<PAGE>
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(To Prospectus dated April 16, 1998) Registration No. 333-47469
2,000,000 Shares
BRE Properties, Inc.
8 1/2% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
(Liquidation Preference $25 Per Share)
----------------
Distributions on the Series A Preferred Stock will be cumulative from the date
of original issuance and will be payable quarterly at the rate of 8 1/2%
of the liquidation preference per annum, starting March 31, 1999. The
Series A Preferred Stock will not be redeemable before January 29, 2004
except under limited circumstances intended to preserve our status as a
real estate investment trust for federal income tax purposes. Beginning
January 29, 2004, we may redeem any Series A Preferred Stock at $25 per
share plus accrued and unpaid dividends.
----------------
The Series A Preferred Stock has been approved for listing on the
New York Stock Exchange, subject to official notice of
issuance. We expect that trading will commence
within 30 days after initial delivery
of the Series A Preferred Stock.
----------------
Investing in the Series A Preferred Stock involves risks. See "Risk
Factors" beginning on page 4 of the accompanying prospectus.
-----------------
PRICE $25 A SHARE
-----------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.............................. $25.00 $.7875 $24.2125
Total.................................. $50,000,000 $1,575,000 $48,425,000
</TABLE>
----------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
BRE Properties, Inc. has granted the Underwriters the right to purchase up to
an additional 300,000 shares of Series A Preferred Stock to cover over-
allotments, if any. The Underwriters expect to deliver the Series A Preferred
Stock to purchasers on January 29, 1999.
----------------
MORGAN STANLEY DEAN WITTER
A.G. EDWARDS & SONS, INC.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
January 26, 1999
<PAGE>
We have not authorized any person to make a statement that differs from what
is in this prospectus supplement and the accompanying prospectus. If any
person does make a statement that differs from what is in this prospectus
supplement and the accompanying prospectus, you should not rely on it. This
prospectus supplement and the accompanying prospectus are not, together or
individually, an offer to sell, nor are they seeking an offer to buy, these
securities in any jurisdiction where the offer or sale is not permitted. The
information in this prospectus supplement and the accompanying prospectus is
complete and accurate as of their respective dates, but the information may
change after those dates.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement
Page
----
<S> <C>
Prospectus Supplement Summary.............................................. S-3
Recent Developments........................................................ S-6
Capitalization............................................................. S-8
Use of Proceeds............................................................ S-8
Selected Consolidated Financial Data....................................... S-9
The Operating Company...................................................... S-11
Description of the Series A Preferred Stock................................ S-14
Federal Income Tax Considerations.......................................... S-20
Underwriters............................................................... S-23
Experts.................................................................... S-25
Legal Matters.............................................................. S-25
<CAPTION>
Prospectus
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Risk Factors............................................................... 4
Ratio of Earnings to Fixed Charges......................................... 16
Use of Proceeds............................................................ 16
Description of Debt Securities............................................. 16
Description of Preferred Shares............................................ 33
Description of Depositary Shares........................................... 39
Description of Common Stock Warrants....................................... 42
Description of Common Shares............................................... 43
Restrictions on Transfers of Capital Stock; Redemption..................... 45
Federal Income Tax Considerations.......................................... 46
Plan of Distribution....................................................... 55
Legal Matters.............................................................. 56
</TABLE>
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following is only a summary. You should read it together with the more
detailed information elsewhere in this prospectus supplement and the
accompanying prospectus. In addition, important information, including
capitalized terms used but not defined in this prospectus supplement or the
accompanying prospectus, is incorporated by reference into the prospectus.
Unless otherwise expressly stated or the context otherwise requires, the
information in this prospectus supplement assumes that the Underwriters do not
exercise their option to purchase additional shares of Series A Preferred Stock
to cover over-allotments.
The Company
BRE Properties, Inc. is a self-administered, self-managed and fully
integrated real estate investment trust focusing on the development,
acquisition, ownership and management of multifamily properties in the western
United States. As of September 30, 1998, our portfolio included 80 completed
apartment communities aggregating 20,279 units, and two commercial and retail
properties. Of these properties, 35 were located in California, 22 in Arizona,
nine in Washington, four in Nevada, four in Utah, three in Oregon, two in New
Mexico and one in Colorado. As of that date, our portfolio also included 11
apartment communities under development which, when completed, will include an
aggregate of approximately 3,022 units in Arizona, California, Colorado, New
Mexico, Nevada, Utah and Washington. As of September 30, 1998, our properties
(excluding properties under development) contained, in the aggregate,
approximately 17.8 million net rentable square feet of improvements owned by
us. In addition, at September 30, 1998, we held limited partnership interests
in two shopping centers located in Arizona. In November 1997, the Company
completed the acquisition of certain properties and operations of Trammell Crow
Residential located in the western United States. A substantial portion of the
properties acquired from Trammell Crow Residential are held by our subsidiary
BRE Property Investors LLC, a Delaware limited liability company of which we
are the sole managing member.
The Offering
Issuer.................. BRE Properties, Inc.
Securities Offered...... 2,000,000 shares of 8 1/2% Series A Cumulative
Redeemable Preferred Stock. The Underwriters have the
option to purchase up to 300,000 additional shares of
Series A Preferred Stock to cover over-allotments, if
any.
Dividends............... Investors will be entitled to receive cumulative cash
dividends on the Series A Preferred Stock at a rate
of 8 1/2% per annum of the $25.00 per share
liquidation preference (equivalent to $2.125 per
annum per share). Dividends on the Series A Preferred
Stock will be payable quarterly in arrears on March
31, June 30, September 30 and December 31, commencing
March 31, 1999. Dividends on the Series A Preferred
Stock will be cumulative from the date of original
issuance, which is expected to be January 29, 1999.
Because the first dividend payment date is March 31,
1999, the dividend payable on each share of Series A
Preferred Stock on that date will be less than the
amount of a full quarterly dividend.
Maturity................ The Series A Preferred Stock does not have any
maturity date nor are we required to redeem the
Series A Preferred Stock. Accordingly, the Series A
Preferred Stock will remain outstanding unless we
decide to redeem it. In addition, we are not required
to set aside funds to redeem the Series A Preferred
Stock.
Optional Redemption..... We may not redeem the Series A Preferred Stock prior
to January 29, 2004, except under limited
circumstances intended to preserve our status
S-3
<PAGE>
as a real estate investment trust for federal income
tax purposes. On and after January 29, 2004, we may,
at our option, redeem the Series A Preferred Stock,
in whole or from time to time in part, for cash in
the amount of $25.00 per share, plus accrued and
unpaid dividends to the date of redemption. We may
pay the redemption price (other than the portion
consisting of accrued and unpaid dividends) only out
of the sale proceeds of our other capital stock,
which may include other series of our preferred
stock.
Liquidation Preference.. If we liquidate, dissolve or wind up the Company,
holders of the Series A Preferred Stock will have the
right to receive $25.00 per share, plus accrued and
unpaid dividends to the date of payment, before any
payment is made to the holders of our common stock.
Ranking................. The Series A Preferred Stock will rank prior to our
common stock with respect to the payment of dividends
and the distribution of assets in the event of our
liquidation, dissolution or winding up.
Voting Rights........... Holders of Series A Preferred Stock will generally
have no voting rights. However, if we do not pay
dividends on the Series A Preferred Stock for six or
more quarterly periods (whether or not consecutive),
the holders of the Series A Preferred Stock, voting
as a class with the holders of any other class or
series of our capital stock which has similar voting
rights, will be entitled to vote for the election of
two additional directors to serve on our board of
directors until we pay all dividends which we owe on
the Series A Preferred Stock. In addition, the
affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A
Preferred Stock is required for us to issue capital
stock ranking senior to the Series A Preferred Stock,
to amend our articles of incorporation in a manner
that materially and adversely affects the rights of
the Series A Preferred Stock, or to enter into a
merger or consolidation unless the Series A Preferred
Stock remains outstanding or is converted into
preferred stock of the successor entity.
Listing................. The New York Stock Exchange has approved the listing
of the Series A Preferred Stock, subject to official
notice of issuance. Trading of the Series A Preferred
Stock is expected to commence within 30 days after
initial delivery of the Series A Preferred Stock.
Restrictions on
Ownership and Transfer.. Our articles of incorporation and bylaws contain
provisions which are intended to help preserve our
status as a real estate investment trust for federal
income tax purposes. For example, if our board of
directors determines that the direct or indirect
ownership of shares of our capital stock, including
the Series A Preferred Stock, has or may become
concentrated to an extent that would prevent us from
qualifying as a real estate investment trust, we may
redeem those shares at any time. Similarly, we may
prevent any proposed transfer of our capital stock,
including the Series A Preferred Stock, which would
jeopardize our status as a real estate investment
trust.
S-4
<PAGE>
Conversion.............. The Series A Preferred Stock will not be convertible
into or exchangeable for any other securities or
property.
Use of Proceeds......... We will use the net proceeds from the offering of the
Series A Preferred Stock to repay outstanding
indebtedness under our credit facility.
