-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FHkNcRiu1JRNFW0mzglYFavP+kV8MCXmlWPFaD0iD7Sm4AkvZPJqPYqa+U6R9sUu s4rbj1IAzMioCxYGi9Bggw== 0000929624-99-001927.txt : 19991115 0000929624-99-001927.hdr.sgml : 19991115 ACCESSION NUMBER: 0000929624-99-001927 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRE PROPERTIES INC /MD/ CENTRAL INDEX KEY: 0001011174 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 941722214 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14306 FILM NUMBER: 99746887 BUSINESS ADDRESS: STREET 1: 44 MONTGOMERY ST STREET 2: STE 3600 CITY: SAN FRANCISCO STATE: CA ZIP: 94104-5525 BUSINESS PHONE: 4154456530 MAIL ADDRESS: STREET 1: ONE MONTGOMERY STREET STREET 2: SUITE 2500 TELESIS TOWER CITY: SAN FRANCISCO STATE: CA ZIP: 94104-5525 FORMER COMPANY: FORMER CONFORMED NAME: BRE MARYLAND INC DATE OF NAME CHANGE: 19960402 10-Q 1 BRE PROPERTIES, INC./FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-5305 BRE PROPERTIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 94-1722214 - --------------------------------------------- --------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 44 Montgomery Street 36th Floor San Francisco, CA 94104-4809 - --------------------------------------------- --------------------- (Address of principal office) (Zip Code) (415) 445-6530 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- Number of shares of common stock outstanding as of November 9, 1999 44,679,341 BRE PROPERTIES, INC. INDEX TO FORM 10-Q September 30, 1999 Page No. -------- PART I FINANCIAL INFORMATION ITEM 1: Consolidated balance sheets - September 30, 1999 and December 31, 1998 2 Consolidated statements of income - three months ended September 30, 1999 and 1998 3 Consolidated statements of income - nine months ended September 30, 1999 and 1998 4 Consolidated statements of cash flows - nine months ended September 30, 1999 and 1998 5 Notes to consolidated financial statements 6-7 ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8-18 ITEM 3: Quantitative and Qualitative Disclosures about Market Risk 19 PART II OTHER INFORMATION ITEM 1 Legal Proceedings 20 ITEM 2 Changes in Securities and Use of Proceeds 20 ITEM 3 Defaults Upon Senior Securities 20 ITEM 4 Submission of Matters to a Vote of Security Holders 20 ITEM 5 Other Information 20 ITEM 6 Exhibits and Reports on Form 8-K 20 BRE Properties, Inc. - -------------------------------------------------------------------------------- PART I FINANCIAL INFORMATION ITEM 1 - Financial Statements --------------------
Consolidated Balance Sheets (unaudited) - ------------------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands, except per share data) September 30, 1999 December 31, 1998 -------------------- --------------------- Assets Real estate portfolio: Direct investments in real estate: Investments in rental properties $1,653,537 $1,618,461 Construction in progress 35,198 43,830 Less: accumulated depreciation (100,870) (75,838) -------------------- --------------------- 1,587,865 1,586,453 -------------------- --------------------- Equity interests in real estate joint ventures: Investments in rental properties - - Construction in progress 12,382 - -------------------- --------------------- 12,382 - -------------------- --------------------- Land under development 20,358 15,328 -------------------- --------------------- Total real estate portfolio 1,620,605 1,601,781 Cash 3,244 2,057 Other assets 25,705 27,078 -------------------- --------------------- Total assets $1,649,554 $1,630,916 ==================== ===================== Liabilities and Shareholders' Equity Liabilities Mortgage loans $ 228,399 $ 235,146 Unsecured senior notes 253,000 253,000 Unsecured line of credit 238,000 264,000 Accounts payable and other liabilities 17,362 26,333 -------------------- --------------------- Total liabilities 736,761 778,479 -------------------- --------------------- Commitments and contingencies (notes B and C) - - Minority interest 88,864 87,432 -------------------- --------------------- Shareholders' equity Preferred stock, $.01 par value, liquidation preference $25.00 per share, 10,000,000 shares authorized. Shares issued and outstanding: 2,150,000 shares of Series A at September 30, 1999; no shares outstanding at December 31, 1998 53,750 - Common stock, $.01 par value, 100,000,000 shares authorized. Shares issued and outstanding: 44,679,341 at September 30, 1999; 44,221,560 at December 31, 1998 447 443 Additional paid-in capital 671,782 664,811 Accumulated net income in excess of cumulative dividends 97,950 99,751 -------------------- --------------------- Total shareholders' equity 823,929 765,005 -------------------- --------------------- Total liabilities and shareholders' equity $1,649,554 $1,630,916 ==================== ===================== See notes to consolidated financial statements
2 BRE Properties, Inc. - --------------------------------------------------------------------------------
Consolidated Statements of Income (unaudited) - --------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands, except per share data) For the Three Months Ended September 30, ----------------------------------------- 1999 1998 ------------------- ----------------- Revenue Rental income $55,519 $49,423 Other income 4,310 3,327 ------------------- ----------------- Total revenue 59,829 52,750 ------------------- ----------------- Expenses Real estate operating 18,587 17,671 Depreciation 8,977 7,024 Interest 10,400 8,604 General and administrative 1,431 1,715 Provision for non-recurring charge - 2,400 ------------------- ----------------- Total expenses 39,395 37,414 ------------------- ----------------- Income before net gain (loss) on sales of investments in rental properties, minority interest and dividends attributable to preferred stock 20,434 15,336 Net gain (loss) on sales of investments in rental properties - (202) ------------------- ----------------- Income before minority interest 20,434 15,134 Minority interest in income 1,353 1,018 ------------------- ----------------- Net income 19,081 14,116 Dividends attributable to preferred stock 1,142 - ------------------- ----------------- Net income available to common shareholders $17,939 $14,116 =================== ================= Net income per outstanding common share: Income before net gain (loss) on sales of investments in rental properties less minority interest $ 0.40 $ 0.33 Net gain (loss) on sales of investments in rental properties - (0.01) ------------------- ----------------- Net income per share - basic $ 0.40 $ 0.32 =================== ================= Income before net gain (loss) on sales of investments in rental properties and minority interest $ 0.40 $ 0.32 Net gain (loss) on sales of investments in rental properties - - ------------------- ----------------- Net income per share - assuming dilution $ 0.40 $ 0.32 =================== ================= Weighted average common shares outstanding - basic 44,680 43,480 =================== ================= Weighted average common shares outstanding - assuming dilution 47,860 46,570 =================== ================= Dividends declared and paid per common share $ 0.39 $ 0.36 =================== ================= See notes to consolidated financial statements
3 BRE Properties, Inc. - --------------------------------------------------------------------------------
Consolidated Statements of Income (unaudited) - --------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands, except per share data) For the Nine Months Ended September 30, ----------------------------------------- 1999 1998 ------------------- ----------------- Revenue Rental income $161,779 $139,618 Other income 11,809 9,776 ------------------- ----------------- Total revenue 173,588 149,394 ------------------- ----------------- Expenses Real estate operating 52,986 47,643 Depreciation 26,287 20,177 Interest 30,535 25,966 General and administrative 5,123 5,085 Provision for non-recurring charge 1,250 2,400 ------------------- ----------------- Total expenses 116,181 101,271 ------------------- ----------------- Income before net gain (loss) on sales of investments in rental properties, minority interest and dividends attributable to preferred stock 57,407 48,123 Net gain (loss) on sales of investments in rental properties 54 (1,073) ------------------- ----------------- Income before minority interest 57,461 47,050 Minority interest in income 4,104 3,051 ------------------- ----------------- Net income 53,357 43,999 Dividends attributable to preferred stock 3,040 - ------------------- ----------------- Net income available to common shareholders $ 50,317 $ 43,999 =================== ================= Net income per outstanding common share: Income before net gain (loss) on sales of investments in rental properties less minority interest $ 1.13 $ 1.06 Net gain (loss) on sales of investments in rental properties - (0.03) ------------------- ----------------- Net income per share - basic $ 1.13 $ 1.03 =================== ================= Income before net gain (loss) on sales of investments in rental properties and minority interest $ 1.13 $ 1.05 Net gain (loss) on sales of investments in rental properties - (0.02) ------------------- ----------------- Net income per share - assuming dilution $ 1.13 $ 1.03 =================== ================= Weighted average common shares outstanding - basic 44,500 42,560 =================== ================= Weighted average common shares outstanding - assuming dilution 47,740 45,760 =================== ================= Dividends declared and paid per common share $ 1.17 $ 1.08 =================== ================= See notes to consolidated financial statements
4 BRE Properties, Inc. - --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows (unaudited) - -------------------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands) For the Nine Months Ended September 30, ------------------------------------------------ 1999 1998 ---------------------- -------------------- Cash flows from operating activities: Net income $ 53,357 $ 43,999 Adjustments to reconcile net income to net cash generated by operating activities: Provision for depreciation 26,287 20,177 Provision for nonrecurring charge - 2,400 Net (gain) loss on sales of investments in rental properties (54) 1,073 Minority interest 4,104 3,051 (Decrease) increase in accounts payable and other liabilities (1,351) 1,964 Decrease (increase) in other assets 1,438 (1,233) ---------------------- -------------------- Net cash flows generated by operating activities 83,781 71,431 ---------------------- -------------------- Cash flows from investing activities: Additions to direct investment construction in progress (26,203) (142,846) Reimbursements of construction in progress from unconsolidated joint ventures 10,073 - Purchase of land under development (5,030) - Multifamily properties purchased (24,264) (115,988) Decrease in funds held in escrow - 15,833 Capital expenditures (3,485) (2,645) Rehabilitation expenditures (8,185) (4,762) Proceeds from sales of property, net 11,510 20,295 ---------------------- -------------------- Net cash flows (used in) investing activities (45,584) (230,113) ---------------------- -------------------- Cash flows from financing activities: Principal payments on mortgage loans (6,747) (5,135) Issuance of unsecured senior notes, net - 130,000 Costs of issuance of senior unsecured notes - (3,787) Line of credit: Advances 126,000 346,000 Repayments (152,000) (318,000) Proceeds from preferred equity offering, net 51,659 - Proceeds from common equity offerings, net - 56,306 Proceeds from exercises of stock options, net 3,438 1,332 Distributions to minority members (4,202) (3,051) Dividends paid (55,158) (45,981) ---------------------- -------------------- Net cash flows (used in) generated by financing activities (37,010) 157,684 ---------------------- -------------------- Increase (decrease) in cash 1,187 (998) Balance at beginning of period 2,057 4,216 ---------------------- -------------------- Balance at end of period 3,244 $ 3,218 ---------------------- -------------------- Transfers of construction in progress to direct investments in real estate $ 5,667 $ 132,060 ====================== ==================== Transfers of construction in progress to equity interests in real estate joint ventures $ 22,455 - ====================== ==================== Interest capitalized $ 7,226 $ 8,695 ====================== ==================== Mortgage loans assumed - $ 8,612 ====================== ==================== See notes to consolidated financial statements
