<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15,1996
BRE PROPERTIES, INC.
- - -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 0-5305 94-1722214
- - ----------------- --------------------- ------------------------
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION
INCORPORATION NUMBER)
OR ORGANIZATION)
ONE MONTGOMERY STREET
TELESIS TOWER, SUITE 2500
SAN FRANCISCO, CALIFORNIA 94104-5525
- - ---------------------------------------- ------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415)445-6530
- - -------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 15, 1996 (the "Effective Date"), BRE Properties, Inc., a
Delaware corporation ("BRE"), and Real Estate Investment Trust of California,
a California real estate investment trust ("RCT") concluded a series of
transactions resulting in the merger of RCT with and into BRE (the "RCT
Merger") in accordance with the terms and conditions of the Agreement and
Plan of Merger, dated October 11, 1995, among BRE on behalf of itself and BRE
Properties, Inc., a Maryland corporation and a wholly-owned subsidiary of BRE
("BRE Maryland"), RCT and Real Estate Investment Trust of Maryland, a
Maryland real estate investment trust and a wholly-owned subsidiary of RCT,
as amended (the "Merger Agreement"). The RCT Merger was unanimously approved
by the boards of both companies and, on March 12, 1996, was approved by the
requisite vote of the shareholders of BRE and RCT at the respective
shareholders' meetings.
Under the terms of the Merger Agreement, each share of beneficial
interest of RCT ("RCT Merger Shares") issued and outstanding immediately
prior to the RCT Merger was converted into the right to receive 0.57 of a
share of the Class A Common Stock of BRE Delaware ("BRE Delaware Stock") in a
tax-free transaction. In order to effect such conversion, 5,342,218 shares of
the BRE Delaware Stock were issued to those persons who were holders of RCT
Merger Shares (the "RCT Shareholders") immediately prior to the effectiveness
of the RCT Merger. The aggregate market value on the Effective Date of the
shares of BRE Delaware Stock issued pursuant to the RCT Merger was $189,648,739,
based on the $35.50 per share closing price of the BRE Delaware Stock on the
New York Stock Exchange on the Effective Date. As a result of the RCT
Merger, the former RCT Shareholders hold approximately 33% of the combined
entity's capital stock. Based on the market price of BRE Delaware Stock on
the Effective Date, the combined companies had an equity market
capitalization of approximately $579,135,356 upon the closing of the RCT
Merger.
Also on the Effective Date and immediately after the effectiveness of
the RCT Merger, BRE changed its state of incorporation from Delaware to
Maryland pursuant to a reincorporation merger with and into BRE Maryland (the
"Reincorporation Merger"). As a result of the Reincorporation Merger, each
share of BRE Delaware Stock issued and outstanding immediately after the RCT
Merger and immediately prior to The Reincorporation Merger, including those
shares held by the former RCT Shareholders immediately before the RCT Merger,
was converted into the right to receive one share of the Common Stock of BRE
Maryland in a tax-free transaction.
Frank C. McDowell will continue to serve as the President and Chief
Executive Officer of the combined entity, which will be headquartered in San
Francisco. Jay W. Pauly, formerly the president and chief executive officer of
RCT, will serve the combined entity as Senior Executive Vice President and Chief
Operating Officer. Additionally, LeRoy E. Carlson and John H. Nunn, both of
RCT, will join BRE's senior management team as the Executive Vice President and
Chief Financial Officer, and Senior Vice President, Property
<PAGE>
Management, respectively. The Board of Directors of BRE Maryland has been
increased from six to nine directors and three trustees of RCT have been
appointed to the board.
BRE is a self-administered equity REIT which primarily owns and operates
multifamily properties in California, Arizona, Oregon and Washington. Prior to
the RCT Merger, RCT was a self-administered and self-managed equity REIT which
owned and operated apartment communities and other income producing properties
in the Western United States. As of December 31, 1995, multifamily assets
represented approximately 80% and 70%, respectively, of the equity investments
of BRE and RCT. The combined entity intends to continue to seek to redeploy
non-residential assets into additional apartment properties.
Although the Merger Agreement contains provisions relating to the
continued service to the combined entity by certain officers and trustees of
RCT and related compensation arrangements for future services, prior to the
Merger no officer or trustee of RCT was affiliated, or had a material
relationship, with BRE Delaware or any of its officers and directors or any of
their respective associates.
ITEM 5. OTHER EVENTS.
The registrant (herein, the "Corporation") has amended its Articles of
Incorporation to authorize a class of 10,000,000 shares of Preferred Stock
having such preferences and privileges as the Board of Directors may determine
at the time of issuance. The amendment was approved by the requisite vote of
the shareholders of BRE Delaware at the annual meeting on March 12, 1996. The
following is a description of the capital stock of the registrant after giving
effect to the foregoing amendment.
DESCRIPTION OF CAPITAL STOCK
The aggregate number of shares of all classes of stock that the Corporation
is authorized to issue is sixty million (60,000,000) consisting of fifty million
(50,000,000) shares of common stock, par value $0.01 per share ("Common Stock");
and ten million (10,000,000) shares of preferred stock, par value $0.01 per
share, on such terms, conditions, preferences and privileges as the Board of
Directors may from time to time designate ("Preferred Stock"). No Preferred
Stock is outstanding or has been authorized for issuance by the Board of
Directors.
Although the Board of Directors has the power to grant pre-emptive rights
to the holders of any class or series of stock to subscribe for or purchase any
class or series of the Corporation's stock, no pre-emptive rights have been
granted with respect to the Common Stock or the Preferred Stock.
The following is a description of the Common Stock of the Corporation
and certain rights of shareholders related thereto as established in the
Corporation's Amended and Restated Articles of Incorporation.
GENERAL. Each share of Common Stock entitles the holder of record thereof
to one vote at all meetings of the Corporation's shareholders, except meetings
at which only holders of another specified class or series of capital stock are
entitled to vote. Subject to any preference rights as to dividends or
liquidation distributions attaching to any Preferred Stock that may be issued in
the future, the holders of Common Stock are entitled to receive, as and when
declared by the Board of Directors, dividends or other distributions of the
Corporation's assets among shareholders for the purpose of winding up the
Corporation's affairs. The Corporation's Common Stock is traded on the New York
Stock Exchange under the symbol "BRE".
CLASSIFIED BOARD OF DIRECTORS. The Board of Directors of the
Corporation is divided into three approximately equal classes, designated
Class I, Class II and Class III. The directors elected to each class have
three-year terms. Cumulative voting is not permitted. If the number of
directors is changed, any increase or decrease is to be apportioned among the
classes by the directors then in office so as to maintain the number of
directors in each class as nearly equal as possible. Any director elected to
fill a vacancy for a newly created directorship resulting from an
<PAGE>
increase in the authorized number of directors shall hold office for a term
coinciding with the remaining term of the other directors of the same class. In
no case will a decrease in the number of directors shorten the term of any
incumbent director. One of the advantages of a classified board is that, by
providing that directors will serve three-year terms rather than one-year terms,
it will enhance the likelihood of continuity and stability in the composition,
leadership and policies of the Corporation's board of directors. With a
classified board of directors, it would generally take a majority of the
shareholders at least two years to elect a majority of the board. As a result,
a classified board may discourage proxy contests for the election of directors
or purchases by tender offer or otherwise of a substantial block of stock
because its provisions could operate to prevent obtaining control of the board
in a relatively short period of time.
VACANCIES ON THE BOARD OF DIRECTORS. A director may be removed only for
cause and only by the affirmative vote of the holders of a majority of the
outstanding voting shares. Any vacancy on the Board of Directors, including
vacancies created by increases in number, may be filled only by a majority vote
of the directors then in office, except that a vacancy resulting from removal
may also be filled by a majority of the shareholders.
RESTRICTIONS ON TRANSFER IN ORDER TO MAINTAIN REIT STATUS. To protect
the Corporation's qualification as a REIT under the Internal Revenue Code of
1986, as amended, if the Board of Directors determines that share ownership
of the Corporation has or may become concentrated to an extent that would
prevent the Corporation from qualifying as a REIT, the Board is authorized to
prevent the transfer of, or redeem (by lot or otherwise) at a price that may
be unfavorable, a number of shares sufficient to maintain the Corporation's
qualification as a REIT for tax purposes. In general, in the case of any
such redemption, the redemption price would be based on the last reported
sale price of the shares on the New York Stock Exchange on the day preceding
the redemption date.
RESTRICTIONS ON REDEMPTION OF CONTROL SHARES. The Corporation may not
acquire any of its securities from any person who holds five percent or more
of the voting stock of the Corporation (a "Five Percent Holder") at a price
above the average fair market value of the shares unless the transaction is
approved by the holders of at least a majority of the outstanding voting
stock or the Corporation purchases a proportionate amount of stock from all
other shareholders at the same price. In general, the fair market value will
be determined by reference to the price at which the shares are traded on the
New York Stock Exchange over the preceding thirty days without regard to any
premium that may have been paid by the Five Percent Holder for any shares of
the Corporation's stock. These restrictions are not affected, and cannot be
waived, by Board approval. However, these restrictions will not restrict the
ability of the Board, without shareholder approval, to call for redemption
from any shareholder (including a Five Percent Holder) of a number of such
shares sufficient in the opinion of the Board to maintain or bring the direct
or indirect ownership of the shares into conformity with the requirements for
maintaining REIT tax status. This provision is designed to restrict the
technique known as "greenmail," by which a person who has acquired a
substantial quantity of shares in a company and is threatening a takeover or
disruption of the company's business, negotiates a sale of its shares to the
company at a price or on other terms more favorable than are available to
other shareholders or which would otherwise be obtained by the seller in the
open market.
<PAGE>
RESTRICTIONS ON BUSINESS COMBINATIONS WITH A CONTROLLING SHAREHOLDER.