Risk Factors
You should carefully review the information contained in the accompanying
prospectus under the caption "Risk Factors."
Forward-Looking Statements
In addition to historical information, we have made forward-looking
statements in this prospectus supplement and in the accompanying prospectus and
in the documents incorporated by reference in the accompanying prospectus.
These forward-looking statements pertain to, among other things, our capital
resources, portfolio performance and results of operations. Forward-looking
statements involve numerous risks and uncertainties and you should not rely on
such statements as predictions of future events since there can be no assurance
that the events or circumstances reflected in these statements will be achieved
or will occur. Certain such forward-looking statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or the negative thereof or other variations
thereof or comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and they may be
incapable of being realized. The following factors, among others, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements: defaults or non-renewal of
leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and in effecting acquisitions, failure to successfully integrate acquired
properties and operations, risks and uncertainties affecting property
development and construction (including construction delays, cost overruns,
inability to obtain necessary permits and public opposition to such
activities), failure to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended, environmental uncertainties, risks
related to natural disasters, financial market fluctuations, changes in real
estate and zoning laws and increases in real property tax rates. Our success
also depends upon economic trends generally, including interest rates, income
tax laws, governmental regulation, legislation, population changes and those
risk factors discussed in the accompanying prospectus under the heading "Risk
Factors." You are cautioned not to place undue reliance on forward-looking
statements, which reflect management's analysis only. We assume no obligation
to update forward-looking statements.
S-5
<PAGE>
RECENT DEVELOPMENTS
Unsecured Line of Credit
In October 1998, BRE Properties, Inc. (the "Company" or "BRE") entered into
a new, unsecured line of credit (the "Credit Facility") with a syndicate of
banks led by Bank of America National Trust and Savings Association ("Bank of
America"). The Credit Facility provides for up to $400,000,000 in total
borrowings and matures in August 2001. The Credit Facility replaced the
Company's $265 million line of credit with Bank of America and the Company's
$35 million line of credit with Sanwa Bank California. The Credit Facility
bears interest at the lower of LIBOR plus .70% or a rate based on bids of the
participating banks, and is guaranteed by BRE Property Investors LLC (the
"Operating Company"), a subsidiary of the Company.
Certain 1998 Financial Information
On January 19, 1999, the Company announced the following unaudited financial
information for the quarter and year ended December 31, 1998.
Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Assets
Investments in rental properties:
Multifamily........................................... $1,610,461 $1,248,012
Commercial and retail................................. 1,200 11,929
Construction in progress.............................. 65,958 84,202
Less: accumulated depreciation and amortization....... (75,838) (49,721)
---------- ----------
1,601,781 1,294,422
Investments in limited partnerships................... 814 2,780
---------- ----------
Real estate portfolio................................. 1,602,595 1,297,202
Mortgage loans, net................................... 2,336 4,871
Cash and short-term investments....................... 2,057 4,216
Funds held in escrow.................................. -- 15,833
Other................................................. 23,928 19,776
---------- ----------
Total assets.......................................... $1,630,916 $1,341,898
========== ==========
Liabilities and Shareholders' Equity
Liabilities:
Mortgage loans........................................ $ 235,146 $ 232,367
Unsecured senior notes................................ 253,000 123,000
Unsecured lines of credit............................. 264,000 186,000
Accounts payable and accrued expenses................. 26,333 16,970
---------- ----------
Total liabilities..................................... 778,479 558,337
---------- ----------
Minority interest..................................... 87,432 76,066
---------- ----------
Shareholders' equity:
Common Shares......................................... 443 417
Additional paid-in capital............................ 764,562 707,078
---------- ----------
Total shareholders' equity............................ 765,005 707,495
---------- ----------
Total liabilities and shareholders' equity............ $1,630,916 $1,341,898
========== ==========
</TABLE>
S-6
<PAGE>
Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
----------------------- --------------------
1998 1997 1998 1997
----------- ----------- ----------- --------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue
Rental income:
Multifamily..................... $51,117 $36,761 $189,810 $122,936
Commercial and retail........... 71 373 996 5,742
Other income...................... 2,663 2,817 12,439 9,083
------- ------- -------- --------
Total revenue..................... 53,851 39,951 203,245 137,761
Expenses
Real estate expenses:
Multifamily..................... 16,981 13,329 64,566 44,049
Commercial and retail........... -- 129 58 522
Depreciation and amortization..... 7,586 5,303 27,763 17,938
Interest expense.................. 9,632 6,261 35,598 21,606
General and administrative........ 1,048 1,188 6,133 4,301
Provision for litigation loss..... -- -- 2,400 --
------- ------- -------- --------
Total expenses.................... 35,247 26,210 136,518 88,416
Net income before gains (losses)
on sales of real estate
investments and minority
interests........................ 18,604 13,741 66,727 49,345
Gains (losses) on sales of real
estate investments............... (786) (336) 1,859 27,824
------- ------- -------- --------
Income before minority interest... 17,818 13,405 64,868 77,169
Minority interest................. 1,173 972 4,224 972
------- ------- -------- --------
Net income........................ $16,645 $12,433 $ 60,644 $ 76,197
======= ======= ======== ========
Net income per Common Share:
Net income per Common Share before
gains (losses) on sales of real
estate investments less minority
interest--basic.................. $ 0.39 $ 0.33 $ 1.45 $ 1.35
Gains (losses) per Common Share on
sales of real estate investments. (0.01) (0.01) (0.04) 0.78
------- ------- -------- --------
Net income per Common Share--
basic............................ $ 0.38 $ 0.32 $ 1.41 $ 2.13
======= ======= ======== ========
Net income per Common Share before
gains (losses) on sales of real
estate investments and minority
interest--assuming dilution (1).. $ 0.39 $ 0.33 $ 1.45 $ 1.35
Gains (losses) per Common Share on
sales of real estate investments. (0.01) (0.01) (0.04) 0.76
------- ------- -------- --------
Net income per Common Share--
assuming dilution (1)............ $ 0.38 $ 0.32 $ 1.41 $ 2.11
======= ======= ======== ========
Funds from operations (2)......... $26,092 $19,044 $ 96,792 $ 67,283
Weighted average Common Shares
outstanding--basic............... 44,190 38,470 42,940 35,750
Weighted average Common Shares
outstanding--assuming dilution... 47,300 40,030 46,110 36,610
</TABLE>
- --------
(1) Effective in 1997, the calculation of earnings per share was changed by
Statement of Financial Accounting Standards No. 128. This Statement
requires disclosure of the impact of the assumed conversion of stock
options and other dilutive securities, if any.
(2) See note 4 under "Selected Consolidated Financial Data" for the definition
of, and certain important information concerning, funds from operations.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of September 30, 1998 and as adjusted to give effect to the
issuance of the Series A Preferred Stock offered hereby and the application of
the estimated net proceeds therefrom to repay indebtedness under the Credit
Facility. The table should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's filings under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
incorporated into the accompanying prospectus by reference and the information
set forth herein under "Recent Developments--Certain 1998 Financial
Information."
<TABLE>
<CAPTION>
As of September 30, 1998
------------------------------------
Actual As Adjusted
---------------- -------------------
(unaudited, dollars in thousands)
<S> <C> <C>
Indebtedness:
Credit facilities(1)....................... $ 214,000 $ 165,725
Unsecured senior notes..................... 253,000 253,000
Mortgage loans payable..................... 235,844 235,844
---------------- ----------------
Total indebtedness........................... 702,844 654,569
---------------- ----------------
Minority interest............................ 76,066 76,066
---------------- ----------------
Shareholders' equity:
Preferred Shares, $0.01 par value per
share, 10,000,000 shares authorized, no
shares issued or outstanding actual,
2,000,000 shares issued and outstanding as
adjusted.................................. -- 20
Common Shares, $0.01 par value per share,
100,000,000 shares authorized, 44,148,816
issued and outstanding(2)................. 442 442
Additional paid-in capital................. 663,695 711,950
Accumulated net income in excess of
cumulative dividends...................... 99,014 99,014
---------------- ----------------
Total shareholders' equity .................. 763,151 811,426
---------------- ----------------
Total capitalization......................... $ 1,542,061 $ 1,542,061
================ ================
</TABLE>
- --------
(1) As of December 31, 1998, the Company had borrowings of approximately $264
million outstanding under the Credit Facility. See "Use of Proceeds."
(2) Excludes shares of common stock, par value $0.01 per share ("Common
Shares"), reserved for issuance upon the exercise of options under the
Company's stock option plans, Common Shares reserved for issuance under
the Company's dividend reinvestment plan and Common Shares reserved for
issuance upon exchange of outstanding units in the Operating Company (the
"OC Units"). See "The Operating Company--Exchange Rights."