5 BRE Properties, Inc. - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - -------------------------------------------------------------------------------- September 30, 1999 NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Annual Report of BRE Properties, Inc. (the "Company" or "BRE") on Form 10-K for the year ended December 31, 1998 (the "1998 10-K"). In the opinion of management, all adjustments (consisting of normal recurring adjustments only) have been made that are necessary for a fair statement of the results for the interim periods presented herein. BRE adopted Financial Accounting Standards Board Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("Statement 131") in the fourth quarter of 1998. Statement 131 requires certain descriptive information to be provided about an enterprise's reportable segments. BRE has determined that it has one operating and reportable segment, multifamily communities, which comprised 98% of BRE's assets and 98% of its total revenue as of and for the nine months ended September 30, 1999. All multifamily communities owned by the Company are located in the Western United States. BRE's business focus is the ownership and operation of multifamily communities and it evaluates performance and allocates resources primarily based on the net operating income ("NOI") of an individual multifamily community. NOI is defined by the Company (and generally by the real estate industry) as the excess of all revenue generated by the community (primarily rental revenue) less direct operating expenses (primarily, but not limited to, payroll, property taxes, insurance and maintenance expense). Accordingly, NOI excludes depreciation, capitalized expenditures and interest expense. NOI from multifamily communities totaled $116,617,000 and $97,811,000 for the nine months ended September 30, 1999 and 1998, respectively. All other segment measurements are presently disclosed in the accompanying consolidated balance sheets and Notes to Consolidated Financial Statements. All revenue is from external customers and there is no revenue from transactions with other segments, as the only activity outside operating apartments is the ownership of one parcel of commercial land. There are no tenants that contributed 10% or more of BRE's total revenue in the nine months ended September 30, 1999 or 1998. Interest income is not separately reported, as it is immaterial. Interest expense on debt is not allocated to individual properties, even if such debt is secured. Further, minority interest in consolidated subsidiaries is not allocated to the related properties. There is no provision for income tax as the Company is organized as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Certain reclassifications have been made from the prior period's presentation to conform to the current period's presentation. NOTE B - LITIGATION - ------------------- BRE is defending various claims and legal actions that arise from its normal course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, in the opinion of management, none of these actions will have a material adverse effect on BRE's results of operations or financial position. 6 BRE Properties, Inc. - -------------------------------------------------------------------------------- NOTE C - COMMITMENTS - -------------------- As of September 30, 1999, the Company had commitments to acquire two multifamily communities, with a total estimated acquisition cost of approximately $65 million. The Company expects to fund the commitments in calendar year 2000. There can be no assurance that these communities will be acquired or will be acquired for the estimated cost indicated. 7 BRE Properties, Inc. - -------------------------------------------------------------------------------- ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- September 30, 1999 Overview BRE Properties, Inc. (the "Company" or "BRE") is a regionally focused, self- administered equity real estate investment trust ("REIT") which primarily owns and operates a portfolio of 85 apartment communities (aggregating 22,334 units) in 12 major markets of the Western United States. The Company also owns a medical office property and two properties held in partnerships in which BRE is a minority limited partner. The Company's revenue consists primarily of rental income (93% of total revenue in the quarter ended September 30, 1999 and 94% in the same period in 1998) derived from its portfolio of income-producing properties. Other income includes various fees and charges to residents of multifamily communities, and to a lesser extent, interest from notes receivable, fee management and development income and income from partnership investments. The policy of the Company is to emphasize cash flows from operations rather than the realization of capital gains through property dispositions. As dispositions of real estate assets are made, the Company typically seeks to reinvest net proceeds from sales in income-producing real estate. In addition to historical information, the information included in this report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as those pertaining to the Company's capital resources, portfolio performance and results of operations. Forward-looking statements involve numerous risks and uncertainties and should not be relied upon as predictions of future events and there can be no assurance that the events or circumstances reflected in such forward-looking statements will be achieved or will occur. Certain such forward-looking statements can be identified by the use of forward- looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates," or "anticipates" or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Such forward- looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and they may be incapable of being realized. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward- looking statements: defaults or non-renewal of leases, increased interest rates and operating costs, failure to obtain necessary outside financing, difficulties in identifying properties to acquire and in effecting acquisitions, failure to successfully integrate acquired properties and operations, risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities), failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), environmental uncertainties, risks related to natural disasters, financial market fluctuations, changes in real estate and zoning laws and increases in real property tax rates. The success of the Company also depends upon economic trends generally, including interest rates, income tax laws, governmental regulation, legislation, population changes and other factors. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only. The Company assumes no obligation to update forward-looking statements. See also the Company's reports filed from time to time with the Securities and Exchange Commission pursuant to the Securities Act. 8 BRE Properties, Inc. - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS Comparison of the Quarters Ended September 30, 1999 and 1998 Revenue Total revenue was $59,829,000 for the three months ended September 30, 1999 compared to $52,750,000 for the same period in 1998, primarily due to an increase in rental revenue. Rental revenue increased from $49,423,000 in the quarter ended September 30, 1998 to $55,519,000 in the quarter ended September 30, 1999, due largely to the completion of eight multifamily properties previously under construction and the acquisition of one multifamily community. This increase is offset in part by the sale of two multifamily communities during or after the quarter ended September 30, 1998, but before September 30, 1999. These changes in the portfolio contributed, on a net basis, approximately $4,274,000 to rental revenue for the three months ended September 30, 1999, as compared to the same period in 1998. Further, multifamily rental revenue from same-store communities (multifamily communities owned by the Company and stabilized as of July 1, 1998 and consisting of 19,297 of BRE's 22,334 total units) increased $2,030,000 for the three months ended September 30, 1999 compared to the same period in 1998. This increase in same-store communities was due primarily to an average increase in rental rates of approximately 3% and stable physical occupancy of 97% at both September 30, 1999 and 1998. Other income increased from $3,327,000 in the quarter ended September 30, 1998 to $4,310,000 for the quarter ended September 30, 1999 due primarily to the portfolio changes discussed above, net development and management fees from third parties, offset in part by the loss of other income from the sale of three commercial and retail properties. A summary of the components of revenue for the quarter ended September 30, 1999 and 1998 follows (dollars in thousands):
Three months ended September 30, 1999 Three months ended September 30, 1998 --------------------------------------- ------------------------------------- % of Total % of Total % Change from Revenue Revenue Revenue Revenue 1998 to 1999 ------------------ --------------- ---------------- --------------- -------------- Rental Revenue: Multifamily: Same-store $48,914 $46,884 4% Non same-store 6,549 2,275 188% ------- ------- Total Multifamily 55,463 93% 49,159 93% 13% Commercial and retail 56 - 264 1% (79%) ------- --- ------- --- Rental revenue 55,519 93% 49,423 94% 12% Other income 4,310 7% 3,327 6% 30% ------- --- ------- --- Total revenue $59,829 100% $52,750 100% 13% ======= === ======= ===
Multifamily communities physical occupancy rates as of September 30, 1999 and 1998 were as follows: 1999 1998 - --------------------------------------------------------------------------------------------------------- Multifamily: Same-store 97% 97% - --------------------------------------------------------------------------------------------------------- Multifamily: All 97% 97% - ---------------------------------------------------------------------------------------------------------
Portfolio occupancy is calculated by dividing the total occupied units by the total units in the portfolio. Apartment units are generally leased to residents for rental terms, which do not exceed one year. 9 BRE Properties, Inc. - -------------------------------------------------------------------------------- Expenses Real Estate Expenses Real estate expenses for multifamily properties (including maintenance and repairs, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses) for the quarter ended September 30, 1999 increased 5% to $18,587,000 from the comparable period in 1998, primarily due to expenses of eight multifamily properties previously under construction and the acquisition of one multifamily community. Additionally, ongoing cost control measures have resulted in lower expense in same-store properties during these periods. This increase is offset in part by the sale of two multifamily communities during or after the quarter ended September 30, 1998, but before September 30, 1999. Real estate expenses as a percentage of total revenue were 31.1% and 33.5% for the quarters ended September 30, 1999 and 1998, respectively, due primarily to increases in rental revenue and decreases in real estate expense on a same-store basis. A summary of the categories of real estate expenses for the quarters ended September 30, 1999 and 1998 follows (dollars in thousands):
