<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 AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000 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
incorporation 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
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(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 May 10, 2000 44,783,990
<PAGE>
BRE Properties, Inc.
INDEX TO FORM 10-Q
March 31, 2000
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I FINANCIAL INFORMATION
ITEM 1:
Consolidated balance sheets - March 31, 2000 and December 31,
1999 2
Consolidated statements of income - three months ended March
31, 2000 and 1999 3
Consolidated statements of cash flows - three months ended
March 31, 2000 and 1999 4
Notes to consolidated financial statements 5-6
ITEM 2:
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-14
ITEM 3:
Quantitative and Qualitative Disclosures about Market Risk 14
Part II OTHER INFORMATION
ITEM 1 Legal Proceedings 15
ITEM 2 Changes in Securities and Use of Proceeds 15
ITEM 3 Defaults Upon Senior Securities 15
ITEM 4 Submission of Matters to a Vote of Security Holders 15
ITEM 5 Other Information 15
ITEM 6 Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE>
BRE Properties, Inc.
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PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
--------------------
Consolidated Balance Sheets (unaudited)
(Dollar amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------------- ---------------------
<S> <C> <C>
ASSETS
Real estate portfolio
Direct investments in rental properties
Multifamily $1,693,574 $1,691,762
Construction in progress 86,146 46,575
Less: accumulated depreciation (118,093) (109,623)
-------------------- ---------------------
1,661,627 1,628,714
-------------------- ---------------------
Equity interests in and advances to real estate joint ventures
Investments in rental properties 4,565 -
Construction in progress 10,843 15,083
-------------------- ---------------------
15,408 15,083
-------------------- ---------------------
Land under development 12,126 26,538
-------------------- ---------------------
Total real estate portfolio 1,689,161 1,670,335
Cash 1,173 13,812
Other assets 29,076 25,306
-------------------- ---------------------
Total assets $1,719,410 $1,709,453
==================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage loans payable $ 205,623 $ 211,403
Unsecured senior notes 243,000 253,000
Unsecured line of credit 340,500 315,000
Accounts payable and other liabilities 18,693 17,212
-------------------- ---------------------
Total liabilities 807,816 796,615
-------------------- ---------------------
Minority interest 86,190 87,640
-------------------- ---------------------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized: 8
1/2% Series A cumulative redeemable, liquidation preference $25 per
share. Shares issued and outstanding: 2,150,000 shares at March
31, 2000 and at December 31, 1999 53,750 53,750
Common stock, $.01 par value; 100,000,000 shares authorized. Shares
issued and outstanding: 44,729,821 shares at March 31, 2000;
44,679,341 shares at December 31, 1999 447 447
Additional paid-in capital 688,986 671,760
Accumulated net income in excess of cumulative dividends 82,221 99,241
-------------------- ---------------------
Total shareholders' equity 825,404 825,198
-------------------- ---------------------
Total liabilities and shareholders' equity $1,719,410 $1,709,453
==================== =====================
</TABLE>
See Notes to Consolidated Financial Statements
2
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CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------------
2000 1999
------------------- -----------------
<S> <C> <C>
Revenue
Rental income $57,642 $52,293
Other income 3,961 3,127
------------------- -----------------
Total revenue 61,603 55,420
------------------- -----------------
Expenses
Real estate 17,405 16,940
Provision for depreciation 8,980 8,184
Interest 11,635 9,839
General and administrative 1,894 1,696
Provision for nonrecurring charge - 1,250
------------------- -----------------
Total expenses 39,914 37,909
------------------- -----------------
Income before gain on sales of investments in rental
properties, minority interest and dividends attributable to
preferred stock 21,689 17,511
Net gain on sales of investments in rental properties - -
------------------- -----------------
Income before minority interest 21,689 17,511
Minority interest in income 1,352 1,415
------------------- -----------------
Net income 20,337 16,096
Dividends attributable to preferred stock 1,142 756
------------------- -----------------
Net income available to common shareholders $19,195 $15,340
=================== =================
Net income per common share:
Income excluding net gain on sales of investments in rental
properties and minority interest $ 0.43 $ 0.35
