides coverage for personal liability and fire damage. In
the event that an uninsured disaster or a loss in excess of insured limits were
to occur, we could lose the capital we have invested in the affected community,
as well as anticipated future revenue from that community, and we would continue
to be obligated to repay any mortgage indebtedness or other obligations related
to the community. Any such loss could materially and adversely affect our
business and our financial condition and results of operations.
RISKS OF PROPERTY DAMAGE AND INCREASED EXPENSES RESULTING FROM INCLEMENT WEATHER
Our communities in the Northeast and Midwest expose us to risks associated
with inclement winter weather, including increased costs for the removal of snow
and ice as well as from delays in the construction, reconstruction, development
or redevelopment of apartment communities. In addition, inclement weather could
increase the need for maintenance and repair of our communities. Similarly,
unusually high rainfall or other inclement weather could result in increased
costs due to delays in the construction, reconstruction, development or
redevelopment of apartment communities. These costs and delays could adversely
effect our financial performance.
POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION
Under various federal, state and local environmental laws, a current or
previous owner or operator of real estate may be required (often regardless of
knowledge or responsibility) to investigate and remediate the effects of
hazardous or toxic substances or petroleum product releases at its properties,
and may be held liable to a governmental entity or to third parties for property
damage and for investigation and remediation costs incurred by them in
connection with the contamination. These costs could be substantial. The
presence of such substances (or the failure to properly remediate the
contamination) may materially and adversely affect the owner's ability to borrow
against, sell or rent the affected property. In addition, certain environmental
laws create liens on contaminated sites in favor of the government for damages
and costs it incurs in connection with the contamination.
Certain federal, state and local laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs") when such materials are in
poor condition or in the event of reconstruction, remodeling, renovation, or
demolition of a building. Those laws may impose liability for release of ACMs
and may provide for third parties to seek recovery from owners or operators of
real properties for personal injury associated with ACMs. In connection with our
ownership and operation of the communities, we may potentially be liable for
such costs.
We are not aware that any ACMs were used in connection with the
construction of the communities we developed. However, ACMs were used in
connection with the construction of several of the communities that we have
acquired. We do not anticipate that we will incur any material liabilities in
connection with the presence of ACMs at our communities. We currently have or
intend to implement an operations and maintenance program for each of the
communities at which ACMs have been detected.
All of our stabilized operating communities, and all of the communities
that we are currently developing or redeveloping, have been subjected to a Phase
I or similar environmental assessment (which generally does not involve invasive
techniques such as soil or ground water sampling). These assessments have not
revealed any environmental conditions that we believe will have a material
adverse effect on our business, assets, financial condition or results of
operations. We are not aware of any other environmental conditions which would
have such a material adverse effect.
9
<PAGE> 11
However, we are aware that the migration of contamination from an
upgradient landowner near Toscana, one of our communities which is under
development, has affected the groundwater there. The upgradient landowner is
undertaking remedial response actions and we expect that the upgradient
landowner will take all necessary response actions. The upgradient landowner has
also provided an indemnity that runs to current and future owners of the Toscana
property and upon which we may be able to rely if we incur environmental
liability arising from the groundwater contamination at issue.
We are also aware that certain communities have lead paint and we are
undertaking or intend to undertake appropriate remediation or management
activity.
Additionally, prior to their respective initial public offerings, Bay and
Avalon had each been occasionally involved in developing, managing, leasing and
operating various properties for third parties. Consequently, each may be
considered to have been an operator of such properties and, therefore,
potentially liable for removal or remediation costs or other potential costs
which could relate to hazardous or toxic substances. We are not aware of any
material environmental liabilities with respect to properties managed or
developed by either Bay or Avalon for such third parties.
We cannot assure you that:
* the environmental assessments identified all potential environmental
liabilities;
* that no prior owner created any material environmental condition not
known to us or the consultants who prepared the assessments;
* that no environmental liabilities developed since such environmental
assessments were prepared;
* that the condition of land or operations in the vicinity of our
communities (such as the presence of underground storage tanks) will
not affect the environmental condition of such communities; or
* that future uses or conditions (including, without limitation, changes
in applicable environmental laws and regulations) will not result in
the imposition of environmental liability.