Three months ended Three months ended September 30, 1999 September 30, 1998 -------------------------------- ----------------------------- % of Total % of Total % Change from Expense Revenue Expense Revenue 1998 to 1999 ------------ -------------- ---------- ------------- -------------- Multifamily: Same-store $16,508 $16,772 (2%) Non same-store 2,056 789 161% Other 23 102 (77%) ------------ ---------- Total Multifamily 18,587 31.1% 17,663 33.5% 5% Commercial and retail - 8 (100%) ------------ ---------- Total real estate expense $18,587 $17,671 5% ============ ==========
Provision for Depreciation The provision for depreciation increased by $1,953,000 to $8,977,000 for the quarter ended September 30, 1999 from the comparable period of 1998. The increase in 1999 resulted primarily from the completion of eight properties previously under construction and was offset in part by dispositions of multifamily and commercial and retail properties in prior periods. Interest Expense Interest expense was $10,400,000 (net of interest capitalized to the cost of apartment communities under development of $2,191,000) for the quarter ended September 30, 1999, an increase of $1,796,000 or 21%. Interest expense was $8,604,000 for the same period in 1998 and was net of $3,838,000 of interest capitalized to the cost of apartment communities under construction. This increase was due largely to lower amounts of capitalized interest (due to the delivery and occupancy of communities previously under construction) and interest expense on higher average balances on the line of credit (due to expenditures on construction in progress). 10 BRE Properties, Inc. - -------------------------------------------------------------------------------- General and Administrative General and administrative costs were $1,431,000 or approximately 2.4% of total revenue for the third quarter in 1999 and $1,715,000 or approximately 3.3% of total revenue, for the third quarter in 1998. The reduction in general and administrative costs as a percentage of total revenue is primarily due to lower salary costs (due in part to the February, 1999 restructuring) and the timing of certain costs. Provision for Non-Recurring Charge In the third quarter of 1998, the Company recorded a provision for litigation loss of $2,400,000 in connection with a jury award and related legal expenses. There was no such amount in the third quarter of 1999. Net Gain (Loss) on Sales of Real Estate Investments There was no net gain (loss) on sale of real estate investments for the three months ended September 30, 1999. The net loss on sales of real estate investments of ($202,000) for the quarter ended September 30, 1998 was primarily due to the sale of the Vista Village retail property and the Valencia Medical property. Minority Interest in Income Minority interest in income was $1,353,000 and $1,018,000 for the quarters ended September 30, 1999 and 1998, respectively. The increase is due to the addition in the fourth quarter of 1998 of one property structured as a limited liability company whose minority members have no conversion rights into the Company's common stock. Further, additional Operating Company units in a consolidated subsidiary, BRE Property Investors LLC, were granted to minority members pursuant to the achievement of certain goals with respect to communities under development and this increase was offset in part by the conversion of existing operating company units into common stock. Dividends Attributable to Preferred Stock During the quarter ended March 31, 1999, the Company issued 2,150,000 shares of 8 1/2% Series A Cumulative Redeemable Preferred Stock for net proceeds of approximately $51,600,000. There was no preferred stock outstanding in the three months ended September 30, 1998. Net Income Available to Common Shareholders Net income available to common shareholders was $17,939,000 and $14,116,000 for the quarters ended September 30, 1999 and 1998 respectively, an increase of $3,823,000. This increase is primarily due to net earnings from eight communities previously under construction and offset in part by the dividend on the 8 1/2% Series A Cumulative Redeemable Preferred Stock issued in January 1999. 11 BRE Properties, Inc. - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS Comparison of the Nine Months Ended September 30, 1999 and 1998 Revenue Total revenue was $173,588,000 for the nine months ended September 30, 1999 compared to $149,394,000 for the same period in 1998, primarily due to an increase in rental revenue. Rental revenue increased from $139,618,000 in the nine months ended September 30, 1998 to $161,779,000 for the nine months ended September 30, 1999, due largely to the acquisition of seven multifamily communities and the completion of eight multifamily properties previously under construction. This increase is offset in part by the sale of four multifamily communities during or after the nine months ended September 30, 1998, but before September 30, 1999. These changes in the portfolio contributed, on a net basis, approximately $18,680,000 to multifamily rental revenue for the nine months ended September 30, 1999 as compared to the same period in 1998. Further, multifamily rental revenue from same-store communities (multifamily communities owned by the Company and stabilized as of January 1, 1998 and consisting of 17,592 of BRE's 22,334 total units) increased $4,220,000 for the nine months ended September 30, 1999, compared to the same period in 1998. This increase in revenue from same-store communities was due primarily to an average increase in rental rates of approximately 3% as physical occupancy was stable, with both September 30, 1999 and 1998 at 97%. Other income increased from $9,776,000 in the nine months ended September 30, 1998 to $11,809,000 for the nine months ended September 30, 1999, due primarily to the portfolio changes discussed above and net development and management fees from third parties, and was offset in part by the loss of other income due to the sale of four commercial and retail properties and one partnership investment. A summary of the components of revenue for the nine months ended September 30, 1999 and 1998 follows (dollars in thousands):