Net gain on sales of investments in rental properties - -
------------------- -----------------
Net income per common share - basic $ 0.43 $ 0.35
=================== =================
Net income per common share assuming dilution:
Income excluding net gain on sales of investments in rental
properties and minority interest $ 0.42 $ 0.35
Net gain on sales of investments in rental properties - -
------------------- -----------------
Net income per common share - assuming dilution $ 0.42 $ 0.35
=================== =================
Weighted average common shares outstanding - basic 44,710 44,280
=================== =================
Weighted average common shares outstanding - assuming dilution 47,860 47,690
=================== =================
Dividends declared and paid per common share $ 0.425 $ 0.390
=================== =================
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-------------------------------------
2000 1999
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 20,337 $ 16,096
Adjustments to reconcile net income to net cash flows generated
by operating activities
Provision for depreciation 8,980 8,184
Provision for nonrecurring charge - 1,250
Minority interest in income 1,352 1,415
(Increase) decrease in other assets (4,280) 1,772
Increase (decrease) in accounts payable and other liabilities 1,481 (635)
----------------- ---------------
Net cash flows generated by operating activities 27,870 28,082
----------------- ---------------
Cash flows from investing activities
Additions to direct investment construction in progress (14,359) (4,146)
Reimbursements of construction in progress from unconsolidated
joint ventures 16,926 -
Advances to unconsolidated joint ventures for construction in
progress (17,251) -
Purchase of land under development (10,800) (8,155)
Capital expenditures - multifamily (1,199) (1,191)
Rehabilitation expenditures (613) (4,744)
Mortgage loans receivable repayments - 57
Other - (843)
----------------- ---------------
Net cash flows (used in) investing activities (27,296) (19,022)
----------------- ---------------
Cash flows from financing activities
New mortgage loans payable - 10,954
Principal payments on mortgage loans and unsecured senior notes (15,780) (730)
Line of credit
Advances 77,000 41,000
Repayments (51,500) (82,000)
Proceeds from preferred equity offering, net - 51,933
Proceeds from exercises of stock options, net 1 1,854
Distributions to minority members and purchase of minority interest (2,802) (1,437)
Dividends paid (20,132) (18,031)
----------------- ---------------
Net cash flows (used in) generated by financing activities (13,213) 3,543
----------------- ---------------
(Decrease) increase in cash (12,639) 12,603
Balance at beginning of period 13,812 2,057
----------------- ---------------
Balance at end of period $ 1,173 $ 14,660
================= ===============
Transfers of direct investment construction in progress - $ 12,811
================= ===============
Transfers of joint venture construction in progress, net $ 5,049 -
================= ===============
Transfers of land under development $ 25,212 -
================= ===============
Interest capitalized $ 2,938 $ 3,034
================= ===============
See Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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March 31, 2000
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements were 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, 1999 (the "1999 10-K"). In the opinion of
management, all adjustments (consisting of normal recurring adjustments only)
that were necessary for a fair statement of the results for the interim periods
presented herein were made.
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 about an enterprise's reportable segments. BRE
determined that it has one operating and reportable segment, multifamily
communities, which comprised 98% of BRE's assets and 98% of its revenues as of,
and for, the quarter ended March 31, 2000. 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. The Company 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 $42,642,000 and $37,900,000 for the quarters
ended March 31, 2000 and 1999, respectively. All other segment measurements are
disclosed presently in the accompanying consolidated balance sheets and Notes to
Consolidated Financial Statements.
All revenues are from external customers. There are no revenues from
transactions with other segments, because the only activity outside operating
apartments is the ownership of one parcel of commercial land. There are no
tenants who contributed 10% or more of BRE's total revenues in the quarters
ended March 31, 2000 or 1999. Interest income is not separately reported
because 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 because the Company is organized as a real estate
investment trust under the Internal Revenue Code of 1986, as amended.