FEDERAL INCOME TAX RISKS--FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
We intend to operate in a manner that will allow us to continue to qualify
as a REIT. Although we believe that we have been organized and our past and
present operations qualify us as a REIT, we cannot assure you that this is true,
or that we will remain qualified as a REIT in the future. This is because
qualification as a REIT involves the application of highly technical and complex
Internal Revenue Code provisions for which there are only limited judicial or
administrative interpretations and involves the determination of various factual
matters and circumstances not entirely within our control.
If either Bay or Avalon failed to qualify as a REIT prior to the merger,
this failure could disqualify us as a REIT. If we fail to qualify as a REIT, we
will be subject to federal income tax at regular corporate rates for both
current and past years. In this event, we could be subject to potentially
significant tax liabilities, and the amount of cash available for distribution
to stockholders would be reduced and possibly eliminated. Unless entitled to
relief under certain statutory provisions, we would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost.
THE COMPANY
The Company is a 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, 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.
10
<PAGE> 12
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.
USE OF PROCEEDS
The Company will not receive any of the proceeds of the sale, if any, of
the Shares offered hereby.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Charter and bylaws, as amended and in effect on the date hereof.
GENERAL
Under the Charter, the Company has authority to issue 300 million shares of
Common Stock. Under Maryland law, stockholders generally are not responsible for
the Company's debts or obligations. As of August 31, 1998, the Company had
outstanding 63,670,126 shares of Common Stock. The Common Stock is listed on the
NYSE and the PCX under the symbol "AVB."
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,
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 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.
11
<PAGE> 13
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 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 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, 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. See "Restrictions on Transfers of Stock."
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.
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.
12
<PAGE> 14
TRANSFER AGENT
The transfer agent and registrar for the Common Stock, and the rights agent
for the Rights, is First Union National Bank of Charlotte, North Carolina.
RESTRICTIONS ON TRANSFERS OF STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding stock may be owned, directly or
indirectly, by five or fewer individuals (defined in the Code to include certain
entities) during the last half of a taxable year, and such stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of twelve (12) months or during a proportionate part of a shorter taxable
year (in each case, other than the first such year). To ensure that the Company
remains a qualified REIT, the Charter, subject to certain exceptions, provides
that no holder may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than 9.8% (the "Ownership Limit") of any class or
series of the Company's stock, and certain pension plans and mutual funds
registered under the Investment Company Act of 1940 are permitted to own
beneficially up to 15% (the "Look-Through Ownership Limit") of a class or series
of the Company's stock. Any transfer of shares of the Company's stock or of any
security convertible into shares of the Company's stock that would create a
direct or indirect ownership of shares in excess of the Ownership Limit or the
Look-Through Ownership Limit, as applicable, or that would result in the
disqualification of the Company as a REIT, including any transfer that would (i)
result in the shares of stock being owned by fewer than 100 persons, (ii) result
in the Company being "closely held" within the meaning of Section 856(h) of the
Code or (iii) result in the Company constructively owning 10% or more of the
ownership interests in a tenant of the Company within the meaning of Section
856(a)(5) of the Code, shall be null and void, and the intended transferee will
acquire no rights to such shares of stock exceeding the applicable limit. In
addition, if any purported transfer of stock or any other event would otherwise
result in any person violating the Ownership Limit or the Look-Through Ownership
Limit, as applicable, then any such purported transfer will be void and of no
force or effect with respect to the purported transferee (the "Prohibited
Transferee") as to that number of shares in excess of the applicable limit and
the Prohibited Transferee shall acquire no right or interest (or, in the case of
any event other than a purported transfer, the person or entity holding record
title to any such shares in excess of applicable limit (the "Prohibited Owner")
shall cease to own any right or interest) in such excess shares.
