<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-5305
BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 94-1722214
- -------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
44 Montgomery Street
36th Floor
San Francisco, CA 94104-4809
- -------------------------------------- ---------------------------------------
(Address of principal office) (Zip Code)
(415) 445-6530
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -------
Number of shares of common stock
outstanding as of August 11, 1999 44,675,757
<PAGE>
BRE PROPERTIES, INC.
INDEX TO FORM 10-Q
June 30, 1999
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I FINANCIAL INFORMATION
ITEM 1:
Consolidated balance sheets - June 30, 1999 and December 31, 2
1998
Consolidated statements of income - three months ended June 30, 3
1999 and 1998
Consolidated statements of income - six months ended June 30, 4
1999 and 1998
Consolidated statements of cash flows - six months ended June 5
30, 1999 and 1998
Notes to consolidated financial statements 6-7
ITEM 2:
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-18
ITEM 3:
Quantitative and Qualitative Disclosures about Market Risk 19
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 20
ITEM 2 Changes in Securities and Use of Proceeds 20
ITEM 3 Defaults Upon Senior Securities 20
ITEM 4 Submission of Matters to a Vote of Security Holders 20
ITEM 5 Other Information 21
ITEM 6 Exhibits and Reports on Form 8-K 21
</TABLE>
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
--------------------
Consolidated Balance Sheets (unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31, 1998
1999
-------------------- ---------------------
<S> <C> <C>
Assets
Real estate portfolio:
Direct investments in real estate:
Investments in rental properties $1,625,445 $1,618,461
Construction in progress 14,922 43,830
Less: accumulated depreciation (92,270) (75,838)
-------------------- ---------------------
1,548,097 1,586,453
-------------------- ---------------------
Equity interests in real estate joint ventures:
Investments in rental properties - -
Construction in progress 9,918 -
-------------------- ---------------------
9,918 -
Land under development 28,448 15,328
-------------------- ---------------------
Total real estate portfolio 1,586,463 1,601,781
Cash 1,097 2,057
Other assets 25,124 27,078
-------------------- ---------------------
Total assets $1,612,684 $1,630,916
==================== =====================
Liabilities and Shareholders' Equity
Liabilities
Mortgage loans $ 229,182 $ 235,146
Unsecured senior notes 253,000 253,000
Unsecured line of credit 202,000 264,000
Accounts payable and other liabilities 15,896 26,333
-------------------- ---------------------
Total liabilities 700,078 778,479
-------------------- ---------------------
Commitments and contingencies (notes B and C) - -
Minority interest 89,594 87,432
-------------------- ---------------------
Shareholders' equity
Preferred stock, $.01 par value, liquidation preference $25.00 per
share, 10,000,000 shares authorized. 2,150,000 shares of Series A
outstanding at June 30, 1999; no shares outstanding at December
31, 1998 53,750 -
Common stock, $.01 par value, 100,000,000 shares authorized.
Shares issued and outstanding: 44,662,018 at June 30, 1999;
44,221,560 at December 31, 1998 447 443
Additional paid-in capital 671,361 664,811
Accumulated net income in excess of cumulative dividends 97,454 99,751
-------------------- ---------------------
Total shareholders' equity 823,012 765,005
-------------------- ---------------------
Total liabilities and shareholders' equity 1,612,684 $1,630,916
==================== =====================
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Consolidated Statements of Income (unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
-----------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Revenue
Rental income $53,967 $45,873
Other income 4,372 3,358
------------------- -----------------
Total revenue 58,339 49,231
------------------- -----------------
Expenses
Real estate operating 17,459 15,227
Depreciation 9,126 6,668
Interest 10,296 8,827
General and administrative 1,996 1,705
------------------- -----------------
Total expenses 38,877 32,427
------------------- -----------------
Income before net gain (loss) on sales of investments in
rental properties, minority interest and dividends
attributable to preferred stock 19,462 16,804
Net gain (loss) on sales of investments in rental properties 54 (46)
------------------- -----------------
Income before minority interest 19,516 16,758
Minority interest in income 1,336 1,017
------------------- -----------------
Net income 18,180 15,741
Dividends attributable to preferred stock 1,142 -
------------------- -----------------
Net income available to common shareholders $17,038 $15,741
=================== =================
Net income per outstanding common share:
Income before net gain (loss) on sales of investments in rental
properties less minority interest $ 0.38 $ 0.37
Net gain (loss) on sales of investments in rental properties - -
------------------- -----------------
Net income per share - basic $ 0.38 $ 0.37
=================== =================
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 0.38 $ 0.37
Net gain (loss) on sales of investments in rental properties - -
------------------- -----------------
Net income per share - assuming dilution $ 0.38 $ 0.37
=================== =================
Weighted average common shares outstanding - basic 44,570 42,170
=================== =================
Weighted average common shares outstanding - assuming
dilution 47,850 45,360
=================== =================
Dividends declared and paid per common share $ 0.39 $ 0.36
=================== =================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Consolidated Statements of Income (unaudited)
- --------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-----------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Revenue
Rental income $106,260 $90,195
Other income 7,499 6,449
------------------- -----------------
Total revenue 113,759 96,644
------------------- -----------------
Expenses
Real estate operating 34,399 29,972
Depreciation 17,310 13,153
Interest 20,135 17,362
General and administrative 3,692 3,370
Provision for non-recurring charge 1,250 -
------------------- -----------------
Total expenses 76,786 63,857
------------------- -----------------
Income before net gain (loss) on sales of investments in
rental properties, minority interest and dividends
attributable to preferred stock 36,973 32,787
Net gain (loss) on sales of investments in rental properties 54 (871)
------------------- -----------------
Income before minority interest 37,027 31,916
Minority interest in income 2,751 2,033
------------------- -----------------
Net income 34,276 29,883
Dividends attributable to preferred stock 1,898 -
------------------- -----------------
Net income available to common shareholders $ 32,378 $29,883
=================== =================
Net income per outstanding common share:
Income before net gain (loss) on sales of investments in rental
properties less minority interest $ 0.73 $ 0.73
Net gain (loss) on sales of investments in rental properties - ($0.02)
------------------- -----------------
Net income per share - basic $ 0.73 $ 0.71
=================== =================
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 0.73 $ 0.73
Net gain (loss) on sales of investments in rental properties - ($0.02)
------------------- -----------------
Net income per share - assuming dilution $ 0.73 $ 0.71
=================== =================
Weighted average common shares outstanding - basic 44,430 42,000
=================== =================
Weighted average common shares outstanding - assuming
dilution 47,740 45,260
=================== =================
Dividends declared and paid per common share $ 0.78 $ 0.72
=================== =================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
BRE Properties, Inc.
==============================================================================
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (unaudited)
- -----------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
For the Six Months Ended
June 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 34,276 $ 29,883
Adjustments to reconcile net income to net cash generated by
operating activities:
Provision for depreciation 17,310 13,153
Provision for nonrecurring charge 1,250 -
Net (gain) loss on sales of investments in rental properties (54) 871
Minority interest 2,751 2,033
(Decrease) in accounts payable and other liabilities (4,067) (909)
Decrease (increase) in other assets 2,396 (2,364)
--------- ---------
Net cash flows generated by operating activities 53,862 42,667
--------- ---------
Cash flows from investing activities:
Additions to direct investment construction in progress (8,908) (68,816)
Reimbursements of construction in progress from 12,537 -
unconsolidated joint ventures
Purchase of land under development (13,120) -
Multifamily properties purchased - (115,988)
Decrease in funds held in escrow - 1,333
Capital expenditures (2,325) (1,838)
Rehabilitation expenditures (2,536) (2,029)
Proceeds from sales of property, net 11,510 12,170
--------- ---------
Net cash flows (used in) investing activities (2,842) (175,168)
--------- ---------
Cash flows from financing activities:
Principal payments on mortgage loans (5,964) (1,168)
Issuance of unsecured senior notes, net - 126,213
Line of credit:
Advances 69,000 226,000
Repayments (131,000) (200,000)
Proceeds from preferred equity offering, net 51,659 -
Proceeds from common equity offerings, net - 9,386
Proceeds from exercises of stock options, net 3,663 2,141
Distributions to minority members (2,765) (2,033)
Dividends paid (36,573) (30,329)
--------- ---------
Net cash flows (used in) generated by financing activities (51,980) 130,210
--------- ---------
Decrease in cash (960) (2,291)
Balance at beginning of period 2,057 4,216
--------- ---------
Balance at end of period $ 1,097 $ 1,925
========= =========
Transfers of construction in progress to direct investment
real estate $ 5,347 $ 50,340
========= =========
Transfers of construction in progress to joint venture
interest $ 22,455 -
========= =========
Interest capitalized $ 5,035 $ 4,857
========= =========
Mortgage loans assumed - $ 8,612
========= =========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
BRE Properties, Inc.
===============================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
- -------------------------------------------------------------------------------
June 30, 1999
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and should be read in
conjunction with the Annual Report of BRE Properties, Inc. (the "Company" or
"BRE") on Form 10-K for the year ended December 31, 1998 (the "1998 10-K"). In
the opinion of management, all adjustments (consisting of normal recurring
adjustments only) have been made that are necessary for a fair statement of the
results for the interim periods presented herein.
BRE adopted Financial Accounting Standards Board Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("Statement 131") in
the fourth quarter of 1998. Statement 131 requires certain descriptive
information to be provided about an enterprise's reportable segments. BRE has
determined that it has one operating and reportable segment, multifamily
communities, which comprised 98% of BRE's assets and 97% of its total revenues
as of and for the quarter ended June 30, 1999. All multifamily communities owned
by the Company are located in the Western United States.
