<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF BRE PROPERTIES]
BRE PROPERTIES, INC.
44 Montgomery Street, 36th Floor
San Francisco, CA 94104
March 27, 2000
Dear Shareholder:
It is a pleasure to invite you to attend our Annual Meeting of Shareholders
to be held on Tuesday, May 16, 2000 at 10:00 a.m. Pacific Daylight time, in The
Way Things Work Auditorium of the Sony Metreon, 101 Fourth Street, San
Francisco, California.
This booklet includes the notice of meeting and proxy statement, which
contain information about the formal business to be acted on by shareholders.
The Annual Meeting will also feature a report on the operations of your
Company, followed by a question and discussion period. After the Meeting, you
will have the opportunity to speak informally with the directors and officers.
At the Annual Meeting, you will be asked to vote on: (i) electing three Class
III directors for a term of three years, (ii) approving an amendment to
increase the maximum number of shares that may be issued for options granted
under the Company's Amended and Restated Non-Employee Director Stock Option
Plan from 1,550,000 shares to 2,300,000 shares and (iii) such other matters as
may properly come before the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE THREE
DIRECTOR NOMINEES AND TO APPROVE THE OTHER ITEM TO BE VOTED ON AT THE ANNUAL
MEETING.
It is important that your shares be voted whether or not you plan to be
present at the Annual Meeting. Please complete, sign, date and return the
enclosed form of proxy promptly, or you may utilize our telephone or Internet
voting procedures, as more fully described in this document. If you attend the
Annual Meeting and wish to vote your shares personally, you may revoke any
previously executed proxy.
Please vote promptly, and we look forward to seeing you at the Annual
Meeting.
Sincerely,
BRE Properties, Inc.
/s/ Frank C. McDowell
Frank C. McDowell
President & Chief Executive Officer
<PAGE>
BRE PROPERTIES, INC.
Notice of Annual Meeting of Shareholders
----------------
Notice is hereby given that the Annual Meeting of Shareholders of BRE
Properties, Inc. will be held on May 16, 2000 at 10:00 a.m. Pacific Daylight
time, in The Way Things Work Auditorium of Sony Metreon, 101 Fourth Street,
San Francisco, California, for the following purposes:
1. To elect three Class III directors for a term of three years.
2. To approve an amendment increasing the maximum number of shares that may
be issued for options granted under the Company's Amended and Restated
Non-Employee Director Stock Option Plan from 1,550,000 shares to
2,300,000 shares.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on March 10, 2000 are
entitled to vote at the meeting.
By Order of the Board of Directors
LeRoy E. Carlson,
Secretary
Dated: March 27, 2000
<PAGE>
BRE PROPERTIES, INC.
44 Montgomery Street, 36th Floor
San Francisco, CA 94104-4809
Telephone: (415) 445-6530
Facsimile: (415) 445-6505
----------------
PROXY STATEMENT
----------------
Annual Meeting of Shareholders
The enclosed proxy is solicited by the Board of Directors of BRE Properties,
Inc., a Maryland corporation (the "Company"), for use at the Annual Meeting of
Shareholders of the Company (the "Annual Meeting") to be held on May 16, 2000
at 10:00 a.m. Pacific Daylight time, or at any adjournment thereof. The
meeting will be held in The Way Things Work Auditorium of the Sony Metreon,
101 Fourth Street, San Francisco, California. At the meeting, holders of
record of the Company's common stock ("Common Stock") at the close of business
on March 10, 2000 (the "Record Date") are entitled to vote. On that date, the
Company's outstanding capital stock consisted of 44,702,341 shares of Common
Stock, each share of which is entitled to one vote at the meeting and
2,150,000 shares of the Company's 8 1/2% Series A Cumulative Redeemable
Preferred Stock, which is not entitled to vote at the meeting.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Directors, officers and employees of the Company may also, without
additional compensation, solicit proxies by mail, personal interview,
telephone and telecopy. This Proxy Statement and the enclosed proxy card are
scheduled to be mailed to shareholders commencing on or about March 27, 2000.
The Company will request banks, brokerage houses and other institutions,
nominees or fiduciaries to forward the soliciting material to the beneficial
owners of shares and to obtain authorization for the execution of proxies. The
Company will, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to the beneficial owners. If a shareholder is a
participant in the Company's Direct Stock Purchase and Dividend Reinvestment
Plan, the proxy card represents a voting instruction as to the number of full
shares in the plan account, as well as any shares held directly by the
shareholder.
In lieu of mailing the proxy card in the postage-paid envelope provided,
shareholders of record can vote their shares by either calling the toll-free
telephone number on the proxy card or by accessing the Web site at the address
listed on the proxy card. Both the telephone voting and Internet voting
procedures are designed to authenticate shareholders by use of a control
number on your proxy card. These procedures allow shareholders to vote their
shares and to confirm that their instructions have been properly recorded.
Specific instructions to be followed by any shareholder of record interested
in voting by telephone or the Internet are set forth on the enclosed proxy
card.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting as specified in such proxies.
Votes at the Annual Meeting will be tabulated by one or more independent
inspectors of election appointed by the Company. If no vote is specified in an
executed proxy, the shares represented by such signed proxy will be voted for
the election of the three nominees for Class III Director, in favor of the
other proposal set forth in the notice attached hereto, and in the proxy
holder's discretion, upon such other business as may properly come before the
meeting. The three nominees for election as Class III Directors who receive
the highest number of votes voting in person or by proxy at the Annual
Meeting, provided a quorum is present and voting, shall be elected as
directors (Proxy Item No. 1). The affirmative votes of the holders of a
majority of the shares present and voting in person or by proxy at the Annual
Meeting, provided a quorum is present and voting, shall be required to approve
the amendment of the Amended and Restated Non-Employee Director Stock Option
Plan (the "Director Plan") (Proxy Item No. 2).
1
<PAGE>
In tallying shareholder votes, abstentions (i.e., shares for which a proxy
is presented but abstains from voting on one or more matters) and "broker non-
votes" (i.e., shares held by brokers or nominees for which proxies are
presented but as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter because it is
a non-routine matter) will be counted for purposes of determining whether a
quorum is present for the conduct of business at the Annual Meeting. However,
abstentions and non-votes will not constitute votes for or against any
proposal and will be disregarded in determining votes cast.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
Ernst & Young LLP, certified public accountants, has provided services to
the Company during the past fiscal year, which included the examination of the
Company's annual report to shareholders on Form 10-K and preparation of the
Company's Federal and state income tax returns. A representative of Ernst &
Young LLP will be at the annual meeting of shareholders to respond to
appropriate questions concerning the financial statements of the Company.
The Company's principal executive offices are located at 44 Montgomery
Street, 36th Floor, San Francisco, California 94104-4809. The Company's
telephone number is (415) 445-6530.
2
<PAGE>
ELECTION OF DIRECTORS
(Proxy Item No. 1)
The Company's Board of Directors (the "Board") consists of nine members,
divided into three classes, designated Class I, Class II and Class III. The
Articles of Incorporation provide that there shall be from three to 15
directors, as determined from time to time by the Board. Currently, there are
three Class I directors, three Class II directors and three Class III
directors.
At the Annual Meeting, three Class III directors are to be elected for a
term of three years (expiring in the year 2003) or until the election and
qualification of their successors. The persons proposed for re-election as the
Class III directors are William E. Borsari, Edward E. Mace and Frank C.
McDowell. The accompanying proxies solicited by the Board will (unless
otherwise directed, revoked or suspended) be voted for the re-election of
Messrs. Borsari, Mace and McDowell, who are the present Class III directors.
In the unanticipated event that any nominee should become unavailable for
election, or upon election should be unable to serve, the proxies will be
voted for the election of such other person or persons as shall be determined
by the persons named in the proxy in accordance with their judgment or, if
none, the size of the Board will be reduced.
The following table sets forth certain information as to the nominees, as
well as the other current members of the Board, including their age, principal
business experience during the past five years, the year they each first
became a director, Board committee membership, and other directorships
currently held in companies with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15(d) of that Act or any Company registered as an
Investment Company under the Investment Company Act of 1940.
Nominees--Class III Directors:
<TABLE>
<CAPTION>
Principal Business Experience Director Board Committee
Name During Past Five Years Age Since (1) Membership
---- ----------------------------- --- -------- ----------------------
<C> <S> <C> <C> <C>
William E. Borsari Chairman or President, The 61 1992 Asset Management*,
Walters Management Company, a Executive, Development
real estate asset management and Acquisitions
company, for more than five
years.
Edward E. Mace President and Chief Executive 48 1998 Strategic Planning*
Officer of Fairmont Hotels &
Resorts-U.S. /Mexico division
based in San Francisco since
1999. President and Chief
Executive Officer of Fairmont
Hotels 1996--1999. Midwest
regional director for
management consulting for the
Real Estate Industry Group of
KPMG Peat Marwick from 1994
to 1996. President and
managing partner for Lincoln
Property Company of Europe
from 1990 to 1994.
Frank C. McDowell President and Chief Executive 51 1995 Executive,
Officer of the Company since Strategic Planning
June 1995. Chief Executive
Officer and Chairman of
Cardinal Realty Services,
Inc., 1992-95.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Business
Experience
During Past Five Director Board Committee
Name Years Age Since (1) Membership
---- ------------------ --- -------- ---------------
Class I Directors--Term Expires in 2001:
<C> <S> <C> <C> <C>
Robert A. Fiddaman Chairman of SSR Realty 62 1998 Development and
Advisors, a real estate Acquisitions, Strategic
investment and management Planning
firm, from 1996 to 1997.
President and Chief Executive
Officer of Metric Realty from
1993 to 1996.
Roger P. Kuppinger President, The Kuppinger 59 1995 Capital Markets*,
Company, a private financial Audit
advisor to public and private
companies, since February
1994. Senior Vice President
and Managing Director, Sutro
& Co., Inc., an investment
banking company, from 1969 to
February 1994. Director,
Realty Income Corporation.
Arthur G. von Thaden President and Chief Executive 68 1981 Audit*,
Officer of the Company from Asset Management
1987 to June 1995. Chief
Executive Officer,
BankAmerica Realty Services,
Inc., a real estate
investment advisory firm,
from 1970 to 1987.
Class II Directors--Term Expires in 2002:
John McMahan Chairman of the Board of the 62 1993 Executive*,
Company. Managing Principal, Strategic Planning,
The McMahan Group, real Capital Markets,
estate strategic management Compensation
consultants, since 1996.
President, John McMahan
Associates, Inc., a
management consulting firm,
and McMahan Real Estate
Securities, Inc., a real
estate investment firm, 1994
to 1996. President and Chief
Executive Officer,
Mellon/McMahan Real Estate
Advisors, Inc., a real estate
advisory firm, 1990-94.
Executive Director, The
Center for Real Estate
Enterprise Management, since
1999.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal Business Experience Director Board Committee
Name During Past Five Years Age Since (1) Membership
---- ----------------------------- --- -------- ---------------
<C> <S> <C> <C> <C>
L. Michael Foley Principal, L. Michael Foley 61 1994 Compensation*,
and Associates, real estate Audit,
and corporate consulting, Capital Markets
since 1996. Senior Vice
President and Chief Financial
Officer, Coldwell Banker
Corporation, 1995-1996.