In general, the Corporation may not engage in a business combination, such as
a merger or sale of assets, with any person who is the beneficial owner of
ten percent or more of the Corporation's voting stock (a "Ten Percent
Holder"), including a "follow-up merger," unless the transaction (i) is
approved by a majority of the disinterested members of the Board of Directors
as well as a majority of all directors, (ii) is approved by at least 70% of
the outstanding voting shares, or (iii) satisfies certain "fair-pricing"
criteria. If the requisite approval of the directors is given, the normal
shareholder approval requirements under the Maryland General Corporation Law
would apply, and, accordingly, only a majority vote of the outstanding voting
shares would be required, or, for certain transactions, no shareholder vote
would be necessary.
These restrictions are designed to address so-called "two-tier pricing"
tactics used in some corporate takeovers, where a purchaser pays cash to
acquire a controlling equity interest in a company, by tender offer or other
transaction, and then acquires the remaining equity interest in the company
by paying the balance of the shareholders a price for their shares which is
lower than the price initially paid or with a different and less desirable
form of consideration, such as securities of the purchaser that do not have
an established trading market at the time they are issued in the business
combination.
The effect of these restrictions will be to increase the likelihood that
a person interested in acquiring the Corporation would negotiate in advance
with the Board of Directors. One of the advantages of board negotiation is
that the interest of all shareholders will best be served by a transaction
that results from negotiations based upon careful consideration of the
proposed terms, such as the price to be paid minority shareholders (if
applicable) and the tax effects of the transaction. However, the
restrictions may also have a negative impact on the likelihood of a tender
offer for the Corporation's shares or the price offered in the initial
acquisition. Tender offers or other non-open market acquisitions of stock
are usually made at prices above the prevailing market price of a company's
stock. In addition, acquisitions of stock by persons attempting to acquire
control through open market purchases may cause an increase in the market
price of the stock. The business combination restrictions may have a
tendency to discourage such purchases, particularly those of less than 70% of
the shares, and may thereby deprive some of the holders of the Corporation's
stock of an opportunity to sell their stock at a temporarily higher market
price. In addition, a purchaser seeking to acquire the Corporation by means
of a two-step acquisition may, in order to preserve its ability to comply
with the minimum price requirements, offer an amount per share in the first
step which is less than it might have offered in the absence of the business
combination restrictions.
CHARTER AMENDMENTS. Certain material provisions of the Corporation's
Articles of Incorporation may not be repealed or amended except upon the
affirmative vote of the holders of not less than 70% of the outstanding
shares of stock entitled to vote generally in the election of directors
unless the amendment has been approved by (a) the Board of Directors, and (b)
by a majority of the directors who are disinterested as to any person who is
Ten Percent Holder at the time of the proposed amendment. These requirements
exceed the minimum shareholder approval that would otherwise be required by
the Maryland General Corporation Law for the repeal or amendment of a charter
provision. Some of the provisions to which this super-majority vote applies
include: (i) the authorized capital stock of the Corporation; (ii) the
<PAGE>
number of directors, the classification of the Board of Directors and the
removal of directors; (iii) the redemption or restricted transfer of shares
to preserve the Corporation's status as a REIT; (iv) the procedures for
amendment or repeal of the Bylaws; (iv) the limitation of the liability for
monetary damages with respect to claims against an officer or director by the
Corporation or its shareholders and the indemnification of officers and
directors as to claims brought by the Corporation, its shareholders or third
parties; (v) the restrictions on the use of corporate assets to purchase or
redeem stock from certain control shareholders; and (vi) the restrictions on
business combinations with certain control shareholders. This provision is
designed to prevent a shareholder who holds or controls a majority of the
voting shares from circumventing the various provisions discussed above by
amending or repealing them by simple majority vote, which under the Maryland
General Corporation Law would be sufficient in the absence of this provision.
However, this provision also has the potential disadvantage that it limits
shareholder flexibility to amend these provisions to reflect changed
circumstances in which the Corporation may find itself.
Many of the foregoing provisions are intended to provide continuity and
stability in the management of the Corporation's business and affairs, to
increase the probability that all shareholders are treated fairly in the
event of a proposed acquisition of the Corporation and to discourage the
accumulation of substantial stockholdings with a view to forcing a repurchase
of those holdings by the Corporation at a premium. These provisions may
encourage persons interested in acquiring the Corporation to negotiate with
the Board of Directors rather than to pursue unilateral, non-negotiated
tender offers or acquisition proposals. However, these provisions, as well as
certain provisions of the applicable state corporation laws, may have the
overall effect of discouraging a merger, tender offer or proxy contest, or
the accumulation of a large block of the Corporation's shares, by, among
other things, making it more difficult for a person holding a substantial
equity interest to acquire control of the Corporation, to complete its
acquisition by buying the remainder of its shares or to force a repurchase of
its shares by Corporation at a premium.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following financial statements of RCT are included in this
report (and Independent Auditors' Report thereon)
Consolidated balance sheet as of December 31, 1994 and 1995
Consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995
Schedule III - Consolidated schedule of investments in rental
properties and accumulated depreciation
(b) The PRO FORMA financial information that would be required
pursuant to Article XI of Regulation S-X is not available at the time of
this filing because the preparation of such information at this time is
impracticable. Such information is expected to be filed within sixty days.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Trustees of
Real Estate Investment Trust of California:
We have audited the accompanying consolidated balance sheets of Real Estate
Investment Trust of California as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the accompanying consolidated financial statement
Schedule III. These financial statements and the financial statement schedule
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Real Estate
Investment Trust of California at December 31, 1995 and 1994 and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.
/s/ Ernst & Young LLP
Los Angeles, California
January 12, 1996, except for Note 2,
as to which the date is March 15, 1996
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31,
1995 1994
---- ----
ASSETS
<S> <C> <C>
INVESTMENTS IN RENTAL PROPERTIES - Notes 1, 6, and 8
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,597,651 $ 44,212,654
Buildings and improvements . . . . . . . . . . . . . . . . . . 166,688,188 162,015,001
------------ ------------
212,285,839 206,227,655
Less accumulated depreciation. . . . . . . . . . . . . . . . . (20,812,764) (18,888,941)
------------ ------------
191,473,075 187,338,714
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP - Notes 1 and 7 . . . . 1,091,810 1,523,810
NOTES RECEIVABLE SECURED BY REAL PROPERTIES - Note 4 . . . . . . 1,791,040 7,436,623
CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,014 867,491
ESCROW DEPOSIT - Note 6. . . . . . . . . . . . . . . . . . . . . 10,163,166 -
OTHER ASSETS - Note 1. . . . . . . . . . . . . . . . . . . . . . 2,412,967 1,798,741
------------ ------------
$207,673,072 $198,965,379
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LINE OF CREDIT AND NOTES PAYABLE -Note 8 . . . . . . . . . . . . $89,716,915 $88,675,446
ACCOUNTS PAYABLE AND ACCRUED EXPENSES. . . . . . . . . . . . . . 2,379,482 1,900,595
DISTRIBUTION PAYABLE TO SHAREHOLDERS - Note 5. . . . . . . . . . 3,327,171 3,299,459
------------ ------------
95,423,568 93,875,500
COMMITMENT AND CONTINGENCIES - Notes 8 and 9 . . . . . . . . . . - -
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest - no par value: unlimited shares
authorized; 9,372,312 shares in 1995 and 9,294,251
shares in 1994 issued and outstanding - Notes 10 and 11. . . 112,249,504 105,089,879
------------ ------------
$207,673,072 $198,965,379
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
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REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
<TABLE>
<CAPTION>
Consolidated Statements of Income
For The Years Ended December 31,
;
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES
Rental. . . . . . . . . . . . . . . . . . . . . . . . . . $32,024,293 $27,695,219 $20,126,346
Interest and other investment income. . . . . . . . . . . 2,022,839 1,453,488 2,125,230
----------- ----------- -----------
34,047,132 29,148,707 22,251,576
----------- ----------- -----------
REAL ESTATE EXPENSES
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 5,396,397 4,231,148 3,185,074
Interest. . . . . . . . . . . . . . . . . . . . . . . . . 6,952,428 4,855,524 1,988,399
Property taxes. . . . . . . . . . . . . . . . . . . . . . 1,908,619 1,302,013 847,708
Repairs and maintenance . . . . . . . . . . . . . . . . . 1,884,637 1,705,964 1,221,946
Insurance . . . . . . . . . . . . . . . . . . . . . . . . 214,212 186,231 120,409
Leasing commissions and payroll . . . . . . . . . . . . . 2,268,333 1,819,016 1,172,274
Utilities . . . . . . . . . . . . . . . . . . . . . . . . 2,506,482 2,038,496 1,257,666
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,070,915 1,468,993 1,094,089
----------- ----------- -----------
23,202,023 17,607,385 10,887,565
----------- ----------- -----------
ADMINISTRATIVE EXPENSES
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . 121,800 84,000 82,000
Professional services . . . . . . . . . . . . . . . . . . 88.918 108,022 236,165
Salaries and other - Note 13. . . . . . . . . . . . . . . 786,533 872,371 735,439
----------- ----------- -----------
997,251 1,064,393 1,053,603
----------- ----------- -----------
INCOME BEFORE GAINS ON SALE OF RENTAL PROPERTY. . . . . . 9,847,858 10,476,929 10,310,408
Gains on sale of rental property - Notes 1 and 6. . . . . 9,378,088 271,767 145,885
----------- ----------- -----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . $19,225,946 $10,748,696 $10,456,294
----------- ----------- -----------
----------- ----------- -----------
NET INCOME PER SHARE:
BEFORE GAINS ON SALE OF RENTAL PROPERTY - Note 12. . . . $1.05 $1.14 $1.12
----------- ----------- -----------
----------- ----------- -----------