BRE's business focus is the ownership and operation of multifamily communities
and it evaluates performance and allocates resources primarily based on the net
operating income ("NOI") of an individual multifamily community. NOI is defined
by the Company (and generally by the real estate industry) as the excess of all
revenue generated by the community (primarily rental revenue) less direct
operating expenses (primarily, but not limited to, payroll, property taxes,
insurance and maintenance expense). Accordingly, NOI excludes depreciation,
capitalized expenditures and interest expense. NOI from multifamily communities
totaled $39,161,000 and $32,634,000 for the quarters ended June 30, 1999 and
1998, respectively. All other segment measurements are presently disclosed in
the accompanying consolidated balance sheets and Notes to Consolidated Financial
Statements.
All revenues are from external customers and there are no revenues from
transactions with other segments, as the only activity outside operating
apartments is the ownership of one parcel of commercial land. There are no
tenants that contributed 10% or more of BRE's total revenues in the quarters
ended June 30, 1999 or 1998. Interest income is not separately reported as it is
immaterial. Interest expense on debt is not allocated to individual properties,
even if such debt is secured. Further, minority interest in consolidated
subsidiaries is not allocated to the related properties. There is no provision
for income tax as the Company is organized as a real estate investment trust
under the Internal Revenue Code of 1986, as amended.
Certain reclassifications have been made from the prior year's presentation to
conform to the current year's presentation.
The Company has entered into joint venture agreements in which BRE funds all or
a pro rata share of the construction costs of a multifamily community. These
funds include proceeds from construction loans. For certain joint ventures in
which BRE funds all the cost of construction, upon the completion of the
community, the community is contributed to the joint venture. The joint venture
partner's equity contribution and long term secured debt (if any) pay off
secured construction debt. The joint ventures are unconsolidated and are
reported using the equity method, with secured debt offset against the cost
basis of the community for financial statement presentation. From time to time,
communities under construction that BRE currently directly owns (or consolidates
for financial reporting purposes) may be contributed into a joint venture in the
future. Accordingly, BRE has changed the line item captions in the balance sheet
to reflect
6
<PAGE>
BRE Properties, Inc.
===============================================================================
the joint ventures. Further, purchases of land for development have been
segregated until the Company determines actual cost based on bids on
construction contracts, the most advantageous course of development (including
possibly selling part of the land) and whether the land will be contributed to a
joint venture arrangement.
NOTE B - LITIGATION
- -------------------
BRE is defending various claims and legal actions that arise from its normal
course of business. While it is not feasible to predict or determine the
ultimate outcome of these matters, in the opinion of management, none of these
actions will have a material adverse effect on BRE's results of operations or
financial position.
NOTE C - COMMITMENTS
- --------------------
As of June 30, 1999, the Company had commitments to acquire two multifamily
communities, with a total estimated acquisition cost of approximately $65
million. The Company expects to fund the commitments in calendar year 2000.
There can be no assurance that these communities will be acquired or will be
acquired for the estimated cost indicated.
7
<PAGE>
BRE Properties, Inc.
==============================================================================
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
- -------------------------------------------------------------------------------
June 30, 1999
Overview
BRE Properties, Inc. (the "Company" or "BRE") is a regionally focused, self-
administered equity real estate investment trust ("REIT") which primarily owns
and operates a portfolio of 84 apartment communities (aggregating 22,062 units)
in 12 major markets of the Western United States. The Company also owns a
medical office property and two properties held in partnerships in which BRE is
a minority limited partner. The Company's revenues consist primarily of rental
income (93% of total revenues in the quarters ended June 30, 1999 and 1998)
derived from its portfolio of income-producing properties. Other income includes
various fees and charges to residents of multifamily communities, and to a
lesser extent, interest from notes receivable, fee management and development
income and income from partnership investments. The policy of the Company is to
emphasize cash flows from operations rather than the realization of capital
gains through property dispositions. As dispositions of real estate assets are
made, the Company typically seeks to reinvest net proceeds from sales in income-
producing real estate.
In addition to historical information, the information included in this report
on Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such as those pertaining to the Company's capital resources, portfolio
performance and results of operations. Forward-looking statements involve
numerous risks and uncertainties and should not be relied upon as predictions of
future events and there can be no assurance that the events or circumstances
reflected in such forward-looking 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. Such 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,
without limitation, construction delays, cost overruns, inability to obtain
necessary permits and public opposition to such activities), failure to qualify
as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"),
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The success of the Company also depends upon economic
trends generally, including interest rates, income tax laws, governmental
regulation, legislation, population changes and other factors. Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only. The Company assumes no obligation to update
forward-looking statements. See also the Company's reports filed from time to
time with the Securities and Exchange Commission pursuant to the Securities Act.
8
<PAGE>
BRE Properties, Inc.
===============================================================================
RESULTS OF OPERATIONS
Comparison of the Quarters Ended June 30, 1999 and 1998
Revenues
Total revenues were $58,339,000 for the three months ended June 30, 1999
compared to $49,231,000 for the same period in 1998. This increase was primarily
due to an increase in multifamily rental revenues resulting from the acquisition
of seven multifamily communities and the completion of eight multifamily
properties previously under construction. This increase is offset in part by the
sale of four multifamily communities during or after the quarter ended June 30,
1998, but before June 30, 1999. These changes in the portfolio contributed, on a
net basis, approximately $6,852,000 to rental revenues for the three months
ended June 30, 1999, as compared to the same period in 1998. Further,
multifamily rental revenues from "same-store" communities (multifamily
communities owned by the Company and stabilized as of April 1, 1998 and
consisting of 17,816 of BRE's 22,062 total units) increased $1,528,000 for the
three months ended June 30, 1999 compared to the same period in 1998. This
increase in same-store communities was due primarily to an average increase in
rental rates of approximately 4%, and a slight increase in physical occupancy
was from 97% in quarter ended June 30, 1999 and 96% in the quarter ended June
30, 1998.
Other income increased from $3,358,000 in the quarter ended June 30, 1998 to
$4,372,000 for the quarter ended June 30, 1999 due primarily to the portfolio
changes discussed above and net development and management fees and was offset
in part by the loss of other income due to the sale of four commercial and
retail properties.
A summary of the components of revenue for the quarters ended June 30, 1999 and
1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1999 June 30, 1998
--------------------------- ---------------------------
% of Total % of Total % Change from
Revenues Revenues Revenues Revenues 1998 to 1999
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Rental Revenue:
Multifamily:
Same-store $43,982 $42,454 4%
Non same-store 9,929 3,072 223%
------- -------
Total Multifamily 53,911 92% 45,526 93% 18%
Commercial and retail 56 - 347 - -
------- ---- ------- ----
Rental revenue 53,967 92% 45,873 93% 18%
Other income 4,372 8% 3,358 7% 30%
------- ---- ------- ----
Total revenue $58,339 100% $49,231 100% 18%
======= ==== ======= ====
</TABLE>
Multifamily communities physical occupancy rates as of June 30, 1999 and 1998
were as follows:
1999 1998
- -------------------------------------------------------------------------
Multifamily: Same-store 97% 96%
- -------------------------------------------------------------------------
Multifamily: All 96% 96%
- -------------------------------------------------------------------------
Portfolio occupancy is calculated by dividing the total occupied units by the
total units in the portfolio. Apartment units are generally leased to residents
for rental terms which do not exceed one year.
9
<PAGE>
BRE Properties, Inc.
===============================================================================
Expenses
Real Estate Expenses
Real estate expenses for multifamily properties (including maintenance and
repairs, utilities, on-site staff payroll, property taxes, insurance,
advertising and other direct operating expenses) for the quarter ended June 30,
1999 increased 15% to $17,459,000 from the comparable period in 1998 primarily
due to expenses of seven multifamily property acquisitions and the completion of
eight multifamily properties previously under construction. This increase is
offset in part by the sale of four multifamily communities during or after the
quarter ended June 30, 1998, but before June 30, 1999. Real estate expenses as a
percentage of total revenues were 29.9% and 30.9% for the quarters ended June
30, 1999 and 1998, respectively.
A summary of the categories of real estate expenses for the quarters ended June
30, 1999 and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1999 June 30, 1998
------------------------- ---------------------------
% of Total % of Total Change from
Expense Revenue Expenses Revenue 1998 to 1999
------- ------- -------- ------- ------------
<S> <C> <C> <C> <C>
Multifamily:
Same-store $14,146 $13,972 1%
Non same-store 3,343 994 236%
Other (30) 226 (113)%
------- -------
Total Multifamily 17,459 29.9% 15,192 30.9% 15%
Commercial and retail - 35 -
------- -------
Total real estate expense $17,459 $15,227 15%
======= =======
</TABLE>
Provision for Depreciation
The provision for depreciation increased by $2,458,000 to $9,126,000 for the
quarter ended June 30, 1999 from the comparable period of 1998. The increase in
1999 resulted primarily from multifamily property acquisitions and the
completion of eight properties previously under construction and was offset in
part by dispositions of multifamily and commercial and retail properties in
prior periods.
Interest Expense
Interest expense was $10,296,000 (net of interest capitalized to the cost of
apartment communities under development of $2,001,000) for the quarter ended
June 30, 1999, an increase of $1,469,000 or 17%. Interest expense was $8,827,000
for the same period in 1998 and was net of $2,831,000 of interest capitalized to
the cost of apartment communities under construction. This increase was due
largely to lower amounts of capitalized interest (due to the delivery and
occupancy of communities previously under construction) and interest expense on
higher average balances on the line of credit (due to expenditures on
construction in progress).
10
<PAGE>
BRE Properties, Inc.