USE OF PROCEEDS
The net proceeds to the Company from the offering of the Series A Preferred
Stock, which will be approximately $48.3 million (approximately $55.5 million
if the over-allotment option granted to the Underwriters is exercised in
full), will be used by the Company to repay outstanding indebtedness under its
Credit Facility. As of December 31, 1998, the Company had total borrowings of
approximately $264 million outstanding under the Credit Facility at a weighted
average interest rate of approximately 6.1% per annum. The proceeds from these
borrowings were used by the Company to finance acquisitions and for other
general corporate purposes.
S-8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial and other data have been derived from the
consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's filings under the 1934 Act and incorporated by
reference in the accompanying prospectus and the information included herein
under "Recent Developments--Certain 1998 Financial Information."
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- --------- --------- ---------- ----------- -------- ----------
(in thousands, except per share data, (unaudited)
ratios and Other Information)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues................ $ 49,806 $ 56,970 $ 65,387 $ 101,651 $ 137,761 $ 97,811 $ 149,394
Real estate expenses.... 15,230 17,256 21,540 31,030 44,571 31,115 47,643
-------- --------- --------- ---------- ----------- -------- ----------
Net operating income.... 34,576 39,714 43,847 70,621 93,190 66,696 101,751
Interest expense........ 5,656 5,599 7,973 16,325 21,606 15,344 25,966
Depreciation expense.... 6,097 7,080 7,864 13,283 17,938 12,635 20,177
General and
administrative
expenses............... 3,292 4,469 4,221 3,999 4,301 3,114 5,085
Provision for investment
loss................... -- -- 2,000 -- -- -- --
Provision for litigation
loss................... -- -- -- -- -- -- 2,400
Net gain (loss) on sales
of investments......... 506 1,646 221 52,825 27,824 28,160 (1,073)
Minority interest....... -- -- -- -- 972 -- 3,051
-------- --------- --------- ---------- ----------- -------- ----------
Net income.............. $ 20,037 $ 24,212 $ 22,010 $ 89,839 $ 76,197 $ 63,763 $ 43,999
======== ========= ========= ========== =========== ======== ==========
Weighted average number
of Common Shares
outstanding............ 20,150 21,840 21,905 30,520 35,750 34,790 42,560
Weighted average number
of Common Shares
outstanding assuming
dilution............... 20,195 21,870 21,935 30,790 36,610 35,450 45,760
Net income per Common
Share.................. $ 0.99 $ 1.11 $ 1.01 $ 2.94 $ 2.13 $ 1.83 $ 1.03
Net income per Common
Share assuming
dilution............... $ 0.99 $ 1.11 $ 1.00 $ 2.92 $ 2.11 $ 1.80 $ 1.03
BALANCE SHEET DATA (at
end of period)
Investment in rental
property, at cost...... $310,003 $ 373,676 $ 371,438 $ 816,389 $ 1,346,923 $865,931 $1,598,158
Total assets............ $293,628 $ 343,853 $ 354,895 $ 783,714 $ 1,341,898 $866,083 $1,563,395
Total indebtedness...... $ 45,416 $ 97,169 $ 112,290 $ 311,985 $ 541,367 $269,710 $ 702,844
Shareholders' equity.... $245,156 $ 243,436 $ 239,248 $ 464,114 $ 707,495 $585,702 $ 763,151
Common Shares
outstanding............ 21,830 21,850 21,940 32,880 41,740 37,040 44,150
OTHER DATA
Cash provided by
operating activities... $ 24,121 $ 31,063 $ 27,068 $ 47,887 $ 63,818 $ 34,541 $ 70,550
Cash used in investing
activities............. $(57,430) $ (66,740) $ (3,820) $ (132,082) $ (235,293) $(46,279) $ (229,232)
Cash provided by (used
in) financing
activities............. $ 42,216 $ 25,821 $ (11,077) $ 68,322 $ 175,507 $ 12,429 $ 157,684
Interest coverage ratio
(1).................... 5.5x 6.3x 5.0x 4.1x 4.1x 4.1x 3.7x
Fixed charge coverage
ratio (2).............. 5.0x 5.2x 4.4x 3.7x 3.7x 3.6x 3.5x
Ratio of earnings to
combined fixed charges
and preferred share
dividends (3).......... 4.4x 5.0x 4.0x 3.2x 3.0x 3.3x 2.1x
FUNDS FROM OPERATIONS
Net income.............. $ 20,037 $ 24,212 $ 22,010 $ 89,839 $ 76,197 $ 63,763 $ 43,999
Depreciation of real
estate................. 6,097 7,080 7,864 13,283 17,938 12,635 20,177
Minority interest....... -- -- -- -- 972 -- 3,051
Provision for investment
losses................. -- -- 2,000 -- -- -- --
Provision for litigation
loss................... -- -- -- -- -- -- 2,400
Net gain (loss) on sales
of investments......... (506) (1,646) (221) (52,825) (27,824) (28,160) 1,073
-------- --------- --------- ---------- ----------- -------- ----------
Funds from operations
(4).................... $ 25,628 $ 29,646 $ 31,653 $ 50,297 $ 67,283 $ 48,238 $ 70,700
======== ========= ========= ========== =========== ======== ==========
OTHER INFORMATION (at
end of period)
Total number of
completed apartment
units.................. 3,442 5,067 5,475 12,212 18,569 13,543 20,279
</TABLE>
S-9
<PAGE>
- --------
(1) The interest coverage ratios represent net income, less net gain on sales
of investments, plus the provision for investment and litigation loss,
interest expense and depreciation, divided by interest expense.
(2) The fixed charge coverage ratios represent net income, less net gain on
sales of investments, plus the provision for investment and litigation
loss, interest expense, and depreciation, divided by the sum of interest
expense and scheduled principal payments on debt.
(3) For the purposes of computing these ratios, earnings have been calculated
by adding fixed charges to income before net gains (losses) on sales of
investments and provisions for investment and litigation loss. Fixed
charges consist of interest costs (including capitalized interest),
amortization of debt expense and one-third of the rental expense, which is
deemed to be the interest component of rental expense. No preferred shares
were outstanding for any of the periods set forth in the table above.
(4) Management considers funds from operations ("FFO") to be an appropriate
supplemental measure of the performance of an equity real estate
investment trust ("REIT") because it is predicated on cash flow analyses
which facilitate an understanding of the operating performances of the
Company's properties without giving effect to non-cash items such as
depreciation. FFO is defined by the National Association of Real Estate
Investment Trusts as net income (loss) (computed in accordance with
generally accepted accounting principles) excluding gains or losses from
debt restructuring and sales of property, plus depreciation and
amortization of real estate assets. FFO does not represent cash generated
from operating activities in accordance with generally accepted accounting
principles, and therefore should not be considered as a substitute for net
income as a measure of results of operations or for cash flow from
operations as a measure of liquidity. Additionally, the application and
calculation of FFO by other REITs may vary materially from that of the
Company, and therefore the Company's FFO and the FFO of other REITs may
not be directly comparable.
S-10
<PAGE>
THE OPERATING COMPANY
On November 18, 1997, the Company completed the acquisition (the "TCR-West
Transaction") of certain properties and operations of Trammell Crow
Residential located in the western United States ("TCR-West"). Substantially
all of the properties acquired in the TCR-West Transaction were held through
the Operating Company and Blue Ravine Investors, LLC, a Delaware limited
liability company ("Blue Ravine"), both of which were formed by the Company
for the purpose of acquiring properties in the TCR-West Transaction. On
December 31, 1998, Blue Ravine was merged into the Operating Company,
whereupon the operating company units of Blue Ravine became OC Units in the
Operating Company. The Operating Company continues to hold substantially all
of the properties acquired in the TCR-West Transaction.
The Operating Company is organized as a limited liability company under the
Delaware Limited Liability Company Act (the "Act") and pursuant to the terms
of the Amended and Restated Limited Liability Company Agreement dated as of
November 18, 1997 (the "LLC Agreement"). BRE is the sole managing member of
the Operating Company and, as of December 31, 1998, held approximately 74% of
the outstanding OC Units of the Operating Company. The remaining OC Units of
the Operating Company are held by third parties as non-managing members. The
OC Units held by holders other than the Company are exchangeable, at the
option of the holders thereof, into Common Shares of the Company or, at the
option of the Company, cash as described below under "--Exchange Rights."
A summary of certain provisions of the LLC Agreement is set forth below. The
summary does not purport to be complete and is qualified in its entirety by
reference to applicable provisions of the Act and the complete LLC Agreement,
which is included as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 which is incorporated by reference as an
exhibit to the registration statement of which the accompanying prospectus is
a part.
Management and Operations
Subject to the terms of the LLC Agreement and the Act, BRE, as the sole
managing member of the Operating Company, has the exclusive right and power to
manage the Operating Company and the non-managing members have no authority to
transact business for, or participate in the management activities or
decisions of, the Operating Company.
