Bay Apartment Communities sells Larkspur Woods Apartments; realizes $2.4 million gain.

SAN JOSE, Calif.--(BUSINESS WIRE)--June 20, 1995--Bay Apartment Communities (NYSE:BYA) has sold Larkspur Woods, a 232 apartment community in Sacramento, Calif. for approximately $17,647,000 to an institutional buyer.

As a result, Bay realized a gain of more than $2.4 million after consideration of Bay's acquisition, reconstruction and carrying costs expended over the past 15 months.

Bay originally purchased the partially completed community in March 1994 by buying a defaulted mortgage loan on the property at a substantial discount from the Resolution Trust Corporation and simultaneously purchasing title to the community through a bankruptcy proceeding. Bay's acquisition price totalled slightly more than $10 million.

The company then invested more than $5 million to complete construction on 115 uncompleted apartment homes, the leasing and physical fitness centers, pool, spa, landscaping and a gate system. Bay completed reconstruction in December 1994. The community achieved stabilized occupancy in late February 1995.

Bay intends to use the proceeds from the all cash transaction in the near term to reduce the company's short-term variable rate debt incurred in significant part with the recent purchase of the Kimberly Woods Apartments in Pacifica, less than 15 miles from downtown San Francisco.

Kimberly Woods is a 220 unit community purchased by Bay for $10.25 million from foreclosure at a substantial discount to the defaulted note balance. Bay has commenced a $5.7 million asset repositioning program for Kimberly Woods, including major exterior and interior reconstruction of the community.

"Bay's strategy is to purchase distressed apartment communities at attractive prices and then add value by utilizing our strong in-house development, construction, financing and marketing skills," said Gilbert M. Meyer, president and chief executive officer of Bay. "In the past year, we have completed three major repositioning projects, including that at Larkspur Woods, and plan to complete at least six more during the next year."

"When appropriate," he continued, "we will take advantage of the value we create in assets, such as in Larkspur Woods, and redeploy capital into other high yielding, value added opportunities like Kimberly Woods. In the near term, this transaction will slightly reduce our Funds from Operations per share since we are using proceeds to pay off relatively low-cost, variable rate debt. We will not recognize this gain on our FFO/share calculation because the sale is considered a nonrecurring event."

Bay does not anticipate any corporate level income tax and expects only a modest reduction in the return of capital as a percentage of the company's 1995 distribution as a result of the Larkspur Woods sale.

Bay Apartment Communities is a fully integrated, multi-family real estate investment trust focused on the acquisition, construction and reconstruction and management of high-quality apartments in Northern California. The company owns 22 apartment communities totalling approximately 5,500 apartment homes in the San Francisco Bay Area and Northern California.

CONTACT: Bay Apartment Communities, San Jose

Gilbert M. Meyer, 408/983-1500