Any such excess shares described above shall be automatically converted
into an equal number of shares of Excess Stock and transferred automatically, by
operation of law, to a trust, the beneficiary of which shall be a qualified
charitable organization selected by the Company. If the shares that are
converted into Excess Stock are not shares of common stock, then the Excess
Stock into which they are converted shall be deemed to be a separate series of
Excess Stock with a designation and title corresponding to the designation and
title of the shares that have been converted. As soon as practicable after the
transfer of shares to the trust, the trustee of the trust (who shall be
designated by the Company and be unaffiliated with the Company and any
Prohibited Transferee or Prohibited Owner) will be required to sell such shares
of Excess Stock to a person or entity who could own such shares without
violating the Ownership Limit or Look-Through Ownership Limit, as applicable,
and distribute to the Prohibited Transferee an amount equal to the lesser of the
price paid by the Prohibited Transferee for such shares of Excess Stock or the
sales proceeds received by the trust for such shares of Excess Stock. Upon such
transfer of shares of Excess Stock, such shares shall be automatically converted
into an equal number of shares of the same class and series which was converted
into such Excess Stock, and such shares of Excess Stock shall be automatically
retired and canceled and shall thereupon be restored to the status of authorized
but unissued shares of Excess Stock.
In the case of any Excess Stock resulting from any event other than a
transfer, or from a transfer for no consideration (such as a gift), the trustee
will be required to sell such Excess Stock to a qualified person or entity and
distribute to the Prohibited Owner an amount equal to the lesser of the fair
market value of such Excess Stock as of the date of such event or the sales
proceeds received by the trust for such Excess Stock. In either case, any
proceeds in excess of the amount distributable to the Prohibited Transferee or
Prohibited Owner, as applicable, will be distributed to the beneficiary of the
trust. Prior to a sale of any such Excess Stock by the trust, the trustee will
be entitled to receive in trust for the beneficiary all dividends and other
distributions paid by the Company with respect to such Excess Stock.
In addition, subject to certain limited exceptions, shares of Excess Stock
held in the trust shall be deemed to have been offered for sale to the Company,
or its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that resulted in such transfer to the trust (or, in the
case of a devise or gift, the market price
13
<PAGE> 15
at the time of such devise or gift) and (ii) the market price on the date the
Company, or its designee, accepts such offer. The Company shall have the right
to accept such offer for a period of 90 days. Upon such a sale to the Company,
the interest of the beneficiary of the trust in the Excess Stock sold shall
terminate and the trustee shall distribute the net proceeds of the sale to the
Prohibited Owner.
The foregoing restrictions on transferability and ownership will not apply
if the Company's Board determines that it is no longer in the best interest of
the Company to continue to qualify as a REIT. The Board may, in its sole
discretion, waive the Ownership Limit and the Look-Through Ownership Limit if
evidence satisfactory to the Board is presented that the transfer of stock will
not jeopardize the qualification of the Company as a REIT and the Board
otherwise decides that such action is in the best interest of the Company.
In addition, the Charter provides that each stockholder of the Company
shall be required upon demand to disclose to the Company in writing any
information with respect to the direct, indirect and constructive ownership of
stock as the Board deems necessary to comply with the provisions of the Code
applicable to REITs, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
The Ownership Limit and the Look-Through Ownership Limit may have the
effect of delaying, deferring or preventing a change in control of the Company.
REGISTRATION RIGHTS
The registration of the Shares pursuant to the Registration Statement of
which this Prospectus is a part will discharge certain of the Company's
obligations under the terms of (i) a Registration Rights Agreement dated as of
December 22, 1997, (ii) a Registration Rights Agreement dated as of April 30,
1998, and (iii) a Registration Rights Agreement dated as of May 29, 1998
(collectively, the "Registration Rights Agreements").