===============================================================================
General and Administrative
General and administrative costs were $1,996,000 or approximately 3.4% of total
revenues for the second quarter in 1999 and $1,705,000 or approximately 3.5% of
total revenues, for the second quarter in 1998. The reduction in general and
administrative costs as a percentage of total revenues is a result of economies
in administrating a larger portfolio, with total revenues increasing
approximately 18% from the quarter ended June 30, 1998 to the quarter ended June
30, 1999.
Net Gain (Loss) on Sales of Real Estate Investments
The net gain on sale of real estate investments for the three months ended June
30, 1999 was due to the gain on sale of the Los Senderos community in Phoenix,
Arizona and was offset by the loss on sale of a property under construction. The
net loss on the sales of real estate investments for the quarter ended June 30,
1998 was primarily due to the sale of Santa Paula Village Apartments and Santa
Ana Industrial properties.
Minority Interest in Income
Minority interest in income was $1,336,000 and $1,017,000 for the quarters ended
June 30, 1999 and 1998, respectively. The increase is due to the addition of one
property structured as a limited liability company whose minority members have
no conversion rights into the Company's common stock. Further, additional
Operating Company units in a consolidated subsidiary, BRE Property Investors
LLC, were granted to minority members pursuant to the achievement of certain
goals with respect to communities under development and this increase was offset
in part by the conversion of operating company units into common stock.
Dividends Attributable to Preferred Stock
During the quarter ended March 31, 1999, the Company issued 2,150,000 shares of
8 1/2% Series A Cumulative Redeemable Preferred Stock for net proceeds of
approximately $51,600,000. There was no preferred stock outstanding in the
quarter ended June 30, 1998.
Net Income Available to Common Shareholders
Net income available to common shareholders was $17,038,000 and $15,741,000 for
the quarters ended June 30, 1999 and 1998 respectively, an increase of
$1,297,000. This increase is primarily due to net earnings from the addition of
seven multifamily apartment communities and eight communities previously under
construction and offset in part by the dividend on the 8 1/2% Series A
Cumulative Redeemable Preferred Stock issued in January 1999.
11
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 1999 and 1998
Revenues
Total revenues were $113,759,000 for the six months ended June 30, 1999 compared
to $96,644,000 for the same period in 1998. This increase was primarily due to
an increase in multifamily rental revenues resulting from the acquisition of
seven multifamily communities and the completion of eight multifamily properties
previously under construction. This increase is offset in part by the sale of
four multifamily communities during or after the six months ended June 30, 1998,
but before June 30, 1999. These changes in the portfolio contributed, on a net
basis, approximately $14,192,000 to multifamily rental revenues for the six
months ended June 30, 1999 as compared to the same period in 1998. Further,
multifamily rental revenues from "same-store" communities (multifamily
communities owned by the Company and stabilized as of January 1, 1998 and
consisting of 17,592 of BRE's 22,062 total units) increased $2,402,000 for the
six months ended June 30, 1999, compared to the same period in 1998. This
increase in revenue from same-store communities was due primarily to an average
increase in rental rates of approximately 4% as physical occupancy was slightly
lower in the six months ended June 30, 1999, as compared to the six months ended
June 30, 1998.
Other income increased from $6,449,000 in the six months ended June 30, 1998 to
$7,499,000 for the six months ended June 30, 1999, due primarily to the
portfolio changes discussed above and net development and management fees and
was offset in part by the loss of other income due to the sale of four
commercial and retail properties and one partnership investment.
A summary of the components of revenue for the six months ended June 30, 1999
and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Six months Ended Six months Ended
June 30, 1999 June 30, 1998
---------------------------------- ---------------------------------
% of Total % of Total % Change from
Revenues Revenues Revenues Revenues 1998 to 1999
------------ --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Rental Revenue:
Multifamily:
Same-store $ 86,027 $83,625 3%
Non same-store 20,101 5,908 240%
-------- -------
Total Multifamily 106,128 93% 89,533 93% 19%
Commercial and retail 132 - 662 - (80%)
-------- --- ------- ---
Rental revenue 106,260 93% 90,195 93% 18%
Other income 7,499 7% 6,449 7% 16%
-------- --- ------- ---
Total revenue $113,759 100% $96,644 100% 18%
======== === ======= ===
</TABLE>
12
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Expenses
Real Estate Expenses
Real estate expenses for multifamily properties (including maintenance and
repairs, utilities, on-site staff payroll, property taxes, insurance,
advertising and other direct operating expenses) for the six months ended June
30, 1999 increased 15% to $34,399,000 from the comparable period in 1998
primarily due to expenses of seven multifamily property acquisitions and the
completion of eight multifamily properties previously under construction. This
increase is offset in part by the sale of four communities during or after the
six months ended June 30, 1998, but before June 30, 1999. Real estate expenses
as a percentage of total revenues were 30.2% and 31.0% for the six months ended
June 30, 1999 and 1998, respectively.
A summary of the categories of real estate expenses for the six months ended
June 30, 1999 and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1999 June 30, 1998
---------------------------------- ----------------------------------
% of Total % of Total % Change from
Expense Revenue Expense Revenue 1998 to 1999
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Multifamily:
Same-store $27,668 $27,699 -
Non same-store 6,695 1,875 257%
Other 36 350 (89%)
--------------- ---------------
Total Multifamily 34,399 30.2% 29,922 31.0% 15%
Commercial and retail - 50 -
--------------- ---------------
Total real estate expense $34,399 $29,972 15%
=============== ===============
</TABLE>
Provision for Depreciation
The provision for depreciation increased by $4,157,000 to $17,310,000 for the
six months ended June 30, 1999 from the comparable period of 1998. The increase
in 1999 resulted primarily from multifamily property acquisitions and the
completion of eight properties previously under construction and was offset in
part by dispositions of multifamily and commercial and retail properties in
prior periods.
Interest Expense
Interest expense was $20,135,000 (net of interest capitalized to the cost of
apartment communities under development of $5,035,000) for the six months ended
June 30, 1999, an increase of $2,773,000 or 16%. Interest expense was
$17,362,000 for the same period in 1998 and was net of $4,857,000 of interest
capitalized to the cost of apartment communities under construction. This
increase was due largely to interest expense for the full six months in the
period ended June 30, 1999 on the Company's $130,000,000 unsecured senior notes,
which were issued in February 1998, and higher average balances on the line of
credit due to expenditures on construction in progress.
13
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
General and Administrative
General and administrative costs were $3,692,000 or approximately 3.2% of total
revenues for the first six months in 1999 and $3,370,000 or approximately 3.5%
of total revenues, for the first six months in 1998. The reduction in general
and administrative costs as a percentage of total revenues is a result of
economies in administrating a larger portfolio, with total revenues increasing
18% from the six months ended June 30, 1998 to the six months ended June 30,
1999.
Net Gain (Loss) on Sales of Real Estate Investments
The net gain on sale of real estate investments for the six months ended June
30, 1999 was due to the sale of the Los Senderos community in Phoenix, Arizona
and was offset by a loss on a sale of property previously under construction.
The net loss on sales of real estate investments for the six months ended June
30, 1998 was primarily due to the sale of the Park Glenn apartment community in
Camarillo, California, and the limited partnership interest in Chateau de Ville
partnership in Anaheim, California.
Minority Interest in Income
Minority interest in income was $2,751,000 and $2,033,000 for the six months
ended June 30, 1999 and 1998, respectively. The increase is due to the addition
of one property structured as a limited liability company whose minority members
have no conversion rights into the Company's common stock. Further, additional
Operating Company units in a consolidated subsidiary, BRE Property Investors
LLC, were granted to minority members pursuant to the performance of certain
goals with respect to communities under development and in part offset by the
conversion of operating company units to common stock.
Dividends Attributable to Preferred Stock
During the quarter ended March 31, 1999, the Company issued 2,150,000 shares of
8 1/2% Series A Cumulative Redeemable Preferred Stock. There was no preferred
stock outstanding in the six months ended June 30, 1998.
Net Income Available to Common Shareholders
Net income available to common shareholders was $32,378,000 and $29,883,000 for
the six months ended June 30, 1999 and 1998, respectively, an increase of
$2,495,000. This increase is primarily due to net earnings from the addition of
seven multifamily apartment communities and eight communities previously under
construction, a loss on sale of rental properties of $871,000 in 1998 where
there was a $54,000 gain in 1999 and offset in part by the dividend on the 8
1/2% Series A Cumulative Redeemable Preferred Stock issued in January 1999.
14
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Land Under Development and Construction in Progress
Land acquired for development is capitalized and reported as "Land under
development" until the most advantageous development plan for the land is
formalized. Once the development plan is determined, the costs are transferred
to the balance sheet line item "Construction in progress". Land acquisition,
development and carrying costs of properties under construction are capitalized
and reported as a "direct investments in real estate" or "equity interests in
real estate joint ventures", as appropriate, in "Construction in progress." The
Company transfers the capitalized costs for each building in a community under
construction to the balance sheet line item "Investments in rental properties"
once the building receives a final certificate of occupancy and is ready to
lease.
The following table presents data with respect to the Company's properties
included in land under development and construction in progress at June 30,
1999. Completion of these properties is subject to a number of risks and
uncertainties, including construction delays and cost overruns. No assurance
can be given that these properties will be completed or, if completed, that they
will be completed by the estimated dates or for the estimated amounts or that
they will contain the number of proposed units in the table below.