Chairman and Chief Executive
Officer, Sears Savings Bank,
1989-93. Senior Executive
Vice President, Coldwell
Banker Real Estate Group,
Inc., 1986-93. Executive Vice
President, Homart Development
Co., 1983-- 1993. Director
and executive committee
member, Western Property
Trust.
Gregory M. Simon Self-employed as a private 58 1991 Development and
investor, since 1991. Senior Acquisitions*,
Vice President, H.F. Ahmanson Compensation
& Co. and Home Savings of
America, from 1983 to 1991.
Officer and Director, Golden
Orange Broadcasting, a
privately held corporation.
</TABLE>
- --------
* Denotes committee chairman.
(1) For Mr. von Thaden, includes service as a trustee of the Company's
predecessor, BankAmerica Realty Investors. For Messrs. Kuppinger, Simon
and Borsari (who joined the Board in March 1996), includes service as a
trustee of Real Estate Investment Trust of California ("RCT"), which
merged with the Company in March 1996.
Vote Required
The three nominees who receive the highest numbers of votes shall be elected
as Class III directors. The Board of Directors unanimously recommends that the
shareholders vote FOR Messrs. Borsari, Mace and McDowell.
Board and Committee Meetings; Compensation of Directors
During the year ended December 31, 1999, the Board held 11 regular meetings
and no special meetings. All of the directors attended 75% or more of the
meetings of the Board and the committees on which they served during 1999.
In response to the Company's rapid growth since 1995, the Board has created
several committees in order to more effectively direct and review the
Company's operations and strategic outlook. In addition, the committees allow
management timely interface and response to factors affecting the ongoing
operations of the Company. Further, management regularly consults with
committee chairmen to review possible actions and seek counsel. Where
appropriate, the Board delegates authority to committees (within specified
parameters) to finalize the execution of various Board functions. While the
committee structure has improved the level of Board oversight, it has also
greatly increased the effort and time required of Board members who serve on
the various committees.
The Board has established the following committees: Audit, Executive,
Compensation, Strategic Planning, Capital Markets, Development and
Acquisitions and Asset Management. The present members of these committees are
indicated in the preceding section of this Proxy Statement.
5
<PAGE>
The Audit Committee reviews the consolidated financial statements and
accounting policies with both management and the independent auditors. Such
review includes an assessment as to whether the consolidated financial
statements are complete and consistent with information known to them and
reflect appropriate accounting principles. The Audit Committee also reviews
the insurable risks impacting the Company and the management thereof. The
Audit Committee meets with the independent auditors in preparation for, and in
review of, the annual audit. These responsibilities are more specifically
contained in the attached Charter and Powers of the Audit Committee of the
Board of Directors of BRE Properties, Inc., which was approved by the full
Board of Directors on October 25, 1999. During 1999, the Audit Committee met
formally five times.
The Executive Committee has all powers of the Board in the management and
affairs of the Company, subject to limitations prescribed by the Board and by
Maryland law, but meets only in the event of unusual or exceptional
circumstances affecting the Company. The Executive Committee did not meet
during 1999.
The Compensation Committee reviews the compensation of officers and the
management succession plan, administers the Company's stock compensation plans
and nominates directors. The Compensation Committee met numerous times on an
informal basis, and met formally nine times during 1999.
The Strategic Planning Committee supplements and assists the full Board in
the review and definition of a strategic plan for the Company, including such
considerations as growth, geographic concentration and asset type. Further,
the Strategic Planning Committee conducts an ongoing evaluation and assessment
of the Company's prospects and future in the industry. The Strategic Planning
Committee did not formally meet during 1999; however, committee members
discussed strategic planning issues during full Board meetings, including a
meeting specifically devoted to strategic planning.
The Capital Markets Committee reviews and establishes a capital markets
strategy and supervises management's implementation of such strategy. Further,
the Capital Markets Committee is delegated certain powers from time to time in
the execution of the financial affairs of the Company. The Capital Markets
Committee met formally six times during 1999 and had extensive informal
meetings as well as discussions of capital market issues with the full Board.
The Development and Acquisitions Committee reviews, analyzes and recommends
to the Board whether proposed development opportunities and acquisitions
should be undertaken. This process includes site visits to properties and
meeting with management and staff to review potential development
opportunities and acquisitions. The Development and Acquisitions Committee met
formally nine times during 1999.
The Asset Management Committee reviews property performance and annual
budgets and determines which assets should be divested. The Asset Management
Committee met formally two times during 1999 and held numerous informal
meetings, including meetings with management and several property tours.
The Company has adopted a policy of paying retainer and meeting fees for
non-employee directors solely in stock options that have an exercise price
equal to the fair market value of the Common Stock on the date of grant. The
Director Plan provides that each non-employee director will receive annual
stock options for 25,000 shares of Common Stock (50,000 shares for the
Chairman of the Board) in lieu of cash compensation. Options for an additional
5,000 shares may be granted to each non-employee director if for the preceding
fiscal year the increase in the Company's funds from operations ("FFO") per
share over the prior year places the Company at or above the 80th percentile
in this category for the ten largest publicly traded multifamily real estate
investment trusts. In the event the FFO is below the 50th percentile, the non-
employee directors receive no additional options. If the FFO places the
Company between the 50th to 80th percentiles, the non-employee directors
receive a pro rated number of options. Further, options for up to 8,000 shares
will be granted per non-employee director for committee membership and/or
chairmanship. However, non-employee directors who serve as members of the
Executive Committee do not receive stock options as compensation for such
committee membership. Options granted under the Plan have a term of ten years
and the automatic annual grants become exercisable as to one-twelfth of the
options per month, so that the options are fully vested by the first
anniversary of the date of grant. The additional option grant for 5,000 shares
related to the FFO per share increase (if such requirement has been met) vests
immediately. All non-employee directors are also reimbursed for their
reasonable out-of-pocket
6
<PAGE>
expenses in attending meetings. No options were granted to the non-employee
directors based on the Company's 1999 performance in accordance with the
calculation described above.
The Board has adopted a share ownership guideline of having each new
director own within three years of joining the Board a number of shares of
Common Stock equal to $150,000 divided by the price of a share of the Common
Stock. In order to facilitate share ownership and retention, the Director Plan
provides for reload options, as discussed in footnote 2 on page 10. During
1999, 140,681 reload options were granted to non-employee directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of its equity securities, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to it and written representations that no other reports were
required during the year ended December 31, 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with, except for Ms. Barr, who
inadvertently filed late reports showing her purchase of 17 shares in
September 1998 and 34 shares in December 1998 pursuant to the Company's Direct
Stock Purchase and Dividend Reinvestment Plan.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 29, 2000, information
regarding the shares of Common Stock beneficially owned by each person who is
known by the Company to own beneficially more than 5% of the Common Stock, by
each director, by each named executive officer (as hereinafter defined) and by
all directors and executive officers as a group. The amounts shown are based
on information provided by the individuals named.
COMMON STOCK
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Name and Address Owned(1) Owned(1)(2)
---------------- ------------ ------------
<S> <C> <C>
Prudential Insurance Company of America ...... 3,139,006 (3)(4) 6.8%
751 Broad Street
Newark, NJ 07102-3777
State Farm Insurance Companies................ 3,230,803 (3)(5) 7.0%
One State Farm Plaza
Bloomington, IL 61710
John McMahan.................................. 151,434 (6)
William E. Borsari............................ 133,237 (7)
Robert A. Fiddaman............................ 62,692 (8)
L. Michael Foley.............................. 135,702 (9)
Roger P. Kuppinger............................ 117,602(10)
Edward E. Mace................................ 61,575(11)
Frank C. McDowell............................. 228,766(12)
Gregory M. Simon.............................. 176,245(13)
Arthur G. von Thaden.......................... 109,730(14)
LeRoy E. Carlson.............................. 110,190(15)
Bruce Ward.................................... 609,422(16) 1.3%
John H. Nunn.................................. 87,370(17)
Lauren L. Barr................................ 63,897(18)
All directors and executive officers as a
group (13 persons)........................... 2,047,862 4.4%
</TABLE>
- --------
(1) The amounts and percentages of Common Stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities. Except as otherwise indicated, each individual has sole voting
and sole investment power with regard to the shares owned.
7
<PAGE>
(2) Except where otherwise indicated, does not exceed 1%.
(3) Based on information furnished by the holder or contained in filings made
with the Securities and Exchange Commission.
(4) The Prudential Insurance Company of America ("Prudential") may have
direct or indirect voting and/or investment discretion over 3,139,006
shares of the Company's common stock which are held for the benefit of
Prudential's clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates.
(5) Includes 3,226,388 shares held by State Farm Mutual Automobile Insurance
Company, and 4,415 shares held by State Farm Variable Product Trust. Each
entity in the State Farm Insurance Companies group disclaims beneficial
ownership as to all shares for which such entity has no right to receive
the proceeds of the sale of such shares.
(6) Mr. McMahan--includes 19,863 shares he owns directly, and 131,571 shares
that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before April
29, 2000.
(7) Mr. Borsari--includes 1,412 shares he owns directly, 956 shares held by
his wife, 18,725 shares held in an intervivos trust and 112,144 shares
that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before April
29, 2000.
(8) Mr. Fiddaman--includes 6,127 shares he owns outright and 56,565 shares
that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before
April 29, 2000.
(9) Mr. Foley--includes 16,938 shares owned by a family trust of which Mr.
Foley and his wife are trustees and share voting and investment power,
and 118,764 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on
or before April 29, 2000.
(10) Mr. Kuppinger--includes 16,417 shares he owns outright and 101,185 shares
that may be purchased upon the exercise of stock options that are
currently exercisable or that will become exercisable on or before April
29, 2000.
(11) Mr. Mace--includes 3,343 shares owned by a deferred compensation plan
other than BRE's defined compensation plan and 58,232 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000.
(12) Mr. McDowell--includes 27,521 shares he owns directly, 1,450 shares held
by his wife in which he disclaims any interest, 105,902 shares that may
be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000,
8,893 restricted shares and 85,000 shares acquired upon exercise of stock
options that are collateral for recourse loans from the Company. See
Stock Loans.
(13) Mr. Simon--includes 58,120 shares he owns directly, 2,112 shares owned by
his wife as separate property, 4,274 shares held in trust for his
children of which Mr. Simon is the trustee and 111,739 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000.
(14) Mr. von Thaden--includes 43,252 shares he owns directly, 252 shares held
by his wife in her Individual Retirement Account, as to which Mr. von
Thaden has no voting or investment power, and 66,226 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000.
(15) Mr. Carlson--includes 8,117 shares he owns directly, 64,591 shares that
may be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000,
1,482 restricted shares and 36,000 shares acquired upon exercise of stock
options that are collateral for recourse loans from the Company. See
Stock Loans.
(16) Mr. Ward--includes 393 shares he owns directly, 577,547 units of interest
in a subsidiary of the Company which are exchangeable into Common Stock
on a 1:1 basis or, at the Company's election, cash in an amount equal to
the market value at the time of the exchange of the Common Stock issuable
upon such exchange,
8
<PAGE>
20,000 units of interest which have been earned but not issued, 1,482
restricted shares and 10,000 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before April 29, 2000.
