Item 8.01. Other Events.
On June 12, 2017, AvalonBay Communities, Inc. (the “Company”) priced a public offering (the “Offering”) of an aggregate of $300,000,000 principal amount of its 4.15% Medium Term Notes due 2047 (the “Notes”). The Offering was made pursuant to a Pricing Supplement dated June 12, 2017, a Prospectus Supplement dated May 6, 2015 and a Prospectus dated February 19, 2015 relating to the Company’s Shelf Registration Statement on Form S-3 (File No. 333-202185). The Terms Agreement, dated June 12, 2017, by and among the Company and Goldman Sachs & Co. LLC and Wells Fargo Securities, LLC, as representatives of the agents named therein, is filed herewith as Exhibit 1.1.
The Notes were issued under an Indenture between the Company and The Bank of New York Mellon, as trustee, dated as of January 16, 1998, as supplemented by a First Supplemental Indenture dated as of January 20, 1998, a Second Supplemental Indenture dated as of July 7, 1998, an Amended and Restated Third Supplemental Indenture dated as of July 10, 2000, a Fourth Supplemental Indenture dated as of September 18, 2006, and a Fifth Supplemental Indenture dated as of November 21, 2014.
The Notes bear interest from June 21, 2017, with interest on the Notes payable semi-annually on January 1 and July 1, beginning on January 1, 2018. The Notes will mature on July 1, 2047. The Company will use the aggregate net proceeds, after underwriting discounts and other transaction-related costs, of approximately $296,725,000 from the sale of the Notes, supplemented by cash balances on hand and (to the extent required) borrowings under its unsecured revolving credit facility, to prepay all indebtedness outstanding under the Company’s Freddie Mac secured debt pool, which matures on May 1, 2019, and to pay a related yield maintenance penalty as described below. The 5.86% per annum fixed rate debt pool was originated in April 2009 and included 12 collateral properties as of June 1, 2017, each subject to a separate mortgage and collectively subject to a master cross-collateralization agreement and a master substitution agreement. The aggregate principal amount of secured indebtedness outstanding in connection with this debt pool was $556,312,883 as of June 1, 2017, the date for which the Company made the most recent payment of principal and interest. Prepayment of the debt pool requires the payment of a yield maintenance penalty, which was estimated to be approximately $34,000,000 as of June 8, 2017. The yield maintenance penalty is computed based on a U.S. Treasury rate that has a remaining term commencing five business days prior to the payoff date through the expiration of the yield maintenance window, and the exact amount of the yield maintenance penalty is therefore subject to change. Settlement occurred on June 21, 2017.