In the quarter ended March 31, 1999, the Company provided a nonrecurring
restructuring charge of $1,250,000, primarily in personnel severance benefits,
in connection with a restructuring to reduce corporate overhead costs.
Certain reclassifications have been made from the prior year's presentation to
conform to the current year's presentation.
5
<PAGE>
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 March 31, 2000, the Company had commitments to acquire two multifamily
communities, with a total estimated acquisition cost of approximately
$65,000,000. 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.
6
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
- ------------------------------------------------------------------------------
March 31, 2000
Overview
BRE Properties, Inc. ("BRE" or the "Company") is a real estate investment
trust that owns and internally manages a portfolio of 85 apartment communities
(aggregating 22,690 units) in 12 major markets of the Western United States. The
majority of our revenues are from rental income from our portfolio of
multifamily properties (94% of total revenues in the quarters ended March 31,
2000 and 1999). Our policy emphasizes cash flows from operations rather than the
realization of capital gains through property dispositions.
In addition to historical information, we make forward-looking statements in
this report on Form 10-Q. These forward-looking statements pertain to, among
other things, our capital resources, portfolio performance and results of
operations. Forward-looking statements involve numerous risks and uncertainties.
You should not rely on these statements as predictions of future events because
there is no assurance that the events or circumstances reflected in the
statements can be achieved or will occur. Forward-looking statements are
identified by words such as "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or in their negative form or other variations,
or by discussions of strategy, plans or intentions. Forward-looking statements
are based on assumptions, data or methods that may be incorrect or imprecise or
incapable of being realized. The following factors, among others, could affect
actual results and future events: defaults or nonrenewal of leases; increased
interest rates and operating costs; failure to obtain necessary outside
financing; difficulties in identifying properties to acquire and in effecting
acquisitions; failure to successfully integrate acquired properties and
operations; risks and uncertainties affecting property development and
construction (including construction delays, cost overruns, inability to obtain
necessary permits and public opposition to such activities); failure to qualify
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended (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. Our success also depends on
general economic trends, including interest rates, income tax laws, governmental
regulation, legislation, population changes and other factors. Do not rely
solely on forward-looking statements, which only reflect management's analysis.
We assume no obligation to update forward-looking statements.
7
<PAGE>
RESULTS OF OPERATIONS
Comparison of the Quarters Ended March 31, 2000 and 1999
Revenues
Total revenues were $61,603,000 for the three months ended March 31, 2000,
compared to $55,420,000 for the same period in 1999. This increase was due
primarily to an increase in multifamily rental revenues from six multifamily
properties that were under development or lease-up during the first quarter
1999. Multifamily rental revenues from "same-store" communities (multifamily
communities owned by the Company and stabilized as of January 1, 1999 and
consisting of 20,255 of BRE's 22,690 total units) increased $2,611,000 for the
three months ended March 31, 2000, compared to the same period in 1999. This
increase in revenue from same-store communities was due primarily to an increase
in average rental rates of approximately 3%, stable physical occupancy and lower
concessions.
Other income (which consists primarily of recurring nonrental income derived
from apartment communities and includes, among other items, partnership,
interest and third-party property management and development income) was
$3,961,000 and $3,127,000 for the quarters ended March 31, 2000 and 1999,
respectively. The increase in the first quarter ended March 31, 2000 over 1999
is due to other income from same-store communities, the portfolio changes
discussed above and development fees from joint ventures to the extent of third-
party interests.
