8-KOther EventsExhibits & Filings

AVALONBAY COMMUNITIES INC 8-K Report, Corporate Update (Sep 12, 2014)

Filed September 12, 2014For Securities:AVB

Summary

AvalonBay Communities, Inc. (AVB) announced on September 9, 2014, the pricing of a public offering of 4,500,000 shares of its common stock. This offering is structured through a forward sale agreement with Goldman, Sachs & Co., where the forward purchaser initially sold shares to the public, and AVB intends to issue and sell these shares to the forward purchaser at a later date, expected to be physically settled by September 8, 2015. The company also granted the underwriter an option to purchase an additional 675,000 shares, which AVB may choose to fulfill by issuing new shares or through additional forward sale agreements. This transaction effectively allows AVB to raise capital and defer the issuance of shares until a future date, providing flexibility. Investors should note that while the settlement is expected, there is inherent risk associated with forward sale agreements. The ultimate impact on dilution and capital raised will depend on the final settlement terms and the market price of AVB's stock at the time of settlement.

Key Highlights

  • 1AVB priced a public offering of 4,500,000 shares of common stock on September 9, 2014.
  • 2The offering is conducted via a forward sale agreement with Goldman, Sachs & Co.
  • 3The company expects to physically settle the forward sale by September 8, 2015.
  • 4An option to purchase an additional 675,000 shares was granted to the underwriter.
  • 5AVB has the discretion to fulfill the additional share option by issuing new stock or entering into a new forward sale.
  • 6This structure allows AVB to raise capital with deferred share issuance.

Frequently Asked Questions

In this context, a forward sale agreement means that AvalonBay Communities, Inc. (AVB) has agreed to sell a specific number of its shares to Goldman, Sachs & Co. (the Forward Purchaser) at a future date. Goldman Sachs initially sold these shares to the public, and AVB will deliver the actual shares to Goldman Sachs later, likely by September 8, 2015. The price will be determined at settlement, subject to the terms of the agreement.

The offering involves the future issuance of up to 4,500,000 shares (plus potentially an additional 675,000 shares). This means that if AVB physically settles the forward sale by issuing new shares, it will result in dilution to existing shareholders as the total number of outstanding shares will increase.

The primary benefit for AVB is the ability to raise capital now while deferring the actual issuance of shares. This provides flexibility, as the company can time the share issuance based on market conditions or its capital needs, potentially mitigating immediate dilution if the stock price is favorable at settlement, or securing funds while delaying the share count increase.

AVB expects to physically settle the forward sale, meaning it will issue the shares to the Forward Purchaser, on one or more dates no later than September 8, 2015. The exact timing within that window is at AVB's discretion, subject to certain conditions.