<TABLE>
<CAPTION>
Proposed Cost to date - Estimated Total
Category Units/1/ June 30, 1999 Cost
- ------------------------------ ------------- ------------------- ----------------------
<S> <C> <C> <C>
Direct investment
construction in progress/2/ 248 $14,922,000 $ 38,300,000
Equity interests in joint
venture construction in
progress/3/ 780 41,510,000 86,500,000
------------- ------------------- ----------------------
Subtotal 1,028 56,432,000 $124,800,000
======================
Land under development/4/ 694 28,448,000
------------- -------------------
1,722 $84,880,000
============= ===================
</TABLE>
______________________
/1/ As of June 30, 1999, none of these units had been delivered.
/2/ Consists of the Pinnacle Bellevue community in Bellevue Washington, with
248 units planned and an estimated completion in the fourth quarter of 2000.
/3/ Consists of three communities, Pinnacle at Blue Ravine, Pinnacle Sonata and
Pinnacle at Queen Creek, with 260, 268 and 252 units planned, respectively.
These three communities are under joint venture agreements and are presented on
the financial statements net of $31,592,000 of draws on construction loans.
/4/ Consists of Pinnacle Carmel Creek in San Diego, California and Pinnacle
MacArthur Place in Santa Ana, California. The development plans for these
communities are under review and finalization, including obtaining final bids
for construction costs, and the total proposed units may change.
15
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Year 2000 Considerations
Some of the Company's older computer programs were originally written using two
digits rather than four to define the applicable year. As a result, those
computer programs had time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. Without correction, this could
cause a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in other normal business activities.
The Company has completed an assessment which will replace portions of its
software so that its computer systems will function properly with respect to
dates in the year 2000 and thereafter. The total year 2000 project cost for the
Company's systems was approximately $200,000 and such costs were expensed
according to the Company's policy. The project has been completed. The Company
completed the necessary software replacement largely using existing employees.
The Company believes that with the conversions to new software, the year 2000
issue will not pose significant operational problems for its computer systems.
At this time, no estimates can be made as to any potential adverse impact
resulting from the failure of third parties, including tenants, vendors and
financial institutions, to address year 2000 issues. For example, to the extent
payments, deposits and other transactions are not processed on a timely basis by
financial institutions, the Company's ability to collect payments from tenants
and/or make payments to its creditors could be adversely affected. The Company
is dependent on such third parties to assess the impact of the year 2000 issue
on their systems and to take any necessary corrective action. As a component of
its year 2000 project, the Company is in an ongoing process of discussing year
2000 compliance issues with its key vendors and service providers and is
developing and implementing contingency plans, including establishing multiple
vendors or service providers for critical functions such as banking and
telecommunications. However, there can be no assurance that these contingency
plans will successfully avoid service interruption.
Due to the complexity and pervasiveness of the year 2000 issue and, in
particular, the uncertainty regarding the compliance programs of third parties,
actual results could differ materially from those anticipated.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's cash and cash equivalents totaled $1,097,000,
down from $2,057,000 at December 31, 1998. Borrowings under the Company's line
of credit were $202,000,000 at June 30, 1999, compared to $264,000,000 at
December 31, 1998. Drawings on the line of credit are available to fund property
acquisitions, capital improvements, operating expenses and pay dividends to
shareholders. The Company typically reduces its outstanding balance on the line
of credit with cash balances as available.
At June 30, 1999, the Company's line of credit provided for borrowings of up to
$400,000,000, with $198,000,000 available at that date. The line of credit bears
interest at LIBOR plus .70% or lower based on bids of the participating banks.
Cost of the line of credit is .15% per annum on the total commitment amount.
Additionally, the Company had $73,000,000 of unsecured indebtedness at June 30,
1999, with an interest rate of 7.88% per annum as to $18,000,000 and 7.44% per
annum as to $55,000,000.
16
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
This indebtedness is to be repaid through scheduled principal payments in the
years 2000 to 2005. The Company also had a $50,000,000 issue of unsecured notes
due 2007, with an effective rate of 7.8% and a $130,000,000 issue of unsecured
notes due 2013 with an effective rate of approximately 7.3%. At June 30, 1999,
the Company also had outstanding mortgage indebtedness of $229,182,000 at
interest rates ranging from 5.3% to 9.3%, with an overall average of
approximately 7.7%. The remaining terms of the mortgage indebtedness range from
less than one to 29 years. Additionally, the Company's communities included in
equity interests in real estate joint ventures have a total of $72,731,000 in
construction loans with $31,592,000 outstanding at June 30, 1999 with interest
rates ranging from 6.5% to 7.25%, and maturities from less than one year to 12
years.
For additional information regarding the Company's line of credit, unsecured
notes payable and mortgage loans payable, including scheduled principal payments
over the next five years, see Notes 5 and 6 in the Notes to Consolidated
Financial Statements contained in the Company's 1998 Report on Form 10-K.
Certain of the Company's indebtedness contains financial covenants as to minimum
net worth, interest coverage ratios, maximum secured debt and total debt to
capital, among others. The Company was in compliance with all such financial
covenants during the applicable periods, including the three and six months
ended June 30, 1999.
The Company funded a total of approximately $27,963,000 for construction of
direct investment and joint venture communities under development in the six
months ended June 30, 1999. These acquisition and construction costs were
funded with borrowings on the line of credit, a preferred equity offering and
secured construction financing for joint venture communities totaling
$31,592,000. Because of higher prices and corresponding declining rates of
return on completed apartment communities in its targeted Western markets, the
Company does not anticipate significant acquisitions of completed apartment
communities in the remainder of 1999.
The Company intends to meet its short-term liquidity requirements through cash
balances and cash flows provided by operations, borrowings on the unsecured line
of credit, and to a lesser extent, proceeds from asset sales. The Company
believes that its cash flow, cash available from its line of credit and
additional secured borrowings (including secured construction financing) will be
sufficient to meet its liquidity needs during the remainder of 1999, which
include normal recurring expenses, debt service requirements, budgeted
expenditures for improvements to certain properties and distributions required
to maintain the Company's REIT qualification under the Code.
The Company anticipates that it will continue to require outside sources of
financing to meet its long-term liquidity needs beyond 1999, such as scheduled
debt repayments, construction funding and property acquisitions. At June 30,
1999, the Company had committed to the purchase of approximately $65,000,000 of
multifamily communities and had an estimated cost of $23,400,000 to complete
direct investment construction in progress. The estimated cost to complete the
Company's equity interest in joint venture multifamily communities is
approximately $45,000,000, of which the Company anticipates $38,000,000 will be
funded by drawings on the joint venture's construction loans and the joint
venture partners' equity contribution. The cost to complete of the Company's
land under development is still under review and construction contracts are not
yet finalized; further, such properties may be funded through joint ventures.
To facilitate the acquisition of public capital, the Company filed a universal
shelf registration statement in March 1998 providing for the issuance of up to
$750,000,000 in equity, debt, preferred or convertible securities, of which
approximately $640,000,000 remains unused at June 30, 1999. During the quarter
ended March 31, 1999, the Company issued shares of its 8 1/2%
17
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Series A Cumulative Redeemable Preferred Stock for net proceeds of approximately
$51,600,000. The proceeds from this issuance were used initially to pay down
outstanding balances on the line of credit. The Company believes that public
capital markets will not be, for the foreseeable future, as significant a source
of funding as they have been in the two years ended June 30, 1999. The Company
is actively searching for other sources of possible funding, including joint
ventures and secured construction debt. The Company has entered into joint
venture agreements in which the joint venture partner provides significant
equity upon completion of the Pinnacle at Blue Ravine, Pinnacle Sonata and
Pinnacle at Queen Creek communities and is reviewing other possible joint
venture opportunities. The Company also owns unencumbered real estate assets
that could be sold or used as collateral for financing purposes (subject to
certain lender restrictions) and has encumbered assets with significant equity
that could be further encumbered should other sources of capital not be
available.
DIVIDENDS AND DISTRIBUTIONS TO MINORITY MEMBERS
A cash dividend has been paid to shareholders each quarter since the Company's
inception in 1970. On February 22, 1999, the Company increased its dividend on
its common shares from $1.44 per year to $1.56 per year. Total dividends paid to
common shareholders for the six months ended June 30, 1999 and 1998 were
$34,675,000 and $30,329,000 respectively. Additionally, the Company paid
$1,898,000 in dividends on its 8 1/2% Series A Cumulative Redeemable Preferred
Stock in the six months ended June 30, 1999, which was a pro-rated amount for
the actual time outstanding during the period. The Company had no preferred
stock outstanding during 1998.
Total distributions to minority members of the Company's consolidated
subsidiaries were $2,765,000 and $2,033,000 for the six months ended June 30,
1999 and 1998, respectively.
18
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
Information concerning market risk is incorporated herein by reference to Item
7A of the Company's Form 10-K for the fiscal year ended December 31, 1998.
There has been no material change in the quantitative and qualitative disclosure
about market risk since December 31, 1998.
19
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of shareholders held on May 11, 1999, the
shareholders elected three Directors for three-year terms, and approved one
other corporate action by the following votes:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST WITH-HELD NON-VOTE
--------------------------------------- -------------- ------------ --------------
% of
Shares
Voted % of
on this Out- No. of No. of No. of
No. of shares Item standing Shares Shares Shares
------------- ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Item No. 1
(Election of Directors)
Class II
L. Michael Foley 32,504,929 99% 73% 274,801
John McMahan 32,371,646 99% 73% 408,084
Gregory M. Simon 32,505,203 99% 73% 274,527
Item No. 2
Approval of the 1999
BRE Stock Incentive
Plan 24,776,794 76% 56% 7,024,575 978,357 4
</TABLE>
20
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
The terms of office of the Company's six other directors continued after the
Annual meeting, as follows:
----------------------------------------------------------
Director Term Expires Class
----------------------------------------------------------
William E. Borsari 2000 III
Frank C. McDowell 2000 III
Edward E. Mace 2000 III
Robert A. Fiddaman 2001 I
Roger P. Kuppinger 2001 I
Arthur G. von Thaden 2001 I
----------------------------------------------------------
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 1999 BRE Stock Incentive Plan
10.2 Amended and Restated Non-Employee Director Stock Option Plan
11 Statement Re Computations of Per Share Earnings
27 Financial Data Schedule
99.1 Other Exhibits -Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K:
None.