Pursuant to the Registration Rights Agreements, the Company has agreed to
pay all expenses of registering the Shares (other than brokerage and
underwriting commissions, taxes of any kind and any legal, accounting and other
expenses incurred by a holder thereunder). The Company also has agreed under the
Registration Rights Agreements to indemnify each Selling Stockholder and its
officers, directors and other affiliated persons and any person who controls any
Selling Stockholder against losses, claims, damages and expenses arising under
the securities laws in connection with the Registration Statement or this
Prospectus, subject to certain limitations. In addition, each Selling
Stockholder under the Registration Rights Agreements severally agreed to
indemnify the Company and its respective directors, officers and any person who
controls the Company against all losses, claims, damages and expenses arising
under the securities laws insofar as such loss, claim, damage or expense relates
to information furnished to the Company by such Selling Stockholder for use in
the Registration Statement or Prospectus or an amendment or supplement thereto
or the failure by such Selling Stockholder (through no fault of the Company) to
deliver or cause to be delivered this Prospectus or any amendment or supplement
thereto to any purchaser of Shares covered by the Registration Statement from
such Selling Stockholder.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue
to operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the treasury regulations thereunder. The following
summary is qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. If the Company fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its stockholders.
14
<PAGE> 16
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than a dividend or
capital gain income, and will reduce the basis for the stockholder's capital
stock with respect to the distribution paid or, to the extent that they exceed
such basis, will be taxed in the same manner as gain from the sale of such
capital stock.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Common Stock offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax consequences
of an investment in the Company, including the possibility of United States
income tax withholding on Company distributions.
SELLING STOCKHOLDERS
As used herein, "Selling Stockholders" are those persons listed below who
currently hold Units and who may, at the Company's option, receive Shares upon
the exercise of their rights to require the redemption of their Units.
The following table provides the names of and the number of shares of
Common Stock and Units owned by each Selling Stockholder as of August 31, 1998.
The Shares offered by this Prospectus may be offered from time to time by the
Selling Stockholders. Since the Company is not required to issue Shares upon the
redemption of Units and the Selling Stockholders may sell all, some or none of
the Shares, the Company can only estimate, by assuming that the Selling
Stockholders sell all of the Shares, the number and percentage of shares of
Common Stock that each Selling Stockholder will own upon completion of the
offering to which this Prospectus relates.
The amounts set forth below are based upon information provided to the
Company by the Selling Stockholders, or on the Company's records, as of the date
set forth in the table below and are accurate to the Company's knowledge. It is
possible, however, that those Selling Stockholders may acquire or dispose of
beneficial ownership of additional shares of the Company's Common Stock from
time to time after the date of this Prospectus.
<TABLE>
<CAPTION>
Units Owned as of Number of Shares
Shares of August 31, 1998 that of Common Stock Owned
Common Stock may be Redeemed After Offering (1)
Owned as of for Shares of ----------------------------
Name August 31, 1998(2) Common Stock (3) Number Percent (4)
---- ------------------ -------------------- ------ -----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Craig C. Avery 0 20,050.33 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Stanford Baratz 0 23,160.40 (5)(6) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Amy Beth Baratz Irrevocable 0 3,816.91 (7) 0 *
Intervivos Trust dated May 17,
1990, Sidney Kaplan or Steve
Schachtman, Trustees
- ------------------------------------------------------------------------------------------------------------------------------------
Stanford M. Baratz Children's 0 15,266.89 (8) 0 *
Irrevocable Trust dated November
20, 1990, Victor Greenstein,
Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
CFP Residential, L.P. 0 55,630.30 (9) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Chasewood Bloomington Limited 0 45,514.09(10) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
Crow Residential Realty Investors, 0 76.83(11) 0 *
L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher T. Carley 0 14,636.88 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
James G. Carswell 0 2,356.38 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Brian K. Cranor 0 15,657.96 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Dennis Doyle 0 23,924.09 (6)(12) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Margaret Doyle 0 23,924.09(13) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Welsh Residential Acquisition and 0 763.69 0 *
Development, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Elwell 0 3,800.79 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Hubbard (14) 0 38,634.74 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Perry M. Parrott, Jr. 0 4,264.83 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Nancy Lux 0 30,015.94(15) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Robert Lux 0 30,015.94(6)(16) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Randy J. Pace 53,152 10,273.71 53,152 *
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Patterson 0 135.22 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
James C. Potts 0 133.68 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
J. Daryl Reyna 0 1,050.27 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
David R. Seiler 0 911.20 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
TCF Interests Partnership, Ltd. 0 857.43(17) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
TCF Residential Partnership, Ltd. 0 21,079.08(18) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
J. Ronald Terwilliger 363,556(19)(20) 76,763.17 363,556 *
- ------------------------------------------------------------------------------------------------------------------------------------
J. Ronald Terwilliger Grantor Trust 0 76.83(21) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Thomas 0 11,938.62 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Leonard W. Wood 0 15,132.44(22) 0 *
- ------------------------------------------------------------------------------------------------------------------------------------
Leonard W. Wood Family Limited 0 24,369.70 0 *
Partnership Grantor Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Leonard W. Wood Family Limited 0 42,642.18 0 *
Partnership
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
Notes:
* Less than 1%
16
<PAGE> 18
1. Assumes that all Shares issuable upon redemption of Units are sold by the
Selling Stockholders.