AFTER GAINS ON SALE OF RENTAL PROPERTY -Note 12 . . . . . $2.06 $1.12 $1.13
----------- ----------- -----------
----------- ----------- -----------
DISTRIBUTIONS PAID OR ACCRUED PER SHARE
Taxable at ordinary income rates. . . . . . . . . . . . . $1.104 $1.160 $1.118
Taxable at capital gain rates . . . . . . . . . . . . . . .097 .030 .016
Non-taxable return of capital . . . . . . . . . . . . . . .219 .185 .156
----------- ----------- -----------
Total per share distributions . . . . . . . . . . . . . . $1.420 $1.375 $1.290
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Consolidated Statements of Shareholders' Equity
For The Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Shares of Total
Beneficial Undistributed Shareholders'
Interest Net Income Equity
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 $ 106,845,083 $ - $106,845,083
Proceeds from sale of Shares of Beneficial Interest - Note 11 751,008 - 751,008
Net income for the year ended December 31, 1993 . . . . . . - 10,456,294 10,456,294
Cash distributions. . . . . . . . . . . . . . . . . . . . . (1,439,574) (10,456,294) (11,895,868)
------------ ------------- ------------
BALANCE AT DECEMBER 31, 1993 106,156,517 - 106,156,517
Proceeds from sale of Shares of Beneficial Interest - Note 11 930,989 - 930,989
Net income for the year ended December 31, 1994 . . . . . . - 10,748,696 10,748,696
Cash distributions. . . . . . . . . . . . . . . . . . . . . (1,997,627) (10,748,696) (12,746,323)
------------- ------------- ------------
BALANCE AT DECEMBER 31, 1994 105,089,879 - 105,089,879
Proceeds from sale of Shares of Beneficial Interest - Note 11 1,208,927 - 1,208,927
Net income for the year ended December 31, 1995 . . . . . . - 19,225,946 19,225,946
Cash distributions. . . . . . . . . . . . . . . . . . . . . - (13,275,247) (13,275,247)
------------- ------------- ------------
BALANCE AT DECEMBER 31, 1995 $ 106,298,806 $ 5,950,699 $112,249,504
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For The Years Ended December 31, 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . $19,225,946 $10,748,696 $10,456,294
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization . . . . . . . . . . . 5,669,623 4,313,457 3,260,649
Gains on sale of rental property. . . . . . . . . . (9,378,088) (271,767) (145,885)
(Increase) decrease in other assets . . . . . . . . (888,189) (1,045,255) 829,372
Increase in accounts payable. . . . . . . . . . . . 480,402 688,696 254,728
----------- ----------- -----------
Net cash provided by operating activities. . . . 15,109,694 14,433,827 14,655,158
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to land, buildings and improvements. . . . (11,752,674) (72,745,165) (32,202,699)
Collections on notes receivable. . . . . . . . . . . 4,045,583 1,459,981 10,103,132
Increase in notes receivable . . . . . . . . . . . . - (610,000) (116,662)
Increase in escrow deposit . . . . . . . . . . . . . (10,163,166) - -
Net proceeds from sales of rental properties . . . . 13,631,224 13,750,000 2,890,706
----------- ----------- -----------
Net cash used in investing activities . . . . . . (4,239,033) (58,145,184) (19,325,523)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on secured notes payable. . . . . (58,530) (22,824) (10,882,163)
Distributions to shareholders. . . . . . . . . . . . (13,247,535) (12,495,643) (11,788,538)
Net proceeds from sales of Shares of Beneficial Interest 1,208,927 930,988 751,008
Net proceeds from issuance of unsecured note . . . . - 55,000,000 -
Net proceeds from secured note payable . . . . . . . 18,000,000 4,298,267 -
Proceeds from line of credit . . . . . . . . . . . . 17,300,000 52,250,000 61,800,000
Principal payments on line of credit . . . . . . . . (34,200,000) (55,600,000) (35,150,000)
----------- ----------- -----------
Net cash (used in) provided by financing activities (10,997,138) 44,360,788 4,730,307
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH. . . . . . . . . . . . (126,477) 649,431 59,942
CASH AT BEGINNING OF YEAR. . . . . . . . . . . . . . . 867,491 218,060 158,118
----------- ----------- -----------
CASH AT END OF YEAR. . . . . . . . . . . . . . . . . . $ 741,014 $ 867,491 $ 218,060
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest . . . . . . . $ 6,879,228 $ 4,472,651 $ 2,053,317
----------- ----------- -----------
----------- ----------- -----------
NON-CASH INVESTING ACTIVITY
On March 3, 1995, the Trust acquired improvements on a retail property using a $1,613,333 note receivable secured
by those improvements as payment.
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements
DECEMBER 31, 1995, 1994, AND 1993
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION
Real Estate Investment Trust of California (the Trust) is a regionally focused,
self-administered real estate investment trust which has investments in a
diversified portfolio of 41 income producing properties at December 31, 1995.
The portfolio principally consists of apartment communities, and is
geographically concentrated in California and adjacent states.
The significant accounting policies of the Trust are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of December 31, 1995 and 1994, and for
the years ended December 31, 1995, 1994, and 1993, include the accounts of the
Trust and a limited partnership in which the Trust acquired substantially all of
the economic ownership as of April 15, 1981; the Trust is the general partner.
All significant intercompany balances and transactions have been eliminated in
consolidation.
INVESTMENTS IN RENTAL PROPERTIES
Investment in rental properties are recorded at depreciated cost, unless the
property is permanently impaired. Properties identified by management as
permanently impaired or for current disposition are recorded at the lower of
depreciated cost or fair value. Fair value is determined based on management's
estimates of the selling price of the property less cost of the sale
transaction. At December 31, 1995, none of the Trust's assets are considered
impaired or held for current disposition.
RENTAL OPERATIONS
Rental income and income from direct financing leases are recorded on the
accrual basis of accounting and, accordingly, such income is recorded when
earned. Certain lease agreements contain provisions for additional rents based
upon the sales volume of the lessee. These additional rents are estimated and
reflected for quarterly reporting purposes. However, amounts which are not
determinable by the end of the year are not accrued.
Rental expenses are recorded on the accrual basis of accounting and,
accordingly, expenses are recorded when incurred.
Depreciation on the buildings and improvements is provided on a straight-line
basis over estimated useful lives primarily ranging from 10 to 40 years.
6
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
Expenditures for maintenance and repairs are charged to operations and renewals
and betterments are capitalized. At the time of disposal of any property, the
asset is relieved of the cost and the accumulated depreciation is removed from
the accounts.
Amortization of major leasing costs, principally commissions, is computed on the
straight-line method over the period of the related lease.
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
The Trust's investment in an unconsolidated partnership is reflected under the
equity method. (See Note 7 - Investment in Unconsolidated Partnership)
GAIN ON SALE OF RENTAL PROPERTY
Sales are generally recorded at the close of escrow or after title has been
transferred to the buyer and after appropriate down payments have been received
and there is reasonable assurance that the remaining receivable will be
collected.
FINANCIAL INSTRUMENTS
For those instruments, as defined under Statement of Financial Accounting
standards No. 107, "Disclosures About Fair Value of Financial Instruments," for
which it is practical to estimate fair value, management has determined that the
carrying amounts of the Trust's financial instruments approximate their fair
value at December 31, 1995.
RECLASSIFICATIONS
Certain items in the consolidated financial statements have been reclassified to
be in conformity with the 1995 presentation.
USE OF ESTIMATES
The preparation of the Trust's financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the financial
statement date and the reported amounts of revenue and expenses during the
reporting period. Due to uncertainties inherent in the estimation process, it
is reasonably possible that actual results could differ from these estimates.
NOTE 2 - SIGNIFICANT MATTERS
On October 11, 1995, the Trust executed a definitive agreement in which the
Trust would be merged into BRE Properties, Inc. (BRE), in which BRE would be the
surviving entity. Under the terms of the merger agreement, BRE would exchange
0.57 shares of its common stock for each share of beneficial interest of the
Trust in a tax free transaction to be accounted for as a purchase. As of
December 31, 1995, the merger was subject to the approval of the shareholders of
both companies and other conditions.
7
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
On March 15, 1996, all conditions to the merger were finalized and the
transaction was completed, at which time the Trust ceased to exist.
NOTE 3 - INCOME TAXES
The Trust has not provided for federal income taxes because the Trust believes
it qualifies as a real estate investment trust under Sections 856-860 of the
Internal Revenue Code and similar California statutes and distributes
substantially all of its taxable income to its Shareholders. The book value for
financial reporting purposes of certain investments in rental properties exceeds
the cost basis for income tax reporting purposes by approximately $397,000 at
December 31, 1995 and 1994. The difference relates to properties acquired by
the Trust in prior periods for Shares of Beneficial Interest where the Trust
succeeded to the transferor's tax basis. Accordingly, a portion of the current
and future depreciation expense charged to operations for financial statement
purposes is not deductible on the Trust's income tax return.
Additional timing differences arise primarily from the use of accelerated
methods of depreciation and differences in income recognition due to the
application of Statement of Financial Accounting Standards No. 13 (Note 6). The
aggregate of these differences is approximately $2,482,000 and $2,493,000 of
cumulative book income over cumulative taxable income (before the deduction for
distributions) at December 31, 1995 and 1994, respectively.
On December 29, 1995, the Trust entered into an agreement to defer, under
section 1031 of the Internal Revenue Code, a gain on the sale of a rental
property of approximately $8,300,000 (see Note 6). The exchange property is to
be acquired in February, 1996.
NOTE 4 - NOTES RECEIVABLE SECURED BY REAL PROPERTIES
Notes receivable secured by real properties primarily in Southern California
consist of mortgage notes that arose, in part, from the sale of rental
properties and bear interest at rates ranging from 8.5% to 11.0% and are due in
various periods through 1999.
Principal maturities on notes receivable for the succeeding years totaling
$1,791,040 are due $1,630,000 in 1996 and $161,040 in 1999.
Certain of the Trust's notes receivable secured by real properties located in
Southern California totaling $1,630,000, have provisions in which the loans are
secured by buildings and improvements that are constructed on land owned by the
Trust and leased-back to the mortgagee. The ground lease and related mortgage,
in each case, have coinciding expiration and due dates, respectively.