A summary of the components of revenue for the quarters ended March 31, 2000
and 1999 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------------------------- ---------------------------------
% of Total % of Total % Change from
Revenues Revenues Revenues Revenues 1999 to 2000
------------------ --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Rental revenue:
Multifamily:
Same-store $52,087 $49,476
Other 5,499 2,742
------------------ --------------
Total multifamily 57,586 94% 52,218 94% 10%
Commercial and retail 56 - 75 -
------------------ --------------- -------------- ---------------
Rental revenue 57,642 94% 52,293 94% 10%
Other income 3,961 6% 3,127 6% 27%
------------------ --------------- -------------- ---------------
Total revenue $61,603 100% $55,420 100% 11%
================== =============== ============== ===============
</TABLE>
Portfolio physical occupancy rates as of March 31, 2000 and 1999 were as
follows:
<TABLE>
2000 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Multifamily: Same-store 96% 96%
- ------------------------------------------------------------------------------------------------
Multifamily: All 96% 96%
- ------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Expenses
Real Estate Expenses
Real estate expenses for multifamily rental properties (which include
maintenance and repairs, utilities, on-site staff payroll, property taxes,
insurance, advertising and other direct operating expenses) increased 3% to
$17,405,000 for the quarter ended March 31, 2000, from $16,940,000 in the
comparable period in 1999. This increase is due largely to the completion and
lease-up of six multifamily properties previously under development as real
estate expenses at same-store communities remained essentially flat. Multifamily
real estate expenses as a percentage of multifamily rental income decreased from
32.4% in 1999 to 30.2% for the quarter ended March 31, 2000.
A summary of the categories of real estate expenses for the quarters ended
March 31, 2000 and 1999 follows (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
----------------------------------- -------------------------------
% of % of % Change
Rental Rental from 1999
Expense Revenue Expense Revenue to 2000
-------------- ---------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Multifamily:
Same-store $15,734 $15,677 0%
Nonsame-store 1,769 1,196 48%
Other (98) 67 (248%)
-------------- ------------
Total Multifamily $17,405 30.2% $16,940 32.4% 3%
============== ============
</TABLE>
Provision for Depreciation
The provision for depreciation increased by $796,000 to $8,980,000 for the
quarter ended March 31, 2000, from the comparable period of 1999. The increase
in 2000 resulted primarily from the depreciation on the completion of six
properties previously under construction.
Interest Expense
Interest expense was $11,635,000 (net of interest capitalized to the cost of
apartment communities under development of $2,938,000) for the quarter ended
March 31, 2000, an increase of $1,796,000 or 18%. Interest expense was
$9,839,000 for the same period in 1999 and was net of $3,034,000 of interest
capitalized to the cost of apartment communities under construction. This
increase is due largely to the completion and lease-up of six properties
previously under development as interest is no longer capitalized on completed
communities.
General and Administrative
General and administrative costs were $1,894,000, or approximately 3.1% of
total revenues, for the first quarter in 2000 and $1,696,000, also approximately
3.1% of total revenues, for the first quarter in 1999. The stability in general
and administrative costs as a percentage of total revenues is a result of
continued efficiencies in administrating a larger portfolio and a
9
<PAGE>
restructuring of corporate personnel in the first quarter of 1999. Total
revenues increased 11% from the quarter ended March 31, 1999 to the quarter
ended March 31, 2000.
Provision for Restructuring Charge
In the first quarter of 1999, the Company recorded a restructuring charge of
$1,250,000 related to reductions in corporate personnel pursuant to a
restructuring plan. There was no such amount in the quarter ended March 31,
2000.
Minority Interest in Income
Minority interest in income was $1,352,000 and $1,415,000 for the quarters
ended March 31, 2000 and 1999, respectively. The decrease is primarily due to
the conversion of Operating Company units into BRE common stock, which increased
BRE's ownership in the consolidated subsidiary.
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. The increase in
dividends attributable to preferred stock in the quarter ended March 31, 2000 as
compared to quarter ended March 31, 1999 is due to a full quarter of dividends
in 2000, while in 1999, the dividend was prorated for the period outstanding.