Under the terms of the LLC Agreement, the Operating Company is required to
maintain certain debt service coverage, debt-to-asset and other financial
ratios intended to protect the members' rights to receive distributions. In
addition, with respect to certain tax-exempt financing for certain completed
properties, the Operating Company is restricted from prepaying its debt or
taking certain other specified actions which could have adverse tax
consequences for the members. Further, BRE, as the managing member, is
restricted from taking certain other specified actions--either absolutely or
without the consent of a majority in interest of the non-managing members (or
of the non-managing members affected thereby)--including, but not limited to,
any actions that would make it impossible to carry out the business of the
Operating Company, or that would subject a non-managing member to liability as
a managing member, or that would cause the Operating Company to institute
bankruptcy proceedings or confess a judgment, or that would prohibit or
restrict a member from exercising its rights to exchange OC Units for Common
Shares.
Further, BRE may not, without the consent of a majority in interest of the
non-managing members, (i) dispose of any of the properties held by the
Operating Company in a taxable sale or exchange prior to respective dates
which are specified in the LLC Agreement for each of the properties, ranging
from one to ten years from November 18, 1997, or (ii) dissolve the Operating
Company other than incident to a Termination Transaction (as defined in "--
Removal or Withdrawal of BRE as Managing Member; Transferability of BRE's
Interests" below), even if such a disposition or dissolution would be in the
best interest of the Company.
Capital and Capital Accounts
Each member of the Operating Company has a capital account, which will be
increased by the amounts of any additional capital contributions to the
Operating Company made by the member and all net income and gain
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allocated to the member, and will be decreased by the amounts of all
distributions made to the member and all net loss allocated to the member.
If the Operating Company requires additional funds, for the acquisition or
development of additional properties or for any other purpose, such funds may
be raised, at the election and in the discretion of BRE, by selling additional
membership interests or by incurring or assuming debt upon such terms as BRE
deems appropriate. See also "--Distributions and Allocations" below regarding
the obligation of BRE to make capital contributions under certain
circumstances. As of December 31, 1998, BRE had outstanding loans to the
Operating Company aggregating $46 million, and repayment of loans made by BRE
to the Operating Company is subordinate to the payment of the Priority
Distribution (as defined below) to members other than BRE.
The Operating Company has guaranteed all borrowings outstanding from time to
time under the Company's Credit Facility. See "Recent Developments--Unsecured
Line of Credit," "Use of Proceeds" and "Capitalization."
Distributions and Allocations
All of the Operating Company's Available Cash (as defined below) must be
distributed quarterly: first, to members (other than BRE) until each member
has received, cumulatively on a per OC Unit basis, distributions equal to the
cumulative dividends declared with respect to one Common Share over the
corresponding period (subject to adjustment from time to time as applicable to
account for stock dividends, stock splits and similar transactions affecting
the Common Shares) (the "Priority Distribution"); and second, the balance to
BRE.
If the Operating Company's Available Cash in any quarterly period is
insufficient to permit distribution of the full amount of the Priority
Distribution for that quarter, BRE is required to make a capital contribution
to the Operating Company in an amount equal to the lesser of (i) the amount
necessary to permit the full Priority Distribution or (ii) an amount equal to
the sum of any capital expenditures made by the Operating Company plus the sum
of any payments made by the Operating Company on account of any loans to or
investments in, or any guarantees of the obligations of, BRE or its affiliates
for that quarterly period.
Upon dissolution of the Operating Company, all net liquidation proceeds of
the Operating Company (after payment of or reservation for all liabilities and
claims) will be distributed in accordance with the positive balances in the
members' capital accounts, after adjusting the capital accounts for all net
income or net loss allocable to the members through the date of dissolution.
"Available Cash" means (a) the sum of (1) the Operating Company's net income
or loss, (2) depreciation and all other non-cash charges to the extent
deducted in determining the net income or loss, (3) any reduction in the
reserves, (4) the excess, if any, of the net cash proceeds from the sale,
exchange, disposition, financing or refinancing of property over the gain (or
loss) recognized, and (5) all other cash received or any net amounts borrowed
and not included in net income or net loss, less (b) the sum of (1) all
principal debt payments, (2) capital expenditures, (3) investments in any
entity (including loans), (4) all other expenditures and payments not deducted
in determining net income or loss, (5) any amount included in determining net
income or loss that was not actually received, and (6) any increase of
reserves.
Exchange Rights
The OC Units are exchangeable for Common Shares at a rate of one Common
Share for each OC Unit exchanged (with the exchange ratio subject to
adjustment in the event of stock splits, stock dividends, issuance of certain
rights, certain extraordinary distributions and similar events affecting the
Common Shares) or, at BRE's election, cash in an amount equal to the market
value at the time of the exchange of the Common Shares issuable upon such
exchange. Whether to issue Common Shares or cash in exchange for OC Units is
an election made by BRE in its sole discretion, subject only to such
restrictions as may be imposed by its articles of incorporation, applicable
law, or other instruments.
Registration Rights
BRE has an effective registration statement covering the resale of the
3,713,331 Common Shares issued in the TCR-West Transaction and an effective
registration statement covering the resale of the Common Shares
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which may be issued in connection with the TCR-West Transaction upon the
exchange of OC Units. As of December 31, 1998, 2,870,683 OC Units were issued
and outstanding and up to an additional 500,395 OC Units may be issued upon
the achievement of certain performance, employment or other conditions
relating to the properties and operations acquired in the TCR-West
Transaction. As described above, each OC Unit is currently exchangeable for
one Common Share. BRE has agreed to use reasonable efforts to keep such
registration statements continuously effective, so long as BRE remains
eligible to use Form S-3 under the Securities Act of 1933, as amended, (i)
until November 18, 1999, with respect to the 3,713,331 Common Shares, and (ii)
until the earlier of November 18, 2007 or the date upon which less than 10% of
the OC Units issued pursuant to the TCR-West Transaction are outstanding, with
respect to the Common Shares issued in exchange for such OC Units. If BRE
becomes ineligible to use Form S-3 before its registration obligations
otherwise terminate, the holders of such OC Units and the 3,713,331 Common
Shares will have certain demand and "piggy-back" registration rights.
Removal or Withdrawal of BRE as Managing Member; Transferability of BRE's
Interests
BRE may not be removed as the managing member by the non-managing members,
with or without cause, other than with its consent. BRE may not voluntarily
withdraw from the Operating Company or transfer all or any portion of its
interest in the Operating Company without the consent of all of the non-
managing members, except in certain limited circumstances, such as a sale of
all or substantially all of BRE's assets, or any merger, consolidation or
other combination by BRE with or into another person, or any reclassification,
recapitalization or change of BRE's outstanding equity interests (a
"Termination Transaction").
BRE may engage in a Termination Transaction if all holders of OC Units
either will receive, or will have the right to elect to receive, for each OC
Unit an amount of cash, securities or other property equal to the amount that
would have been paid to the holder if, immediately prior to consummation of
the Termination Transaction, the OC Unit had been exchanged for Common Shares
(see "--Exchange Rights" above). In addition, if in connection with a
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than 50% of the outstanding Common
Shares, the LLC Agreement further provides that each holder of OC Units will
receive, or will have the right to elect to receive, the greatest amount of
cash, securities or other property which such holder would have received had
it exercised its right to exchange OC Units for Common Shares immediately
prior to the expiration of such purchase, tender or exchange offer and had
thereupon accepted such purchase, tender or exchange offer.
Term; Dissolution
The term of the Operating Company will continue until September 25, 2012
unless extended by unanimous agreement of the members or earlier terminated
pursuant to the terms of the LLC Agreement.
The Operating Company will be dissolved and its affairs wound up upon the
earliest of: (i) the expiration of its term; (ii) the termination of BRE as
managing member due to its withdrawal, dissolution or bankruptcy unless,
within 90 days, a majority in interest of the remaining members elect to
continue the business and appoint a substitute managing member; (iii) after
September 30, 2012, an election to dissolve the Operating Company made by the
managing member; (iv) entry of a decree of judicial dissolution of the
Operating Company pursuant to the provisions of the Act; (v) after September
30, 2012, the sale of all or substantially all of the Operating Company's
assets and properties for cash or marketable securities; (vi) the incapacity
of the managing member unless a majority in interest of the remaining members
elect to continue the business and appoint a substitute managing member; or
(vii) the exchange for Common Shares of all of the OC Units other than those
held by BRE. Any proceeds from the dissolution or liquidation of the Operating
Company shall be applied in the following order of priority: (a) to pay (or
make provision for the payment of) the debts of the Operating Company; (b) to
satisfy the Operating Company's debts and liabilities to the managing member;
(c) to satisfy the Operating Company's debts and liabilities to the non-
managing members; and then (d) to the members of the Operating Company,
including any non-management members holding OC Units, in accordance with
their respective positive capital account balances, after giving effect to all
contributions, distributions and allocations for all periods.
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DESCRIPTION OF THE SERIES A PREFERRED STOCK
This description of certain terms of the 8 1/2% Series A Cumulative
Redeemable Preferred Stock (the "Series A Preferred Stock") offered hereby
supplements, and to the extent inconsistent therewith replaces, the
description of certain general terms and provisions of the Company's preferred
stock, par value $0.01 per share (the "Preferred Shares"), set forth in the
accompanying prospectus. As used under this caption "Description of the Series
A Preferred Stock," all references to the "Company" mean BRE Properties, Inc.
excluding, unless otherwise expressly stated or the context otherwise
requires, its subsidiaries.