(17) Mr. Nunn--includes 21,317 shares he owns directly, 32,071 shares that may
be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000,
1,482 restricted shares and 32,500 shares acquired upon exercise of stock
options that are collateral for recourse loans from the Company. See
Stock Loans.
(18) Ms. Barr--includes 13,887 shares she owns directly, 36,224 shares that
may be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before April 29, 2000,
1,786 restricted shares and 12,000 shares acquired upon exercise of stock
options that are collateral for recourse loans from the Company. See
Stock Loans.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table summarizes the compensation paid to the Company's Chief
Executive Officer and the four other highest paid executive officers (the
"named executive officers") for the years ended December 31, 1999, 1998 and
1997.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
------------------ -----------------------
All Other
Name and Options/ Compensation
Principal Position Year Salary($) Bonus($) SARs(#)(1) ($)(2)(3)
------------------ ---- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Frank C. McDowell......... 1999 $348,917 $175,000 160,000 $4,800
President and Chief 1998
Executive 350,632 262,000 135,000 4,500
Officer 1997 348,001 348,001 30,000 29,834
LeRoy E. Carlson.......... 1999 $248,047 $120,000 31,000 $8,080
Executive Vice President 1998
and Chief 233,590 100,000 30,000 7,550
Financial Officer 1997 225,672 100,000 25,000 5,673
Bruce C. Ward............. 1999 $246,154 (4) 25,000 $4,800
Executive Vice President, 1998 183,894 $100,000 -- 4,500
Development 1997(5) -- -- 25,000 --
John H. Nunn.............. 1999 $221,154 $100,000 30,000 $8,080
Executive Vice President, 1998 194,295 90,000 30,000 7,550
Asset Management 1997 174,229 40,000 25,000 5,675
Lauren L. Barr............ 1999 $148,372 $ 70,000 24,000 $4,800
Senior Vice President 1998 126,462 60,000 20,500 4,500
Strategic Planning 1997 117,136 45,000 15,000 2,375
</TABLE>
- --------
(1) Does not include restricted share grants pursuant to reload stock options
as follows:
<TABLE>
<CAPTION>
Restricted
Reload Grants Share Grants
------------- ------------
1999 1998 1999
------ ------ ------------
<S> <C> <C> <C>
Mr. McDowell................................... 38,333 40,902 11,250
Mr. Carlson.................................... -- 40,591 1,875
Mr. Ward....................................... -- -- 1,875
Mr. Nunn....................................... -- 12,071 1,875
Ms. Barr....................................... 5,487 3,636 1,500
</TABLE>
No options with a reload provision were granted in 1997. There were no
restricted share grants in 1998 or 1997.
9
<PAGE>
(2) Consists of contributions to the Company's defined contribution retirement
plan (401(k) Plan) on behalf of the named executive officers. Also
includes the Company's payments of $27,459 in 1997 for Mr. McDowell,
representing the value of the Supplemental Retirement Plan ("SERP") which
he would have received had the SERP not been terminated in 1996.
Additionally includes for Messrs. Carlson and Nunn for 1999, 1998 and
1997, the $3,280, $3,050 and $3,300 benefit, respectively, of an interest-
free $50,000 loan, assuming a market interest rate equal to the Company's
borrowing cost.
(3) Does not include potential loan forgiveness. See Stock Loans. While the
amount to be forgiven is not yet determinable, the following amounts were
expensed on the Company's financial statements.
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Mr. McDowell..................................... $88,889 $145,379 $63,583
Mr. Carlson...................................... $34,629 $ 51,678 $19,725
Mr. Nunn......................................... $33,572 $ 51,678 $19,725
Ms. Barr......................................... $ 8,910 $ 8,354 --
</TABLE>
(4) Mr. Ward may receive a bonus of $100,000, pending the successful
completion of certain transactions.
(5) Mr. Ward joined the Company in January 1998.
Option Grants in 1999
The following table sets forth: (i) grants of stock options made by the
Company during 1999 to each of the named executive officers based on the
Company's and their individual performance for 1998; (ii) the ratio that the
number of options granted to each individual bears to the total number of
options granted to all employees; (iii) the exercise price and expiration date
of these options; and (iv) the estimated potential realizable values assuming
certain stock price appreciation over the ten-year option term.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Potential Realized
Value
at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options/SARs Appreciation
Underlying Granted to Exercise or for Option Term(4)
Options/SARs Employees Base Price Expiration ---------------------
Name Granted(1)(2) in Fiscal Year ($/Sh) Date(3) 5% 10%
---- ------------- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 160,000 19.4% $26.00 5/11/09 $2,616,202 $6,629,969
4,865 0.6% $25.81 2/13/07 $ 54,952 $ 130,293
8,215 1.0% $25.81 8/26/06 $ 88,124 $ 206,157
25,253 3.1% $25.81 6/5/05 $ 217,358 $ 492,007
LeRoy E. Carlson........ 31,000 3.8% $26.00 5/11/09 $ 506,889 $1,284,556
Bruce C. Ward........... 25,000 3.0% $26.00 5/11/09 $ 408,782 $1,035,933
John H. Nunn............ 30,000 3.6% $26.00 5/11/09 $ 490,538 $1,243,119
Lauren L. Barr.......... 24,000 2.9% $26.00 5/11/09 $ 392,430 $ 994,495
1,804 0.2% $25.25 8/28/05 $ 15,492 $ 35,145
3,683 0.4% $25.25 8/29/04 $ 25,616 $ 56,588
</TABLE>
- --------
(1) All options shown in the table were granted under the 1999 BRE Stock
Incentive Plan. The exercise price is 100% of the fair market value of the
Common Stock on the date of grant. All options held by Messrs. McDowell,
Carlson, Nunn and Ward may become immediately exercisable upon termination
of employment following a change in control. See Employment Contracts and
Termination of Employment and Change in Control Arrangements. Messrs.
McDowell, Carlson and Nunn and Ms. Barr immediately exercised, upon grant,
options for 10,000, 6,000, 5,000 and 4,000 shares, respectively. See Stock
Loans.
(2) The right to receive reload options was given in connection with some
options. The reload options enable the named executive officers to
purchase a number of shares of Common Stock equal to the number of shares
of Common Stock delivered by him or her to exercise the underlying option.
The effective date of
10
<PAGE>
the grant of the reload options will be the date the underlying option is
exercised by delivering shares of Common Stock to the Company. The reload
options have the same expiration date as the underlying options and will
have an exercise price equal to the fair market value of the Common Shares
as of the effective date of the grant of the reload options. Included in the
amounts shown are reload options granted for Mr. McDowell and Ms. Barr of
38,333 and 5,487 shares, respectively.
(3) The options have a term of ten years, subject to acceleration upon a
change in control or termination.
(4) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant of the option
until the end of the option term. The value is net of the exercise price
but is not adjusted for the taxes that would be due upon exercise. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future stock prices. There can be no assurance
that any of the values reflected in the table will be achieved. Actual
gains, if any, upon future exercise of any of these options will depend on
the actual performance of the Common Stock and the continued employment of
the executive officer holding the option through its vesting period.
Option Grants on January 28, 2000
On January 28, 2000, the Compensation Committee approved the following
option grants to the named executive officers under the 1999 BRE Stock
Incentive Plan:
<TABLE>
<CAPTION>
Options
Name Granted
---- -------
<S> <C>
Frank C. McDowell.............................................. 210,000(1)
LeRoy E. Carlson............................................... 110,000(2)
Bruce C. Ward.................................................. --
John H. Nunn................................................... 67,500(3)
Lauren L. Barr................................................. 30,000(4)
</TABLE>
- --------
(1) Includes 10,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
(2) Includes 10,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
(3) Includes 7,500 shares to be exercised immediately related to a stock loan
(see Stock Loans).
(4) Includes 5,000 shares to be exercised immediately related to a stock loan
(see Stock Loans).
The above options were granted at the market price of the Common Stock on
the date of grant.
Aggregated Option Exercises in 1999 and Year-End Option Values
The following table sets forth: (i) the number of shares received and the
aggregate dollar value realized in connection with each exercise of
outstanding stock options during 1999 by each of the named executive officers;
(ii) the total number of all outstanding unexercised options held by the named
executive officers at the end of 1999; and (iii) the aggregate dollar value of
all such unexercised options based on the excess of the market price of the
Common Stock over the exercise price of the option.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the Money
Shares Options/SARs at 12/31/99 Options at 12/31/99(3)
Acquired on Value ------------------------- -------------------------
Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 58,333 $420,309 35,000 397,568 $26,875 $305,831
LeRoy E. Carlson........ 6,000 -- 52,591 63,000 $14,813 $ 29,625
Bruce C. Ward........... -- -- 10,000 40,000 -- --
John H. Nunn............ 5,000 -- 22,071 57,000 $ 9,875 $ 19,750
Lauren L. Barr.......... 12,859 $ 85,125 23,288 58,323 $77,359 $ 42,312
</TABLE>
- --------
(1) The amounts shown for Messrs. McDowell, Carlson and Nunn and Ms. Barr
include 10,000, 6,000, 5,000 and 4,000 shares, respectively, for the
immediate exercise of stock options granted; these shares represent
collateral for stock loans. There was no value realized for these shares.
See Stock Loans.
11
<PAGE>
(2) Value realized is calculated by subtracting the total exercise price from
the market value of the underlying Common Stock on the date of exercise.
For the options exercised for stock loans on the date of grant, the
exercise price was equal to the market price at the time of exercise.
(3) The market value of the Company's Common Stock at December 31, 1999 was
$22.69 per share.
Retirement Plan (401(k) Plan)
The Company's Retirement Plan is intended to be a qualified retirement plan
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code"). Under the Retirement Plan, participating employees (including the
named executive officers) may contribute up to 15% of their compensation, but
not exceeding the amount allowed under applicable tax laws ($10,000 in
calendar 1999), and the Company contributes 75% of the first 4% of the
employee's contribution. All employees of the Company with six months of
service are eligible to participate in the Retirement Plan. The Company's
contributions on behalf of employees who have been employed with the Company
(including prior service for certain entities acquired by the Company) for at
least five years are fully vested.
Stock Loans
Since 1995, the Board has approved five-year loans aggregating $3,538,282 to
the named executive officers for the purpose of immediately exercising a
portion of stock options granted on the date of the loan (the "Stock Loans").
The first of these loans was granted to Mr. McDowell on June 5, 1995, the date
of commencement of his employment with the Company. Similar loans were granted
to Messrs. Carlson and Nunn and Ms. Barr. See Employment Contracts and
Termination of Employment and Change in Control Arrangements--Mr. McDowell--
Stock Loan. A provision in Mr. McDowell's employment agreement entitles him to
the financial equivalent of an annual stock loan for 10,000 shares of Common
Stock if certain Company performance goals are met. See Employment Contracts
and Termination of Employment and Change in Control Arrangements--Mr.
McDowell--Future Awards. The Board has adopted the practice of making similar
annual performance grants to the other named executive officers.
