<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 September 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 incorporation (I.R.S. Employer
or organization) Identification No.)
44 Montgomery Street
36th Floor
San Francisco, CA 94104-4809
- --------------------------------------------- ---------------------
(Address of principal office) (Zip Code)
(415) 445-6530
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(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 November 9, 1999 44,679,341
<PAGE>
BRE PROPERTIES, INC.
INDEX TO FORM 10-Q
September 30, 1999
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1:
Consolidated balance sheets - September 30, 1999 and December
31, 1998 2
Consolidated statements of income - three months ended
September 30, 1999 and 1998 3
Consolidated statements of income - nine months ended
September 30, 1999 and 1998 4
Consolidated statements of cash flows - nine months ended
September 30, 1999 and 1998 5
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 20
ITEM 6 Exhibits and Reports on Form 8-K 20
<PAGE>
BRE Properties, Inc.
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PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
--------------------
<TABLE>
<CAPTION>
Consolidated Balance Sheets (unaudited)
- -------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
September 30, 1999 December 31, 1998
-------------------- ---------------------
<S> <C> <C>
Assets
Real estate portfolio:
Direct investments in real estate:
Investments in rental properties $1,653,537 $1,618,461
Construction in progress 35,198 43,830
Less: accumulated depreciation (100,870) (75,838)
-------------------- ---------------------
1,587,865 1,586,453
-------------------- ---------------------
Equity interests in real estate joint ventures:
Investments in rental properties - -
Construction in progress 12,382 -
-------------------- ---------------------
12,382 -
-------------------- ---------------------
Land under development 20,358 15,328
-------------------- ---------------------
Total real estate portfolio 1,620,605 1,601,781
Cash 3,244 2,057
Other assets 25,705 27,078
-------------------- ---------------------
Total assets $1,649,554 $1,630,916
==================== =====================
Liabilities and Shareholders' Equity
Liabilities
Mortgage loans $ 228,399 $ 235,146
Unsecured senior notes 253,000 253,000
Unsecured line of credit 238,000 264,000
Accounts payable and other liabilities 17,362 26,333
-------------------- ---------------------
Total liabilities 736,761 778,479
-------------------- ---------------------
Commitments and contingencies (notes B and C) - -
Minority interest 88,864 87,432
-------------------- ---------------------
Shareholders' equity
Preferred stock, $.01 par value, liquidation preference $25.00 per
share, 10,000,000 shares authorized. Shares issued and
outstanding: 2,150,000 shares of Series A at September 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: 44,679,341 at September 30, 1999;
44,221,560 at December 31, 1998 447 443
Additional paid-in capital 671,782 664,811
Accumulated net income in excess of cumulative dividends 97,950 99,751
-------------------- ---------------------
Total shareholders' equity 823,929 765,005
-------------------- ---------------------
Total liabilities and shareholders' equity $1,649,554 $1,630,916
==================== =====================
See notes to consolidated financial statements
</TABLE>
2
<PAGE>
BRE Properties, Inc.
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<TABLE>
<CAPTION>
Consolidated Statements of Income (unaudited)
- ---------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
For the Three Months Ended
September 30,
-----------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Revenue
Rental income $55,519 $49,423
Other income 4,310 3,327
------------------- -----------------
Total revenue 59,829 52,750
------------------- -----------------
Expenses
Real estate operating 18,587 17,671
Depreciation 8,977 7,024
Interest 10,400 8,604
General and administrative 1,431 1,715
Provision for non-recurring charge - 2,400
------------------- -----------------
Total expenses 39,395 37,414
------------------- -----------------
Income before net gain (loss) on sales of investments in rental
properties, minority interest and dividends attributable to
preferred stock 20,434 15,336
Net gain (loss) on sales of investments in rental properties - (202)
------------------- -----------------
Income before minority interest 20,434 15,134
Minority interest in income 1,353 1,018
------------------- -----------------
Net income 19,081 14,116
Dividends attributable to preferred stock 1,142 -
------------------- -----------------
Net income available to common shareholders $17,939 $14,116
=================== =================
Net income per outstanding common share:
Income before net gain (loss) on sales of investments in rental
properties less minority interest $ 0.40 $ 0.33
Net gain (loss) on sales of investments in rental properties - (0.01)
------------------- -----------------
Net income per share - basic $ 0.40 $ 0.32
=================== =================
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 0.40 $ 0.32
Net gain (loss) on sales of investments in rental properties - -
------------------- -----------------
Net income per share - assuming dilution $ 0.40 $ 0.32
=================== =================
Weighted average common shares outstanding - basic 44,680 43,480
=================== =================
Weighted average common shares outstanding - assuming dilution 47,860 46,570
=================== =================
Dividends declared and paid per common share $ 0.39 $ 0.36
=================== =================
See notes to consolidated financial statements
</TABLE>
3
<PAGE>
BRE Properties, Inc.