Provisions in the ground leases allow for both the mortgagee and the Trust to
participate in appreciation in value, if any, upon ultimate sale of the
property, including the land and improvements. Should the property not be sold
before the expiration of the ground lease, the improvements would, upon
expiration, revert to the Trust.
In March 1995, the Trust purchased from the ground lessee, the improvements on a
retail property secured by a deed of trust, using the balance on the note
receivable as the purchase price for those improvements. The Trust cancelled
the ground lease as of the purchase date.
8
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
NOTE 5 - DISTRIBUTIONS PAYABLE TO SHAREHOLDERS
In the years 1995 and 1994, the Trust declared fourth quarter distributions of
income in the amount of $.355 per share payable to Shareholders of record on
December 31, 1995 and December 31, 1994 with payment dates of January 18, 1996
and January 19, 1995, respectively.
NOTE 6 - LEASES AND RENTAL PROPERTIES
The Trust's rental properties, exclusive of apartment units (which have leases
for one year or less), generally are leased to tenants under noncancellable
leases with remaining terms ranging from one to 30 years and requiring monthly
payments of minimum specified rents. Certain of the leases require the tenant
to pay all operating expenses of the properties. In addition, some leases
provide for additional rental payments based upon gross revenues of the tenant
in excess of specified amounts. For the years ended December 31, 1995, 1994,
and 1993, the Trust earned overage rents of approximately $407,692, $344,000,
and $335,000, respectively.
Two of the Trust's leases are classified as direct financing leases with a net
investment as outlined below. Essentially, under this method of accounting the
Trust recognizes income on a basis similar to interest on a decreasing loan
principal amount rather than a level stream of rental payments.
<TABLE>
<CAPTION>
1995 1994
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Total minimum lease payments to be received $ 2,769,460 $ 3,028,328
Estimated unguaranteed residual values of leased properties 270,205 270,205
Unearned income (1,539,233) (1,703,783)
- - ----------------------------------------------------------------------------------------------------
Net investment $ 1,500,432 $ 1,594,750
</TABLE>
The remainder of the Trust's leases are classified as operating leases and the
costs, at December 31, 1995 and 1994, of the related rental properties by major
class are as follows:
<TABLE>
<CAPTION>
1995 1994
- - --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 45,597,651 $ 44,212,654
Apartments 121,636,496 114,815,947
Shopping Centers 20,418,151 24,458,883
Warehouses 4,309,264 4,209,014
Other commercial property 18,823,845 16,936,407
- - --------------------------------------------------------------------------------
210,785,407 204,632,905
Less Accumulated depreciation (20,812,764) (18,888,940)
- - --------------------------------------------------------------------------------
$ 189,972,643 $ 185,743,964
</TABLE>
9
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
In 1995 and 1994, the Trust sold certain land and improvements having book
values of $4,080,067 and $13,383,536, respectively, realizing gains of
$9,378,088 and $271,767, respectively.
At December 31, 1995, the Trust made an escrow deposit of $10,163,166 to acquire
additional rental property with an aggregate purchase price of $13,150,000.
The future minimum lease payments receivable under direct financing leases and
the future minimum rental income from noncancellable operating leases due within
the five years subsequent to December 31, 1995, and all periods thereafter are
as follows:
<TABLE>
<CAPTION>
Direct Financing Operating
Leases Leases
------------------------------------------------------------
<S> <C> <C>
1996 $ 291,984 $ 5,784,570
1997 177,126 4,776,966
1998 177,126 3,650,025
1999 177,126 2,376,523
2000 177,126 1,775,627
Thereafter 1,768,992 9,580,315
------------------------------------------------------------
------------------------------------------------------------
$ 2,769,480 $ 27,944,027
</TABLE>
NOTE 7 - INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
On December 15, 1986, the Trust purchased for $1,523,810, a 21% interest in
Chateau de Ville Apartment Fund, Ltd., a California limited partnership. The
partnership owns and operates a 258-unit apartment complex in Anaheim,
California. The general partner of the partnership is the William Walters
Company, the Trust's former Advisor.
As disclosed in Note 1, the Trust accounts for its partnership investment under
the equity method. The equity method accounts for the investment at the
underlying equity in the net assets of the partnership and records income or
loss from the partnership based on the Trust's pro rata share. The income from
the partnership recorded by the Trust is included in rental income and was
$153,155, $149,143 and $149,143, in 1995, 1994 and 1993, respectively. The
total assets and total liabilities of the partnership were approximately
$9,392,000 and $2,280,000 at December 31, 1995 and $9,493,000 and $2,381,000 at
December 31, 1994, respectively.
10
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
NOTE 8 - LINE OF CREDIT AND NOTES PAYABLE
<TABLE>
<CAPTION>
SECURED BY REAL ESTATE 1995 1994
- - --------------------------------------------------------------------------------
<S> <C> <C>
Line of Credit secured by deeds of trust
(totaling $20,000,000 in 1995 and $36,500,000
in 1994) bearing interest at Bank's prime or
reference rate or LIBOR plus 1.25% to 1.75%.
Interest is paid monthly on the outstanding
principal balance. Of the Line of Credit
totaling $20,000,000 as of December 31, 1995,
$18,000,000 expires on May 31, 1997. The
remaining $2,000,000 is renewable on a 90 day
basis expiring on February 28, 1996. Upon
expiration of the line the entire principal
balance plus accrued interest would be due
unless the term was extended or the Line
renewed. $ 12,500,000 $ 29,400,000
- - --------------------------------------------------------------------------------
First trust deed note bearing interest at
9.35% per annum with monthly payments of
$37,975 applied to principal and interest
based on a 30 year amortization schedule
until maturity on June 15, 1999. 4,216,915 4,275,446
- - --------------------------------------------------------------------------------
Note secured by deed of trust bearing
interest at 7.88% (interest only payable
monthly) with principal due in full on July
7, 2005. 18,000,000 -
- - --------------------------------------------------------------------------------
UNSECURED
- - --------------------------------------------------------------------------------
Unsecured note payable bearing interest at
7.44% (payable monthly) due in principal
installments as follows in the years: 2000
- - -$10,000,000, 2001 - $10,000,000, 2002 -
$10,000,000, 2003 - $10,000,000, 2004 -
$15,000,000. 55,000,000 55,000,000
- - --------------------------------------------------------------------------------
$89,716,915 $88,675,446
- - --------------------------------------------------------------------------------
</TABLE>
The bank line of credit described above is secured by first trust deeds on
various properties with an aggregate carrying value of approximately $47,547,000
at December 31, 1995. Pursuant to the credit agreements, the financial
institution will not loan more than 50% of the aggregate appraised value of the
properties. All of the notes payable (including the line of credit) obligate
the Trust to comply with certain restrictive covenants of a non-financial nature
not limited to among other things, a minimum debt to tangible net worth ratio
and a minimum cash flow to debt ratio. At December 31, 1995, the prime or
reference rate was 8.5%.
NOTE 9 - CONTINGENCIES
The Trust maintains some of its cash in bank deposit accounts which, at times,
may exceed federally insured limits. No losses have been experienced related to
such accounts. The Trust believes it places its cash with quality financial
institutions and is not exposed to any significant concentrations of credit risk
on cash.
Earthquake insurance, when it can be obtained, typically costs up to 10% of the
value of the insured property per year. Having evaluated the risk/cost
relationship, the Trustees have elected not to carry earthquake insurance.
Additionally, Trustees and officers of the Trust may obtain reimbursement from
the Trust pursuant to terms of the Declaration of Trust for expenses incurred by
such persons in the performance of their duties. This reimbursement obligation
of the Trust is not currently covered by insurance due to the high cost of
insurance generally.
11
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
NOTE 10 - STOCK OPTION PLAN
During 1992, the Trust reset the stock options issued to two key employees of
the Trust pursuant to the Plan adopted in 1991. The total option shares
authorized are 350,000, of which all shares are granted subject to certain
restrictions. In 1994, 120,000 shares were vested. The option prices are
$13.00 per share as to 200,000 shares and $16.88 per share as to 150,000 shares,
with the options to expire in the year 2002 and 2003, respectively. As of
December 31, 1995, 15,000 options were exercised. The remaining options vest
70,000 shares per year to qualified key employees.
NOTE 11 - PROCEEDS FROM SALES OF SHARES OF BENEFICIAL INTEREST
In 1995, 1994 and 1993, the Trust sold Shares of Beneficial Interest pursuant to
its Dividend Reinvestment and Stock Purchase Plan.
<TABLE>
<CAPTION>
Shares sold
pursuant to
Dividend Price range Net
Reinvestment per share proceeds
Plan
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 63,061 $15.83 - $17.53 $ 1,025,745
1994 55,527 $16.33 - $17.85 $ 930,988
1993 46,693 $14.25 - $17.78 $ 751,008
</TABLE>
NOTE 12 - NET INCOME PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding during each period. The weighted average number of shares
outstanding during the years ended December 31, 1995, 1994, and 1993 were
9,341,413, 9,266,546, and 9,218,519, respectively. Outstanding stock options
have not been included as they are anti-dilutive.
NOTE 13 - TRANSACTIONS WITH RELATED PARTIES
The Walters Management Company, which is partially owned by a Trustee (and
effective January 1, 1995, Chairman of the Board) of the Trust, managed four
apartment properties owned by the Trust as follows: WindRush Village Apartments,
Canyon Villas Apartments, Countryside Apartments and Lakeview Village
Apartments. Prior to December 31, 1995, all management contracts were
terminated and the Trust assumed direct management of the properties. The
Walters Management Company's management fees were comparable to fees which would
be charged by similar management organizations operating in the geographic areas
where the properties were located. Management fees paid to The Walters
Management Company for the years ended December 31, 1995, and December 31, 1994
were $79,844 and $179,362, respectively.