12
<PAGE>
The following table summarizes certain information concerning the Stock
Loans granted:
<TABLE>
<CAPTION>
To Exercise
Loan Option for Interest
Date Amount No. of Shares Rate(1)
---- -------- ------------- --------
<S> <C> <C> <C>
January 28, 2000
McDowell.................................... $225,625 10,000 6.9%
Carlson..................................... $225,625 10,000 6.9%
Nunn........................................ $169,219 7,500 6.9%
Barr........................................ $112,813 5,000 6.9%
May 11, 1999
McDowell.................................... $260,000 10,000 6.0%
Carlson..................................... $156,000 6,000 6.0%
Nunn........................................ $130,000 5,000 6.0%
Barr........................................ $104,000 4,000 6.0%
March 2, 1998
McDowell.................................... $268,750 10,000 5.4%
Carlson..................................... $134,375 5,000 5.4%
Nunn........................................ $134,375 5,000 5.4%
Barr........................................ $ 80,625 3,000 5.4%
February 13, 1997
McDowell.................................... $123,125 5,000 5.4%
Carlson..................................... $123,125 5,000 5.4%
Nunn........................................ $123,125 5,000 5.4%
August 26, 1996
McDowell.................................... $200,000 10,000 6.6%
March 15, 1996 (2)
Carlson..................................... $177,500 10,000 7.1%
Nunn........................................ $177,500 10,000 7.1%
June 5, 1995
McDowell.................................... $612,500 40,000 8.25%
</TABLE>
- --------
(1) Payable quarterly except for Mr. McDowell's loans, for which interest
accrues subject to forgiveness for loans made before January 28, 2000. The
interest rate is equal to the dividend yield on the Common Stock purchased
on the loan date.
(2) Does not include $50,000 in interest-free loans to each of Messrs. Carlson
and Nunn. See Employment Contracts and Termination of Employment and
Change in Control Arrangements--Messrs. Carlson and Nunn--Interest-Free
Loans.
These loans are collateralized by the purchased shares with full recourse to
the named executive officers. The loans made before 1999 are forgivable in
whole or in part upon the achievement of Company performance goals related to
growth in assets, growth in FFO per share relative to peers and stock price
multiple relative to peers. The loans made in 1999 are forgivable in whole or
in part upon the achievement of Company performance goals related to growth
net operating income for comparable (same-store) apartment communities
relative to peers, growth in FFO per share relative to peers and stock price
multiple relative to peers. The loans made in 2000 do not have any forgiveness
provisions. In addition, all loans are also forgivable in whole or in part
under certain circumstances similar to the forgiveness applicable to Mr.
McDowell's June 5, 1995 loan as described in Employment Contracts and
Termination of Employment and Change in Control Arrangements --Mr. McDowell--
Stock Loan, Certain Severance Benefits and Messrs. Carlson and Nunn --Certain
Severance Benefits. Upon termination, the Stock Loans that have forgiveness
provisions are forgiven pro rata for the measurement periods, but the same
performance goal criteria are used. Although certain of the performance goals
have been attained, loan forgiveness will not occur until the five-year term
ends.
13
<PAGE>
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Mr. McDowell
Effective June 5, 1995 (the "Commencement Date"), the Company entered into a
five-year employment agreement with Mr. McDowell. Certain material terms of
the agreement are as follows:
Base Salary and Annual Incentive Bonus. Mr. McDowell receives a current base
salary of $375,000 per year and is eligible to receive an annual incentive
bonus targeted at 50% of base salary and up to 100% of base salary based on
achievement of predefined operating or performance criteria established by the
Board, with emphasis on growth in FFO per share (the "Annual Criteria").
Stock Loan. Upon the commencement of his employment with the Company, Mr.
McDowell received a loan of $612,500 to exercise options to purchase 40,000
shares of Common Stock (at an exercise price of $15.32 per share) issued on
that date (the "McDowell Stock Loan"). The McDowell Stock Loan bears interest
at 8.25% per annum, compounded annually, with all principal and accrued
interest payable in full on June 5, 2000 (the "Payment Date"); provided,
however, that repayment of any principal and accrued interest under the
McDowell Stock Loan (the "Loan Amount") will be forgiven in accordance with
the following formulas (the "Performance Formulas"): (i) 20% of the Loan
Amount will be forgiven if the gross book value of the Company's equity
investments in real estate, investments in limited partnerships and mortgages
is $937 million or more on the Payment Date, and a pro rata portion of 20% of
the Loan Amount will be forgiven if such value is between $791 million and
$937 million; (ii) 20% of the Loan Amount will be forgiven on the Payment Date
if, on the second anniversary date of the McDowell Stock Loan, there has been
an increase in FFO per share of the Common Stock for the two year period
ending April 30, 1997 which is at or above the 80th percentile of the ten
largest publicly traded multifamily real estate investment trusts (the
"Indexed REITs") for a comparable period, and a pro rata portion of 20% of the
Loan Amount will be forgiven if any such increase is within the 50th and 80th
percentiles; (iii) 30% of the Loan Amount will be forgiven if, on the Payment
Date, there has been an increase in FFO per share of Common Stock for the
three year period ending April 30, 2000 which is at or above the 80th
percentile of the Indexed REITs, and a pro rata portion of 30% of the Loan
Amount will be forgiven if any such increase is within the 50th and 80th
percentiles; and (iv) 30% of the Loan Amount will be forgiven if, as of the
Payment Date, the average of the FFO multiples of Common Stock as of December
31 of each of the five preceding years (computed in each case by dividing the
market price of Common Stock on the last trading day of the calendar year by
the preceding twelve months' FFO) is at or above the 80th percentile of the
average multiple of the Indexed REITs for the same five year period, and a pro
rata portion of 30% of the Loan Amount will be forgiven if such multiple is
within the 50th and 80th percentiles. In addition, repayment of a pro rata
portion of the Loan Amount will be forgiven by the Company upon termination of
Mr. McDowell's employment under the circumstances described in Certain
Severance Benefits. Each of Mr. McDowell's subsequent loans granted in 1996
through 1998 have substantially the same terms as the McDowell Stock Loan. The
stock loan made to Mr. McDowell in 1999 replaced formula (i) above with a
formula allowing a forgiveness of up to 20% of the Loan Amount based on the
Company's "same-store" (i.e., those apartment communities owned and stabilized
for two full years ending on December 31 of each applicable year) growth in
net operating income ("NOI", i.e., the excess of property income over property
expense, excluding interest and depreciation). If the five year average of the
Company's same-store growth in NOI is at or above the 80th percentile of the
average of the same-store growth in NOI of the Indexed REITs for the same five
year period, 20% of the Loan Amount will be forgiven; and a pro rata portion
of 20% of the Loan Amount will be forgiven if such multiple is within the 50th
and 80th percentiles. The stock loan made to Mr. McDowell in 2000 does not
have any provision for forgiveness. See also Stock Loans.
Future Awards. Mr. McDowell will receive annual long-term incentive awards
which, assuming achievement of applicable performance goals, will provide Mr.
McDowell with the financial equivalent of (i) a forgivable performance-based
five-year loan to purchase 10,000 shares of Common Stock pursuant to an
immediately exercisable stock option, on terms similar to the McDowell Stock
Loan (see Stock Loan above), and (ii) performance options to purchase 100,000
shares of Common Stock at market value on the date of award (see Option Grants
in 1999).
14
<PAGE>
Certain Severance Benefits. If at any time during the five-year employment
term the employment of Mr. McDowell is terminated, he shall be entitled to
receive the benefits described below.
(a) Termination Other Than In Connection with a Change in Control.
(i) Termination by the Company Without Cause. If Mr. McDowell is terminated
without cause, Mr. McDowell would receive a lump sum payment equal to his then
base salary, plus an amount equal to the average of his annual bonus, if any,
over the most recent two years, and the Loan Amount for loans made before 2000
would be reduced based on a pro rata application of the Performance Formulas
(the "Performance Adjustment"), taking into consideration the number of full
months worked and the Company's performance data through the last quarter
ended 45 days or more prior to the termination date.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, Mr. McDowell or his estate will receive a lump sum payment
equal to the estimated annual bonus he would have received for the fiscal year
in question, if any (based on actual performance relative to the Annual
Criteria for the fiscal year and Mr. McDowell's contribution to the date of
death or disability), calculated on a pro rata basis to the date of
termination. In addition, the McDowell Stock Loan would be forgiven based on
the Performance Adjustment, with any balance payable 15 days after
termination.
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
would be payable to Mr. McDowell and the outstanding balance of the McDowell
Stock Loan, together with accrued but unpaid interest, would be payable in
full within 15 days of termination.
(b) Termination Following a Change in Control.
(i) Termination by the Company Without Cause or by Mr. McDowell for Good
Reason. If Mr. McDowell is terminated without cause within 12 months following
a Change in Control (defined to include, without limitation, the acquisition
by a person or group of the beneficial ownership of 50% or more of the
Company's outstanding securities and certain changes in the Board of Directors
resulting from proxy contests or other actions by a person or group with
beneficial ownership of 5% or more of the Company's outstanding securities),
or if Mr. McDowell terminates his employment for Good Reason (defined as
material changes in the executive's duties, responsibilities or authority or
the Company's relocation of the executive outside of San Francisco) within 12
months after a Change in Control, he would receive the following benefits: (a)
a lump sum payment equal to (x) two times his then base salary plus an amount
equal to two times the average of his annual bonus over the most recent two
years, if any (based on his current base salary of $375,000 and assuming
average incentive compensation in the maximum amount of $375,000, this payment
would be $1,500,000) plus (y) the estimated annual bonus he would have
received for the fiscal year in question, if any (based on actual performance
relative to the Annual Criteria for the fiscal year and Mr. McDowell's
contribution to date), calculated on a pro rata basis to the date of
termination; (b) all unvested stock options held by Mr. McDowell would vest
and be exercisable for a period of three months; and (c) the McDowell Stock
Loan would be forgiven based on the Performance Adjustment, with any balance
payable upon termination.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, Mr. McDowell or his estate would
receive the same benefits described in paragraph (a)(ii) above.
(iii) Voluntary Termination Without Good Reason or Termination for
Cause. Upon voluntary termination of employment by Mr. McDowell without Good
Reason within 12 months following a Change in Control, he would receive a lump
sum payment equal to his then base salary plus an amount equal to the average
of his annual bonus over the most recent two years, if any ($750,000 assuming
a $375,000 base salary and maximum incentive bonus). The outstanding balance
of the McDowell Stock Loan would be due on such termination. Upon termination
for "cause" by the Company within 12 months following a Change in Control, no
further
15
<PAGE>
compensation would be payable to Mr. McDowell and the outstanding balance of
the McDowell Stock Loan, together with accrued but unpaid interest, would be
payable in full within 15 days of termination.
Any of the foregoing amounts payable to Mr. McDowell following a Change in
Control is subject to reduction to the extent such payments would constitute
"parachute payments" as defined in Section 280G of the Code.
Messrs. Carlson and Nunn
Effective March 15, 1996, the date of the merger with RCT, the Company
entered into employment agreements with LeRoy E. Carlson and John H. Nunn.
Each agreement was for an initial term of two years, with automatic renewal on
a year-to-year basis thereafter unless terminated in accordance with its
terms. Certain material terms of these agreements are as follows:
Base Salary. Mr. Carlson currently receives a base salary of $275,000 and
Mr. Nunn currently receives a base salary of $240,000. Each base salary will
be subject to review each year with an expectation that the base salary will
increase in an amount at least equal to any increase in the Consumer Price
Index for the San Francisco Bay Area over the preceding twelve months.