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<TABLE>
<CAPTION>
Consolidated Statements of Income (unaudited)
- ---------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
For the Nine Months Ended
September 30,
-----------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Revenue
Rental income $161,779 $139,618
Other income 11,809 9,776
------------------- -----------------
Total revenue 173,588 149,394
------------------- -----------------
Expenses
Real estate operating 52,986 47,643
Depreciation 26,287 20,177
Interest 30,535 25,966
General and administrative 5,123 5,085
Provision for non-recurring charge 1,250 2,400
------------------- -----------------
Total expenses 116,181 101,271
------------------- -----------------
Income before net gain (loss) on sales of investments in rental
properties, minority interest and dividends attributable to
preferred stock 57,407 48,123
Net gain (loss) on sales of investments in rental properties 54 (1,073)
------------------- -----------------
Income before minority interest 57,461 47,050
Minority interest in income 4,104 3,051
------------------- -----------------
Net income 53,357 43,999
Dividends attributable to preferred stock 3,040 -
------------------- -----------------
Net income available to common shareholders $ 50,317 $ 43,999
=================== =================
Net income per outstanding common share:
Income before net gain (loss) on sales of investments in rental
properties less minority interest $ 1.13 $ 1.06
Net gain (loss) on sales of investments in rental properties - (0.03)
------------------- -----------------
Net income per share - basic $ 1.13 $ 1.03
=================== =================
Income before net gain (loss) on sales of investments in rental
properties and minority interest $ 1.13 $ 1.05
Net gain (loss) on sales of investments in rental properties - (0.02)
------------------- -----------------
Net income per share - assuming dilution $ 1.13 $ 1.03
=================== =================
Weighted average common shares outstanding - basic 44,500 42,560
=================== =================
Weighted average common shares outstanding - assuming dilution 47,740 45,760
=================== =================
Dividends declared and paid per common share $ 1.17 $ 1.08
=================== =================
See notes to consolidated financial statements
</TABLE>
4
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (unaudited)
- --------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
For the Nine Months Ended
September 30,
------------------------------------------------
1999 1998
---------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 53,357 $ 43,999
Adjustments to reconcile net income to net cash generated by
operating activities:
Provision for depreciation 26,287 20,177
Provision for nonrecurring charge - 2,400
Net (gain) loss on sales of investments in rental properties (54) 1,073
Minority interest 4,104 3,051
(Decrease) increase in accounts payable and other liabilities (1,351) 1,964
Decrease (increase) in other assets 1,438 (1,233)
---------------------- --------------------
Net cash flows generated by operating activities 83,781 71,431
---------------------- --------------------
Cash flows from investing activities:
Additions to direct investment construction in progress (26,203) (142,846)
Reimbursements of construction in progress from unconsolidated
joint ventures 10,073 -
Purchase of land under development (5,030) -
Multifamily properties purchased (24,264) (115,988)
Decrease in funds held in escrow - 15,833
Capital expenditures (3,485) (2,645)
Rehabilitation expenditures (8,185) (4,762)
Proceeds from sales of property, net 11,510 20,295
---------------------- --------------------
Net cash flows (used in) investing activities (45,584) (230,113)
---------------------- --------------------
Cash flows from financing activities:
Principal payments on mortgage loans (6,747) (5,135)
Issuance of unsecured senior notes, net - 130,000
Costs of issuance of senior unsecured notes - (3,787)
Line of credit:
Advances 126,000 346,000
Repayments (152,000) (318,000)
Proceeds from preferred equity offering, net 51,659 -
Proceeds from common equity offerings, net - 56,306
Proceeds from exercises of stock options, net 3,438 1,332
Distributions to minority members (4,202) (3,051)
Dividends paid (55,158) (45,981)
---------------------- --------------------
Net cash flows (used in) generated by financing activities (37,010) 157,684
---------------------- --------------------
Increase (decrease) in cash 1,187 (998)
Balance at beginning of period 2,057 4,216
---------------------- --------------------
Balance at end of period 3,244 $ 3,218
---------------------- --------------------
Transfers of construction in progress to direct investments in real
estate $ 5,667 $ 132,060
====================== ====================
Transfers of construction in progress to equity interests in real
estate joint ventures $ 22,455 -
====================== ====================
Interest capitalized $ 7,226 $ 8,695
====================== ====================
Mortgage loans assumed - $ 8,612
====================== ====================
See notes to consolidated financial statements
</TABLE>
5
<PAGE>
BRE Properties, Inc.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
September 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 98% of its total revenue as
of and for the nine months ended September 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 $116,617,000 and $97,811,000 for the nine months ended September 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 revenue is from external customers and there is no revenue 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 revenue in the nine months ended
September 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 period's presentation to
conform to the current period's presentation.