12
<PAGE>
SCHEDULE III - CONSOLIDATED SCHEDULE OF INVESTMENTS IN RENTAL PROPERTIES AND
ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
Amount of Initial Cost to Trust Net
Encumbrance _______________________________________ Improvements
at Buildings to
Description December 31, and December 31,
Classification of Property of Property 1995 Land Improvements Total 1995
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
200 South Glenn Drive Apartment (4) 378,031 1,477,267 1,855,298 983,999
Camarillo, California Complex
218 North 8th Street Apartment 94,620 15,574 110,194 928,992
Santa Paula, California Complex
1699 East Washington Street Apartment (4) 2,915,415 12,542,704 15,458,119 522,860
Colton, California Complex
12844 N. Paradise Village Parkway Apartment 665,600 2,698,861 3,364,461 291,087
Phoenix, Arizona Complex
11821 N. 28th Drive Apartment 1,115,000 2,853,480 3,968,480 825,852
Phoenix, Arizona Complex
2938 N. 61st Place Apartment 540,000 2,764,769 3,304,769 340,100
Scottsdale, Arizona Complex
5877 N. Granite Reef Road Apartment 820,000 3,438,476 4,258,476 226,426
Scottsdale, Arizona Complex
302 E. Monte Vista Apartment 153,000 747,299 900,299 112,689
Phoenix, Arizona Complex
601 Telegraph Canyon Road Apartment 2,374,000 8,838,253 11,212,253 525,615
San Diego, California Complex
1212 East Bethany Home Road Apartment 680,000 2,813,716 3,493,716 338,833
Phoenix, Arizona Complex
3200 Sweetwater Avenue Apartment (4) 3,626,100 11,692,761 15,318,861 225,754
San Diego, California Complex
8842 Winding Way Apartment (5) 1,246,000 7,687,652 8,933,652 212,925
Fair Oaks, California Complex
2400 Ridgeview Drive Apartment 1,566,455 5,958,911 7,525,366 27,587
Chino Hills, California Complex
1525 Graves Avenue Apartment 969,400 2,735,857 3,705,257 97,922
El Cajon, California Complex
13220 S. 48th Street Apartment 2,700,000 10,824,335 13,524,335 766,651
Phoenix, Arizona Complex
3651 North Rancho Rd. Apartment 1,152,000 6,378,167 7,530,167 39,082
Las Vegas, Nevada Complex
6570 West Flamingo Road Apartment 4,216,915 1,855,163 5,882,811 7,737,974 22,611
Las Vegas, Nevada Complex
5051 El Don Drive Apartment (5) 744,860 7,839,467 8,584,327 116,754
Rocklin, California Complex
2651 Sunset Boulevard Apartment (5) 825,300 5,501,129 6,326,429 91,082
Rocklin, California Complex
99 Cable Circle Apartment (5) 810,835 4,700,680 5,511,515 104,110
Folsom, California Complex
800 Micro Court Apartment 1,974,000 7,443,396 9,417,396 0
Roseville, California Complex
9276-9432 Telephone Road Shopping 270,000 738,317 1,008,317 1,685,622
Ventura, California Center
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
Cost at December 31, 1995
____________________________
Buildings
and Accumulated Date
Land Improvements Total Depreciation Acquired
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
200 South Glenn Drive 378,031 2,461,266 2,839,297 1,582,304 1972
Camarillo, California
218 North 8th Street 94,620 944,566 1,039,186 440,077 1972
Santa Paula, California
1699 East Washington Street 2,915,415 13,065,564 15,980,979 1,617,945 1991
Colton, California
12844 N. Paradise Village Parkway 665,600 2,989,948 3,655,548 368,454 1991
Phoenix, Arizona
11821 N. 28th Drive 1,115,000 3,679,332 4,794,332 381,356 1991
Phoenix, Arizona
2938 N. 61st Place 540,000 3,104,869 3,644,869 318,373 1991
Scottsdale, Arizona
5877 N. Granite Reef Road 820,000 3,664,902 4,484,902 303,969 1992
Scottsdale, Arizona
302 E. Monte Vista 153,000 859,988 1,012,988 65,088 1992
Phoenix, Arizona
601 Telegraph Canyon Road 2,374,000 9,363,868 11,737,868 690,895 1993
San Diego, California
1212 East Bethany Home Road 680,000 3,152,549 3,832,549 201,795 1993
Phoenix, Arizona
3200 Sweetwater Avenue 3,626,100 11,918,515 15,544,615 734,131 1993
San Diego, California
8842 Winding Way 1,246,000 7,900,577 9,146,577 363,310 1994
Fair Oaks, California
2400 Ridgeview Drive 1,566,455 5,986,498 7,552,953 277,114 1994
Chino Hills, California
1525 Graves Avenue 969,400 2,833,779 3,803,179 130,896 1994
El Cajon, California
13220 S. 48th Street 2,700,000 11,590,986 14,290,986 420,749 1994
Phoenix, Arizona
3651 North Rancho Rd. 1,152,000 6,417,249 7,569,249 246,680 1994
Las Vegas, Nevada
6570 West Flamingo Road 1,855,163 5,905,422 7,760,585 223,981 1994
Las Vegas, Nevada
5051 El Don Drive 744,860 7,956,222 8,701,082 247,263 1994
Rocklin, California
2651 Sunset Boulevard 825,300 5,592,211 6,417,511 161,485 1994
Rocklin, California
99 Cable Circle 810,835 4,804,789 5,615,624 129,540 1994
Folsom, California
800 Micro Court 1,974,000 7,443,396 9,417,396 31,064 1995
Roseville, California
9276-9432 Telephone Road 270,000 2,423,939 2,693,939 1,294,023 1973
Ventura, California
<PAGE>
SCHEDULE III - CONSOLIDATED SCHEDULE OF INVESTMENTS IN RENTAL PROPERTIES AND ACCUMULATED DEPRECIATION (CONTINUED)
- - ------------------------------------------------------------------------------------------------------------------------------
Amount of Initial Cost to Trust Net
Encumbrance _______________________________________ Improvements
at Buildings to
Description December 31, and December 31,
Classification of Property of Property 1995 Land Improvements Total 1995
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2501 East Lakeshore Drive (1) Shopping 383,905 1,110,474 1,494,379 49,536
Lake Elsinore, California Center
13271-13499 East Telegraph Road Shopping 4,771,556 12,900,873 17,672,429 888,352
Santa Fe Springs, California Center
133 S. Yorba/2512-2462 E. Chapman (3) Shopping 1,505,257 0 1,505,257 0
Orange, California Center
25842-25864 Tournament Road Shopping 2,827,526 2,827,527 5,655,053 217,450
Valencia, California Center
2705 Loma Vista Road (1) Medical 281,000 0 281,000 29,676
Ventura, California Office
23560 Madison Medical 1,560,000 4,449,737 6,009,737 1,630,158
Torrance, California Office
25880 Tournament Road Medical 235,000 4,466,220 4,701,220 233,431
Valencia, California Office
756 East Thompson Blvd. (2) Motel 11,329 0 11,329 0
Ventura, California Site (Land)
541-549 West Betteravia Road Business Park/ 272,000 1,428,000 1,700,000 108,150
Santa Maria, California Mini-Warehouse
4600 Pierce Road Storage 102,180 1,120,151 1,222,331 23,757
Bakersfield, California Mini-Warehouse
2625 Johnson Drive (3) Retail 1,403,673 0 1,403,673 7,690
Ventura, California Building
12917 Park Street Warehouse 105,000 325,291 430,291 6,000
Santa Fe Springs, California Building
2591 & 2595 Katherine Avenue Warehouse 289,877 1,175,798 1,465,675 122,114
Oxnard, California Building
705-719 East Santa Barbara Street Retail 8,925 79,194 88,119 55,744
Santa Paula, California Buildings
1050-1098 East Thompson Blvd. Retail 16,841 80,189 97,030 1,240,076
Ventura, California Buildings
20016-20150 Hawthorne Blvd. (3) Retail 1,520,000 0 1,520,000 0
Torrance, California Buildings
2501-2519 West 5th Street Industrial 628,000 1,740,325 2,368,325 14,247
Santa Ana, California Building
16818 Via del Campo Court Industrial 2,184,284 2,669,603 4,853,887 299,999
Rancho Bernardo, California Building
12011 San Vicente Blvd. Headquarters 0 78,290 78,290 143,621
Los Angeles, California Office
TOTAL: 34,716,915 45,582,132 150,025,554 195,607,687 13,558,547
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
Cost at December 31, 1995
____________________________
Buildings
and Accumulated Date
Land Improvements Total Depreciation Acquired
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2501 East Lakeshore Drive (1) 383,905 1,160,010 1,543,915 367,100 1984
Lake Elsinore, California
13271-13499 East Telegraph Road 4,771,556 13,789,225 18,560,781 3,358,424 1986
Santa Fe Springs, California
133 S. Yorba/2512-2462 E. Chapman (3) 1,505,257 0 1,505,257 0 1987
Orange, California
25842-25864 Tournament Road 2,827,526 3,044,977 5,872,503 524,973 1989
Valencia, California
2705 Loma Vista Road (1) 281,000 29,676 310,676 18,326 1952
Ventura, California
23560 Madison 1,560,000 6,079,895 7,639,895 2,312,002 1985
Torrance, California
25880 Tournament Road 235,000 4,699,651 4,934,651 1,050,930 1987
Valencia, California
756 East Thompson Blvd. (2) 11,239 0 11,329 0 1921
Ventura, California
541-549 West Betteravia Road 272,000 1,536,150 1,808,150 649,323 1981
Santa Maria, California
4600 Pierce Road 102,180 1,143,908 1,246,088 513,359 1978
Bakersfield, California
2625 Johnson Drive (3) 1,419,192 1,613,333 3,032,526 40,333 1986
Ventura, California
12917 Park Street 105,000 331,291 436,291 115,829 1982
Santa Fe Springs, California
2591 & 2595 Katherine Avenue 289,877 1,297,912 1,587,789 47,151 1994
Oxnard, California
705-719 East Santa Barbara Street 8,925 134,938 143,863 107,537 1963
Santa Paula, California
1050-1098 East Thompson Blvd. 16,841 1,320,265 1,337,106 247,729 1953
Ventura, California
20016-20150 Hawthorne Blvd. (3) 1,520,000 0 1,520,000 0 1985
Torrance, California
2501-2519 West 5th Street 628,000 1,754,572 2,382,572 345,252 1985
Santa Ana, California
16818 Via del Campo Court 2,184,284 2,969,602 5,153,886 761,167 1987
Rancho Bernardo, California
12011 San Vicente Blvd. 0 221,917 221,917 122,841 1990
Los Angeles, California
TOTAL: 45,597,651 165,187,756 210,785,407 20,812,764
</TABLE>
(1) Additional amounts classified as direct financing leases, see Note 6 to
Consolidated Financial Statements.