The following summary of certain terms of the Series A Preferred Stock does
not purport to be complete and is subject to and qualified in its entirety by
reference to all of the provisions of the Amended and Restated Articles of
Incorporation of the Company (the "Articles"), the bylaws of the Company (the
"Bylaws") and the form of articles supplementary ("Articles Supplementary")
relating to the Series A Preferred Stock, all of which have been or will be
filed as exhibits to or incorporated by reference in the Registration
Statement (as defined in the accompanying prospectus), and copies of which may
be obtained as described under "Available Information" in the accompanying
prospectus.
Prospective investors should carefully review the information set forth
below under "--Restrictions on Ownership and Transfer" and in the accompanying
prospectus under "Restrictions on Transfers of Capital Stock; Redemption" for
important information concerning restrictions on ownership and transfer
applicable to the Series A Preferred Stock.
General
The Articles authorize the Company to issue up to 110,000,000 shares of its
capital stock, consisting of (i) up to 100,000,000 Common Shares and (ii) up
to 10,000,000 Preferred Shares in one or more series. The Articles grant the
Company's board of directors the power, without further shareholder
authorization, to authorize from time to time the issuance of Preferred Shares
in one or more series and to determine the number of shares to be included in
the series and the terms, rights, restrictions and qualifications of the
shares of the series, including any preference, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption. As of the date of this prospectus
supplement, no Preferred Shares were outstanding.
The Company has authorized the issuance of a series of Preferred Shares,
consisting of 2,000,000 shares (plus up to 300,000 additional shares which may
be issued upon exercise of the Underwriters' over-allotment option),
designated as the 8 1/2% Series A Cumulative Redeemable Preferred Stock.
The Series A Preferred Stock has been approved for listing on the New York
Stock Exchange, subject to official notice of issuance. See "Underwriters."
The Series A Preferred Stock does not contain any provisions affording
holders of the Series A Preferred Stock protection in the event of a highly
leveraged or other transaction that might adversely affect holders of the
Series A Preferred Stock, except to the limited extent described below under
"--Voting Rights."
The transfer agent, registrar and paying agent for the Series A Preferred
Stock will be ChaseMellon Shareholder Services L.L.C. The Articles
Supplementary will provide that the Company will at all times maintain an
office or agency in the Borough of Manhattan, The City of New York, where
shares of Series A Preferred Stock may be surrendered for payment (including
upon redemption, if any), registration of transfer or exchange.
The certificates evidencing the Series A Preferred Stock will initially be
issued in the form of temporary certificates. Holders of temporary
certificates will be entitled to exchange them for definitive certificates as
soon as such definitive certificates are available (which the Company
anticipates will be within 150 days after the original issuance of the Series
A Preferred Stock).
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Ranking
The Series A Preferred Stock will rank, with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up of the Company (i) senior to the Common Shares and senior to all
other capital stock of the Company other than capital stock referred to in
clauses (ii) and (iii) of this sentence; (ii) on a parity with all capital
stock of the Company the terms of which specifically provide that such capital
stock ranks on a parity with the Series A Preferred Stock with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all capital
stock of the Company the terms of which specifically provide that such capital
stock ranks senior to the Series A Preferred Stock with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution or
winding up of the Company. The term "capital stock" does not include
convertible debt securities. The description of the ranking of the Series A
Preferred Stock set forth in this paragraph supersedes and replaces, insofar
as concerns the Series A Preferred Stock, the discussion set forth in the
accompanying prospectus under "Description of Preferred Shares--Rank" in its
entirety.
The board of directors of the Company may from time to time, without
shareholder approval, authorize the issuance of one or more series of
Preferred Shares ranking on a parity with the Series A Preferred Stock. See
"--General" above and "--Voting Rights" below. In addition, with the
affirmative vote or consent of the holders of at least two-thirds of the
shares of Series A Preferred Stock outstanding at the time as described below
under "--Voting Rights," the Company may issue capital stock which ranks
senior to the Series A Preferred Stock as to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up of the
Company, and the rights of holders of Series A Preferred Stock to receive
dividends and amounts due upon liquidation, dissolution or winding up of the
Company shall be subject to the preferential rights of any such senior capital
stock; however, no such senior capital stock is currently outstanding. In
addition, because a significant portion of the operations of the Company is
conducted through its subsidiaries, including the Operating Company, the cash
flow of the Company and the consequent ability to pay dividends on the Series
A Preferred Stock will be partially dependent upon the results of operations
of and distributions from such subsidiaries. See "Risk Factors--Ranking of
Securities" in the accompanying prospectus.
Dividend and Redemption Restrictions Under Debt Instruments
The Company and its subsidiaries are and may in the future become parties to
agreements and instruments which restrict or prevent the payment of dividends
on, or the purchase or redemption of, Common Shares, Series A Preferred Stock
and any other outstanding capital stock of the Company, including indirect
restrictions (through, for example, covenants requiring the maintenance of
specified levels of net worth) and direct restrictions. In particular, the
Company's Credit Facility provides that aggregate distributions made by the
Company to holders of equity interests in the Company or its consolidated
subsidiaries (including for these purposes dividends and distributions on
Common Shares, OC Units and the Series A Preferred Stock) during any calendar
year may not exceed the greater of (i) 95% of funds from operations (as
defined in the Credit Facility) for such period or (ii) an amount, not in
excess of 100% of funds from operations for such period, as may be required to
be distributed in order for the Company to maintain its REIT status for
federal income tax purposes, subject to certain limited exceptions. In
addition, the terms of the Credit Facility provide that no distributions to
holders of equity interests may be made during the continuance of a monetary
default under the Credit Facility, and also provide for limitations on
distributions made during the continuance of an event of default other than a
monetary default.
In the event of a deterioration in the financial condition or results of
operations of the Company or its subsidiaries, the terms of the Credit
Facility or other instruments or agreements to which the Company or its
subsidiaries are or may in the future become parties could limit or prohibit
the payment of dividends on shares of Series A Preferred Stock, Common Shares
and any other outstanding capital stock of the Company. In addition, the terms
of the Series A Preferred Stock prohibit the Company from paying dividends on
its Common Shares if dividends on the Series A Preferred Stock are not paid in
full. See "Description of Preferred Shares--Dividends" in the accompanying
prospectus. Any failure of the Company to pay dividends as required by the
Internal Revenue Code of 1986, as amended (the "Code"), whether as a result of
restrictive covenants in its
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debt instruments, by virtue of the foregoing terms of the Series A Preferred
Stock or otherwise, would result in the loss of its status as a REIT under the
Code, which would likely have a material adverse effect on the Company. See
"Risk Factors--Tax Risks" in the accompanying prospectus.
Dividends
Subject to the preferential rights of holders of any other capital stock of
the Company ranking prior to the Series A Preferred Stock as to dividends,
holders of the Series A Preferred Stock shall be entitled to receive, when, as
and if declared by the board of directors of the Company, out of funds of the
Company legally available for the payment of dividends, cumulative cash
dividends at the rate of 8 1/2% per annum of the $25.00 per share liquidation
preference (equivalent to an annual rate of $2.125 per share). Dividends shall
accrue and be cumulative from the Original Issue Date, which will be defined
in the Articles Supplementary as the first date on which any shares of Series
A Preferred Stock are originally issued and which is expected to be January
29, 1999. Dividends on the Series A Preferred Stock shall be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year
(each a "Dividend Payment Date") or, if such day is not a Business Day (as
defined in the Articles Supplementary), the next succeeding Business Day. The
first dividend, which will be payable on March 31, 1999 (or, if such day is
not a Business Day, on the next succeeding Business Day), will be for less
than a full quarterly dividend period. Dividends payable on the Series A
Preferred Stock, including dividends payable for partial dividend periods,
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in the
stock transfer books of the Company at the close of business on the applicable
record date, which shall be the 15th day of the calendar month in which the
applicable Dividend Payment Date falls or such other date designated by the
board of directors of the Company that is not more than 30 nor less than ten
days prior to such Dividend Payment Date (each, a "Dividend Record Date").
If any Dividend Payment Date or redemption date for the Series A Preferred
Stock falls on a day which is not a Business Day, the payment which would
otherwise be due on such Dividend Payment Date or redemption date, as the case
may be, may be made on the next succeeding Business Day with the same force
and effect as if made on such Dividend Payment Date or redemption date, as the
case may be, and no interest or additional dividends or other sum shall accrue
on the amount so payable for the period from and after such Dividend Payment
Date or redemption date, as the case may be, to such next succeeding Business
Day.
The Company is and may in the future become a party to instruments and
agreements which could restrict or prevent the payment of dividends on the
Series A Preferred Stock. See "--Dividend and Redemption Restrictions Under
Debt Instruments" above. In that regard, no dividends on any shares of Series
A Preferred Stock shall be declared by the board of directors of the Company
or paid or set apart for payment by the Company at such time as any agreement
of the Company, including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such declaration, payment or
setting apart for payment shall be restricted or prohibited by applicable law.