Annual Incentive Bonus. Each executive shall be eligible to receive an
annual incentive bonus targeted at 30% of base salary. The amount of the
annual bonus will be based on the achievement of predefined operating or
performance goals and other criteria established by the Chief Executive
Officer or the Compensation Committee of the Board.
Interest-Free Loans. Upon their employment, Messrs. Carlson and Nunn each
received a $50,000 interest-free recourse loan (an "Interest-Free Loan") to be
forgiven either on the fifth anniversary of the date of employment, or upon
earlier termination of employment under the circumstances described in Certain
Severance Benefits. See also Stock Loans.
Certain Severance Benefits. If, at any time during any automatic one-year
renewal period, the employment of Messrs. Carlson or Nunn is terminated, he
shall be entitled to receive the benefits described below.
(a) Termination Other Than In Connection with a Change in Control.
(i) Termination by the Company Without Cause. If the executive is terminated
without cause, the executive will receive a lump sum payment equal to his then
annual base salary plus an amount equal to the average of his annual bonus
over the most recent two years, if any. In addition, the Interest-Free Loan
will be forgiven and the Stock Loans will be forgiven based on a Loan Amount
for loans made before 2000 as reduced based on a pro rata application of the
Performance Formulas (the "Performance Adjustment"), taking into consideration
the number of full months employed and the Company's performance data through
the last quarter ended 45 days or more prior to the termination date.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, the executive or his estate will receive a lump sum payment
equal to the annual bonus the executive would have received for the fiscal
year in question, if any (based on the previous or average annual bonus
amounts), calculated on a pro rata basis to the date of termination. In
addition, the Interest-Free Loan will be forgiven and the Stock Loans made
prior to 2000 will be forgiven based on the Performance Adjustment.
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
will be payable to the executive and the outstanding balance of the Interest-
Free Loan and the Stock Loans, together with accrued but unpaid interest, will
be payable in full within 15 days of termination.
16
<PAGE>
(b) Termination Following a Change in Control.
(i) Termination by the Company Without Cause or by the Executive for Good
Reason. If the executive is terminated without cause within 12 months
following a Change in Control or if the executive terminates his employment
for Good Reason within 12 months after a Change in Control, the executive will
receive the following benefits: (a) a lump sum payment equal to two times his
then base salary plus an amount equal to two times the average of his annual
bonus over the most recent two years, if any; (b) all unvested stock options
held by the executive would vest and be exercisable for a period of three
months; and (c) the Interest-Free Loan would be forgiven and the Stock Loans
made prior to 2000 would be forgiven based on the Performance Adjustment, with
any balance due immediately.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, the executive will receive the
same benefits described in paragraph (a)(ii) above, reduced on a pro rata
basis to the date of termination.
(iii) Voluntary Termination Without Good Reason or Termination for
Cause. Upon voluntary termination of employment by the executive without Good
Reason within 12 months following a Change in Control, the executive will
receive a lump sum payment equal to his then base salary plus an amount equal
to the average of his annual bonus over the most recent two years, if any. The
outstanding balance of the Interest-Free Loan and the Stock Loans, together
with accrued but unpaid interest, will be due on such termination. Upon
termination for "cause" by the Company within 12 months following a Change in
Control, no further compensation will be payable to the executive and the
outstanding balance of the Interest-Free Loan and the Stock Loans, together
with accrued but unpaid interest, will be payable in full within 15 days of
termination.
Any of the foregoing amounts payable to Messrs. Carlson and Nunn following a
Change in Control are subject to reduction to the extent such payments would
constitute "parachute payments" as defined in Section 280G of the Code.
Mr. Ward
Effective January 26, 1998, the Company entered into an Employment Agreement
with Bruce C. Ward for a term of three years unless otherwise terminated in
accordance with its terms. Certain material terms of the Agreement are as
follows:
Base Salary. Mr. Ward receives a current base salary of $250,000 per year.
Mr. Ward's base salary will be subject to review each year based on Mr. Ward's
performance subject to approval of the Board or its Compensation Committee.
Annual Incentive Bonus. Mr. Ward shall be eligible to receive an annual
incentive bonus targeted at 40% of base salary. The annual bonus will be based
on the achievement of predefined operating or performance goals and other
criteria set by the Chief Executive Officer; however, the actual amount of the
annual incentive bonus shall be subject to approval of the Board of Directors
or its Compensation Committee.
(a) Termination Other Than In Connection With A Change In Control.
(i) Termination by the Company Without Cause. If the executive is terminated
without cause, the executive will receive a lump sum payment equal to his then
annual salary plus an amount equal to his annual bonus that the executive
would have received for the fiscal year in question, if any.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability, the executive or his estate will receive a lump sum payment
equal to the annual bonus that the executive would have earned for the fiscal
year in question, if any.
(iii) Voluntary Termination or Termination for Cause. Upon voluntary
termination or termination for "cause" by the Company, no further compensation
will be payable to the executive.
17
<PAGE>
(b) Termination Following A Change In Control.
(i) Termination by the Company Without Cause or by the Executive with Good
Reason. If the executive is terminated without cause or if the executive
terminates his employment for Good Reason, the executive will receive: (a) a
lump sum payment equal to two times his base salary plus an amount equal to
two times the annual bonus the executive would have received for that fiscal
year, if any, and (b) all unvested stock options, if any, held by the
executive would vest and be exercisable for a period of three months.
(ii) Termination Due to Death or Disability. Upon termination due to death
or disability following a Change in Control, Mr. Ward will receive the same
benefits described in (a)(ii) above.
(iii) Voluntary Termination Without Good Reason. Upon voluntary termination
of employment by executive without Good Reason, the executive will receive a
lump sum payment from the Company equal to his base salary plus the annual
bonus he would have received for the fiscal year in question, if any.
(iv) Termination for Cause. Upon termination for "cause" by the Company, no
further compensation will be payable to the executive.
Any of the foregoing amounts payable to the executive following a Change in
Control is subject to reduction to the extent such payments would constitute
"parachute payments" as defined in Section 280G of the Code.
18
<PAGE>
COMPENSATION COMMITTEE REPORT ON COMPENSATION
OF EXECUTIVE OFFICERS
Compensation Policies Affecting Executive Officers
General
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation program. The Committee is
composed entirely of outside directors.
The objective of the Company's executive compensation program is to develop
and maintain executive reward programs which contribute to the enhancement of
shareholder value, while attracting, motivating and retaining key executives
who are essential to the long-term success of the Company. As discussed in
detail below, the Company's executive compensation program consists of both
fixed (base salary) and variable (incentive) compensation elements. Variable
compensation consists of annual cash incentives, stock option grants,
incentive stock loans and, on occasion, restricted share grants. These
elements are designed to operate on an integrated basis and together comprise
total compensation value.
Each year, the Committee reviews executive compensation in light of the
Company's performance during the year against previously defined objectives
and compensation data at companies that are considered comparable for Company
performance purposes. In reviewing the Company's performance during 1999, the
Committee considered a variety of additional factors. FFO per share increased
approximately 10.5% from 1998 levels, which placed the Company's performance
in the mid-range of the ten largest multifamily REITs (the "Comparable Group")
and "same store" net operating income increased approximately 6% for the year,
which was among the highest of the Company's Comparable Group. Also during
1999, the Company completed the integration of the properties, operations and
employees acquired in the November 1997 transaction with Trammell Crow
Residential-West. That transaction added 16 completed apartment communities
totaling 4,786 units, eight development properties totaling approximately
2,445 units, as well as development, construction and third-party property
management capabilities. During 1999, delivered development volume totaled
2,121 units, and acquisition volume provided an additional 628 units. Although
total shareholder return, taking into account dividends paid and stock price
appreciation, was negative for the year, the Company's FFO multiple, an
indication of price performance, was in the upper third of its Comparable
Group.
Base Salary
Base salary levels of the Company's key executives are largely determined
through an evaluation of the responsibilities of the position held, the
experience of the particular individuals, a comparison with comparable
companies in the real estate industry and the Committee's desire to achieve
the appropriate mix between fixed compensation and incentive based
compensation. In its determination of comparable companies, the Committee
gives primary consideration to comparable companies included in the equity
REIT peer group used for the five-year comparison of total shareholder return
(see Comparative Stock Performance). Salary information about comparable
companies is surveyed by reference to public disclosures made by companies in
the real estate industry. In addition, during 1999, the Committee used salary
survey data supplied by an outside compensation consultant. A change in a key
executive's compensation from the previous year may reflect factors such as
performance, changes in responsibility, contract provisions relative to
inflation and adjustments to maintain a level of consistency with industry
practices.
Annual Cash Incentives
The annual cash incentive is designed to provide a short-term (one year)
incentive to executive officers with the potential award based on a percentage
of an executive's base salary. For 1999, incentive awards were based on the
achievement of predetermined corporate expectations and a determination of an
executive's performance compared to specific objectives agreed upon by the
executive and the Committee at the start of the year. In addition, the
Committee used survey data supplied from the Company's outside compensation
consultant relative
19
<PAGE>
to total cash compensation, including salary and cash incentive awards. For
the executive officers other than the CEO, targeted annual cash incentive
awards are a percentage of base salary determined by the Committee; for the
CEO, the targeted annual cash incentive award is 50% of base salary with a
maximum annual award of 100% of base salary. The Summary Compensation Table
shows cash incentive bonuses paid to the named executive officers for 1999
based on such performance.
Stock Options
Stock options are designed to provide long-term (ten year) incentives and
rewards tied to the price of the Common Stock. The Committee believes that
stock options, which provide value to participants only when shareholders
benefit from stock price appreciation, are an important component of the
Company's annual executive compensation program. The number of options or
shares currently held by an officer is not a factor in determining individual
grants, and the Committee has not established any target level of ownership of
Common Stock by executive officers. However, accumulation and retention of
shares of Common Stock by officers is strongly encouraged. In order to
facilitate share ownership and retention, in 1998 the Company implemented a
program whereby certain executives may receive reload options, which continued
through 1999.
Stock options are awarded annually following the close of each year. The
Company does not adhere to any firmly established formulas for the issuance of
options to employees. In 1998, the Company extended the program of granting
stock options to additional qualified employees at the community management
level and above. In 1999, this program was continued. The Option Grants in
1999 table shows the options granted to the named executive officers during
1999 for 1998 performance. In determining the size of the grants to the named
executive officers, the Committee assessed relative levels of responsibility,
Company and individual performance and the long-term incentive practices of
other comparable companies.
In accordance with the provisions of the 1999 BRE Stock Incentive Plan, the
exercise price of all options granted was equal to the market value of the
underlying Common Stock on the date of grant. Accordingly, the value of these
grants to the officers is dependent solely upon the future growth and share
value of the Company's Common Stock.