21
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRE PROPERTIES, INC.
(Registrant)
Dated: August 13, 1999 /s/ Leroy E. Carlson
--------------- ---------------------------------------
LeRoy E. Carlson
Executive Vice President,
Chief Financial Officer and Secretary
22
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Index to Exhibits
Exhibit Number Description of Document Page Number
- ---------------- ---------------------------------- ------------------
10.1 1999 BRE Stock Incentive Plan
10.2 Amended and Restated Non-Employee
Director Stock Option Plan
11 Statement Re Computations of Per
Share Earnings
27 Financial Data Schedule
99.1 Ratio of Earnings to Fixed Charges
23
<PAGE>
Exhibit 10.1
1999 BRE STOCK INCENTIVE PLAN
January 25, 1999
ARTICLE I
GENERAL
1.1 Purpose of the Plan. The purpose of the 1999 BRE Stock Incentive Plan
(the "Plan") is to attract and retain employees and consultants who perform
services for the Company or a Subsidiary of the Company and afford them the
opportunity to acquire a stock ownership interest in the Company, thereby
providing them incentive compensation based on the success of the Company.
1.2 Definitions. As used in the Plan and the related Award Agreements,
the following terms will have the meanings stated below:
(a) "Award" means any Option, SAR, Restricted Shares or other stock-
based award granted pursuant to the Plan.
(b) "Award Agreement" means the written agreement, if any, between
the Company and a participant pursuant to which an Award may be granted.
The Committee shall determine the terms of each Award Agreement, subject to
the terms and conditions of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) A "Change of Control" occurs when any person or group together
with its affiliates and associates (other than the Company or any of its
subsidiaries or employee benefit plans), after the effective date of the
Plan, acquires direct or indirect beneficial ownership of 40 percent or
more of the then outstanding Shares or commences a tender or exchange offer
which results in the offeror owning 40 percent or more of the then
outstanding Shares. The terms "group," "affiliates," "associates" and
"beneficial ownership" shall have the meanings ascribed to them in the
rules and regulations promulgated under the Exchange Act.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Company" means BRE Properties, Inc., a Maryland corporation.
(g) "Committee" means the Compensation Committee appointed by the
Board to administer the Plan. The Committee shall consist solely of two or
more members of the Board who are not employees. The Board shall have the
power from time to time to add or remove members of the Committee and to
fill vacancies arising for any reason.
(h) "Eligible Participants" means salaried employees, including
officers and directors who are employees, of the Company or any Subsidiary,
and persons that serve the Company or a Subsidiary as a consultant. An
Award may be granted to a prospective employee prior to the date the
employee performs services for the Company or a Subsidiary, provided that
any such Award shall not become vested prior to the date the employee first
performs such services.
(i) "Exchange Act" means the Securities Exchange Act of 1934.
(j) The "Fair Market Value" of a Share on any date means the closing
price per Share on the New York Stock Exchange for that day (or, if no
Shares were publicly traded on that Exchange on that date, the next
preceding day that Shares were so traded on that Exchange).
<PAGE>
(k) "Incentive Stock Option" or "ISO" means an Option that meets the
requirements of Section 422(b) of the Code.
(l) "Non-qualified Stock Option" or "NQSO" means an Option that is
not intended to qualify as an ISO.
(m) "Option" means an option to purchase Shares and shall be either
an ISO or a NQSO.
(n) "Optionee" means the holder of an Option.
(o) "Option Price" means the price to be paid for Shares upon
exercise of an Option as determined in accordance with Section 2.2.
(p) "Restricted Shareholder" shall have the meaning set forth in
Section 4.1.
(q) "Restricted Shares" means Shares issued pursuant to Article IV.
(r) "Share Appreciation Right" or "SAR" means a right granted
pursuant to Article III.
(s) "Shares" means shares of common stock, $.01 par value, of the
Company.
(t) "Share Units" means a right to receive shares in the future.
(u) "Subsidiary" means any corporation or other entity in which the
Company owns, directly or indirectly, 50 percent or more of the total
combined voting power, or which is otherwise controlled by the Company.
<PAGE>
1.3 Administration of Plan.
(a) The Plan shall be administered by the Committee; provided,
however, that (i) the Board shall at all times be entitled to act in the
Committee's stead, and (ii) to the extent permitted by applicable law, the
Committee may delegate any of its responsibilities and powers to any of its
members or other persons selected by the Committee. Subject to the
provisions of the Plan, the Committee shall have the sole authority to
determine:
(i) The Eligible Participants to whom Awards shall be granted.
Awards may be made to the same person on more than on occasion;
(ii) The number of Shares to be covered by an Award;
(iii) Which Options granted shall be ISOs and which shall be
NQSOs;
(iv) The period and conditions, if any, under which each Award
shall vest or be exercisable (including acceleration of an Award); and
(v) The terms and conditions of each Award Agreement.
(b) The Committee's decision construing, interpreting and
administering the Plan shall be conclusive and binding on all parties. No
member of the Committee or the Board shall be liable for any action taken
or determination made in good faith with respect to the Plan or to any
Award granted pursuant to the Plan.
1.4 Types of Grants and Awards Under Plan. Awards under the Plan may be in
the form of Options, SARs, Restricted Shares or other stock-based Awards. The
date of grant of an Award hereunder shall be deemed to be the date of action by
the Committee, notwithstanding that issuance may be conditioned on the execution
of an Award Agreement.
1.5 Transferability. Except as permitted by the Committee, Awards under
the Plan shall not be transferable by the holder other than by will or the laws
of descent and distribution and shall be exercisable during the holder's
lifetime only by the holder or the holder's guardian or legal representative.
1.6 Shares Subject to Plan. The maximum number of Shares which may be
issued under this Plan (subject to adjustment in accordance with Section 6.4)
shall be 2,000,000 Shares, including the 750,000 Shares authorized in the
Company's 1998 Broad-Based Employee Stock Plan (which plan shall terminate and
be incorporated herein upon shareholder approval of this 1999 Plan); plus any
Shares that are subject to Awards granted under any other prior stock plan of
the Company to the extent that, following termination of that prior plan, the
Award is forfeited, expires or is canceled without delivery of Shares. In the
event that any outstanding Award under this Plan shall expire or terminate for
any reason, the Shares allocable to the unused or forfeited portion of that
Award may again be available for additional Awards under the Plan. In the event
that the Option Price is paid by delivery of already-owned Shares upon exercise
of an Option, only the net Shares issued shall be deemed utilized for purposes
of this Section 1.6; provided, however, that the maximum number of Shares for
which ISOs may be granted under the Plan shall be 2,000,000 Shares.
1.7 Maximum Awards to a Participant. The maximum number of Shares that may
be covered by Awards granted under the Plan to any one person shall be 1,000,000
Shares.
1.8 Effective Date and Term of Plan.
(a) The Plan shall be effective on January 25, 1999, subject to
approval, within 12 months after that date, by a majority of those
outstanding Shares of voting stock of the Company voting in person or by
proxy at a duly held shareholder meeting. To the extent any Awards are
granted prior to shareholder approval of the Plan, the Awards shall be
contingent on shareholder approval of the Plan.
<PAGE>
(b) The Board may terminate the Plan at any time. If not sooner
terminated by the Board, the Plan will expire on January 24, 2009.
Expiration or termination of the Plan will not affect the validity of any
Awards then outstanding.
ARTICLE II
STOCK OPTIONS
2.1 Option Agreements. The grant of an Option may be evidenced by a
written Option Agreement. Each Option Agreement shall state the number of Shares
subject to the Option, the Option Price, the Option period, the method of
exercise, the manner of payment, the restrictions on transfer, and such other
terms and conditions as the Committee shall determine consistent with the Plan.
2.2 Option Price. The price to be paid for Shares upon the exercise of an
Option shall be fixed by the Committee at the time the Option is granted, but
shall in no event be less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.
2.3 Duration of Option. No Option shall be exercisable after the
expiration of ten years from the date of grant.
2.4 Date of Exercise. Any Option may be exercised at any time following
the date of grant, in whole or in part, unless the Committee shall otherwise
provide for vesting or other restrictions under which an Option may be exercised
by the Optionee, in whole or in part. In the discretion of the Committee, an
Option may become immediately and fully exercisable upon the occurrence of
certain times or events, including, without limitation, (i) in the event of
death or permanent disability of the Optionee or (ii) upon a Change of Control.
2.5 Method of Exercise. The Committee shall establish procedures governing
the exercise of an Option consistent with the purposes of the Plan. Such
procedures may include, without limitation, delivery to the Company of written
notice of exercise accompanied by payment in full of the Option Price for the
Shares to which the exercise relates and payment of any amount necessary to
satisfy any withholding tax liability that may result from exercise of the
Option.