Nine months ended Nine months ended September 30, 1999 September 30, 1998 ----------------------------------- ------------------------------- % of Total % of Total % Change from Revenue Revenue Revenue Revenue 1998 to 1999 ---------------- ------------- ------------ ------------- ------------- Rental Revenue: Multifamily: Same-store $130,631 $126,411 3% Non same-store 30,960 12,280 152% ---------------- ------------ Total Multifamily 161,591 93% 138,691 93% 17% Commercial and retail 188 - 927 - (80%) ---------------- ------------- ------------ Rental revenue 161,779 93% 139,618 93% 16% Other income 11,809 7% 9,776 7% 21% ---------------- ------------- ------------ ------------- Total revenue $173,588 100% $149,394 100% 16% ================ ============= ============ =============
12 BRE Properties, Inc. - -------------------------------------------------------------------------------- Expenses Real Estate Expenses Real estate expenses for multifamily properties (including maintenance and repairs, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses) for the nine months ended September 30, 1999 increased 11% to $52,986,000 from the comparable period in 1998 primarily due to expenses of seven multifamily property acquisitions and the completion of eight multifamily properties previously under construction. This increase is offset in part by the sale of four communities during or after the nine months ended September 30, 1998, but before September 30, 1999. Additionally, ongoing cost control measures have resulted in lower expense in same-store properties during these periods. Real estate expenses as a percentage of total revenue were 30.5% and 31.9% for the nine months ended September 30, 1999 and 1998, respectively, due primarily to increases in rental revenue and decreases in real estate expense on a same-store basis. A summary of the categories of real estate expenses for the nine months ended September 30, 1999 and 1998 follows (dollars in thousands):
Nine months ended Nine months ended September 30, 1999 September 30, 1998 -------------------------------- -------------------------------- % of Total % of Total % Change from Expense Revenue Expense Revenue 1998 to 1999 ------------- ------------- ------------- ------------- ------------- Multifamily: Same-store $42,776 $43,077 (1%) Non same-store 10,153 4,055 150% Other 57 453 (87%) ------------- ------------- Total Multifamily 52,986 30.5% 47,585 31.9% 11% Commercial and retail - 58 (100%) ------------- ------------- Total real estate expense $52,986 $47,643 11% ============= =============
Provision for Depreciation The provision for depreciation increased by $6,110,000 to $26,287,000 for the nine months ended September 30, 1999 from the comparable period of 1998. The increase in 1999 resulted primarily from multifamily property acquisitions and the completion of eight properties previously under construction and was offset in part by dispositions of multifamily and commercial and retail properties in prior periods. Interest Expense Interest expense was $30,535,000 (net of interest capitalized to the cost of apartment communities under development of $7,226,000) for the nine months ended September 30, 1999, an increase of $4,569,000 or 18%. Interest expense was $25,966,000 for the same period in 1998 and was net of $8,695,000 of interest capitalized to the cost of apartment communities under construction. This increase was due largely to interest expense for the full nine months in the period ended September 30, 1999 on the Company's $130,000,000 unsecured senior notes, which were issued in February 1998, and higher average balances on the line of credit due to expenditures on construction in progress. 13 BRE Properties, Inc. - -------------------------------------------------------------------------------- General and Administrative General and administrative costs were $5,123,000 or approximately 3.0% of total revenue for the first nine months in 1999 and $5,085,000 or approximately 3.4% of total revenue, for the first nine months in 1998. The reduction in general and administrative costs as a percentage of total revenue is a result of economies in administrating a larger portfolio, with total revenue increasing 16% from the nine months ended September 30, 1998 to the nine months ended September 30, 1999. Provision for Non-Recurring Charge In the first quarter of 1999, the Company recorded a restructuring charge of $1,250,000 in connection with reductions in corporate personnel. In the third quarter of 1998, the Company recorded a provision for litigation loss of $2,400,000 in connection with a jury award and related legal expenses. Net Gain (Loss) on Sales of Real Estate Investments The net gain on sale of real estate investments for the nine months ended September 30, 1999 was due to the sale of the Los Senderos community in Phoenix, Arizona and was offset by a loss on a sale of property under construction. The net loss on sales of real estate investments for the nine months ended September 30, 1998 was primarily due to the sale of the Park Glenn apartment community in Camarillo, California, and the limited partnership interest in