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.
6
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
NOTE C - COMMITMENTS
- --------------------
As of September 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.
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ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
September 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 85 apartment communities (aggregating 22,334 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 revenue consists primarily of rental
income (93% of total revenue in the quarter ended September 30, 1999 and 94% in
the same period in 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 September 30, 1999 and 1998
Revenue
Total revenue was $59,829,000 for the three months ended September 30, 1999
compared to $52,750,000 for the same period in 1998, primarily due to an
increase in rental revenue. Rental revenue increased from $49,423,000 in the
quarter ended September 30, 1998 to $55,519,000 in the quarter ended September
30, 1999, due largely to the completion of eight multifamily properties
previously under construction and the acquisition of one multifamily community.
This increase is offset in part by the sale of two multifamily communities
during or after the quarter ended September 30, 1998, but before September 30,
1999. These changes in the portfolio contributed, on a net basis, approximately
$4,274,000 to rental revenue for the three months ended September 30, 1999, as
compared to the same period in 1998. Further, multifamily rental revenue from
same-store communities (multifamily communities owned by the Company and
stabilized as of July 1, 1998 and consisting of 19,297 of BRE's 22,334 total
units) increased $2,030,000 for the three months ended September 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 3% and
stable physical occupancy of 97% at both September 30, 1999 and 1998.
Other income increased from $3,327,000 in the quarter ended September 30, 1998
to $4,310,000 for the quarter ended September 30, 1999 due primarily to the
portfolio changes discussed above, net development and management fees from
third parties, offset in part by the loss of other income from the sale of three
commercial and retail properties.
A summary of the components of revenue for the quarter ended September 30, 1999
and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended September 30, 1999 Three months ended September 30, 1998
--------------------------------------- -------------------------------------
% of Total % of Total % Change from
Revenue Revenue Revenue Revenue 1998 to 1999
------------------ --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Rental Revenue:
Multifamily:
Same-store $48,914 $46,884 4%
Non same-store 6,549 2,275 188%
------- -------
Total Multifamily 55,463 93% 49,159 93% 13%
Commercial and retail 56 - 264 1% (79%)
------- --- ------- ---
Rental revenue 55,519 93% 49,423 94% 12%
Other income 4,310 7% 3,327 6% 30%
------- --- ------- ---
Total revenue $59,829 100% $52,750 100% 13%
======= === ======= ===
</TABLE>
Multifamily communities physical occupancy rates as of September 30, 1999 and
1998 were as follows:
<TABLE>
<S> <C> <C>
1999 1998
- ---------------------------------------------------------------------------------------------------------
Multifamily: Same-store 97% 97%
- ---------------------------------------------------------------------------------------------------------
Multifamily: All 97% 97%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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 September
30, 1999 increased 5% to $18,587,000 from the comparable period in 1998,
primarily due to expenses of eight multifamily properties previously under
construction and the acquisition of one multifamily community. Additionally,
ongoing cost control measures have resulted in lower expense in same-store
properties during these periods. This increase is offset in part by the sale of
two multifamily communities during or after the quarter ended September 30,
1998, but before September 30, 1999. Real estate expenses as a percentage of
total revenue were 31.1% and 33.5% for the quarters ended September 30, 1999 and
1998, respectively, due primarily to increases in rental revenue and decreases
in real estate expense on a same-store basis.