2. As of August 31, 1998, none of the Selling Stockholders held options to
purchase Common Stock that were exercisable within 60 days. Does not
include Shares issuable upon redemption of Units shown in the adjacent
column.
3. All Units listed in this column can be redeemed on a one-for-one basis for
shares of the Company's Common Stock under certain conditions. Upon such
redemption, all such Shares may be offered for sale hereby.
4. Percentage of ownership is based on 63,670,126 shares of Common Stock
outstanding on August 31, 1998.
5. Includes (a) 3,816.91 Units owned by a trust for Mr. Baratz's spouse and
(b) 15,266.89 Units owned by a trust for the benefit of Mr. Baratz's minor
children. Mr. Baratz may be deemed to be the beneficial owner of the Shares
issuable upon redemption of such Units under Rule 13d-3 under the Exchange
Act ("Rule 13d-3").
6. Includes 763.69 Units owned by Welsh Residential Acquisition and
Development, Inc., of which Units Stanford Baratz, Dennis Doyle and Robert
Lux may be deemed to be beneficial owners under Rule 13d-3 as a result of
their respective 1/3 ownership of the common stock of the corporation.
7. Represents Shares issuable upon redemption of Units owned by a trust for
the benefit of Stanford Baratz's spouse as to which Messrs. Kaplan and
Schachtman are trustees. Mr. Baratz may be deemed the beneficial owner of
the Shares issuable upon redemption of such Units under Rule 13d-3.
8. Represents Shares issuable upon redemption of Units owned by a trust for
the benefit of Stanford Baratz's minor children as to which Mr. Greenstein
is trustee. Mr. Baratz may be deemed the beneficial owner of the Shares
issuable upon redemption of such Units under Rule 13d-3.
9. Units are beneficially owned by the partners of the limited partnership.
Crow Family, Inc. is the general partner of this Unit holder and may be
deemed to be the beneficial owner of such Units under Rule 13d-3. The Chief
Executive Officer of Crow Family, Inc. is Harlan R. Crow, who may be deemed
the beneficial owner of the Shares issuable upon redemption of such Units
under Rule 13d-3.
10. Units are beneficially owned by the partners of the limited partnership.
TCF Interests Limited Partnership, Ltd., the general partner of this Unit
holder, and Mill Spring Holdings, Inc., the general partner of TCF
Interests Limited Partnership, Ltd., may be deemed to be the beneficial
owner of the Shares issuable upon redemption of such Units under Rule
13d-3. The Chief Executive Officer of Mill Spring Holdings, Inc. is Harlan
R. Crow, who may be deemed the beneficial owner of the Shares issuable upon
redemption of such Units under Rule 13d-3.