Chateau de Ville partnership in Anaheim, California. Minority Interest in Income Minority interest in income was $4,104,000 and $3,051,000 for the nine months ended September 30, 1999 and 1998, respectively. The increase is due to the addition of one property structured as a limited liability company in the fourth quarter of 1998 whose minority members have no conversion rights into the Company's common stock. Further, additional Operating Company units in a consolidated subsidiary, BRE Property Investors LLC, were granted to minority members pursuant to the performance of certain goals with respect to communities under development and in part offset by the conversion of operating company units to common stock. Dividends Attributable to Preferred Stock During the quarter ended March 31, 1999, the Company issued 2,150,000 shares of 8 1/2% Series A Cumulative Redeemable Preferred Stock. There was no preferred stock outstanding in the nine months ended September 30, 1998. Net Income Available to Common Shareholders Net income available to common shareholders was $50,317,000 and $43,999,000 for the nine months ended September 30, 1999 and 1998, respectively, an increase of $6,318,000. This increase is primarily due to net earnings from the addition of seven multifamily apartment communities and eight communities previously under construction, a loss on sale of rental properties of $1,073,000 in 1998 where there was a $54,000 gain in 1999, and is offset, in part, by the dividend on the 8 1/2% Series A Cumulative Redeemable Preferred Stock issued in January 1999. 14 BRE Properties, Inc. - -------------------------------------------------------------------------------- Land Under Development and Construction in Progress Land acquired for development is capitalized and reported as "Land under development" until the development plan for the land is formalized. Once the development plan is determined, the costs are transferred to the balance sheet line item "Construction in progress". Land acquisition, development and carrying costs of properties under construction are capitalized and reported as "direct investments in real estate" or "equity interests in real estate joint ventures", as appropriate, in "Construction in progress." The Company transfers the capitalized costs for each building in a community under construction to the balance sheet line item "Investments in rental properties" once the building receives a final certificate of occupancy and is ready to lease. The following table presents data with respect to the Company's properties included in land under development and construction in progress at September 30, 1999. Completion of these properties is subject to a number of risks and uncertainties, including construction delays and cost overruns. No assurance can be given that these properties will be completed or, if completed, that they will be completed by the estimated dates or for the estimated amounts or that they will contain the number of proposed units in the table below.
Cost to date - Proposed September 30, Category Units/1/ 1999 Estimated Total Cost - ------------------------------ ----------- ------------------- ---------------------- Direct investment construction in progress/2/ 596 $ 35,198,000 $ 85,150,000 Equity interests in joint venture construction in progress/3/ 780 54,510,000 86,500,000 ----------- ------------------- ---------------------- Subtotal 1,376 89,708,000 $171,650,000 ====================== Land under development/4/ 458 20,358,000 ----------- ------------------- 1,834 $110,066,000 =========== ===================
Additionally, the Company acquired Adams Place apartments, a 272-unit community in Costa Mesa, California, for $23.3 million. At September 30, 1999 the community was 98% leased. The Company plans $4.2 million of renovations to the common areas and apartment interiors upon unit turnover. - ----------------- /1/ As of September 30, 1999, 113 of these units had been delivered. /2/ Consists of the Pinnacle Bellevue community in Bellevue, Washington and the Pinnacle Carmel Creek community in San Diego, California with 248 and 348 units planned, respectively. Both have an estimated completion in the fourth quarter of 2000. Pinnacle Carmel Creek was previously classified as "Land Under Development." /3/ Consists of three communities, Pinnacle at Blue Ravine in Folsom, California, Pinnacle Sonata in Bothell, Washington and Pinnacle at Queen Creek in Chandler, Arizona, with 260, 268 and 252 units planned, respectively. These three communities are under joint venture agreements and are presented on the financial statements net of $42,128,000 of draws on construction loans. /4/ Consists of Overlook at Blue Ravine II in Folsom, California and Pinnacle MacArthur Place in Santa Ana, California with 112 and 346 units planned, respectively. The development plans for these communities are under review and finalization, including obtaining final bids for construction costs, and the total proposed units may change. 15 BRE Properties, Inc. - -------------------------------------------------------------------------------- Year 2000 Considerations Some of the Company's older computer programs were originally written using two digits rather than four to define the applicable year. As a result, those computer programs had time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. Without correction, this could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in other normal business activities. The Company has completed an assessment which will replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The total year 2000 project cost for the Company's systems was approximately $200,000 and such costs were expensed according to the Company's policy. The project has been completed. The Company completed the necessary software replacement largely using existing employees. The Company believes that with the