Net Income Available to Common Shareholders
Net income available to common shareholders was $19,195,000 and $15,340,000
for the quarters ended March 31, 2000 and 1999, respectively, an increase of
$3,855,000. This increase is due primarily to net earnings from the six
communities previously under construction and the provision for nonrecurring
charge in 1999.
10
<PAGE>
Construction in progress and land under development
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 items "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 and advances to real
estate joint ventures", as appropriate, in "Construction in progress." The
Company transfers the capitalized costs of direct investment properties 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 "Construction in progress" and "Land under development" at March 31,
2000, for both direct investment and equity interest properties. 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 units proposed in the table below.
<TABLE>
<CAPTION>
Proposed Cost to Date - Estimated Total
Units/1/ March 31, 2000 Cost
-------------- -------------------- -----------------------
<S> <C> <C> <C>
Direct investment
construction in progress/2/ 961 $ 86,100,000 $144,600,000
Equity interests in joint
venture construction in
progress/3/ 746 59,500,000 81,900,000
-------------- -------------------- -----------------------
Subtotal 1,707 145,600,000 $226,500,000
=======================
Land under development/4/ 600 12,100,000
-------------- --------------------
Total 2,307 $157,700,000
============== ====================
</TABLE>
/1/ As of March 31, 2000, 307 of these units had been delivered.
/2/ Consists of the Pinnacle Bellcentre community in Bellevue, Washington;
Pinnacle Carmel Creek community in San Diego, California; Pinnacle at Overlook
II community in Folsom, California; and Pinnacle at MacArthur Place community in
Santa Ana, California, with 248, 348, 112 and 253 units planned, respectively.
Pinnacle at Overlook II has an estimated completion in the third quarter of
2000; Pinnacle Bellcentre and Pinnacle Carmel Creek in the fourth quarter of
2000; Pinnacle at MacArthur Place in the third quarter of 2001.
/3/ Consists of the gross costs of three communities, Pinnacle at Stone Creek,
Pinnacle Sonata and Pinnacle at Queen Creek, with 226, 268 and 252 units
planned, respectively. These three communities are under joint venture
agreements and are presented on the financial statements net of $45,600,000 of
draws on construction loans and joint venture partner's capital contribution.
The Company's net equity contribution upon completion is estimated at
$10,000,000.
/4/ Consists of Pinnacle at the Bluffs in Renton, Washington and Pinnacle at
Denver Tech Center, Greenwood Village, Colorado, with 180 and 420 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.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
At March 31, 2000, the Company's cash totaled $1,173,000, down from
$13,812,000 at December 31,1999 due to the cash flow used by investing and
financing activities over the excess of cash flows generated by operating
activities, as follows:
- Net cash flows generated by operating activities decreased from
$28,082,000 in the first quarter of 1999 to $27,870,000 in the first
quarter of 2000, due primarily to increases in other assets, and is offset
in part by higher earnings from the completion of six properties
previously under construction.
- Net cash flows used in investing activities increased by $8,274,000 from
$19,022,000 for the quarter ended March 31, 1999, due primarily to
increased funding of construction in progress and purchases of land under
development.
- Net cash flows used in financing activities increased by $16,756,000 from
$3,543,000 for the quarter ended March 31, 1999, due primarily to
principal payments on mortgage loans and unsecured senior notes.
Borrowings under the Company's line of credit totaled $340,500,000 at March
31, 2000, compared to $315,000,000 at December 31, 1999. Drawings on the line of
credit are available to pay dividends to shareholders and distributions to
minority members, to fund capital improvements and operating expenses, and to
fund property acquisitions and development. The Company typically reduces its
outstanding balance on the line of credit with available cash balances.
Borrowings of up to $400,000,000 are available under the Company's line of
credit, with $59,500,000 available at March 31, 2000. The line of credit matures
in August 2001 and bears interest at the lower of LIBOR plus 0.70% or a rate
based on bids of the participating banks. Cost of the line of credit is 0.15%
per annum on the total commitment amount.