Notwithstanding the foregoing, dividends on the Series A Preferred Stock
will accrue regardless of whether or not the Company has earnings, regardless
of whether or not there are funds legally available for the payment of such
dividends, and regardless of whether or not such dividends are declared. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series A Preferred Stock that may be
in arrears, and holders of the Series A Preferred Stock will not be entitled
to any dividends, whether payable in cash, securities or other property, in
excess of the full cumulative dividends described above. Any dividend payment
made on shares of the Series A Preferred Stock shall first be credited against
the earliest accrued but unpaid dividend due with respect to such shares.
If for any taxable year the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount") of the dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes and series of the Company's
capital stock (the
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"Total Dividends"), then the portion of the Capital Gains Amount that shall be
allocable to the holders of Series A Preferred Stock shall be an amount equal
to the total Capital Gains Amount multiplied by a fraction the numerator of
which is the total dividends (within the meaning of the Code) paid or made
available to the holders of Series A Preferred Stock for that year and the
denominator of which is the Total Dividends for that year. See "Federal Income
Tax Considerations" below and "Federal Income Tax Considerations" in the
accompanying prospectus.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution, or winding up of
the Company, then, before any distribution or payment shall be made to the
holders of any Common Shares or any other class or series of capital stock of
the Company ranking junior to the Series A Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company, but subject to the preferential rights of the holders of any capital
stock of the Company ranking prior to the Series A Preferred Stock with
respect to such distribution of assets, the holders of shares of Series A
Preferred Stock then outstanding are entitled to be paid out of the assets of
the Company legally available for distribution to its shareholders liquidating
distributions in cash or property at its fair market value as determined by
the Company's board of directors in the amount of $25.00 per share, plus an
amount equal to all accrued and unpaid dividends to the date of payment. After
payment of the full amount of the liquidating distributions (including accrued
and unpaid dividends) to which they are entitled, the holders of Series A
Preferred Stock, as such, will have no right or claim to any of the remaining
assets of the Company. For further information regarding matters affecting the
holders of Series A Preferred Stock upon the liquidation, dissolution or
winding up of the Company, see "Description of Preferred Shares--Liquidation
Preference" in the accompanying prospectus.
Optional Redemption
The Series A Preferred Stock is not redeemable prior to January 29, 2004,
except that the Company will be entitled, pursuant to certain provisions in
its Articles, to redeem shares of Series A Preferred Stock in order to
preserve the Company's status as a REIT for federal income tax purposes. See
"--Restrictions on Ownership and Transfer" below. The Series A Preferred Stock
has no stated maturity and is not subject to any sinking fund or mandatory
redemption.
On and after January 29, 2004, the Company may, at its option upon not less
than 30 nor more than 60 days' prior written notice to the holders of the
Series A Preferred Stock, redeem the Series A Preferred Stock, in whole or
from time to time in part, for a cash redemption price equal to $25.00 per
share plus (except as provided below) accrued and unpaid dividends to the date
fixed for redemption. The redemption price of the Series A Preferred Stock
(other than the portion thereof consisting of accrued and unpaid dividends)
shall be payable solely out of the sale proceeds of other capital stock of the
Company and not from any other source. For purposes of the preceding sentence,
the term "capital stock" means any equity securities (including Common Shares
and Preferred Shares other than Series A Preferred Stock), shares, interests,
participations or other ownership interests (however designated), depositary
shares representing interests in any of the foregoing, and any rights (other
than debt securities convertible into or exchangeable for equity securities)
or options to purchase any of the foregoing. If fewer than all the outstanding
shares of Series A Preferred Stock are to be redeemed, the number of shares to
be redeemed will be determined by the Company and the shares to be so redeemed
will be selected pro rata (as nearly as may be practicable without creating
fractional shares) from the holders of record of such shares in proportion to
the number of such shares held or by lot or by any other equitable method
determined by the Company that will not give the Company the right to redeem
shares of Series A Preferred Stock pursuant to the provisions of its Articles
allowing the redemption of its capital stock to preserve the status of the
Company as a REIT for federal income tax purposes. See "--Restrictions on
Ownership and Transfer" below. If the shares of Series A Preferred Stock
evidenced by a stock certificate are to be redeemed in part only, one or more
new certificates will be issued for the shares not so redeemed.
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If notice of redemption has been given and if funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of the shares of Series A Preferred Stock called for redemption, then
from and after the date fixed for redemption dividends will cease to accrue on
the shares of Series A Preferred Stock so called for redemption, such shares
of Series A Preferred Stock will no longer be deemed outstanding, and all
rights of the holders of such shares of Series A Preferred Stock will
terminate, except the right to receive the redemption price together with, if
applicable, accrued and unpaid dividends thereon to the redemption date.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made at least once
a week for two successive weeks commencing not less than 30 nor more than 60
days prior to the redemption date. Notice of redemption also will be mailed,
first class postage prepaid, not less than 30 nor more than 60 days prior to
the redemption date, to each holder of record of shares of Series A Preferred
Stock to be redeemed at the address shown on the stock transfer books of the
Company. Any notice which has been mailed in the manner provided in the
preceding sentence shall be conclusively presumed to have been duly given on
the date mailed whether or not the holder receives the notice. No failure to
mail or defect in such mailed notice or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of Series A
Preferred Stock except as to the holder to whom notice was defective or not
given. Each notice shall state: (i) the redemption date; (ii) the redemption
price; (iii) the number of shares of Series A Preferred Stock to be redeemed;
(iv) the place or places (which shall include a place in the Borough of
Manhattan, The City of New York) where the certificates evidencing the Series
A Preferred Stock are to be surrendered for payment of the redemption price;
and (v) that dividends on the shares of the Series A Preferred Stock to be
redeemed will cease to accrue on such redemption date. If fewer than all of
the outstanding shares of Series A Preferred Stock are to be redeemed, the
notice mailed to a holder shall also specify the number of shares of Series A
Preferred Stock to be redeemed from such holder.
The holders of record of shares of Series A Preferred Stock at the close of
business on a Dividend Record Date will be entitled to receive the dividend
payable on the corresponding Dividend Payment Date notwithstanding the
redemption of such shares of Series A Preferred Stock after such Dividend
Record Date and on or prior to the corresponding Dividend Payment Date or the
Company's default in the payment of the dividend due on such Dividend Payment
Date, in which case the redemption price for such shares of Series A Preferred
Stock will not include such dividend (which shall instead be paid on the
applicable Dividend Payment Date to the holders of record on such Dividend
Record Date as aforesaid). Except as provided above and as described below
under "--Restrictions on Ownership and Transfer," the Company will make no
payment or allowance for unpaid dividends, regardless of whether or not in
arrears, on shares of Series A Preferred Stock called for redemption.
Voting Rights
Holders of the Series A Preferred Stock will not have any voting rights,
except as described below and as otherwise required by law from time to time.
In that regard, the description of voting rights set forth below supersedes
and replaces, insofar as concerns the Series A Preferred Stock, the discussion
set forth in the accompanying prospectus under "Description of Preferred
Shares--Voting Rights" in its entirety.
Whenever dividends on any shares of Series A Preferred Stock shall be in
arrears for six or more quarterly periods (whether or not consecutive), the
number of directors then constituting the board of directors of the Company
shall be automatically increased by two (if not already increased by two by
reason of the election of directors by the holders of any other class or
series of capital stock of the Company upon which like voting rights have been
conferred and are exercisable and with which the Series A Preferred Stock is
entitled to vote as a class with respect to the election of such two
directors) and the holders of the shares of Series A Preferred Stock (voting
separately as a class with all other classes or series of capital stock of the
Company upon which like voting rights have been conferred and are exercisable
and which are entitled to vote as a class with the Series A Preferred Stock in
the election of such two directors) will be entitled to vote for the election
of such two directors of the Company at a special meeting called by an officer
of the Company at the request of the
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holders of record of at least 10% of the outstanding shares of Series A
Preferred Stock or by the holders of any other class or series of capital
stock of the Company upon which like voting rights have been conferred and are
exercisable and which is entitled to vote as a class with the Series A
Preferred Stock in the election of such two directors (unless such request is
received less than 90 days before the date fixed for the next annual or
special meeting of the shareholders, in which case the vote for such two
directors shall be held at the earlier of the next such annual or special
meeting of shareholders), and at each subsequent annual meeting until all
dividends accumulated on such shares of Series A Preferred Stock for all past
dividend periods and the then current dividend period shall have been fully
paid or declared and a sum sufficient for the payment thereof set aside for
payment, whereupon the right of the holders of the Series A Preferred Stock to
elect such two directors shall cease and (unless there are one or more other
classes or series of capital stock of the Company upon which like voting
rights have been conferred and are exercisable) the term of office of such
directors shall automatically terminate, such directors will no longer be
qualified to serve and the authorized number of directors of the Company shall
thereupon return to the number of authorized directors otherwise in effect. As
described in the accompanying prospectus under "Description of Common Shares--
Certain Provisions of the Articles of Incorporation and Bylaws," the Company's
board of directors is classified into three classes serving staggered three-
year terms. Under the Articles, any additional directors elected by the
holders of the Series A Preferred Stock will 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.