A summary of the categories of real estate expenses for the quarters ended
September 30, 1999 and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1999 September 30, 1998
-------------------------------- -----------------------------
% of Total % of Total % Change from
Expense Revenue Expense Revenue 1998 to 1999
------------ -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Multifamily:
Same-store $16,508 $16,772 (2%)
Non same-store 2,056 789 161%
Other 23 102 (77%)
------------ ----------
Total Multifamily 18,587 31.1% 17,663 33.5% 5%
Commercial and retail - 8 (100%)
------------ ----------
Total real estate expense $18,587 $17,671 5%
============ ==========
</TABLE>
Provision for Depreciation
The provision for depreciation increased by $1,953,000 to $8,977,000 for the
quarter ended September 30, 1999 from the comparable period of 1998. The
increase in 1999 resulted primarily from 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 $10,400,000 (net of interest capitalized to the cost of
apartment communities under development of $2,191,000) for the quarter ended
September 30, 1999, an increase of $1,796,000 or 21%. Interest expense was
$8,604,000 for the same period in 1998 and was net of $3,838,000 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 $1,431,000 or approximately 2.4% of total
revenue for the third quarter in 1999 and $1,715,000 or approximately 3.3% of
total revenue, for the third quarter in 1998. The reduction in general and
administrative costs as a percentage of total revenue is primarily due to lower
salary costs (due in part to the February, 1999 restructuring) and the timing of
certain costs.
Provision for Non-Recurring Charge
In the third quarter of 1998, the Company recorded a provision for litigation
loss of $2,400,000 in connection with a jury award and related legal expenses.
There was no such amount in the third quarter of 1999.
Net Gain (Loss) on Sales of Real Estate Investments
There was no net gain (loss) on sale of real estate investments for the three
months ended September 30, 1999. The net loss on sales of real estate
investments of ($202,000) for the quarter ended September 30, 1998 was primarily
due to the sale of the Vista Village retail property and the Valencia Medical
property.
Minority Interest in Income
Minority interest in income was $1,353,000 and $1,018,000 for the quarters ended
September 30, 1999 and 1998, respectively. The increase is due to the addition
in the fourth quarter of 1998 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 existing
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 three
months ended September 30, 1998.
Net Income Available to Common Shareholders
Net income available to common shareholders was $17,939,000 and $14,116,000 for
the quarters ended September 30, 1999 and 1998 respectively, an increase of
$3,823,000. This increase is primarily due to net earnings from 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 Nine Months Ended September 30, 1999 and 1998
Revenue
Total revenue was $173,588,000 for the nine months ended September 30, 1999
compared to $149,394,000 for the same period in 1998, primarily due to an
increase in rental revenue. Rental revenue increased from $139,618,000 in the
nine months ended September 30, 1998 to $161,779,000 for the nine months ended
September 30, 1999, due largely to 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 nine months ended September 30, 1998, but before
September 30, 1999. These changes in the portfolio contributed, on a net basis,
approximately $18,680,000 to multifamily rental revenue for the nine months
ended September 30, 1999 as compared to the same period in 1998. Further,
multifamily rental revenue 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 22,334 total units) increased $4,220,000 for the nine months
ended September 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 3% as physical occupancy was stable, with both
September 30, 1999 and 1998 at 97%.
Other income increased from $9,776,000 in the nine months ended September 30,
1998 to $11,809,000 for the nine months ended September 30, 1999, due primarily
to the portfolio changes discussed above and net development and management fees
from third parties, 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 nine months ended September 30,
1999 and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1999 September 30, 1998
----------------------------------- -------------------------------
% of Total % of Total % Change from
Revenue Revenue Revenue Revenue 1998 to 1999
---------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental Revenue:
Multifamily:
Same-store $130,631 $126,411 3%
Non same-store 30,960 12,280 152%
---------------- ------------
Total Multifamily 161,591 93% 138,691 93% 17%
Commercial and retail 188 - 927 - (80%)
---------------- ------------- ------------
Rental revenue 161,779 93% 139,618 93% 16%
Other income 11,809 7% 9,776 7% 21%
---------------- ------------- ------------ -------------
Total revenue $173,588 100% $149,394 100% 16%
================ ============= ============ =============
</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 nine months ended
September 30, 1999 increased 11% to $52,986,000 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 nine months ended September 30, 1998, but before September 30, 1999.