The Company had a total of $243,000,000 in unsecured indebtedness other than
the line of credit at March 31, 2000, consisting of the following:
- $63,000,000 of unsecured senior notes with an interest rate of 7.44%
per annum on $45,000,000 and 7.88% per annum on $18,000,000. This
indebtedness is to be repaid through scheduled principal payments
annually from 2001 to 2005;
- $50,000,000 principal amount of unsecured senior notes due 2007, with
an effective interest rate of approximately 7.8%; and
- $130,000,000 principal amount of unsecured notes due 2013, with an
effective interest rate of approximately 7.3%.
In addition, at March 31, 2000, the Company had mortgage indebtedness totaling
$205,623,000 at interest rates ranging from 5.3% to 9.3%, with remaining terms
of from less than one to 28 years.
For additional information regarding the Company's line of credit, unsecured
senior notes payable and mortgage loans payable, including scheduled principal
payments over the next five years, see Notes 5 and 6 to Notes to Consolidated
Financial Statements contained in the Company's 1999 Form 10-K. Certain of the
Company's indebtedness contain financial covenants
12
<PAGE>
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 quarter ended March 31, 2000.
The Company purchased two land sites for development for a gross purchase
price of approximately $10,800,000. Further, the Company funded approximately
$14,000,000 for direct investment construction in progress in the first quarter
of 2000. These acquisition and construction costs were funded by borrowings on
the line of credit and construction loans on communities under joint venture
agreements. Because of higher prices and corresponding declining rates of
return on completed apartment communities in its targeted Western markets, the
Company presently does not anticipate significant acquisitions of completed
apartment communities in 2000, other than the communities noted below. The
Company continually evaluates its portfolio to determine whether acquisitions or
dispositions may be appropriate to maximize the portfolio's performance.
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 and cash available from its line of credit and other
borrowings will be sufficient to meet its liquidity needs during 2000, which
include normal recurring expenses, debt service requirements, budgeted
expenditures for improvements to certain properties, funding ongoing
construction in progress and distributions required to maintain the Company's
real estate investment trust qualification under the Code.
However, the Company anticipates that it will continue to require outside
sources of financing to meet its long-term liquidity needs beyond 2000, such as
scheduled debt repayments, construction funding and property acquisitions. At
March 31, 2000, the Company had committed to purchase two multifamily
communities for approximately $65,000,000 (estimated to fund in the year 2000)
and had an estimated cost of $59,000,000 to complete existing direct investment
construction in progress. Due to timing requirements, the Company made advances
to joint venture construction in progress slightly in excess of its budgeted
contribution during the period. In addition, the estimated cost to complete
land under development has not been determined as the development plans have not
been finalized. These properties may be contributed to a joint venture, which
may significantly lower the Company's required funding. 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 March 31, 2000. The Company is actively searching
for other sources of possible funding, including further joint ventures and
additional secured construction debt. The Company owns unencumbered real estate
assets that could be sold, contributed to joint ventures 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.
PLANNED SPIN-OFF OF VELOCITYHSI, INC.
On March 16, 2000, the Company announced to BRE shareholders its intention to
spin off the assets and operations of its high-speed Internet division to a
newly formed corporation, VelocityHSI, Inc. ("Velocity"). On May 3, 2000,
Velocity filed a Form S-1 with the Securities and Exchange Commission ("SEC"),
which details the planned spin-off. It is anticipated the spin-off of Velocity
shares will occur in June 2000, pending the review process by the SEC.
13
<PAGE>
DIVIDENDS AND DISTRIBUTIONS TO MINORITY MEMBERS
A cash dividend has been paid to common shareholders each quarter since the
Company's inception in 1970. On February 24, 2000, the Company increased its
annual dividend on its common shares from $1.56 per year to $1.70 per year.