So long as any shares of Series A Preferred Stock remain outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least two-thirds of the shares of Series A Preferred Stock outstanding at the
time, given in person or by proxy (with the Series A Preferred Stock voting
separately as a class), (i) authorize, create or issue, or increase the
authorized or issued amount of, any class or series of capital stock of the
Company ranking prior to the Series A Preferred Stock with respect to payment
of dividends or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized capital stock of the Company into such
shares, or create, authorize or issue any obligation or security convertible
into, exchangeable or exercisable for, or evidencing the right to purchase,
any such shares, (ii) amend, alter or repeal any provisions of the Company's
Articles (including the Articles Supplementary for the Series A Preferred
Stock) so as to materially and adversely affect any right, preference,
privilege or voting power of the Series A Preferred Stock or the holders
thereof, or (iii) enter into any share exchange that affects shares of Series
A Preferred Stock, or consolidate with or merge into any other entity, or
permit any other entity to consolidate with or merge into the Company, unless
in each such case described in this clause (iii) each share of Series A
Preferred Stock remains outstanding without a material adverse change to its
terms and rights or is converted into or exchanged for preferred stock of the
surviving or resulting entity having preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption identical to those of the Series A Preferred Stock;
provided, that any amendment to the Articles of the Company to authorize any
increase in the amount of the authorized Preferred Shares or Common Shares or
the creation or issuance of any other class or series of Preferred Shares or
any increase in the amount of authorized or outstanding shares of the Series A
Preferred Stock or any other class or series of Preferred Shares, in each case
ranking on a parity with or junior to the Series A Preferred Stock with
respect to payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Series A Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
On any matter on which the Series A Preferred Stock is entitled to vote (as
expressly provided in the Articles or the Articles Supplementary or as may be
required by law), including any action by written consent, each share of
Series A Preferred Stock will be entitled to one vote, except that when shares
of any other class or series of Preferred Shares have the right to vote with
the Series A Preferred Stock as a single class on any matter, the Series A
Preferred Stock and the shares of each such other class or series will have
one vote for each $25.00 of liquidation preference.
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<PAGE>
Conversion
The Series A Preferred Stock will not be exchangeable for or convertible
into any other property or securities of the Company.
Restrictions on Ownership and Transfer
As described in the accompanying prospectus under "Restrictions on Transfer
of Capital Stock; Redemption," the Articles and Bylaws of the Company contain
certain provisions intended to help preserve the Company's status as a REIT
for federal income tax purposes and the Series A Preferred Stock will be
subject to such provisions.
Among other things, the Articles provide that, if the board of directors
shall determine, in good faith, that the direct or indirect ownership of any
stock of the Company has or may become concentrated to an extent that would
prevent the Company from qualifying as a REIT, the board of directors is
authorized to prevent the transfer of stock or to call for redemption (by lot
or by other means affecting one or more shareholders selected in the sole
discretion of the board of directors) of a number of shares of stock
sufficient, in the opinion of the board of directors, to maintain or bring the
direct or indirect ownership of capital stock of the Company into conformity
with the REIT provisions of the Code. The Articles Supplementary will provide
that the redemption price for any shares of Series A Preferred Stock so
redeemed shall be $25.00 per share plus (except as provided below) accrued and
unpaid dividends to the date fixed for redemption. Notice of any such
redemption shall be mailed, first class postage prepaid, not less than 30 days
nor more than 60 days prior to the redemption date to each holder of record of
shares of Series A Preferred Stock to be redeemed at the address shown on the
stock transfer books of the Company; provided that if the Company shall have
reasonably concluded, based upon the advice of independent tax counsel
experienced in such matters, that such redemption must be made on a date (the
"Subject Date") which is earlier than 30 days after the date of such mailing
in order to preserve the status of the Company as a REIT for federal income
tax purposes or to comply with federal tax laws relating to the Company's
qualification as a REIT, then the Company may give such shorter notice as is
necessary to effect such redemption on the Subject Date. Any notice which has
been mailed in the manner provided in the preceding sentence shall be
conclusively presumed to have been duly given on the date mailed whether or
not the holder receives the notice. However, the holders of record of shares
of Series A Preferred Stock at the close of business on a Dividend Record Date
will be entitled to receive the dividend payable on the corresponding Dividend
Payment Date notwithstanding any such redemption of such shares of Series A
Preferred Stock after such Dividend Record Date and on or prior to the
corresponding Dividend Payment Date or the Company's default in the payment of
the dividend due on such Dividend Payment Date, in which case the redemption
price for any shares of Series A Preferred Stock so redeemed will not include
such dividend (which shall instead be paid on the applicable Dividend Payment
Date to the holders of record on such Dividend Record Date as aforesaid).
If notice of redemption has been given and if funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of the shares of Series A Preferred Stock called for redemption, then
from and after the date fixed for redemption dividends will cease to accrue on
the shares of Series A Preferred Stock so called for redemption, such shares
of Series A Preferred Stock will no longer be deemed outstanding, and all
rights of the holders of such shares of Series A Preferred Stock will
terminate, except the right to receive the redemption price together with, if
applicable, accrued and unpaid dividends thereon.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations relating to the acquisition, ownership and disposition of the
Series A Preferred Stock. The following description is for general information
only, is not exhaustive of all possible tax considerations, and is not
intended to be and should not be construed as tax advice. For example, this
summary does not give a detailed discussion of any state, local or foreign tax
consequences. It does not discuss all aspects of federal income taxation that
might be relevant to a specific shareholder in light of its particular
investment or tax circumstances. The description does not purport to deal
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with aspects of taxation that may be relevant to shareholders subject to
special treatment under the federal income tax laws. This discussion does not
address the taxation of the Company, the impact on the Company of its election
to be taxed as a REIT or the federal income tax considerations relevant to
holders of Common Shares. Such matters are addressed in the accompanying
prospectus under the caption "Federal Income Tax Considerations."
The information in this section is based on the Code, current, temporary and
proposed Treasury Regulations thereunder, the legislative history of the Code,
current administrative interpretations and practices of the IRS (including its
practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to the taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. No assurance can be
given that future legislation, Treasury Regulations, administrative
interpretations and court decisions will not significantly change current law
or adversely affect existing interpretations of current law. Any such change
could apply retroactively to transactions preceding the date of the change.
As used in this section, the term the "Company" refers solely to BRE
Properties, Inc., excluding its subsidiaries.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP
AND SALE OF SERIES A PREFERRED STOCK IN LIGHT OF ITS SPECIFIC TAX AND
INVESTMENT SITUATION AND THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS APPLICABLE TO IT.
Taxation of Holders of Series A Preferred Stock
Dividends and Other Distributions; Backup Withholding. For a discussion of
the taxation of the Company, the treatment of dividends and other
distributions with respect to shares of the Company, and the backup
withholding rules, see the discussions in the accompanying prospectus under
the captions "Federal Income Tax Considerations--Taxation of the Company" and
"--Taxation of Taxable Domestic Shareholders." In determining the extent to
which a distribution on the Series A Preferred Stock constitutes a dividend
for tax purposes, the earnings and profits of the Company will be allocated
first to distributions with respect to the Series A Preferred Stock and second
to distributions with respect to the Common Shares.
Redemption of Series A Preferred Stock For Cash. The treatment accorded to
any redemption by the Company of Series A Preferred Stock for cash can only be
determined on the basis of particular facts as to each holder of Series A
Preferred Stock ("Preferred Holder") at the time of redemption. In general, a
Preferred Holder will recognize capital gain or loss measured by the
difference between the amount received by the Preferred Holder upon the
redemption (except for any amount received which is attributable to declared
dividends not previously included in income, which will be taxable as dividend
income to the extent of current or accumulated earnings and profits, if any)
and such holder's adjusted tax basis in the Series A Preferred Stock redeemed
(provided the Series A Preferred Stock are held as a capital asset) if such
redemption (i) results in a "complete termination" of the Preferred Holder's
interest in all classes of stock of the Company under Section 302(b)(3) of the
Code or (ii) is "not essentially equivalent to a dividend" with respect to the
Preferred Holder within the meaning of Section 302(b)(1) of the Code. In
general, a redemption is "not essentially equivalent to a dividend" to a
particular shareholder if the redemption results in a "meaningful reduction"
of the shareholder's proportionate interest in the company. The determination
of whether a redemption is "not essentially equivalent to dividend" depends on
the facts and circumstances of each case. In applying the Section 302(b)(3)
and Section 302(b)(1) tests, there must be taken into account not only any
Series A Preferred Stock owned by the Preferred Holder, but also such
Preferred Holder's ownership of Common Shares and any options (including share
purchase rights) to acquire any of the foregoing. The Preferred Holder also
must take into account any such securities (including options) which are
considered to be owned by such Preferred Holder by reason of the constructive
ownership rules set forth in Sections 318 and 302(c) of the Code. If a
particular
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Preferred Holder owns (actually or constructively) no Common Shares or Series
A Preferred Stock or an insubstantial percentage of the outstanding Common
Shares or Series A Preferred Stock, a redemption of a portion of the Preferred
Holder's Series A Preferred Stock is likely to qualify for sale or exchange
treatment because the redemption would not be "essentially equivalent to a
dividend." However, whether a distribution is "not essentially equivalent to a
dividend" depends on all of the facts and circumstances and a Preferred Holder
intending to rely on either of the Section 302(b)(3) or the Section 302(b)(1)
tests at the time of redemption should consult its own tax adviser to
determine their application to its particular situation.