Additionally, ongoing cost control measures have resulted in lower expense in
same-store properties during these periods. Real estate expenses as a percentage
of total revenue were 30.5% and 31.9% for the nine months ended September 30,
1999 and 1998, respectively, due primarily to increases in rental revenue and
decreases in real estate expense on a same-store basis.
A summary of the categories of real estate expenses for the nine months ended
September 30, 1999 and 1998 follows (dollars in thousands):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1999 September 30, 1998
-------------------------------- --------------------------------
% of Total % of Total % Change from
Expense Revenue Expense Revenue 1998 to 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Multifamily:
Same-store $42,776 $43,077 (1%)
Non same-store 10,153 4,055 150%
Other 57 453 (87%)
------------- -------------
Total Multifamily 52,986 30.5% 47,585 31.9% 11%
Commercial and retail - 58 (100%)
------------- -------------
Total real estate expense $52,986 $47,643 11%
============= =============
</TABLE>
Provision for Depreciation
The provision for depreciation increased by $6,110,000 to $26,287,000 for the
nine months ended September 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 $30,535,000 (net of interest capitalized to the cost of
apartment communities under development of $7,226,000) for the nine months ended
September 30, 1999, an increase of $4,569,000 or 18%. Interest expense was
$25,966,000 for the same period in 1998 and was net of $8,695,000 of interest
capitalized to the cost of apartment communities under construction. This
increase was due largely to interest expense for the full nine months in the
period ended September 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 $5,123,000 or approximately 3.0% of total
revenue for the first nine months in 1999 and $5,085,000 or approximately 3.4%
of total revenue, for the first nine months in 1998. The reduction in general
and administrative costs as a percentage of total revenue is a result of
economies in administrating a larger portfolio, with total revenue increasing
16% from the nine months ended September 30, 1998 to the nine months ended
September 30, 1999.
Provision for Non-Recurring Charge
In the first quarter of 1999, the Company recorded a restructuring charge of
$1,250,000 in connection with reductions in corporate personnel. In the third
quarter of 1998, the Company recorded a provision for litigation loss of
$2,400,000 in connection with a jury award and related legal expenses.
Net Gain (Loss) on Sales of Real Estate Investments
The net gain on sale of real estate investments for the nine months ended
September 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 under construction. The
net loss on sales of real estate investments for the nine months ended September
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 $4,104,000 and $3,051,000 for the nine months
ended September 30, 1999 and 1998, respectively. The increase is due to the
addition of one property structured as a limited liability company in the fourth
quarter of 1998 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 nine months ended September 30, 1998.
Net Income Available to Common Shareholders
Net income available to common shareholders was $50,317,000 and $43,999,000 for
the nine months ended September 30, 1999 and 1998, respectively, an increase of
$6,318,000. 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 $1,073,000 in 1998 where
there was a $54,000 gain in 1999, and is 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 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 "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 September 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>
Cost to date -
Proposed September 30,
Category Units/1/ 1999 Estimated Total Cost
- ------------------------------ ----------- ------------------- ----------------------
<S> <C> <C> <C>
Direct investment
construction in progress/2/ 596 $ 35,198,000 $ 85,150,000
Equity interests in joint
venture construction in
progress/3/ 780 54,510,000 86,500,000
----------- ------------------- ----------------------
Subtotal 1,376 89,708,000 $171,650,000
======================
Land under development/4/ 458 20,358,000
----------- -------------------
1,834 $110,066,000
=========== ===================
</TABLE>
Additionally, the Company acquired Adams Place apartments, a 272-unit community
in Costa Mesa, California, for $23.3 million. At September 30, 1999 the
community was 98% leased. The Company plans $4.2 million of renovations to the
common areas and apartment interiors upon unit turnover.
- -----------------
/1/ As of September 30, 1999, 113 of these units had been delivered.
/2/ Consists of the Pinnacle Bellevue community in Bellevue, Washington and the
Pinnacle Carmel Creek community in San Diego, California with 248 and 348 units
planned, respectively. Both have an estimated completion in the fourth quarter
of 2000. Pinnacle Carmel Creek was previously classified as "Land Under
Development."