2.6 Payment of Option Price. Upon exercise of an Option, the Option Price
for the Shares to which the exercise relates shall be paid in full in cash or,
as permitted by the Committee, (i) by tendering to the Company, by either actual
delivery or by attestation of ownership, already-owned Shares having a Fair
Market Value equal to the Option Price on the date of exercise, (ii) by cashless
exercise methods which are permitted by law, including, without limitation,
methods whereby a broker sells the Shares to which the exercise relates or holds
them as collateral for a margin loan, delivers the Option Price to the Company,
and delivers the remaining proceeds to the Optionee (and in connection therewith
the Company may establish a cashless exercise program, including a program
where, in the discretion of Committee, the commissions on the sale of Shares to
which the exercise relates are paid by the Company), or (iii) by any combination
of cash and already-owned Shares or such cashless exercise methods having a
combined value equal to the Option Price. In the discretion of the Committee,
already-owned Shares must have been owned by the Optionee at the time of
exercise for at least the period of time specified by the Committee (which
generally shall be not less than six months). Whenever payment of the Option
Price would require delivery of a fractional Share, the Optionee shall deliver
the next lower whole number of Shares and a cash payment shall be made by the
Optionee for the balance of the Option Price.
2.7 Option Exercise Loans. An Option Agreement may provide for the
extension of a loan from the Company to the Optionee to finance exercise of the
Option. Any such loan shall have a term that does not exceed ten years, shall be
secured by a pledge of the Shares acquired pursuant to exercise of the Option,
shall be with full recourse against the Optionee, shall bear interest at rates
determined by the Committee, and shall contain such other terms and conditions
as the Committee shall determine consistent with the Plan. The Committee may in
its discretion provide for forgiveness of all or part of the loans, conditioned
on achievement of one or more of the performance goals determined in accordance
with Section 4.3, consistent with the requirements for "performance-based
compensation" under Code Section 162(m).
<PAGE>
2.8 Termination of Employment. Options shall normally terminate
immediately upon termination of an Optionee's employment with the Company for
any reason, or not more than three months following the date of termination if
permitted by the Committee, acting in its discretion. However, (i) if an
Optionee dies or becomes permanently disabled, the Committee may in its
discretion allow the Optionee or the Optionee's estate, personal or legal
representative or beneficiary, to exercise the Option (to the same extent the
Optionee could have exercised it on the date of death or permanent disability)
for a period of up to 12 months from the date of death or disability and (ii) if
an Optionee retires at or after retirement age the Committee may in its
discretion allow the Optionee to exercise the Option (to the same extent the
Optionee could have exercised it on the date of retirement) for a period of up
to three years from the date of retirement, but, in either (i) or (ii), not
beyond the original Option term.
<PAGE>
ARTICLE III
SHARE APPRECIATION RIGHTS
3.1 Grant of SARs. Share appreciation rights may be granted in
connection with all or any part of any Option granted under the Plan. The number
of SARs granted to an Optionee shall not exceed the number of Shares which the
Optionee may purchase upon exercise of the related Option. SARs granted under
the Plan shall be included in the related Award Agreement between the Company
and the Optionee.
3.2 Exercise of SARs. A holder of SARs may exercise such rights, in
whole or in part, in lieu of exercise of the related Option, only to the same
extent and subject to the same conditions as the related Option is then
exercisable and unexercised. At the time of exercise, the Optionee shall
surrender the Option with respect to the number of Shares equal to the number of
SARs exercised, and the number of Shares available for the grant of future
Options and SARs under the Plan shall be reduced by the number of Shares with
respect to which an Option is so surrendered. The Committee, in its discretion,
may prescribe terms, conditions and limitations on the exercise of SARs.
3.3 Payment of SARs. Upon exercise of SARs, in consideration of the
surrender of the related Option, the holder thereof shall be entitled to
receive, with respect to each such right, an amount equal to the excess of the
Fair Market Value of one Share at the time of exercise over the Option Price per
Share for the Shares subject to the related Option and SAR being exercised.
This amount shall be payable as the Optionee shall elect, in cash, Shares or any
combination of cash and Shares; provided, however, that the Committee shall have
sole discretion to consent to or disapprove any election to receive cash in full
or partial payment of such amount. If the Optionee is to receive all or any
portion of such amount in Shares, the number of Shares shall be determined by
dividing such amount or portion thereof by the Fair Market Value per Share at
the time of exercise. If the number of Shares so determined is not a whole
number, such number shall be reduced to the next lower whole number.
ARTICLE IV
RESTRICTED SHARES
4.1 Award of Restricted Shares. The Committee may, from time to time
and subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, award Shares to be held under the restrictions set
forth in this Article IV to any Eligible Participant. Upon making such an award,
the Company shall cause Restricted Shares to be issued and registered in the
name of the person to whom Restricted Shares are awarded (the "Restricted
Shareholder").
4.2 Restrictions. Restricted Shares shall be subject to forfeiture
upon such terms and conditions, e.g., continued employment or service and
performance goals, and to such restrictions against sale, transfer or other
disposition as may be determined by the Committee at the time Restricted Shares
are awarded. The Committee may, in its discretion, remove, modify or accelerate
the release of restrictions on any Restricted Shares, including upon a Change of
Control.
4.3 Performance Goals.
(a) The Committee may designate whether any Restricted Share
Award is intended to be "performance-based compensation" under Code
Section 162(m). Any such Awards designated as intended to be
"performance-based compensation" shall be conditioned on the
achievement of one or more performance goals. Each performance goal
that may be used by the Committee for such Awards shall identify one
or more business criteria that is to be monitored during the relevant
period. Such criteria may include, among other things, any of the
following when compared to the Company's prior performance or to peer
companies designated by the Committee: funds from operations per Share
("FFO per Share"); ratio of Common Stock price to FFO per Share; same
property performance; return on net assets; operating ratios; cash
flow; shareholder return; revenue growth; net income; earnings per
Share; debt reduction; return on investment; or revenue.
<PAGE>
(b) The Committee shall determine the target level of performance
that must be achieved with respect to each criterion that is identified in
a performance goal in order for a performance goal to be treated as
attained.
4.4 Forfeiture of Restricted Shares. In the event of the forfeiture of any
Restricted Shares, the Company shall have the right to reacquire all or any
portion of such Shares, as determined by the Committee in its sole discretion,
without the payment of consideration in any form to such Restricted Shareholder,
and the Restricted Shareholder shall unconditionally forfeit any right, title or
interest to such Restricted Shares. All forfeited Restricted Shares shall be
transferred and delivered to the Company. The Committee may, in its sole
discretion, waive in writing the Company's right to reacquire some or all of a
holder's Restricted Shares, whereupon such Shares shall become fully vested in
such Restricted Shareholder.
4.5 Escrow. In order to administer the provisions of this Article IV, the
stock certificates evidencing Restricted Shares, although issued in the name of
the Restricted Shareholder, shall be held by the Company in escrow subject to
delivery to the Restricted Shareholder upon vesting. A person's receipt of an
Award of Restricted Shares pursuant to the Plan shall constitute the grant of an
irrevocable power of attorney to the Company to permit the transfer and delivery
to the Company of any or all Restricted Shares which are forfeited to the
Company.
4.6 Dividends on Restricted Shares. While the Restricted Shares are held
in escrow, all cash dividends the Company pays on the Restricted Shares shall be
subject to such terms, conditions and restrictions on payment as the Committee
shall determine, and shall be delivered directly to the Restricted Shareholder,
to the escrow account, or otherwise held in the manner specified by the
Committee. Share dividends or other dividends in kind on any Restricted Shares
held in escrow shall be paid into such escrow in the name of the Restricted
Shareholder and shall be subject to the same restrictions on disposition and
forfeiture provisions applicable to the Restricted Shares on which such dividend
was paid.
<PAGE>
ARTICLE V
OTHER STOCK-BASED AWARDS
The Committee, in its discretion, may grant Awards under the Plan in the
form of Shares or Share Units, either current or deferred, restricted or
unrestricted, and in tandem or combination with, or as an alternative to, any
other compensation plan of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or messenger or facsimile
transmission, addressed
(a) if to the Company, at
BRE Properties, Inc.
44 Montgomery Street, Suite 3600
San Francisco, CA 94104-4809
Attn: Treasurer
(b) if to the Award holder, at the last address shown on the
Company's personnel records, or
(c) to such address as either party shall later designate by
notice to the other.
6.2 Amendment or Termination. The Board may, at any time and from time to
time, modify, amend, suspend or terminate the Plan in any respect; except that
an amendment increasing the number of Shares subject to the Plan or extending
the term of the Plan shall require approval within 12 months by the shareholders
in the manner specified in Section 1.8(a) of the Plan. The Board or the
Committee may also modify or amend the terms and conditions of any outstanding
Award, subject to the consent of the holder and consistent with the provisions
of the Plan.
6.3 Leave of Absence. The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence taken by the recipient of any grant under the Plan.
Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (a) whether or not any such leave of absence shall be
treated as a termination of employment or service within the meaning of the Plan
and (b) the impact, if any, of any such leave of absence on grants and awards
under the Plan.
6.4 Recapitalization. In the event of any change in capitalization which
affects the Shares, whether by stock dividend, stock distribution, stock split,
subdivision or combination of Shares, reclassification, merger or consolidation
or otherwise, such proportionate adjustments, if any, as the Committee in its
discretion deems appropriate to reflect such change shall be made with respect
to the total number of Shares in respect of which Awards may be granted under
the Plan, the number of Shares covered by each outstanding Award and the Option
Price per Share under each Option; however, any fractional Shares resulting from
any such adjustment shall be eliminated.