(2) Ground leased and lessee constructed improvements.
(3) Ground lease where Trust also has a note receivable.
(4) Deed of Trust recorded in favor of Sanwa Bank in connection with line of
credit totalling $20,000,000, see Note 8 to Consolidated Financial
Statements.
At December 31, 1995, the balance outstanding on the line of credit was
$12,500,000.
(5) Deed of Trust recorded in favor of The Prudential Insurance Company of
America in connection with $18,000,000 secured note, see Note 8 to
Consolidated Financial Statements.
<PAGE>
SCHEDULE III (CONTINUED)
CONSOLIDATED SCHEDULE OF INVESTMENTS IN RENTAL PROPERTIES AND
ACCUMULATED DEPRECIATION
The changes in the carrying amounts of rental properties and accumulated
depreciation for the years ended December 31, 1995, 1994, and 1993, are as
follows:
<TABLE>
<CAPTION>
Buildings
and
Land Improvements Total
-------------- -------------- ---------------
<S> <C> <C> <C>
RENTAL PROPERTIES
Balance at January 1,1993 $ 32,890,897 $ 86,958,989 $ 119,849,886
Additions during the year 6,863,829 25,245,593 32,109,422
Deductions for properties sold (2,268,120) (735, 075) (3,003,195)
-------------- -------------- ---------------
Balance at December 31,1993 37,486,606 111,469,507 148,956,113
Additions during the year 11,999,852 58,974,558 70,974,410
Deductions for properties sold (5,273,804) (10,023,814) (15,297,618)
-------------- -------------- ---------------
Balance at December 31, 1994 44,212,654 160,420,251 204,632,905
Additions during the year 1,981,829 11,384,178 13,366,007
Deductions for properties sold (596,832) (6,616,673) (7,213,505)
-------------- -------------- ---------------
Balance at December 31, 1995 $45,597,651 $165,187,756 $210,785,407
-------------- -------------- ---------------
-------------- -------------- ---------------
ACCUMULATED DEPRECIATION
Balance at January 1, 1993 $ 13,661,884
Add depreciation charged to expense during period 3,185,074
Deduct accumulated depreciation on properties sold (276,080)
---------------
Balance at December 31, 1993 16,570,878
Add depreciation charged to expense during period 4,231,148
Deduct accumulated depreciation on properties sold (1,913,085)
---------------
Balance at December 31, 1994 18,888,941
Add depreciation charged to expense during period 4,964,383
Deduct accumulated depreciation on properties sold (3,040,560)
---------------
Balance at December 31, 1995 $ 20,812,764
---------------
---------------
</TABLE>
<PAGE>
(c) Exhibits required by Item 601 of Regulation S-K:
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
--- -----------------------
2.1 Merger Agreement - Incorporated by reference to the S-4
Registration Statement of BRE Properties, Inc., a Delaware
corporation, (SEC File No. 33-65365) filed with the Securities and
Exchange Commission on December 22, 1995.
3.1 Articles of Amendment and Restatement of the Articles of
Incorporation of the Registrant
27.1 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on his behalf by the
undersigned hereunto duly authorized.
BRE Properties, Inc., a Maryland corporation
Date: April 1, 1996 By: /s/ LeRoy E. Carlson
--------------------------------
LeRoy E. Carlson
Executive Vice President
Chief Financial Officer and Secretary
<PAGE>
BRE PROPERTIES, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
BRE PROPERTIES, INC., a Maryland corporation, having its principal office
in Baltimore City, Maryland (which is hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Charter of the Corporation is hereby amended and restated, so
that the Charter, as so amended and restated, shall read as follows:
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BRE PROPERTIES, INC.
I. NAME
The name of the Corporation is BRE Properties, Inc.
II. PRINCIPAL OFFICE
The address of the Corporation's principal office in the State of
Maryland is 32 South Street, Baltimore, Maryland, 21202. The name and address
of its registered agent is The Corporation Trust Incorporated, a Maryland
corporation, 32 South Street, Baltimore, Maryland, 21202.
III. NATURE OF BUSINESS
The nature of the Corporation's business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Maryland and to do all things
and exercise all powers, rights and privileges which a business corporation may
now or hereafter be organized or authorized to do or to exercise under the laws
of the State of Maryland.
IV. CAPITAL STOCK
(a) CAPITAL STOCK. The aggregate number of shares of all
classes of stock that the Corporation shall have authority to issue is sixty
million (60,000,000) consisting of fifty million (50,000,000) shares of common
stock, par value $0.01 per share ("Common Stock") and ten million (10,000,000)
shares of preferred stock, par value $0.01 per share ("Preferred Stock"). The
aggregate par value of all authorized shares having a par value is $600,000.
(b) COMMON SHARES. Each share of Common Stock shall entitle
the holder of record thereof to one vote at all meetings of the Corporation's
stockholders, except meetings at which only holders of another specified class
or series of capital stock are entitled to vote. Subject to any preference
rights with respect to the payment of dividends attaching to the Preferred Stock
or any series thereof, the holders of Common Stock shall be entitled to receive,
as and when declared by the Board of Directors, dividends that may be paid in
money, property or by the issuance of fully paid capital stock of the
Corporation or other distribution of the Corporation's assets among stockholders
for the purpose of winding up the Corporation's affairs, whether voluntary or
involuntary, and subject to the rights, privileges, conditions and restrictions
attaching to the Preferred Stock or any series thereof, the Common Stock shall
entitle the holders thereof to receive the Corporation's remaining property.
2
<PAGE>
(c) PREFERRED STOCK. The Preferred Stock may be issued from
time to time, in one or more series as authorized by the Board of Directors.
Prior to the issuance of a series, the Board of Directors by resolution shall
designate that series to distinguish it from other series and classes of the
Corporation's capital stock, shall specify the number of shares to be included
in the series, and shall fix the terms, rights, restrictions and qualifications
of the shares of the series, including any preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares of the
series. Subject to the express terms of any series of Preferred Stock
outstanding at the time, the Board of Directors may increase or decrease the
number or alter the designation or classify or reclassify any unissued shares of
a particular series of Preferred Stock by fixing or altering in one or more
respects, from time to time before issuing the shares, any terms, rights,
restrictions and qualifications of the shares, including any preference,
conversion or other rights, voting powers, restrictions, limitations as to
dividends qualifications or terms or conditions of redemption of the shares of
the series.
(d) ISSUANCE OF AUTHORIZED SHARES. The Board of Directors of
the Corporation is hereby empowered to authorize from time to time the issuance
or sale of shares of its stock of any class, whether now or hereafter
authorized, or securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such consideration as may be
deemed advisable by the Board of Directors and without any action by the
stockholders.
(e) NO PRE-EMPTIVE RIGHTS. No holder of any stock or any
other securities of the Corporation, whether now or hereafter authorized, shall
have any pre-emptive right to subscribe for or purchase any stock or any other
securities of the Corporation other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or prices and
upon such other terms as the Board of Directors, in its sole discretion, may
fix; and any stock or other securities which the Board of Directors may
determine to offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series or
type of stock or other securities at the time outstanding to the exclusion of
the holders of any or all other classes, series or types of stock or other
securities at the time outstanding.
V. BOARD OF DIRECTORS
(a) Number and Classification. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors consisting of not less than three directors nor more than 15
directors, the exact number of directors to be determined from time to time in
the manner specified in the Bylaws. The directors shall be divided into three
classes, designated Class I, Class II and Class III, with each class consisting,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The initial directors of the
Corporation who will serve until the annual meeting set forth opposite the
respective class designations below and until their successors are elected and
qualified as set forth below, are as follows:
3
<PAGE>
CLASS I - TERM EXPIRES AT FISCAL 1997 ANNUAL
MEETING:
Arthur G. von Thaden
Malcolm R. Riley
CLASS II - TERM EXPIRES AT FISCAL 1998 ANNUAL
MEETING:
L. Michael Foley
John McMahan
CLASS III - TERM EXPIRES AT FISCAL 1996 ANNUAL
MEETING:
R. Preston Butcher
Frank C. McDowell
As used herein, the term "annual meeting following the end of a certain
fiscal year" shall mean the annual meeting following the end of that accounting
year, whether the accounting year is a calendar year or a fiscal year. In the
event of any change in the accounting year, the term shall refer to the next
annual meeting following the completion of a full accounting year. At each
annual meeting of stockholders beginning with the annual meeting following the
end of fiscal year 1996, successors to the class of directors whose term expires
at that annual meeting shall be elected for a three year term consisting of at
least three full accounting years. If the number of directors is changed, any
increase or decrease shall be apportioned by the directors then in office among
the classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional directors of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the fiscal year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Subject to the rights of the holders
of any series of preferred stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies on the Board resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled only by a
majority vote of the remaining directors then in office though less than a
quorum, and directors so chosen shall hold office for a term of office of the
class to which they have been elected expires. No decrease in the number of
directors constituting the Board shall shorten the term of any incumbent
director.