11. Units are beneficially owned by the partners of the limited partnership.
Crow Family, Inc. is the general partner of this Unit holder and may be
deemed to be the beneficial owner of the Shares issuable upon redemption of
such Units under Rule 13d-3. The Chief Executive Officer of Crow Family,
Inc. is Harlan R. Crow, who may be deemed the beneficial owner of the
Shares issuable upon redemption of such Units under Rule 13d-3.
12. Includes Shares issuable upon redemption of 19,083.80 Units owned by Mr.
Doyle's spouse, as to which he may be deemed the beneficial owner under
Rule 13d-3.
13. Includes Shares issuable upon redemption of 4,840.29 Units owned by Ms.
Doyle's spouse, as to which she may be deemed the beneficial owner under
Rule 13d-3.
14. Mr. Hubbard is Vice President-Development of the Company.
15. Includes Shares issuable upon redemption of 25,191.02 Units owned by Mrs.
Lux's spouse, which may be deemed to be beneficially owned by Mrs. Lux
under Rule 13d-3.
17
<PAGE> 19
16. Includes Shares issuable upon redemption of 4,824.92 Units owned by Mr.
Lux's spouse, which may be deemed to be beneficially owned by Mr. Lux under
Rule 13d-3.
17. Units are beneficially owned by the partners of the limited partnership.
Mill Spring Holdings, Inc. is the general partner of this Unitholder and
may be deemed to be the beneficial owner of the Shares issuable upon
redemption of such Units under Rule 13d-3. Does not include Units owned by
Chase Bloomington Limited or the Shares issuable upon redemption of such
Units, of which this Unitholder is the general partner and may be deemed
the beneficial owner under Rule 13d-3. The Chief Executive Officer of Mill
Spring Holdings, Inc. is Harlan R. Crow, who may be deemed the beneficial
owner of the Shares issuable upon redemption of such Units under Rule
13d-3.
18. Units are beneficially owned by the partners of the limited partnership.
Mill Spring Holdings, Inc. is the general partner of this Unitholder and
may be deemed to be the beneficial owner of such Units under Rule 13d-3.
The Chief Executive Officer of Mill Spring Holdings, Inc. is Harlan R.
Crow, who may be deemed the beneficial owner of the Shares issuable upon
redemption of such Units under Rule 13d-3.
19. Includes (a) 79,035 shares of Common Stock issuable upon redemption of
limited partnership units of other limited partnerships that are not
registered for resale pursuant to this prospectus and (b) 140,358 shares of
Common Stock held by the Terwilliger Family Foundation Charitable Trust,
all of which may be deemed to be beneficially owned by Mr. Terwilliger
under Rule 13d-3.
20. Does not include 76.83 Units owned by the J. Ronald Terwilliger Grantor
Trust, of which Mr. Terwilliger is the sole trustee and in that capacity
has the power to revoke the trust. Mr. Terwilliger may be deemed to be the
beneficial owner of the Shares issuable upon redemption of such Units under
Rule 13d-3.
21. Does not include (a) 284,521 shares of Common Stock, (b) 79,035 shares of
Common Stock issuable upon redemption of limited partnership units of other
limited partnerships or (c) 76,763.18 Units, all of which may be deemed to
be beneficially owned by J. Ronald Terwilliger under Rule 13d-3.
22. Does not include (a) 42,642.19 Units owned by the Leonard W. Wood Family
Limited Partnership or (b) 24,369.71 Units owned by the Leonard W. Wood
Family Limited Partnership Grantor Trust. Mr. Wood may be deemed to be the
beneficial owner of the Shares issuable upon redemption of such Units under
Rule 13d-3.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of the
Shares by the Selling Stockholders. The Company has registered the Shares for
sale pursuant to its obligations under the Registration Rights Agreements, but
registration of such Shares does not necessarily mean that all of the Shares
will be issued by the Company or that any of the Shares will be offered or sold
by the Selling Stockholders.