6.5 Reorganization. If the Company merges or consolidates with another
entity and is not the surviving entity, or if the Company is liquidated or sells
or otherwise disposes of substantially all its assets while unexercised Options
remain outstanding under the Plan, then either (a) after the effective date of
the merger, consolidation, liquidation, sale or other disposition, as the case
may be, each holder of any outstanding Option shall be entitled, upon exercise
of an Option, to receive, in lieu of Shares, the number and class or classes of
shares of stock or other securities or property to which the holder would have
been entitled if, immediately prior to the merger, consolidation, liquidation,
sale or other disposition, the holder had been the holder of record of a number
of Shares equal to the number of Shares as to which the Option may be exercised;
or (b) all Options, from and after a date at least 30 days prior to the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case
<PAGE>
may be, shall be exercisable in full and all outstanding Options which are so
exercisable prior to the effective date of such merger consolidation,
liquidation, sale or other disposition may be canceled by the Committee, in its
discretion, as of such effective date.
6.6 General Restriction. Each Award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (a) the
listing, registration or qualification of the related Shares upon any securities
exchange or under any state or federal law, (b) the consent or approval of any
government regulatory body, or (c) an agreement by the recipient of an Award
restricting disposition of Shares, is necessary or desirable as a condition of,
or in connection with, the making of an Award or the issue for purchase of
Shares thereunder, then such grant shall not be effective in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
6.7 Withholding Taxes. The Company, with the approval of the Committee,
may, at the request of an employee, retain Shares which would otherwise be
delivered to the employee upon exercise of an Option or granting or vesting of
Restricted Shares or other Award, to satisfy any withholding tax liability that
may result from such exercise or vesting. The Shares shall be valued for this
purpose at their Fair Market Value on the date of the exercise or vesting, as
the case may be. Whenever, under the Plan, payments by the Company are made in
cash, such payments shall be net of an amount sufficient to satisfy any federal,
state and/or local withholding tax requirements.
6.8 No Right to Employment. Nothing in the Plan nor in any agreement
entered into pursuant to the Plan shall confer upon any Award holder the right
to continue in the employment or service of the Company, nor affect any right
which the Company may have to terminate the employment or service of such
person.
6.9 Rights as Shareholder. No Optionee shall have rights as a
shareholder with respect to Shares acquired under the Plan unless and until the
certificates for such Shares are delivered to him or her.
6.10 Exchange Act Section 16. With respect to persons subject to Section
16 of the Exchange Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successor under the Exchange Act.
To the extent any provision of the Plan or action by the Plan administrators
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
<PAGE>
Exhibit 10.2
BRE PROPERTIES, INC.
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(as amended through April 12, 1999)
1. Purpose of the Plan. The purpose of the Non-Employee Director Stock
Option Plan (the ''Plan'') is to attract and retain the services of experienced
and knowledgeable non-employee directors, to encourage them to devote their
utmost effort and skill to the advancement and betterment of the Company, and to
permit them to participate in the ownership of the Company through stock
compensation in lieu of cash compensation. This plan amends the Company's
Amended and Restated Non-Employee Director Stock Option Plan, as amended to
March 2, 1998.
2. Definitions. As used in the Plan and the related Option agreements,
the following terms will have the meaning stated below:
(a) ''Board'' means the Board of Directors of the Company.
(b) A ''Change in Control'' occurs when any person or group, together
with its affiliates and associates (other than the Company or any of its
subsidiaries or employee benefit plans), acquires direct or indirect
beneficial ownership of 32 percent or more of the then outstanding Shares
or commences a tender or exchange offer for 40 percent or more of the then
outstanding Shares. The terms ''group,'' ''affiliates,'' ''associates'' and
''beneficial ownership'' shall have the meanings ascribed to them in the
rules and regulations under the Exchange Act.
(c) ''Company'' means BRE Properties, Inc., a Maryland corporation.
(d) ''Code'' means the Internal Revenue Code of 1986, as amended.
(e) ''Committee'' means the Board or its Compensation Committee
appointed by the Board to administer the Plan.
(f) ''Exchange Act'' means the Securities Exchange Act of 1934.
(g) The ''Fair Market Value'' of a Share on any date means the closing
price per Share on the New York Stock Exchange for that day (or, if no
Shares were publicly traded on that Exchange on that date, the next
preceding day that Shares were so traded on that Exchange).
(h) ''Non-Employee Director'' means a member of the Board who is not
an employee of the Company.
(i) ''Option'' means an option to purchase Shares.
(j) ''Optionee'' means the holder of an Option.
(k) ''Option Price'' means the price to be paid for Shares upon
exercise of an Option.
<PAGE>
(l) ''Shares'' means shares of common stock $.01 par value per share
of the Company.
(m) ''Subsidiary'' means any corporation or other entity in which the
Company owns, directly or indirectly, more than 50 percent of the total
combined voting power.
3. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
power to interpret the Plan and prescribe, amend and rescind rules and
regulations relating to it.
4. Participation in the Plan.
(a) Annual Grants in Lieu of Director Fees. Non-Employee Directors shall
receive the following Options in lieu of cash for serving on the Board and
attending meetings of the Board.
(i) Initial Grants Upon Becoming a Non-Employee Director. Any
person who becomes a Non-Employee Director shall automatically receive
an Option for 25,000 Shares effective as of the date of their
appointment or election to the Board.
(ii) Subsequent Annual Grants. In addition to the Option grant
provided for in subparagraph (i) above, each Non-Employee Director
shall automatically receive an additional Option for 25,000 shares on
each anniversary of the date of grant of the Option received pursuant
to subparagraph (i) above.
(b) Additional Annual Grant for Chairman of the Board. The Chairman of the
Board shall receive, in addition to the annual Option granted under subparagraph
(a), an Option for 25,000 Shares upon becoming Chairman and an additional Option
for 25,000 Shares on each subsequent anniversary date.
(c) Additional Annual Grants for Committee Membership. For serving on Board
committees, Non-Employee Directors (other than the Chairman of the Board) shall
receive an additional annual Option for 2,000 Shares for each committee the
director serves on, or for 6,000 Shares for serving as chairman of a committee,
to be granted initially on the date this amended Plan is approved by the
shareholders of the Company and thereafter on the date a director joins a
committee or becomes chairman, and on each subsequent anniversary of the initial
grant date; provided that, no individual shall receive annual Options for more
than 8,000 Shares pursuant to this subparagraph 4(c).
(d) Annual Incentive Grants. In addition to the Options granted pursuant to
subparagraphs (a)-(c) above, each Non-Employee Director shall receive an Option
for the number of Shares set forth in the table below, following any fiscal year
of the Company that the growth in the Company's funds from operations per share
from the prior year, as determined by reference to the Company's annual
consolidated financial statements, exceeds the 50th percentile of the ten
largest publicly-traded multifamily Real Estate Investment Trusts based on total
assets:
<TABLE>
<CAPTION>
Percentile No. of Shares
---------- --------------------------------------------------
<S> <C>
80-100 5,000
</TABLE>
<PAGE>
<TABLE>
<S> <C>
50-80 5,000 multiplied by x/30, with x equal to the
percentile above 50
(e.g., the 70th percentile = 20/30 x 5,000 = 3,333
Shares)
0-50 zero
</TABLE>
The grant date for Options granted pursuant to this paragraph shall be the
date, following publication of the Company's annual consolidated financial
statements, that the reference information for the comparison REITs first
becomes available.
(e) Reload Grants. In the event an Optionee (1) exercises, in whole or in
part, any Option granted under this Plan (including an Option granted under this
Section 4(e)) by delivering (or attesting to ownership of) Shares instead of
paying cash, as permitted by subparagraph 7(c), or (2) pays tax withholding by
delivering Shares, or having Shares withheld, as permitted by subparagraph 7(g),
the Optionee, if then still a Non-Employee Director, shall automatically receive
on the date of such exercise a new Option (a ''Reload Option'') to purchase
additional Shares equal to the number of Shares so delivered to, or withheld by,
the Company. The Reload Option shall have an exercise price equal to the Fair
Market Value per Share on the date the Reload Option is granted, shall expire
the same date as the expiration date of the original Option so exercised, and
shall vest and become exercisable if the Optionee holds all of the new Shares
purchased (net of Shares withheld to pay taxes) under the original Option until
the first to occur of (i) 18 months after grant of the Reload Option or (ii) 12
months before the expiration of the Reload Option. However, a Reload Option
shall vest sooner upon the occurrence of any of the following: (a) a Change in
Control, (b) the Optionee's retirement from the Board, or (c) the Optionee's
death, disability, or personal hardship as determined by the Committee.
5. Shares Subject to Plan. The maximum number of Shares which may be
issued pursuant to Options under the Plan shall be 1,550,000, subject to
adjustment in accordance with Section 8. In the event that any outstanding
Option (other than a Reload Option) shall expire or terminate for any reason,
the Shares allocable to the unused portion of that Option will again be
available for additional Options under the Plan. If an Option is exercised by
delivery of Shares as permitted by subparagraph 7(c), only the number of Shares
issued upon exercise net of the Shares so delivered shall be deemed utilized for
purposes of determining the maximum number of Shares available for future
Options under the Plan.
6. Transferability. Except as permitted by the Committee in accordance
with the rules and regulations promulgated under the Exchange Act with respect
to any exemption from the short-swing profit provisions of Section 16(b) of that
Act, Options granted under the Plan shall not be transferable by the holder
other than by will or the laws of descent and distribution and shall be
exercisable during the holder's lifetime only by the holder or the holder's
guardian or legal representative.
7. Terms and Conditions of Options. The Options granted hereunder will
not be ''incentive stock options'' under Section 422 of the Code. Each Option
Agreement shall state the number of Shares subject to the Option, the Option
Price, the Option period, the method of exercise, the manner of payment, any
restrictions on transfer, and such other terms and conditions as the Committee
shall determine consistent with the Plan and the following:
(a) Option Price. The price to be paid for Shares upon the exercise of
an Option shall be 100% of the Fair Market Value of the Shares on the date the
Option is granted.