/3/ Consists of three communities, Pinnacle at Blue Ravine in Folsom,
California, Pinnacle Sonata in Bothell, Washington and Pinnacle at Queen Creek
in Chandler, Arizona, 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 $42,128,000 of draws on construction loans.
/4/ Consists of Overlook at Blue Ravine II in Folsom, California and Pinnacle
MacArthur Place in Santa Ana, California with 112 and 346 units planned,
respectively. 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 September 30, 1999, the Company's cash totaled $3,244,000, up from $2,057,000
at December 31, 1998. Borrowings under the Company's line of credit were
$238,000,000 at September 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 to pay dividends to
shareholders. The Company typically reduces its outstanding balance on the line
of credit with cash balances as available.
At September 30, 1999, the Company's line of credit provided for borrowings of
up to $400,000,000 with $162,000,000 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 September
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. This indebtedness is to be repaid through
scheduled principal payments in the
16
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
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 September 30,
1999, the Company also had outstanding mortgage indebtedness of $228,399,000 at
interest rates ranging from 5.0% to 9.3%, with an overall average of
approximately 7.7%. The remaining terms of the mortgage indebtedness range from
less than one to 28 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 $42,109,000 outstanding at September 30, 1999 with
interest rates ranging from 7.0% to 7.3%, and maturities from less than one year
to 11 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 nine months
ended September 30, 1999.
The Company funded a total of approximately $58,258,000 for construction of
direct investment and joint venture communities under development in the nine
months ended September 30, 1999. Further, the Company acquired one multifamily
property for $24,264,000. 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 $42,128,000.
Because of relatively 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 September
30, 1999, the Company had committed to the purchase of approximately $65,000,000
of multifamily communities and had an estimated cost of $49,900,000 to complete
direct investment construction in progress. The estimated cost to complete the
Company's equity interest in joint venture multifamily communities is
approximately $32,000,000, of which the Company anticipates $27,900,000 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 September 30, 1999. During the
quarter ended March 31, 1999, the Company issued shares of its
17
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
8 1/2% 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
September 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 nine months ended September 30, 1999 and 1998 were
$52,118,000 and $45,981,000 respectively. Additionally, the Company paid
$3,040,000 in dividends on its 8 1/2% Series A Cumulative Redeemable Preferred
Stock in the nine months ended September 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 $4,202,000 and $3,051,000 for the nine months ended September
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
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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.
20
<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 November 9, 1999 /s/ LeRoy E. Carlson
---------------- -------------------------------------
LeRoy E. Carlson
Executive Vice President,
Chief Financial Officer and Secretary
21
<PAGE>
BRE Properties, Inc.
- --------------------------------------------------------------------------------
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description of Document Page Number
- ---------------- ------------------------------------------ ------------------
<S> <C> <C>
11 Statement Re Computations of Per
Share Earnings
27 Financial Data Schedule
99.1 Ratio of Earnings to Fixed Charges
</TABLE>
22
<PAGE>
Exhibit 11
Statement Re Computations of Per Share Earnings
- --------------------------------------------------------------------------------
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the quarter ended September 30,
1999 1998
------------------------ -----------------------
<S> <C> <C>
Numerator:
Net income available to common shareholders $17,939 $14,116
Less adjustment for gain (loss) on sales of investments in rental
properties available to common shareholders - 202
------------------------ -----------------------
Numerator for basic earnings per share - income from continuing
operations available to common shareholders 17,939 14,318
Effect of dilutive securities:
Minority interest in income convertible into common shares 1,198 1,018
------------------------ -----------------------
Numerator for diluted earnings per share $19,137 $15,336
======================== =======================
Denominator:
Denominator for basic earnings per share - weighted average
shares 44,680 43,480
------------------------ -----------------------
Effect of dilutive securities:
Weighted average convertible operating company units 3,060 2,820
Stock options 120 270
------------------------ -----------------------