The Shares offered hereby may be sold from time to time on the NYSE or the
PCX on terms to be determined at the time of such sales. The Selling
Stockholders may also make private sales directly or through a broker or
brokers. Alternatively, the Selling Stockholders may from time to time offer
Shares to or through underwriters, dealers or agents, who may receive
consideration in the form of discounts and commissions; such compensation, which
may be in excess of ordinary brokerage commissions, may be paid by the Selling
Stockholders and/or the purchasers of the Shares offered hereby for whom such
underwriters, dealers or agents may act. The Selling Stockholders and any
dealers or agents that participate in the distribution of the Shares offered
hereby may be deemed to be "underwriters" as defined in the Securities Act, and
any profit on the sale of such Shares offered hereby by them and any discounts,
commissions or concessions received by any such dealers or agents might be
deemed to be underwriting discounts and commissions under the Securities Act.
The aggregate proceeds to the Selling Stockholders from sales of the Shares
offered by the Selling Stockholders hereby will be the purchase price of such
Shares less brokers' commissions.
To the extent required, the specific Shares to be sold, the names of the
Selling Stockholders, the respective purchase prices and public offering prices,
the names of any such agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying Prospectus Supplement
18
<PAGE> 20
The Shares offered hereby may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Shares offered hereby will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Common Stock offered hereby may not
simultaneously engage in market making activities with respect to the Common
Stock for a period of two business days prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-6 and 10b-7, which may limit the timing of purchases and sales by the
Selling Stockholders.
The Company will pay substantially all of the expenses incurred by the
Selling Stockholders and the Company incident to the offering and sale of the
Shares to the public, but excluding any underwriting discounts, fees,
commissions or transfer taxes.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LEGAL MATTERS
Certain legal matters, including the legality of the Shares and certain tax
matters, will be passed upon for the Company by Goodwin, Procter & Hoar LLP,
Boston, Massachusetts.
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 Current Report on 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 Current Reports on Form
8-K dated August 5, 1998 and October 6, 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.
19
<PAGE> 21
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained in this Prospectus. If
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any other person. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any of
the Shares offered hereby to any person or by anyone in any jurisdiction in
which it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.......................... 2
Incorporation of Certain
Documents by Reference....................... 3
Forward-Looking Statements..................... 4
Risk Factors................................... 4
The Company.................................... 10
Use of Proceeds................................ 11
Description of Common Stock.................... 11
Restrictions on Transfers of Capital Stock .... 13
Registration Rights............................ 14
Federal Income Tax Considerations ............. 14
Selling Stockholders........................... 15
Plan of Distribution........................... 18
Legal Matters.................................. 19
Experts........................................ 19
================================================================================
482,313 Shares
AvalonBay
Communities, Inc.
Common Stock
----------------
PROSPECTUS
----------------
October , 1998
================================================================================
<PAGE> 22
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered are set forth in the following table (all amounts
except the registration fee and NASD fee are estimated):
Registration fee $ 4,798
Legal fees and expenses 15,000
Blue Sky expenses 1,000
Miscellaneous 5,000
---------
TOTAL $ 25,798
=========
All expenses in connection with the issuance and distribution of the
securities being offered will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subject to certain limited exceptions, the Company's Charter and Bylaws,
each as amended, limit the liability of the Company's Directors and officers to
the Company and its stockholders for money damages for any breach of any duty
owed by such Director or officer of the Company to the fullest extent permitted
by Maryland law. The Maryland General Corporation Law ("MGCL") generally permits
the liability of Directors and officers to a corporation or its stockholders for
money damages to be limited, unless it is proved that (i)(a) the Director or
officer actually received an improper personal benefit in money, property or
services, (b) the Director or officer acted in bad faith, or (c) the Director's
or officer's act or omission was the result of active and deliberate dishonesty,
and (ii) the Director's or officer's act or omission was material to the matter
giving rise to the proceeding. However, if the proceeding was one by or in the
right of the Company, indemnification may not be made in respect of any
proceeding in which the Director or officer shall have been adjudged to be
liable to the Company. These provisions do not limit the ability of the Company
or its stockholders to obtain other relief, such as an injunction or rescission.