<PAGE>
(b) Expiration of Option. No Option shall be exercisable after the
expiration of ten years from the date of grant. A Reload Option shall expire
as provided in subparagraph 4(e).
(c) Payment of Option Price. Upon exercise of an Option, the Option Price
for the Shares to which the exercise relates shall be paid in full (i) in cash
or (ii) by delivery to the Company (including delivery by attestation of
ownership) of Shares owned by the Optionee and valued at Fair Market Value on
the date of exercise; provided that, any such already-owned Shares delivered
to pay the exercise price, if originally acquired by the Optionee from the
Company, shall have been held at least six months.
(d) Vesting of Options. Each Option granted under subparagraphs 4(a)-(c)
shall vest and become exercisable as to 1/12 of the shares subject to the
Option on each monthly anniversary date beginning on the grant date of the
Option, subject to the Optionee's continuing service as a director, chairman
or committee member, so that an Option shall have become fully vested one year
after the grant date; provided that upon a Change in Control, all unvested
options shall become fully vested. Incentive grants under subparagraph 4(d)
shall be fully vested upon grant. A Reload Option shall vest as provided in
subparagraph 4(e).
(e) Termination of Director Status. Termination of an Optionee's status
as a director of the Company shall not affect the ability of the Optionee or
the Optionee's estate to exercise, until the expiration date thereof, any
Options which have vested prior to the termination date.
(f) Rights as Shareholder. No Optionee shall have rights as a shareholder
with respect to Shares acquired under the Plan unless and until the stock
certificates for such Shares are delivered to him or her.
(g) Tax Withholding. Option exercises are subject to withholding of all
applicable taxes, which withholding shall be satisfied by the Optionee's cash
remittance or (to the extent permitted by the Committee) through the delivery
or surrender to the Company of Shares, valued at Fair Market Value, which the
Optionee owned prior to exercise or to which the Optionee is otherwise
entitled upon exercise of an Option; provided that, any such already-owned
Shares delivered to pay withholding taxes, if originally acquired by the
Optionee from the Company, shall have been held at least six months.
8. Capital Adjustments; Reorganization. The aggregate number of Shares with
respect to which Options may be granted hereunder, the number of Shares thereof
covered by each outstanding Option and the purchase price per Share shall be
proportionately adjusted for changes in the capitalization of the Company
resulting from a recapitalization, reorganization, merger, consolidation,
exchange of shares, stock dividend, stock split, reverse stock split, or other
subdivision or consolidation of shares or the like. No fractional shares shall
be issued, and any fractional shares resulting from the adjustments contemplated
by this subparagraph shall be eliminated from the respective Option.
If the Company merges or consolidates with another entity and is not the
surviving entity, or if the Company is liquidated or sells or otherwise disposes
of substantially all its assets while unexercised Options remain outstanding
under the Plan, then either (a) after the effective date of the merger,
consolidation, liquidation, sale or other disposition, as the case may be, each
holder of any outstanding Option shall be entitled, upon exercise of an Option,
to receive, in lieu of Shares, the number and class or classes of shares of
stock or other securities or property to which the holder would have been
entitled if, immediately prior to the merger,
<PAGE>
consolidation, liquidation, sale or other disposition, the holder had been the
holder of record of a number of Shares equal to the number of Shares as to which
the Option may be exercised; or (b) all Options, from and after a date at least
30 days prior to the effective date of the merger, consolidation, liquidation,
sale or other disposition, as the case may be, shall be exercisable in full and
all outstanding Options which are so exercisable prior to the effective date of
such merger consolidation, liquidation, sale or other disposition may be
canceled by the Committee in its discretion, as of such effective date, against
payment to the holder of cash in an amount equal to the estimated fair value of
the Options so canceled as determined by the Company's independent financial
advisor.
9. Exchange Act Section 16. Transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successor under the
Exchange Act. To the extent any provision of the Plan or action by the Plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
10. Duration of the Plan. This Amended and Restated Plan, as amended April
12, 1999, shall be deemed effective on April 12, 1999. The Plan shall terminate
on October 1, 2005, but may be sooner terminated by the Board at any time.
Expiration, termination or amendment of the Plan will not affect any Options
then outstanding.
11. Amendment of the Plan. The Board may amend or terminate the Plan at
any time; provided, however, that no such amendment shall, without the approval
of the holders of a majority of the outstanding shares of voting stock of the
Company present and voting at a duly held shareholder meeting, (i) increase the
maximum number of Shares which may be purchased pursuant to the Plan, (ii)
change the purchase price, or (iii) change the Option period or increase the
time limitation on the grant of Options under the Plan.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Statement Re Computations of Per Share Earnings
- ---------------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands, except per share data)
For the Quarter Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income available to common shareholders $17,038 $15,741
Less adjustment for gain (loss) on sales of investments in rental
properties available to common shareholders (54) 46
------- -------
Numerator for basic earnings per share - income from continuing 16,984 15,787
operations available to common shareholders
Effect of dilutive securities:
Minority interest in income convertible into common shares 1,192 1,017
------- -------
Numerator for diluted earnings per share $18,176 $16,804
======= =======
Denominator:
Denominator for basic earnings per share - weighted average shares 44,570 42,170
------- -------
Effect of dilutive securities:
Weighted average convertible operating company units 3,110 2,820
Stock options 170 370
------- -------
Dilutive potential common shares 3,280 3,190
------- -------
Denominator for diluted earnings per share adjusted for
weighted average shares and assumed conversion 47,850 45,360
------- -------
Basic earnings per share excluding gains (loss) on sale $ 0.38 $ 0.37
======= =======
Diluted earnings per share excluding gains (loss) on sale $ 0.38 $ 0.37
======= =======
For the Six Months Ended June 30,
1999 1998
---- ---
Numerator:
Net income available to common shareholders $32,378 $29,883
Less adjustment for gain (loss) on sales of investments in rental
properties available to common shareholders (54) 871
------- -------
Numerator for basic earnings per share - income from continuing
operations available to common shareholders 32,324 30,754
Effect of dilutive securities:
Minority interest in income convertible into common shares 2,461 2,033
------- -------
Numerator for diluted earnings per share $34,785 $32,787
======= =======
Denominator:
Denominator for basic earnings per share - weighted average shares 44,430 42,000
------- -------
Effect of dilutive securities:
Weighted average convertible operating company units 3,140 2,820
Stock options 170 440
------- -------
Dilutive potential commons shares 3,310 3,260
------- -------
Denominator for diluted earnings per share adjusted for
weighted average shares and assumed conversion 47,740 45,260
------- -------
Basic earnings per share excluding gains (loss) on sale $ 0.73 $ 0.73
======== =======
Diluted earnings per share excluding gains (loss) on sale $ 0.73 $ 0.72
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,097
<SECURITIES> 0
<RECEIVABLES> 25,124
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,221
<PP&E> 1,678,733
<DEPRECIATION> (92,270)
<TOTAL-ASSETS> 1,612,684
<CURRENT-LIABILITIES> 15,896
<BONDS> 684,182
0
53,750
<COMMON> 447
<OTHER-SE> 858,409<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,612,684
<SALES> 58,339
<TOTAL-REVENUES> 58,339
<CGS> 17,459
<TOTAL-COSTS> 17,459
<OTHER-EXPENSES> 11,122<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,296
<INCOME-PRETAX> 19,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,424<F3>
<CHANGES> 0
<NET-INCOME> 17,038<F4>
<EPS-BASIC> 0.38<F5>
<EPS-DILUTED> 0.38
<FN>
<F1> Includes $89,594 of minority interest.
<F2> Includes $9,126 of depreciation, a non cash charge.
<F3> Includes $1,336 of minority interest, and $1,142 of dividends to preferred
shareholders and $54 in gains on sales of investments in real estate.
<F4> Represents net income available to common shareholders.
<F5> Represents basic earnings per share.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 99.1
Statement of Computation of Ratio of Earnings to Fixed Charges
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
For the Quarter Ended June 30,
1999 1998
---------------------- ---------------------
<S> <C> <C>
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 19,462 $ 16,804
Less-minority interest not convertible into common stock (144) -
---------------------- ---------------------
Earnings $ 19,318 $ 16,804
====================== =====================
Fixed charges:
Interest $ 10,296 $ 8,827
Capitalized interest 2,001 2,831
Preferred stock dividend 1,142 -
Other 12 12
---------------------- ---------------------
Fixed Charges $ 13,451 $ 11,670
====================== =====================
Earnings plus fixed charges, excluding capitalized interest and
preferred stock dividends $ 29,626 $ 25,643
====================== ====================
Divided by fixed charges $ 13,451 $ 11,670
====================== ====================
Ratio of earnings to fixed charges 2.2 2.2
====================== ====================
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1999 1998
---------------------- ---------------------
<S> <C> <C>
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 36,973 $ 32,787
Plus-provision for non-recurring charge 1,250 -
Less-minority interest not convertible into common stock (290) -
---------------------- ---------------------
Earnings $ 37,933 $ 32,787
====================== =====================
Fixed charges:
Interest $ 20,135 $ 17,362
Capitalized interest 5,035 4,857
Preferred stock dividends 1,898
Other 23 23
---------------------- ---------------------
Fixed Charges $ 27,091 $ 22,242
====================== =====================
Earnings plus fixed charges, excluding capitalized interest and
preferred stock dividends $ 58,091 $ 50,172
====================== =====================
Divided by fixed charges $ 27,091 $ 22,242
====================== =====================
Ratio of earnings to fixed charges 2.1 2.3
====================== =====================
</TABLE>