(b) REMOVAL OF DIRECTOR. Subject to the rights of the holders
of any series of preferred stock then outstanding, any or all of the directors
of the Corporation may be removed from office at any time, but only for cause
and only by the affirmative vote of the holders of a majority of the outstanding
shares of the Corporation then entitled to vote generally in the election of
directors.
4
<PAGE>
(c) GENERAL POWERS. The Board of Directors of the Corporation
shall, consistent with applicable law, have power in its sole discretion to
determine from time to time in accordance with sound accounting practice or
other reasonable valuation methods what constitutes annual or other net profits,
earnings, surplus, or net assets in excess of capital; to fix and vary from time
to time the amount to be reserved as working capital, or determine that retained
earnings or surplus shall remain in the hands of the Corporation; to set apart
out of any funds of the Corporation such reserves in such amounts and for such
proper purposes as it shall determine and to abolish any other funds or amounts
legally available therefor, at such times and to the stockholders of record on
such dates as it may, from time to time determine; and to determine whether and
to what extent and at what times and places and under what conditions and
regulations the books, accounts and documents of the Corporation, or any of
them, shall be open to the inspection of stockholders, except as otherwise
provided by statute or by the bylaws, and, except as so provided, no stockholder
shall have any right to inspect any book, account or document of the Corporation
unless authorized so to do by resolution of the Board of Directors.
VI. LIMITATION OF LIABILITY AND INDEMNIFICATION
To the fullest extent permitted by Maryland statutory or decisional law,
as the same may from time to time be amended or interpreted, no director or
officer of this Corporation shall be personally liable to the Corporation, any
subsidiary thereof or any of its stockholders for money damages. The
Corporation shall indemnify (i) its directors and officers, whether serving the
Corporation or, at its request, any other entity, to the full extent required or
permitted by the General Laws of the State of Maryland now or hereafter in
force, including the advancement of expenses under the procedures and to the
full extent permitted by law, and (ii) other employees and agents to such extent
as shall be permitted by law. The foregoing rights of indemnification shall not
be exclusive of any other rights to which those seeking indemnification may be
entitled. The Board of Directors may take such action as is necessary to carry
out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such bylaws, resolutions or contracts
implementing such provisions or such further indemnification arrangements as may
be permitted by law. No amendment of these Articles of Incorporation or repeal
of any of its provisions shall limit or eliminate the foregoing limitation of
liability or right to indemnification provided hereunder with respect to acts or
omissions occurring prior to such amendment or repeal.
VII. REAL ESTATE INVESTMENT TRUST
For purposes of this Article VII the following terms shall have the
meanings set forth below:
1. "REIT Provisions of the Internal Revenue Code" shall
mean Part II Subchapter M of Chapter 1 of the Internal Revenue
Code 1986, as now enacted or hereafter amended, or successor
statutes and regulations and rulings promulgated thereunder.
5
<PAGE>
2. "REIT" shall mean a real estate investment trust as
described in the REIT Provisions of the Internal Revenue Code.
Any stockholder shall, upon demand, disclose to the Board of Directors in
writing such information with respect to such stockholder's direct and indirect
ownership of the shares of the Corporation as the Board deems necessary to
enable the Corporation to comply with, or to determine whether it will be in
compliance with, the REIT Provisions of the Internal Revenue Code or the
requirements of any other taxing authority. If the Board shall determine, in
good faith, that direct or indirect ownership of the Corporation's stock has or
may become concentrated to an extent that would prevent the Corporation from
qualifying as a REIT, the Board is authorized to prevent the transfer of stock
or call for redemption (by lot or by other means affecting one or more
stockholders selected in the sole discretion of the Board) of a number of shares
of stock sufficient in the opinion of the Board to maintain or bring the direct
or indirect ownership of the stock of the Corporation into conformity with the
REIT Provisions of the Internal Revenue Code.
The redemption price for Common Stock shall be (i) the last reported sale
price of the shares on the last business day prior to the redemption date on the
principal national securities exchange on which the shares are listed or
admitted to trading, (ii) if the shares are not so listed or admitted to
trading, but are reported in the NASDAQ system, the last sale price on the last
business day prior to the redemption date or in the absence of a sale on such
day, the last bid price on such day as reported in the NASDAQ National Market
System, (iii) if the shares are not so reported or listed or admitted to
trading, the mean between the highest bid and lowest asked prices on such last
business day as reported by the National Quotation Bureau Incorporated or a
similar organization selected by the Board of Directors for such purpose, or
(iv) if not determined as aforesaid, as determined in good faith by the Board of
Directors. From and after the date fixed for redemption by the Board of
Directors, the holder of any shares of stock so called for redemption shall
cease to be entitled to dividends, distributions, voting rights and other
benefits with respect to such shares, excepting only to the right to payment of
the redemption price herein fixed, without interest.
VIII. BUSINESS COMBINATIONS
For purposes of this Article VIII (Purchase, Redemption, Etc. of Certain
Shares) and Articles XI and XIII (Shareholder Approval and Amendment of
Articles) of these Articles of Incorporation, the following terms shall have the
meanings set forth below:
(a) The term "Business Combination" shall mean (i) any merger or
consolidation of the Corporation or any Subsidiary with a Related Person or with
any other corporation or entity which after such merger or consolidation would
be an Affiliate or Associate of a Related Person, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition (in one transaction or
a series of transactions) to or with any Related Person of all or any
Substantial Part of the assets of the Corporation or any Subsidiary or of a
Related Person, (iii) any adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of a Related Person,
(iv) any issuance of securities of
6
<PAGE>
the Corporation or any Subsidiary (other than pursuant to an underwritten public
offering of securities approved by the Continuing Directors and registered under
the Securities Act of 1933), or any reclassification of securities (including
any reverse stock split) or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any Subsidiary, or any other
transaction (whether or not with or into or otherwise involving a Related
Person) if any of the foregoing transactions in this clause (iv) would result,
either directly or indirectly, in an increase in the proportionate amount of
shares of outstanding securities of the Corporation or any Subsidiary which is
Beneficially Owned by any Related Person, and (v) any agreement, contract or
other arrangement providing for any of the transactions described in this
definition of Business Combination.
(b) The terms "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on July
1, 1987.
(c) A Person shall "Beneficially Own," or shall be the
"Beneficial Owner" or shall have "Beneficial Ownership" of, any Voting Stock:
(i) which such Person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(ii) which such Person or any of its Affiliates or
Associates has, directly or indirectly, (a) the right to acquire (whether such
right is exerciseable immediately or only after the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or understanding.
(d) The term "Person" shall mean any individual, firm,
corporation or other entity and any members of any group comprised of any of the
foregoing which has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of Voting
Stock of the Corporation.
(e) The term "Related Person" shall mean any Person (other
than the Corporation or any Subsidiary, and other than any profit sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who or which:
(i) Beneficially Owns ten percent (10%) or more of the
outstanding Voting Stock;
(ii) is an Affiliate or Associate of any Person who or
which Beneficially Owns ten percent (10%) or more of the outstanding Voting
Stock;
(iii) is an Affiliate or Associate of the Corporation
and at any time within the two-year period immediately prior to the date in
question was the Beneficial Owner of ten percent (10%) or more of the then-
outstanding Voting Stock; or
7
<PAGE>
(iv) is at any time an assignee of or has otherwise
succeeded to the Beneficial Ownership of any shares of Voting Stock which were
at any time within the two-year period immediately prior to the date in question
Beneficially Owned by any Related Person, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of 1933.
(f) For the purpose of determining whether a Person is a
Related Person pursuant to subparagraph (e) of this Section 1, the number of
shares of Voting Stock outstanding shall be deemed to include any unissued
shares of Voting Stock Beneficially Owned by such Person by virtue of
subparagraph (c) of this Section 1 but shall not include any other unissued
shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(g) The term "Subsidiary" means any corporation of which a
majority of each class of outstanding equity securities is owned, directly or
indirectly, by the Corporation.
(h) The term "Continuing Director" means (i) for purposes of
this Article VIII, any member of the Board of Directors who is not an Interested
Director as to the Related Person involved in a proposed Business Combination
and (ii) for purposes of Article XIII, any member of the Board of Directors who
is not an Interested Director as to any Person who is a Related Person at the
time in question. An "Interested Director" is a member of the Board of
Directors who is an Affiliate, Associate or representative of a Related Person
or who became a member of the Board of Directors after the time that the Related
Person became a Related Person and was not nominated, recommended or elected by
a majority of the Continuing Directors then on the Board of Directors.
(i) The term "Substantial Part" shall mean more than ten
percent (10%) of the Fair Market Value, as determined by a majority of the
Continuing Directors, of the total consolidated assets of the Corporation and
its Subsidiaries, or of a Related Person, as the case may be, taken as a whole
as of the end of its most recent fiscal year ended prior to the time the
determination is being made.
(j) The term "Voting Stock" shall mean all outstanding shares
of capital stock of the Corporation entitled to vote generally in the election
of directors.
(k) The term "Fair Market Value" shall mean (i) in the case of
stock or other securities, the fair market value of such stock or other
securities on the last business day prior to the date in question as determined
in accordance with the method for determining the redemption price for Common
Stock under Article VIII of these Articles of Incorporation; and (ii) in the
case of property other than stock or securities, the fair market value of such
property on the date in question as determined in good faith by a majority of
the Continuing Directors.
(l) The term "Supermajority" shall mean seventy percent (70%)
of the then outstanding shares of Voting Stock.