Incentive Stock Loans
Pursuant to the 1999 BRE Stock Incentive Plan, in 1999 the Company funded
$650,000 aggregate principal amount of incentive stock loans to the named
executive officers. As more fully described in Stock Loans, these loans were
used to exercise some of the options granted to the named executive officers
under the Plan, and repayment of these loans may be forgiven in whole or in
part upon achievement of certain Company performance goals, including same-
store growth in operating income from comparable projects versus the
Comparable Group, FFO per share growth versus the Comparable Group and the
trailing FFO multiple versus the Comparable Group. The Committee believes that
these loans, by encouraging management's acquisition and retention of shares
of Common Stock and by tying forgiveness to Company performance, provide even
greater incentives for management to achieve both the Company's long-term
performance objectives and its current strategic goals.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limit of $1,000,000 on the amount of compensation that may be deducted by the
Company in any year with respect to each of the Company's five most highly
paid executive officers. Certain performance-based compensation that has been
approved by the shareholders is not subject to this deduction limit. The
Company's 1992 Employee Stock Option Plan and the 1999 BRE Stock Incentive
Plan are qualified so that stock options and certain other awards under such
plans are not subject to the deduction limitations of Section 162(m). However,
certain other types of compensation payments and their deductibility depend on
the timing of an executive officer's vesting or exercise of previously granted
rights, or on interpretations of changes in the tax laws and other factors
beyond the Company's control. Although the Company generally seeks to preserve
the federal income tax deductibility of
20
<PAGE>
compensation paid, in order to maintain flexibility in compensating executive
officers in a manner designed to promote varying corporate goals, the
Committee has not adopted a policy that all compensation must be deductible.
For 1999, the Committee anticipates that approximately $5,000 of compensation
to Mr. McDowell will be subject to the deduction limitations of Section
162(m).
CEO Performance Evaluation
For 1999, the Committee evaluated Mr. McDowell's performance based on the
factors discussed above under the caption "General," with particular emphasis
on the achievement of operating, portfolio and performance objectives, growth
in FFO per share and same store net operating income and corporate performance
relative to multifamily peer groups. Based on these factors and Mr. McDowell's
individual performance, in 2000 he received 50% of his potential maximum
annual cash incentive together with the incentive stock loan and stock option
grants described in Stock Loans and Option Grants on January 28, 2000.
The foregoing report is given by the members of the Compensation Committee,
namely:
L. Michael Foley, Chairman
John McMahan
Gregory M. Simon
21
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The line graph below compares the cumulative total shareholder return on the
Common Stock for the last five years with the cumulative total return on the
S&P 500 Index and the NAREIT Equity REIT Total Return Index over the same
period. This comparison assumes that the value of the investment in the Common
Stock and in each index was $100 on December 31, 1994 and that all dividends
were reinvested(/1/).
Value of investment(/2/):
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BRE Properties.......... $100.00 $124.92 $185.68 $223.39 $207.30 $202.64
S&P 500................. $100.00 $137.43 $168.98 $225.37 $289.78 $350.72
NAREIT Equity REIT
Index.................. $100.00 $115.27 $155.92 $187.51 $154.69 $147.54
</TABLE>
- --------
(1) BRE's Common Stock performance data is provided by SNL Securities, which
calculates investment results using the ex-dividend date. The S&P Index
and NAREIT Equity REIT Total Return Index data are provided by NAREIT,
which calculates reinvestment results using the dividend payable date. The
NAREIT Equity REIT Total Return Index includes 167 companies with
aggregate equity capitalization (excluding operating company units) of
approximately $118 billion.
(2) Indicates appreciation of $100 invested on December 31, 1994 in the Common
Stock, S&P 500, and NAREIT Equity REIT Total Return Index securities,
assuming reinvestment of dividends discussed above.
22
<PAGE>
AMENDING THE AMENDED AND
RESTATED NON- EMPLOYEE
DIRECTOR STOCK OPTION PLAN
(Proxy Item No. 2)
The Company's Amended and Restated Non-Employee Director Stock Option Plan
(the "Director Plan") provides for the grant of stock options to non-employee
directors of the Company in lieu of cash compensation. On January 27, 2000,
the Board of Directors amended the Director Plan subject to approval of the
Company's shareholders.
The Director Plan was originally adopted and approved by the shareholders in
1994. On March 12, 1996, the shareholders approved amendments to the Director
Plan providing for (a) automatic annual grants of options to purchase 25,000
shares of Common Stock to each non-employee director of the Company, such
options to be in lieu of annual retainer and meeting fees payable, and (b)
annual incentive grants of additional options for 5,000 shares to each non-
employee director following any year that a stated performance standard is
met. On April 14, 1998, the shareholders approved amendments providing for (i)
increasing the shares available under the Director Plan from 800,000 to
1,550,000 shares of Common Stock, (ii) providing for additional option grants
for up to 8,000 shares per year per non-employee director for service on Board
committees, (iii) modifying the annual incentive grant formula to provide for
options for up to 5,000 shares per year, (iv) providing for payment of the
exercise price and tax withholding using shares of Common Stock owned by a
director, (v) providing for "reload" option grants in order to incentivize the
directors to exercise options at an early date and to retain shares acquired
upon the exercise of options, (vi) providing for acceleration of vesting of
Director Plan options upon a change in control (as defined in the Director
Plan) or upon a merger or similar transaction where the Company is not the
surviving entity unless the transaction does not involve a change in control
and the surviving entity assumes the options, and (vii) updating and
conforming the Director Plan to recent amendments to SEC Rule 16b-3. The
currently proposed amendment would increase the shares available for grant
under the Director Plan from 1,550,000 to 2,300,000.
The purpose of the Director Plan is to attract and retain experienced and
knowledgeable persons to serve as directors through participation in stock
ownership of the Company. The following summary of certain provisions of the
Director Plan does not purport to be complete and is qualified in its entirety
by reference to the Director Plan document, which is appended to this proxy
statement.
The Director Plan is designed to compensate the non-employee directors with
stock options in lieu of annual retainer and Board and committee meeting fees.
In addition to conserving cash, the Board believes that the Director Plan will
increase the directors' proprietary interest in the Company and help align
their interests with those of the shareholders. The number of annual options
is based upon an estimated valuation of the options (including the possibility
of the options having no value) in comparison to the cash retainer and meeting
fees that might otherwise be payable to the directors in light of their time
commitment and contributions to the Company, which includes monthly Board
meetings and numerous committee meetings (see Board and Committee Meetings;
Compensation of Directors). Valuation changes in future years would not,
however, affect the number of options granted.
Annual Stock Options
Options for 25,000 shares of Common Stock are automatically granted to each
director who is not an employee, on the date he or she becomes a director, and
for an additional 25,000 shares on each subsequent anniversary date. The
Chairman of the Board receives annual options totaling 50,000 shares.
Additionally, annual option grants for 2,000 shares are awarded for each Board
committee a non-employee director (other than the Chairman of the Board)
serves and 6,000 shares are awarded for serving as chairman of a committee,
subject to a maximum of 8,000 shares annually for all committee service.
23
<PAGE>
Annual Incentive Grants
If during the preceding year the growth in the Company's FFO per share, as
determined by reference to the Company's annual consolidated financial
statements, placed the Company above the 80th percentile in this category for
the ten largest publicly traded multifamily REITs, the Director Plan provides
for an option for an additional 5,000 shares, to be granted annually to each
non-employee director. If the growth in FFO per share placed the Company
between the 50th and 80th percentile, the grant would be reduced ratably from
5,000 shares, so that at or below the 50th percentile the option grant would
be for zero. These options are fully vested upon grant.
Reload Options
When a non-employee director exercises a Director Plan option using already-
owned shares of Common Stock, the director will automatically receive a new
option for the amount of shares so delivered plus any shares delivered, or
withheld from the exercise, to pay applicable withholding taxes. This reload
option will be at strike price equal to the then current market price and have
a term expiring on the same date as the original option that was exercised.
The reload option will only vest and become exercisable if the director holds
the "new" shares acquired upon exercise of the original option for 18 months
or, if sooner, until 12 months prior to the expiration date of the reload
option. However, a reload option will vest earlier upon either (i) a change in
control (as defined in Director Plan subparagraph 4(e)), (ii) a director's
retirement from the Board, or (iii) the director's death or disability, or
personal hardship as determined by the Compensation Committee. The exercise of
a reload option using stock will result in a further reload option being
granted. Reload options will not be granted when a Director Plan option is
exercised by a person who is no longer a director.
The Board believes that the availability of reload options under the
Director Plan will encourage directors to exercise their options at an early
date rather than wait until near expiration, in that the reload concept in
effect affords the directors the benefit of the original option for the entire
option term, while permitting them to increase their current share holdings.
Option Terms
All options granted under the Director Plan must have an exercise price
which is not less than the fair market value of the shares on the date of
grant, which is defined in the Director Plan as the closing sale price on the
NYSE on the date of grant. Options granted under the Director Plan, other than
reload options, have a term of ten years and become exercisable as to one-
twelfth of the shares per month, so that the options are fully vested by the
first anniversary of the date of grant. Once vested, the options remain
exercisable for the duration of the ten-year option term. Director Plan
options are not transferable in any manner other than by will or the laws of
descent and distribution or as permitted in the Compensation Committee's
discretion. As proposed to be amended, the Director Plan allows the directors
to pay the exercise price of options by delivering to the Company, instead of
cash, shares of Common Stock they already own with a fair market value equal
to the exercise price. The amended Director Plan also allows the directors to
elect to pay tax withholding on exercise of their options by (i) having the
Company withhold from an exercise shares of Common Stock with a fair market
value equal to the tax withholding amount or (ii) the director delivering to
the Company other shares which the director already owns; the Company then
remits to the taxing authorities cash equal to the value of the shares
withheld or delivered.
Shares Available under the Director Plan
Under the proposed amendment, up to 2,300,000 shares of Common Stock will be
available for stock options under the Director Plan, subject to anti-dilution
adjustments. At March 10, 2000, options were outstanding under the Director
Plan for a total of 1,070,534 shares. Therefore, if the proposed 750,000-share
increase is approved by the shareholders, there will be authorized for future
issuance under the Director Plan a total of 1,060,475 shares, of which options
for approximately 115,000 shares will be granted by April 30, 2000.
24
<PAGE>
When already-owned shares are delivered to pay the exercise price of a
Director Plan option, only the net shares issued upon exercise will be deemed
utilized in the Director Plan; therefore, reload options granted in respect of
shares delivered upon exercise of an option will not utilize additional
Director Plan shares. Any shares subject to an option (other than a reload
option) that expires or terminates shall again be available for grant under
the Director Plan.
In addition to the Director Plan, the Company also has outstanding options,
or authorized for future option grants, a total of 3,233,046 shares of Common
Stock, consisting of (i) 3,191,713 shares under the Company's 1984 Stock
Option Plan, the 1992 Employee Stock Option Plan and the 1999 BRE Stock
Incentive Plan and (ii) various non-plan options totaling 41,333 shares,
including an option for 33,333 shares held by Mr. McDowell.
Duration of the Director Plan
The Director Plan expires October 1, 2005, although shares of Common Stock
can be issued after that date pursuant to options granted prior to that date.
Administration of the Director Plan
The Director Plan provides that it will be administered by the Board of
Directors or the Compensation Committee. Because of the Director Plan's
automatic formula provisions, administration does not involve decisions with
regard to the granting of stock options. However, the Board or the
Compensation Committee is authorized to make certain determinations and to do
all things necessary or desirable in connection with the administration of the
Director Plan.