Dilutive potential common shares 3,180 3,090
------------------------ -----------------------
Denominator for diluted earnings per share adjusted for
weighted average shares and assumed conversion 47,860 46,570
======================== =======================
Basic earnings per share excluding gains (loss) on sale $ 0.40 $ 0.33
======================== =======================
Diluted earnings per share excluding gains (loss) on sale $ 0.40 $ 0.32
======================== =======================
<CAPTION>
For the nine months ended September 30,
1999 1998
------------------------ ----------------------
<S> <C> <C>
Numerator:
Net income available to common shareholders $50,317 $43,999
Less adjustment for gain (loss) on sales of investments in rental
properties available to common shareholders (54) 1,073
-------------------------- ------------------------
Numerator for basic earnings per share - income from continuing
operations available to common shareholders 50,263 45,072
Effect of dilutive securities:
Minority interest in income convertible into common shares 3,659 3,051
-------------------------- ------------------------
Numerator for diluted earnings per share $53,976 $47,050
========================== ========================
Denominator:
Denominator for basic earnings per share - weighted average
shares 44,500 42,560
-------------------------- ------------------------
Effect of dilutive securities:
Weighted average convertible operating company units 3,120 2,820
Stock options 120 380
-------------------------- ------------------------
Dilutive potential commons shares 3,240 3,200
-------------------------- ------------------------
Denominator for diluted earnings per share adjusted for
weighted average shares and assumed conversion 47,740 45,760
========================== ========================
Basic earnings per share excluding gains (loss) on sale $ 1.13 $ 1.06
========================== ========================
Diluted earnings per share excluding gains (loss) on sale $ 1.13 $ 1.05
========================== ========================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,244
<SECURITIES> 0
<RECEIVABLES> 25,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,949
<PP&E> 1,721,475
<DEPRECIATION> (100,870)
<TOTAL-ASSETS> 1,649,554
<CURRENT-LIABILITIES> 17,362
<BONDS> 719,399
0
53,750
<COMMON> 447
<OTHER-SE> 858,596<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,649,554
<SALES> 59,829
<TOTAL-REVENUES> 59,829
<CGS> 18,587
<TOTAL-COSTS> 18,587
<OTHER-EXPENSES> 10,408<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,400
<INCOME-PRETAX> 20,434
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,495<F3>
<CHANGES> 0
<NET-INCOME> 17,939<F4>
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.40
<FN>
<F1>Includes $88,864 of minority interest.
<F2>Includes $8,977 of depreciation, a non cash charge.
<F3>Includes $1,353 of minority interest and $1,142 of dividends to preferred
shareholders.
<F4>Represents net income available to common shareholders.
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
Statement of Computation of Ratio of Earnings to Fixed Charges
- --------------------------------------------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
For the quarter ended September 30,
1999 1998
------------------------- ------------------------
<S> <C> <C>
Income before net gain (loss) on sales of investments in rental $20,434 $15,336
properties and minority interest
Less-minority interest not convertible into common stock (155) -
------------------------- ------------------------
Earnings $20,279 $15,336
========================= ========================
Fixed charges:
Interest $10,400 $ 8,604
Capitalized interest 2,191 3,838
Preferred stock dividend 1,142 -
Other 12 12
------------------------- ------------------------
Fixed Charges $13,745 $12,454
========================= ========================
Earnings plus fixed charges, excluding capitalized interest and
preferred stock dividends $30,691 $23,952
========================= ========================
Divided by fixed charges $13,745 $12,454
========================= ========================
Ratio of earnings to fixed charges 2.2 1.9
========================= ========================
<CAPTION>
For the nine months ended September 30,
1999 1998
------------------------- ------------------------
<S> <C> <C>
Income before net gain (loss) on sales of investments in rental
properties and minority interest $57,407 $48,123
Plus-provision for non-recurring charge 1,250 -
Less-minority interest not convertible into common stock (445) -
------------------------- ------------------------
Earnings $58,212 $48,123
========================= ========================
Fixed charges:
Interest $30,535 $25,966
Capitalized interest 7,226 8,695
Preferred stock dividends 3,040 -
Other 35 84
------------------------- ------------------------
Fixed Charges $40,836 $34,745
========================= ========================
Earnings plus fixed charges, excluding capitalized interest and
preferred stock dividends $88,782 $74,173
========================= ========================
Divided by fixed charges $40,836 $34,745
========================= ========================
Ratio of earnings to fixed charges 2.2 2.1
========================= ========================
</TABLE>