8
<PAGE>
2. The affirmative vote of a Supermajority shall be required for the
approval or authorization of any Business Combination, notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified by
law, in any agreement with any national securities exchange or otherwise;
provided, however, that the affirmative vote of a Supermajority shall not be
applicable and such Business Combination shall require only such affirmative
vote as is required by law, in any agreement with any national securities
exchange or otherwise if:
(a) such Business Combination is expressly approved by both
(i) the Board of Directors and (ii) a majority of all Continuing Directors, such
express approval being given either in advance of or subsequent to any Related
Person becoming a Related Person; or
(b) in the case of a Business Combination that involves cash
or other consideration being received by the stockholders of the Corporation,
solely in their respective capacities as stockholders of the Corporation, both
of the following conditions are met:
(i) the cash plus the Fair Market Value as of the date
of the consummation of the Business Combination of any securities, property or
other consideration to be received per share by holders of the common stock of
the Corporation in the Business Combination is not less than the highest of: (A)
the Fair Market Value per share of common stock on the date of the first public
announcement of the proposed Business Combination (the "Announcement Date"); (B)
the price per share equal to the Fair Market Value per share of common stock on
the Announcement Date, plus the average per share "Premium" paid by the Related
Person in acquiring Beneficial Ownership of all shares of common stock acquired
by the Related Person during the two-year period prior to the Announcement Date,
such "Premium" consisting of the difference between the price per share paid by
the Related Person for such shares and the Fair Market Value per share of such
shares on the date or dates they were acquired by the Related Person; or (C) the
net book value per share of the Corporation's common stock based on the
estimated current fair value of its properties as reported in the Corporation's
most recent annual report to its stockholders; and
(ii) the consideration to be received by holders of the
Corporation's common stock shall be in cash or in the same form as previously
has been paid by or on behalf of the Related Person in connection with its
direct or indirect acquisition of Beneficial Ownership of shares of common stock
within the one-year period immediately prior to the Announcement Date. If the
consideration so paid for any such shares is varied as to form, the form of
consideration to be received by holders of common stock shall be either cash or
the same ratio of the varying forms of consideration used to acquire Beneficial
Ownership of all shares of common stock acquired by the Related Person in the
one-year period preceding the Announcement Date. The price determined in
accordance with paragraph (b)(i) of this Section 2 shall be subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
3. A majority of the Continuing Directors shall have the power to
determine, on the basis of information known to them, (A) whether a Person is a
Related Person, (B) the
9
<PAGE>
number of shares of Voting Stock Beneficially Owned by any Person, (C) whether a
Person is an Affiliate or Associate of another, (D) whether the assets which are
the subject of any Business Combination constitute a Substantial Part of such
assets, (E) whether two or more transactions constitute a "series of
transactions", and (F) such other matters with respect to which a determination
is permitted or required under this Article VIII. Any such determination shall
be final and binding for all purposes hereunder.
4. Nothing contained in this Article VIII shall be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve a proposed Business Combination or
recommend its adoption or approval to the stockholders of the Corporation, nor
shall anything contained in this Article VIII limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof, with
respect to evaluations of or actions and responses taken with respect to such
Business Combination. Nothing contained in this Article VIII shall be construed
to relieve any Related Person from any fiduciary obligation imposed by law.
IX. PURCHASE, REDEMPTION, ETC. OF CERTAIN SHARES
In addition to the requirements of these Articles of Incorporation and of
law, the affirmative vote of the holders of a majority of the outstanding Voting
Stock shall be required for any purchase, redemption or other acquisition by the
Corporation or a Subsidiary of any shares of common stock or other securities of
the Corporation Beneficially Owned by a Person which, together with its
Affiliates and Associates, Beneficially Owns in the aggregate five percent (5%)
or more of the outstanding Voting Stock the Corporation (a "Selling
Stockholder"), unless either: (i) the aggregate amount of cash and the Fair
Market Value of other consideration per share to be paid to the Selling
Stockholder is no greater than the average Fair Market Value of the common stock
or other securities during the 30 trading days preceding the acquisition;
(ii) the Corporation offers to purchase from all stockholders (including the
Selling Stockholder) shares of common stock or the other securities proposed to
be purchased from the Selling Stockholder, in an aggregate amount at least equal
to the number of shares of common stock or other securities proposed to be
purchased from the Selling Stockholder, on the same terms as those offered to
the Selling Stockholder, and in proportion to the number of shares of common
stock or other securities owned by all stockholders (including the Selling
Stockholder); or (iii) the transaction involves a redemption pursuant to, and on
the terms and conditions of, Article VII of these Articles of Incorporation.
X. STATUTORY EXEMPTIONS
Notwithstanding anything to the contrary contained herein, the
corporation elects not to be governed by (i) the provisions of Section 3-701 et
seq. of the Maryland General Corporation Law commonly known as the Maryland
Control Share Acquisition Act; or (ii) the provisions of Section 3-601 et seq.
of the Maryland General Corporation Law Commonly known as the Maryland Business
Combination Act, in each case as the same may be amended from time to time.
10
<PAGE>
XI. SHAREHOLDER APPROVAL
Notwithstanding any provision of law requiring the authorization of any
action by a greater proportion than a majority of the total number of shares of
all classes of capital stock or of the total number of shares of any class of
capital stock, such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the Voting Stock, except as
otherwise expressly provided in these Articles of Incorporation.
XII. AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend or
rescind the Bylaws of the Corporation.
XII. AMENDMENT OF ARTICLES
The Corporation reserves the right to repeal, alter, amend, or rescind
any provision contained in these Articles of Incorporation, including without
limitation any amendment to change the terms or contract rights, as expressly
set forth in these Articles, of any of its outstanding stock by classification,
reclassification or otherwise, in the manner now or hereafter prescribed by
statute, and all rights conferred on stockholders herein are granted subject to
this reservation. Notwithstanding the foregoing, any amendment, repeal or other
modification of the provisions of Articles IV (Capital Stock), V (Board of
Directors), VI (Limitation of Liability and Indemnification), VII (Real Estate
Investment Trust), VIII (Business Combinations), IX (Purchase, Redemption, Etc.
of Certain Shares), X (Statutory Exemptions) and this Article XIII of these
Articles of Incorporation, shall require, in addition to the other applicable
requirements of these Articles of Incorporation and of law, Supermajority
approval; provided, however, that the foregoing Supermajority approval
requirement shall not apply to any such amendment, repeal or other modification
that is found advisable (i) by the Board of Directors; and (ii) if at the time
of such approval any person is a Related Person as defined in Article IX above,
by a majority of all Continuing Directors.
SECOND:
(a) As of immediately before the amendment and restatement the
total number of shares of stock of all classes which the Corporation has
authority to issue is 50,000,000 shares, of which 50,000,000 are Common Stock
(par value $.01 per share).
(b) As amended and restated the total number of shares of
stock of all classes which the Corporation has authority to issue is sixty
million (60,000,000) consisting of fifty million (50,000,000) shares of common
stock, par value $0.01 per share ("Common Stock") and ten million (10,000,000)
shares of preferred stock par value, $0.01 per share ("Preferred Stock").
11
<PAGE>
(c) The aggregate par value of all shares having a par value
is $500,000 before the amendment and $600,000 as amended.
(d) The shares of stock of the Corporation are divided into
classes, and the following is a description, as amended, of each class,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption:
COMMONS SHARES. Each share of Common Stock shall entitle the
holder of record thereof to one vote at all meetings of the
Corporation's stockholders, except meetings at which only holders
of another specified class or series of capital stock are entitled
to vote. Subject to any preference rights with respect to the
payment of dividends attaching to the Preferred Stock, or any
series thereof, the holders of Common Stock shall be entitled to
receive, as and when declared by the Board of Directors, dividends
that may be paid in money, property or by the issuance of fully
paid capital stock of the Corporation. In the event of a
liquidation, dissolution or winding up of the Corporation or other
distribution of the Corporation's assets among stockholders for
the purpose of winding up the Corporation's affairs, whether
voluntary or involuntary, and subject to the rights, privileges,
conditions and restrictions attaching to the Preferred Stock or
any series thereof, the Common Stock shall entitle the holders
thereof to receive the Corporation's remaining property.
PREFERRED STOCK. The Preferred Stock may be issued from time to
time, in one or more series as authorized by the Board of
Directors. Prior to the issuance of a series, the Board of
Directors by resolution shall designate that series to distinguish
it from other series and classes of the Corporation's capital
stock, shall specify the number of shares to be included in the
series, and shall fix the terms, rights, restrictions and
qualifications of the shares of the series, including any
preference, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption of the shares of the series.
Subject to the express terms of any series of Preferred Stock
outstanding at the time, the Board of Directors may increase or
decrease the number or alter the designation or classify or
reclassify any unissued shares of a
12
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particular series of Preferred Stock by fixing or altering in one
or more respects, from time to time before issuing the shares, any
terms, rights, restrictions and qualifications of the shares,
including any preference, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of the shares of the series.
THIRD: The foregoing amendment and restatement of the Charter of
the Corporation has been advised by the Board of Directors and approved by the
stockholders of the Corporation.
13
<PAGE>
IN WITNESS WHEREOF, BRE Properties, Inc. has caused these presents to be
signed in its name and on its behalf by its Chief Executive Officer and
witnessed by its Secretary on March 25, 1996.
WITNESS: BRE PROPERTIES, INC.
By:__________________________ By:_____________________________
Howard E. Mason, Jr. Frank C.Dowell
Assistant Secretary Chief Executive Officer
THE UNDERSIGNED, Chief Executive Officer of BRE Properties, Inc., who
executed on behalf of the Corporation the foregoing Articles of Amendment and
Restatement of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation the foregoing Articles of Amendment and
Restatement to be the corporate act of said Corporation and hereby certifies
that to the best of his knowledge, information, and belief the matters and facts
set forth therein with respect to the authorization and approval thereof are
true in all material respects under the penalties of perjury.
________________________________
Frank C. McDowell
Chief Executive Officer
14
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1995 AUDITED
FINANCIAL STATEMENTS, REAL ESTATE INVESTMENT TRUST OF CALIFORNIA AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 741
<SECURITIES> 0
<RECEIVABLES> 1,791
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 213,378
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 207,673
<SALES> 0
<TOTAL-REVENUES> 43,425
<CGS> 0
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<OTHER-EXPENSES> 997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,952
<INCOME-PRETAX> 19,226
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