Total dividends paid to common shareholders for the three months ended March 31,
2000 and 1999 were $18,990,000 and $17,275,000, respectively. In addition, the
Company paid $1,142,000 and $756,000 in dividends on its 8 1/2% Series A
Cumulative Redeemable Preferred Stock in the quarters ended March 31, 2000 and
1999, respectively.
Total distributions to minority members of the Company's consolidated
subsidiaries were $1,352,000 and $1,437,000 for the three months ended March 31,
2000 and 1999, respectively.
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, 1999.
There has been no material change in the quantitative and qualitative disclosure
about market risk since December 31, 1999.
14
<PAGE>
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 - Statement of Computation of Ratio to Fixed
Charges
(b) Reports on Form 8-K:
None.
15
<PAGE>
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)
Date: May 11, 2000 /s/ Leroy E. Carlson
-------------- --------------------
LeRoy E. Carlson
Executive Vice President,
Chief Financial Officer and Secretary
16
<PAGE>
Exhibit 11
STATEMENT RE: COMPUTATIONS OF PER SHARE EARNINGS
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended March 31,
2000 1999
---------------------- ---------------------
<S> <C> <C>
Numerator:
Net income available to common shareholders $19,195 $15,340
Less adjustment for gain on sales of investments in
rental properties available to common shareholders - -
---------------------- --------------------
Numerator for basic earnings per share income from
continuing operations available to common shareholders 19,195 15,340
Effect of dilutive securities:
Minority interest in income convertible into common
shares 1,286 1,269
---------------------- -------------------
Numerator for diluted earnings per share $20,481 $16,609
====================== ===================
Denominator:
Denominator for basic earnings per share - weighted
average shares 44,710 44,280
Effect of dilutive securities:
Stock options 110 160
Weighted average convertible operating company units 3,040 3,250
---------------------- ---------------------
Dilutive potential common shares 3,150 3,410
---------------------- ---------------------
Denominator for diluted earnings per share adjusted
for weighted average shares and assumed conversion 47,860 47,690
====================== ====================
Basic earnings per share excluding gains on sale $ 0.43 $ 0.35
===================== ====================
Diluted earnings per share excluding gains on sale $ 0.42 $ 0.35
===================== ====================
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,173
<SECURITIES> 0
<RECEIVABLES> 29,076
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,249
<PP&E> 1,807,254
<DEPRECIATION> (118,093)
<TOTAL-ASSETS> 1,719,410
<CURRENT-LIABILITIES> 18,693
<BONDS> 789,123
0
53,750
<COMMON> 447
<OTHER-SE> 857,397<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,719,410
<SALES> 61,603
<TOTAL-REVENUES> 61,603
<CGS> 17,405
<TOTAL-COSTS> 17,405
<OTHER-EXPENSES> 10,874<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,635
<INCOME-PRETAX> 21,689
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,494<F3>
<CHANGES> 0
<NET-INCOME> 19,195<F4>
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.42
<FN>
<F1> Includes $86,190 of minority interest.
<F2> Includes $8,980 of deprectiation, a non cash charge.
<F3> Includes $1,352 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
<TABLE>
<CAPTION>
STATEMENT OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
Quarter Ended March 31,
2000 1999
---------------------- ---------------------
<S> <C> <C>
Income before net gain on sales of investments in
rental properties and minority interest $21,689 $17,511
Plus - provision for nonrecurring charge - 1,250
Less - minority interest not convertible into common stock (66) (146)
---------------------- ---------------------
Earnings $21,623 $18,615
====================== =====================
Fixed charges:
Interest $11,635 $ 9,839
Capitalized interest 2,938 3,034
Preferred stock dividends 1,142 756
Other 12 12
---------------------- ---------------------
Fixed Charges $15,727 $13,641
====================== =====================
Earnings plus fixed charges, excluding capitalized
interest and preferred stock dividends $33,270 $28,466
====================== =====================
Divided by fixed charges $15,727 $13,641
====================== =====================
Ratio of earnings to fixed charges 2.1 2.1
====================== =====================
</TABLE>
18