If the redemption does not meet any of the tests under Section 302 of the
Code, then proceeds received from the redemption of Series A Preferred Stock
will be treated as a dividend on the Series A Preferred Stock as described
under "Federal Income Tax Considerations--Taxation of Taxable Domestic
Shareholders" in the accompanying prospectus. If the redemption proceeds are
taxed as a dividend, the Preferred Holder's adjusted tax basis in the Series A
Preferred Stock redeemed will be transferred to any other shareholdings of the
Preferred Holder in the Company. If the Preferred Holder owns no other shares
of capital stock in the Company, under certain circumstances, such basis may
be transferred to a related person, or it may be lost entirely.
Special Consideration for Non-U.S. Shareholders. There are several special
considerations for prospective purchasers of Series A Preferred Stock who are
Non-U.S. Shareholders (as defined in the accompanying prospectus) for U.S.
federal tax purposes. For a description of these special considerations, see
"Federal Income Tax Considerations--Taxation of Foreign Shareholders" in the
accompanying prospectus.
Changes to Capital Gain Taxation
The Internal Revenue Service Restructuring and Reform Act of 1998, which was
signed into law on July 22, 1998, reduced the required holding period for the
application of the 20% and 25% capital gain tax rates from more than 18 months
to more than 12 months for sales of capital gain assets on or after January 1,
1998. It is expected that the IRS will issue clarifying guidance (most likely
applying the same principles set forth in IRS Notice 97-64) regarding the
application of the new holding period requirement to capital gain dividend
designations by REITs.
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UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the
Underwriters named below, for whom Morgan Stanley & Co. Incorporated, A.G.
Edwards & Sons, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Smith Barney Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell to them, severally, the respective number of shares of Series A
Preferred Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................. 400,000
A.G. Edwards & Sons, Inc. ........................................ 390,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 390,000
Salomon Smith Barney Inc. ........................................ 390,000
Bear, Stearns & Co. Inc. ......................................... 20,000
BT Alex. Brown Incorporated....................................... 20,000
CIBC Oppenheimer Corp. ........................................... 20,000
Goldman, Sachs & Co. ............................................. 20,000
Schroder & Co. Inc. .............................................. 20,000
SG Cowen Securities Corporation................................... 20,000
Sutro & Co. Incorporated.......................................... 20,000
George K. Baum & Company.......................................... 10,000
J.C. Bradford & Co. .............................................. 10,000
Crowell, Weedon & Co. ............................................ 10,000
Dain Rauscher Incorporated........................................ 10,000
Davenport & Company LLC........................................... 10,000
Fahnestock & Co. Inc. ............................................ 10,000
Ferris, Baker Watts, Incorporated................................. 10,000
Fidelity Capital Markets, A Division of National Financial
Services Corp. .................................................. 10,000
Fifth Third/The Ohio Company...................................... 10,000
First Albany Corporation.......................................... 10,000
Hilliard Lyons Inc. .............................................. 10,000
Janney Montgomery Scott Inc. ..................................... 10,000
Legg Mason Wood Walker, Incorporated.............................. 10,000
McDonald Investments Inc., A KeyCorp Company...................... 10,000
Mesirow Financial, Inc. .......................................... 10,000
Morgan Keegan & Company, Inc. .................................... 10,000
OLDE Discount Corporation......................................... 10,000
Piper Jaffray Inc. ............................................... 10,000
Raymond James & Associates, Inc. ................................. 10,000
The Robinson-Humphrey Company, LLC................................ 10,000
Roney Capital Markets, A Division of First Chicago Capital
Markets, Inc. ................................................... 10,000
Charles Schwab & Co., Inc. ....................................... 10,000
Scott & Stringfellow, Inc. ....................................... 10,000
Southwest Securities, Inc. ....................................... 10,000
Stifel, Nicolaus & Company, Incorporated.......................... 10,000
Tucker Anthony Incorporated....................................... 10,000
Van Kasper & Company.............................................. 10,000
Wedbush Morgan Securities......................................... 10,000
Wheat First Securities, Inc. ..................................... 10,000
---------
Total........................................................ 2,000,000
=========
</TABLE>
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<PAGE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Series A
Preferred Stock offered hereby are subject to the approval of certain legal
matters by their counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all of the shares of Series A Preferred Stock
offered hereby if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Series A
Preferred Stock directly to the public at the public offering price set forth
on the cover page of this prospectus supplement and part to certain dealers at
a price that represents a concession not in excess of $.50 a share under the
public offering price. Any Underwriter may allow, and such dealers may
reallow, a concession not in excess of $.45 a share to other Underwriters or
to certain dealers. After the initial offering of the shares of Series A
Preferred Stock, the offering price and other selling terms may from time to
time be varied by the Representatives.
The New York Stock Exchange (the "NYSE") has approved the listing of the
Series A Preferred Stock, subject to official notice of issuance. Trading of
the Series A Preferred Stock on the NYSE is expected to commence within 30
days after initial delivery of the Series A Preferred Stock. The Underwriters
have advised the Company that they intend to make a market in the Series A
Preferred Stock prior to the commencement of trading on the NYSE. The
Underwriters will have no obligation to make a market in the Series A
Preferred Stock, however, and may cease market-making activities, if
commenced, at any time.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 30 days after the date of this prospectus supplement,
directly or indirectly, (i) offer, issue, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or otherwise transfer or
dispose of, any shares of Series A Preferred Stock (other than the shares to
be sold to the Underwriters) or other Preferred Shares, any shares of any
other class or series of capital stock of the Company which is substantially
similar to the Series A Preferred Stock or any depositary shares or depositary
receipts representing or evidencing any of the foregoing, or any securities
convertible into or exercisable or exchangeable for Series A Preferred Stock
or other Preferred Shares, or any such substantially similar capital stock or
depositary shares or depositary receipts, or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any Series A Preferred Stock or other
Preferred Shares, any shares of any other class or series of capital stock of
the Company which is substantially similar to the Series A Preferred Stock or
any depositary shares or depositary receipts representing or evidencing any of
the foregoing, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Series A Preferred Stock, other
securities, in cash or otherwise.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this prospectus supplement, to purchase up to an
aggregate of 300,000 additional shares of Series A Preferred Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, made in connection with
the offering of the Series A Preferred Stock offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Series A Preferred Stock as the number of shares set
forth next to such Underwriter's name in the preceding table bears to the
total number of shares of Series A Preferred Stock set forth next to the names
of all Underwriters in the preceding table. If the Underwriters' option is
exercised in full, the total price to public would be $57,500,000, the total
Underwriters' discounts and commissions would be $1,811,250 and the total
proceeds to the Company would be $55,688,750.
In order to facilitate the offering of the Series A Preferred Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Series A Preferred Stock. Specifically, the
Underwriters may over-allot in connection with the offering, creating a short
position in the Series A Preferred Stock for their own account. In addition,
to cover over-allotments or to stabilize the price of the Series A Preferred
Stock, the Underwriters may bid for, and purchase, shares of Series A
Preferred Stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an Underwriter or a
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dealer for distributing the Series A Preferred Stock in the offering, if the
syndicate repurchases previously distributed Series A Preferred Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
price of the Series A Preferred Stock above independent market levels. The
Underwriters are not required to engage in these activities, and may end any
of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
EXPERTS
The consolidated financial statements and related financial schedule of BRE
Properties, Inc. appearing in BRE Properties, Inc.'s Annual Report on Form 10-
K for the year ended December 31, 1997, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference in the accompanying prospectus. Such
consolidated financial statements and schedule referred to above are
incorporated therein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Series A Preferred Stock offered hereby and certain tax
matters will be passed upon for the Company by Paul, Hastings, Janofsky &
Walker llp, San Francisco, California. Brown & Wood llp, San Francisco,
California will act as counsel to the Underwriters. Paul, Hastings, Janofsky &
Walker llp and Brown & Wood llp will rely, as to matters of Maryland law, on
Piper & Marbury L.L.P., Baltimore, Maryland, special Maryland counsel to the
Company.
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[BRE PROPERTIES, INC. LOGO APPEARS HERE]