Pursuant to the authority granted in the Company's Charter and Bylaws, the
Company has also entered into indemnification agreements with certain of its
executive officers and members of the Board of Directors who are not officers of
the Company, pursuant to which the Company has agreed to indemnify them against
certain liabilities incurred in connection with their service as executive
officers and/or Directors. These provisions and contracts could reduce the legal
remedies available to the Company and its stockholders against these
individuals.
ITEM 16. EXHIBITS.
Exhibit No. Description
- ----------- -----------
5.1 Opinion of Goodwin, Procter & Hoar LLP regarding the
legality of the securities being registered.*
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters.*
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
24.1 Powers of Attorney (included in Part II of this registration
statement).*
*Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
II-2
<PAGE> 23
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
undersigned registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act, AvalonBay Communities,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Alexandria, Virginia, on this 16th day
of October, 1998.
AVALONBAY COMMUNITIES, INC.
By: /s/ Richard L. Michaux
-----------------------------
Richard L. Michaux
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Capacity Date
* Executive Chairman of the Board October 16, 1998
- --------------------------
GILBERT M. MEYER
/s/ Richard L. Michaux Director and Chief Executive October 16, 1998
- -------------------------- Officer (Principal Executive
RICHARD L. MICHAUX Officer)
* Director, President and October 16, 1998
- -------------------------- Chief Operating Officer
CHARLES H. BERMAN
* Director October 16, 1998
- --------------------------
BRUCE A. CHOATE
* Director October 16, 1998
- --------------------------
MICHAEL A. FUTTERMAN
* Director October 16, 1998
- --------------------------
JOHN J. HEALY, JR.
* Director October 16, 1998
- --------------------------
CHRISTOPHER B. LEINBERGER
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<PAGE> 25
* Director October 16, 1998
- --------------------------
RICHARD W. MILLER
* Director October 16, 1998
- --------------------------
BRENDA J. MIXSON
* Director October 16, 1998
- --------------------------
THOMAS H. NIELSEN
* Director October 16, 1998
- --------------------------
LANCE R. PRIMIS
* Director October 16, 1998
- --------------------------
ALLAN D. SCHUSTER
/s/ Thomas J. Sargeant Senior Vice President, Chief October 16, 1998
- -------------------------- Financial Officer and Treasurer
THOMAS J. SARGEANT (Principal Financial and
Accounting Officer)
*By: /s/ Richard L. Michaux October 16, 1998
----------------------------
Richard L. Michaux
Attorney-in-Fact
II-5
<PAGE> 26
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the Securities being registered.*
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters.*
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
24.1 Powers of Attorney (included in Part II of this registration
statement).*
*Previously filed.
II-6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of AvalonBay
Communities, Inc. (formerly Bay Apartment Communities, Inc.) (the "Company") of
(1) our report dated January 30, 1998, except for Note 14, as to which the date
is March 24, 1998, appearing on page 52 of the Company's 1997 Annual Report on
Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 1997, (2)
our report dated January 13, 1998, except for Note 14 as to which the date is
March 25, 1998, appearing on page F-1 of the Annual Report on Form 10-K of
Avalon Properties, Inc., as amended and restated by Amendment No. 1 thereto on
Form 10-K/A, for the year ended December 31, 1997, (3) our report dated December
16, 1997, on the audited historical summary of revenues and direct operating
expenses appearing on page F-1 of the Company's Current Report on Form 8-K dated
March 27, 1998, (4) our report dated February 12, 1998, on the audited
historical summary of revenues and direct operating expenses appearing on page
F-4 of the Company's Current Report on Form 8-K filed March 27, 1998, (5) our
report dated August 5, 1998, on the audited historical summary of operating
revenue and expenses appearing on page 5 of the Company's Current Report on Form
8-K dated August 5, 1998, and (6) our report dated September 11, 1998, on
the audited historical summary of operating revenue and expenses appearing on
page 5 of the Company's Current Report on Form 8-K dated October 6, 1998. We
also consent to the reference to us under the caption "Experts" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
Washington, D.C.
October 19, 1998
II-7