Amendment and Termination
The Board of Directors may amend or terminate the Director Plan at any time,
except that no amendment of the Director Plan may become effective without the
approval of the shareholders if such amendment increases the maximum number of
shares that may be purchased pursuant to the Director Plan, changes the
purchase price of Director Plan options, or changes the option term or the
expiration date of the Director Plan.
Federal Income Tax Consequences
Options granted under the Director Plan are subject to the federal income
tax consequences applicable to non-qualified stock options. In brief, although
the grant of non-qualified stock options is not generally taxable to the
optionee, upon exercise the optionee will be taxed at ordinary income rates on
the excess of the fair market value of the stock received over the option
exercise price, and the Company will be entitled to a tax deduction in the
same amount. The amount included in an individual's income as a result of the
exercise of a non-qualified option will be treated as his or her basis in the
shares acquired, and any remaining gain or loss on the subsequent sale of the
shares will be treated as long-term or short-term capital gain or loss, as the
case may be.
Accounting Consequences
Under generally accepted accounting principles, as currently applied, there
would be no accounting charge incurred by the Company with respect to options
granted or exercised under the Director Plan. However, under Financial
Accounting Standard 123 there is footnote disclosure in the Company's
financial statements of the assumed value of the options granted, including
reload option grants.
25
<PAGE>
Options Granted to Non-Employee Directors Under the Director Plan
The following table shows the annual options that may be granted under the
Director Plan to the present non-employee directors in lieu of cash
compensation, excluding any reload grants.
<TABLE>
<CAPTION>
Number of Shares
---------------------------------
Board Committee Incentive
Service Service Grant(1)
------- ------------ ------------
<S> <C> <C> <C>
Chairman of the Board....................... 50,000 None up to 5,000
Other Non-Employee Directors................ 25,000 up to 8,000 up to 5,000
All Non-Employee Directors as a group (8
persons)................................... 225,000 up to 56,000 up to 40,000
</TABLE>
- --------
(1) Assuming the FFO growth per share criterion is achieved.
Vote Required for Approval; Recommendation of Board of Directors
The approval of a majority of the shares present and voting at the meeting
is required to approve the amended Director Plan. The Board of Directors has
unanimously approved the amended Director Plan and unanimously recommends that
shareholders vote FOR the amended Director Plan. If the amended Director Plan
is not approved by the shareholders, the Director Plan as previously in effect
will remain in effect.
Principal Shareholders
The following table indicates the only persons known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock
as of December 31, 1999 and the percentage of the outstanding shares of Common
Stock that such shares represented at that date, based on information
furnished by such holder or contained in filings made with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
Number of
Shares of
Common Percentage
Name and Address Stock of Shares
---------------- --------- ----------
<S> <C> <C>
Prudential Insurance Company of America................. 3,139,006 6.8%
751 Broad Street
Newark, NJ 07102-3777
State Farm Insurance Companies.......................... 3,230,803 7.0%
One State Farm Plaza
Bloomington, IL 61710
</TABLE>
26
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for presentation at the next
Annual Meeting of Shareholders must submit the proposal to BRE Properties,
Inc., 44 Montgomery Street, 36th Floor, San Francisco, CA 94104-4809,
Attention: Secretary. Such proposal must be received not later than
November 28, 2000 for inclusion in the Company's proxy statement and form of
proxy relating to next year's Annual Meeting and provided that the proposals
are in compliance with applicable laws and regulations.
Shareholder proposals to be presented at the 2001 Annual Meeting outside the
process of Rule 14a-8 of the Securities and Exchange Commission's Proxy Rules
must be received by the Company on or before February 11, 2001 or such notice
will be considered untimely under Rule 14a-4(c)(1) of the Commission's Proxy
Rules.
A description of the business experience of the other executive officers of
the Company is contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999, filed with the Securities and Exchange
Commission. That portion of the Company's Annual Report on Form 10-K, which
contains a description of the business experience of the other executive
officers, is incorporated herein by reference.
OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement will be brought before the Annual Meeting.
By Order of the Board of Directors
March 27, 2000
Upon written request of any shareholder entitled to receive this Proxy
Statement, the Company will provide, without charge, a copy of its annual
report on Form 10-K as filed with the Securities and Exchange Commission. Any
such request should be addressed to the Company at 44 Montgomery Street, 36th
Floor, San Francisco, CA 94104-4809, Attention: Investor Relations Department.
This request must include a representation by the shareholder that as of March
10, 2000, the shareholder was entitled to vote at the Annual Meeting.
27
<PAGE>
BRE PROPERTIES, INC.
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(as amended January 27, 2000)
1. Purpose of the Plan. The purpose of the Non-Employee Director Stock
Option Plan (the "Plan") is to attract and retain the services of experienced
and knowledgeable non-employee directors, to encourage them to devote their
utmost effort and skill to the advancement and betterment of the Company, and
to permit them to participate in the ownership of the Company through stock
compensation in lieu of cash compensation. This plan amends the Company's
Amended and Restated Non-Employee Director Stock Option Plan, as amended prior
to January 27, 2000.
2. Definitions. As used in the Plan and the related Option agreements, the
following terms will have the meaning stated below:
(a) "Board" means the Board of Directors of the Company.
(b) A "Change in Control" occurs when any person or group, together with
its affiliates and associates (other than the Company or any of its
subsidiaries or employee benefit plans), acquires direct or indirect
beneficial ownership of 32 percent or more of the then outstanding Shares
or commences a tender or exchange offer for 40 percent or more of the then
outstanding Shares. The terms "group," "affiliates," "associates" and
"beneficial ownership" shall have the meanings ascribed to them in the
rules and regulations under the Exchange Act.
(c) "Company" means BRE Properties, Inc., a Maryland corporation.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Board or its Compensation Committee appointed
by the Board to administer the Plan.
(f) "Exchange Act" means the Securities Exchange Act of 1934.
(g) The "Fair Market Value" of a Share on any date means the closing
price per Share on the New York Stock Exchange for that day (or, if no
Shares were publicly traded on that Exchange on that date, the next
preceding day that Shares were so traded on that Exchange).
(h) "Non-Employee Director" means a member of the Board who is not an
employee of the Company.
(i) "Option" means an option to purchase Shares.
(j) "Optionee" means the holder of an Option.
(k) "Option Price" means the price to be paid for Shares upon exercise of
an Option.
(l) "Shares" means shares of common stock $.01 par value per share of the
Company.
(m) "Subsidiary" means any corporation or other entity in which the
Company owns, directly or indirectly, more than 50 percent of the total
combined voting power.
3. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
power to interpret the Plan and prescribe, amend and rescind rules and
regulations relating to it.
A-1
<PAGE>
4. Participation in the Plan.
(a) Annual Grants in Lieu of Director Fees. Non-Employee Directors shall
receive the following Options in lieu of cash for serving on the Board and
attending meetings of the Board.
(i) Initial Grants Upon Becoming a Non-Employee Director. Any person who
becomes a Non-Employee Director shall automatically receive an Option for
25,000 Shares effective as of the date of their appointment or election to
the Board.
(ii) Subsequent Annual Grants. In addition to the Option grant provided
for in subparagraph (i) above, each Non-Employee Director shall
automatically receive an additional Option for 25,000 shares on each
anniversary of the date of grant of the Option received pursuant to
subparagraph (i) above.
(b) Additional Annual Grant for Chairman of the Board. The Chairman of the
Board shall receive, in addition to the annual Option granted under
subparagraph (a), an Option for 25,000 Shares upon becoming Chairman and an
additional Option for 25,000 Shares on each subsequent anniversary date.
(c) Additional Annual Grants for Committee Membership. For serving on Board
committees, Non-Employee Directors (other than the Chairman of the Board)
shall receive an additional annual Option for 2,000 Shares for each committee
the director serves on, or for 6,000 Shares for serving as chairman of a
committee, to be granted initially on the date this amended Plan is approved
by the shareholders of the Company and thereafter on the date a director joins
a committee or becomes chairman, and on each subsequent anniversary of the
initial grant date; provided that no individual shall receive annual Options
for more than 8,000 Shares pursuant to this subparagraph 4(c).
(d) Annual Incentive Grants. In addition to the Options granted pursuant to
subparagraphs (a)-(c) above, each Non-Employee Director shall receive an
Option for the number of Shares set forth in the table below, following any
fiscal year of the Company that the growth in the Company's funds from
operations per share from the prior year, as determined by reference to the
Company's annual consolidated financial statements, exceeds the 50th
percentile of the ten largest publicly-traded multifamily Real Estate
Investment Trusts based on total assets:
<TABLE>
<CAPTION>
Percentile No. of Shares
---------- ----------------------------------------------------------
<C> <S>
80-100 5,000
50-80 5,000 multiplied by X/30, with X equal to the percentile
above 50
(e.g., the 70th percentile = 20/30 x 5,000 = 3,333
Shares)
0-50 zero
</TABLE>
The grant date for Options granted pursuant to this paragraph shall be the
date, following publication of the Company's annual consolidated financial
statements, that the reference information for the comparison REITs first
becomes available.
(e) Reload Grants. In the event an Optionee (1) exercises, in whole or in
part, any Option granted under this Plan (including an Option granted under
this Section 4(e)) by delivering (or attesting to ownership of) Shares instead
of paying cash, as permitted by subparagraph 7(c), or (2) pays tax withholding
by delivering Shares, or having Shares withheld, as permitted by subparagraph
7(g), the Optionee, if then still a Non-Employee Director, shall automatically
receive on the date of such exercise a new Option (a "Reload Option") to
purchase additional Shares equal to the number of Shares so delivered to, or
withheld by, the Company. The Reload Option shall have an exercise price equal
to the Fair Market Value per Share on the date the Reload Option is granted,
shall expire the same date as the expiration date of the original Option so
exercised, and shall vest and become exercisable if the Optionee holds all of
the new Shares purchased (net of Shares withheld to pay taxes) under the
original Option until the first to occur of (i) 18 months after grant of the
Reload Option or (ii) 12 months before the expiration of the Reload Option.
However, a Reload Option shall vest sooner upon the occurrence of any of the
following: (a) a Change in Control, (b) the Optionee's retirement from the
Board, or (c) the Optionee's death, disability, or personal hardship as
determined by the Committee.
A-2
<PAGE>
5. Shares Subject to Plan. The maximum number of Shares which may be issued
pursuant to Options under the Plan shall be 2,300,000, subject to adjustment
in accordance with Section 8. In the event that any outstanding Option (other
than a Reload Option) shall expire or terminate for any reason, the Shares
allocable to the unused portion of that Option will again be available for
additional Options under the Plan. If an Option is exercised by delivery of
Shares as permitted by subparagraph 7(c), only the number of Shares issued
upon exercise net of the Shares so delivered shall be deemed utilized for
purposes of determining the maximum number of Shares available for future
Options under the Plan.
6. Transferability. Except as permitted by the Committee in accordance with
the rules and regulations promulgated under the Exchange Act with respect to
any exemption from the short-swing profit provisions of Section 16(b) of that
Act, Options granted under the Plan shall not be transferable by the holder
other than by will or the laws of descent and distribution and shall be
exercisable during the holder's lifetime only by the holder or the holder's
guardian or legal representative.
7. Terms and Conditions of Options. The Options granted hereunder will not
be "incentive stock options" under Section 422 of the Code. Each Option
Agreement shall state the number of Shares subject to the Option, the Option
Price, the Option period, the method of exercise, the manner of payment, any
restrictions on transfer, and such other terms and conditions as the Committee
shall determine consistent with the Plan and the following:
(a) Option Price. The price to be paid for Shares upon the exercise of an
Option shall be 100% of the Fair Market Value of the Shares on the date the
Option is granted.
(b) Expiration of Option. No Option shall be exercisable after the
expiration of ten years from the date of grant. A Reload Option shall
expire as provided in subparagraph 4(e).
(c) Payment of Option Price. Upon exercise of an Option, the Option Price
for the Shares to which the exercise relates shall be paid in full (i) in
cash or (ii) by delivery to the Company (including delivery by attestation
of ownership) of Shares owned by the Optionee and valued at Fair Market
Value on the date of exercise; provided that any such already-owned Shares
delivered to pay the exercise price, if originally acquired by the Optionee
from the Company, shall have been held at least six months.
(d) Vesting of Options. Each Option granted under subparagraphs 4(a)-(c)
shall vest and become exercisable as to 1/12 of the shares subject to the
Option on each monthly anniversary date beginning on the grant date of the
Option, subject to the Optionee's continuing service as a director,
chairman or committee member, so that an Option shall have become fully
vested one year after the grant date; provided that upon a Change in
Control, all unvested options shall become fully vested. Incentive grants
under subparagraph 4(d) shall be fully vested upon grant. A Reload Option
shall vest as provided in subparagraph 4(e).
(e) Termination of Director Status. Termination of an Optionee's status
as a director of the Company shall not affect the ability of the Optionee
or the Optionee's estate to exercise, until the expiration date thereof,
any Options which have vested prior to the termination date.
(f) Rights as Shareholder. No Optionee shall have rights as a shareholder
with respect to Shares acquired under the Plan unless and until the stock
certificates for such Shares are delivered to him or her.
(g) Tax Withholding. Option exercises are subject to withholding of all
applicable taxes, which withholding shall be satisfied by the Optionee's
cash remittance or (to the extent permitted by the Committee) through the
delivery or surrender to the Company of Shares, valued at Fair Market
Value, which the Optionee owned prior to exercise or to which the Optionee
is otherwise entitled upon exercise of an Option; provided that any such
already-owned Shares delivered to pay withholding taxes, if originally
acquired by the Optionee from the Company, shall have been held at least
six months.
A-3
<PAGE>
8. Capital Adjustments; Reorganization. The aggregate number of Shares with
respect to which Options may be granted hereunder, the number of Shares
thereof covered by each outstanding Option and the purchase price per Share
shall be proportionately adjusted for changes in the capitalization of the
Company resulting from a recapitalization, reorganization, merger,
consolidation, exchange of shares, stock dividend, stock split, reverse stock
split, or other subdivision or consolidation of shares or the like. No
fractional shares shall be issued, and any fractional shares resulting from
the adjustments contemplated by this subparagraph shall be eliminated from the
respective Option.
If the Company merges or consolidates with another entity and is not the
surviving entity, or if the Company is liquidated or sells or otherwise
disposes of substantially all its assets while unexercised Options remain
outstanding under the Plan, then either (a) after the effective date of the
merger, consolidation, liquidation, sale or other disposition, as the case may
be, each holder of any outstanding Option shall be entitled, upon exercise of
an Option, to receive, in lieu of Shares, the number and class or classes of
shares of stock or other securities or property to which the holder would have
been entitled if, immediately prior to the merger, consolidation, liquidation,
sale or other disposition, the holder had been the holder of record of a
number of Shares equal to the number of Shares as to which the Option may be
exercised; or (b) all Options, from and after a date at least 30 days prior to
the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, shall be exercisable in full and all
outstanding Options which are so exercisable prior to the effective date of
such merger consolidation, liquidation, sale or other disposition may be
canceled by the Committee in its discretion, as of such effective date,
against payment to the holder of cash in an amount equal to the estimated fair
value of the Options so canceled as determined by the Company's independent
financial advisor.
9. Exchange Act Section 16. Transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successor under the
Exchange Act. To the extent any provision of the Plan or action by the Plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
10. Duration of the Plan. This Amended and Restated Plan, as amended January
27, 2000, shall be deemed effective on January 27, 2000, if no later than
March 1, 2001 the Plan has been approved by the affirmative vote of a majority
of the outstanding shares of voting stock of the Company present and voting in
person or by proxy at a duly held shareholder meeting. If not so approved, the
Plan as previously amended shall remain in effect. The Plan shall terminate on
October 1, 2005, but may be sooner terminated by the Board at any time.
Expiration, termination or amendment of the Plan will not affect any Options
then outstanding.
11. Amendment of the Plan. The Board may amend or terminate the Plan at any
time; provided, however, that no such amendment shall, without the approval of
the holders of a majority of the outstanding shares of voting stock of the
Company present and voting at a duly held shareholder meeting, (i) increase
the maximum number of Shares which may be purchased pursuant to the Plan, (ii)
change the purchase price, or (iii) change the Option period or increase the
time limitation on the grant of Options under the Plan.
A-4
<PAGE>
CHARTER AND POWERS OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF BRE PROPERTIES, INC.
Organization
This Charter and Powers ("Charter") of the Audit Committee ("Committee") was
prepared and approved by the Board of Directors ("Board") of BRE Properties,
Inc. ("Company") on October 25, 1999 to serve as a guideline for the
Committee. The Committee shall be comprised of at least three directors who
are independent of management. Members of the Committee shall be considered
independent if they have no relationship to the Company that may interfere
with the exercise of their independence from management and the Company. A
member of the Committee who receives compensation from the Company solely for
his or her service on the Board or who receives benefits under a tax qualified
retirement plan shall be considered independent. All Committee members will be
financially literate, and at least one member will have accounting or related
financial expertise.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
Statement of Policy
The Committee shall provide assistance to the Board in fulfilling its
responsibilities to the shareholders relating to the reliability and integrity
of the accounting policies, financial reporting and financial disclosure
practices of the Company. Further, in conjunction with counsel and independent
accountants, the Committee shall review, as it deems appropriate, the adequacy
of and compliance with the system of internal controls of the Company,
including compliance by the Company with all applicable laws, regulations and
Company policies relating to accounting, financial reporting and financial
disclosure.
The Committee shall remain flexible in response to changing conditions. Not
by way of limitation, the Committee shall have the following specific powers
and duties:
1. Holding such regular meetings as may be necessary and such special meetings
as may be called by the Chair of the Committee or at the request of the
Company's independent accountants;
2. Reviewing the performance of the independent accountants and making
recommendations to the Board regarding their appointment or termination;
3. Conferring with the independent accountants and the internal auditors
concerning the scope of their examinations of the books and records of the
Company and its subsidiaries; reviewing the independent accountants' annual
engagement letter as appropriate; and directing the special attention of
the auditors to specific matters or areas deemed by the Committee or the
auditors to be of special significance;
4. Reviewing with the Board or management, the independent accountants and
internal auditors significant risks and exposures, audit activities and
significant audit findings;
5. Reviewing the range and cost of audit and non-audit services performed by
the independent accountants;
6. Reviewing the Company's audited annual financial statements and the
independent accountants' opinion rendered with respect to such financial
statements, including reviewing the nature and extent of any significant
changes in accounting principles or the application therein;
7. Obtaining from the independent accountants and internal auditors their
recommendations, if any, regarding internal controls and other matters
relating to the accounting procedures and the books and records of the
Company and its subsidiaries and reviewing the correction of controls
deemed to be deficient, if any;
A-5
<PAGE>
8. Providing an independent, direct line of communication between the Board
and the internal auditors and independent accountants;
9. Reviewing with appropriate Company personnel the actions taken to ensure
compliance with the Company's Code of Ethics and Conflict of Interest
Policy;
10. Reviewing the procedures established by the Company that monitor
compliance by the Company with its loan and indenture covenants and
restrictions;
11. Reporting to the Board following meetings of the Committee;
12. Maintaining minutes or other records of meetings and activities of the
Committee;
13. Reviewing the powers of the Committee and reporting and making
recommendations to the Board on these responsibilities;
14. Conducting or authorizing investigations into any matters within the
Committee's scope of responsibilities. The Committee shall, at its own
discretion, retain independent counsel, accountants, or others to assist
it in the conduct of any investigation;
15. Considering such other matters in relation to the financial affairs of the
Company and its accounts, and in relation to the internal and external
audit of the Company as the Committee may, in its discretion, determine to
be advisable;
16. The Committee shall reassess this Charter and make recommendations to the
Board regarding its revision when and as necessary.
A-6
<PAGE>
[LOGO OF BRE PROPERTIES]
[LOGO OF RECYCLED PAPER]
Printed on Recycled Paper
<PAGE>
PROXY CARD
BRE PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Frank C. McDowell, John McMahan and
LeRoy E. Carlson, or any of them, as proxies, with full power of substitution,
to vote as directed all shares of common stock of BRE Properties. Inc. that the
undersigned is entitled to vote at the Annual Meeting of Shareholders of BRE
Properties, Inc. The Annual Meeting will be held in the Way Things Work
Auditorium of the Sony Metreon, 101 Fourth Street, San Francisco, California at
10:00 a.m., Pacific Daylight time, on May 16, 2000, and at any adjournment
thereof. By signing this Proxy, the undersigned also authorizes each designated
proxy to vote at his discretion on any other matter that may properly come
before the Annual Meeting or any adjournment thereof. If this card contains no
specific voting instructions, my (our) shares will be voted FOR election of all
nominees for Director and FOR Item 2.
(Continued, and to be signed and dated on the reverse side).
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH Please mark
ITEM LISTED BELOW. your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS
FOR all WITHHOLD AUTHORITY EXCEPTIONS
nominees listed to vote for all nominees
below listed below
[ ] [ ] [ ]
Nominees: 01 William E. Borsari; 02 Edward E. Mace; and 03 Frank C. McDowell
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
Exceptions
--------------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN INCREASING THE MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED
PURSUANT TO THE PLAN FROM 1,550,000 SHARES TO 2,300,000 SHARES.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as name appears on this proxy. When signing as attorney,
executor, administrator, trustee, custodian, guardian or corporate officer, give
full title. If more than one trustee, all should sign.
Dated: , 2000
-----------------
- ----------------------------------------------
Signature of Shareholder
- ----------------------------------------------
Votes MUST be indicated in Black or Blue Ink.
Sign, Date and Return this Proxy Card Promptly Using the Enclosed Envelope.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<CAPTION>
[PHONE ICON] VOTE BY TELEPHONE OR INTERNET [COMPUTER ICON]
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day - 7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1
- ------------------------------------------------------------------------------------------------------------------------------------
When asked, please confirm by Pressing 1.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each proposal separately, press 0. You will hear these instructions:
- ------------------------------------------------------------------------------------------------------------------------------------
Proposal 1 - To vote FOR ALL nominees, press 1: to WITHHOLD FOR ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm by Pressing 1.
The instructions are the same for all remaining proposals.
or
--
2. VOTE BY INTERNET: Follow the instructions at our Website Address: http://www.eproxy.com/
or
--
3. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by internet or telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
</TABLE>