conversions to new software, the year 2000 issue will not pose significant operational problems for its computer systems. At this time, no estimates can be made as to any potential adverse impact resulting from the failure of third parties, including tenants, vendors and financial institutions, to address year 2000 issues. For example, to the extent payments, deposits and other transactions are not processed on a timely basis by financial institutions, the Company's ability to collect payments from tenants and/or make payments to its creditors could be adversely affected. The Company is dependent on such third parties to assess the impact of the year 2000 issue on their systems and to take any necessary corrective action. As a component of its year 2000 project, the Company is in an ongoing process of discussing year 2000 compliance issues with its key vendors and service providers and is developing and implementing contingency plans, including establishing multiple vendors or service providers for critical functions such as banking and telecommunications. However, there can be no assurance that these contingency plans will successfully avoid service interruption. Due to the complexity and pervasiveness of the year 2000 issue and, in particular, the uncertainty regarding the compliance programs of third parties, actual results could differ materially from those anticipated. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1999, the Company's cash totaled $3,244,000, up from $2,057,000 at December 31, 1998. Borrowings under the Company's line of credit were $238,000,000 at September 30, 1999, compared to $264,000,000 at December 31, 1998. Drawings on the line of credit are available to fund property acquisitions, capital improvements, operating expenses and to pay dividends to shareholders. The Company typically reduces its outstanding balance on the line of credit with cash balances as available. At September 30, 1999, the Company's line of credit provided for borrowings of up to $400,000,000 with $162,000,000 available at that date. The line of credit bears interest at LIBOR plus .70% or lower based on bids of the participating banks. Cost of the line of credit is .15% per annum on the total commitment amount. Additionally, the Company had $73,000,000 of unsecured indebtedness at September 30, 1999, with an interest rate of 7.88% per annum as to $18,000,000 and 7.44% per annum as to $55,000,000. This indebtedness is to be repaid through scheduled principal payments in the 16 BRE Properties, Inc. - -------------------------------------------------------------------------------- years 2000 to 2005. The Company also had a $50,000,000 issue of unsecured notes due 2007, with an effective rate of 7.8% and a $130,000,000 issue of unsecured notes due 2013 with an effective rate of approximately 7.3%. At September 30, 1999, the Company also had outstanding mortgage indebtedness of $228,399,000 at interest rates ranging from 5.0% to 9.3%, with an overall average of approximately 7.7%. The remaining terms of the mortgage indebtedness range from less than one to 28 years. Additionally, the Company's communities included in equity interests in real estate joint ventures have a total of $72,731,000 in construction loans with $42,109,000 outstanding at September 30, 1999 with interest rates ranging from 7.0% to 7.3%, and maturities from less than one year to 11 years. For additional information regarding the Company's line of credit, unsecured notes payable and mortgage loans payable, including scheduled principal payments over the next five years, see Notes 5 and 6 in the Notes to Consolidated Financial Statements contained in the Company's 1998 Report on Form 10-K. Certain of the Company's indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum secured debt and total debt to capital, among others. The Company was in compliance with all such financial covenants during the applicable periods, including the three and nine months ended September 30, 1999. The Company funded a total of approximately $58,258,000 for construction of direct investment and joint venture communities under development in the nine months ended September 30, 1999. Further, the Company acquired one multifamily property for $24,264,000. These acquisition and construction costs were funded with borrowings on the line of credit, a preferred equity offering and secured construction financing for joint venture communities totaling $42,128,000. Because of relatively higher prices and corresponding declining rates of return on completed apartment communities in its targeted Western markets, the Company does not anticipate significant acquisitions of completed apartment communities in the remainder of 1999. The Company intends to meet its short-term liquidity requirements through cash balances and cash flows provided by operations, borrowings on the unsecured line of credit, and to a lesser extent, proceeds from asset sales. The Company believes that its cash flow, cash available from its line of credit and additional secured borrowings (including secured construction financing) will be sufficient to meet its liquidity needs during the remainder of 1999, which include normal recurring expenses, debt service requirements, budgeted expenditures for improvements to certain properties and distributions required to maintain the Company's REIT qualification under the Code. The Company anticipates that it will continue to require outside sources of financing to meet its long-term liquidity needs beyond 1999, such as scheduled debt repayments, construction funding and property acquisitions. At September 30, 1999, the Company had committed to the purchase of approximately $65,000,000 of multifamily communities and had an estimated cost of $49,900,000 to complete direct investment construction in progress. The estimated cost to complete the Company's equity interest in joint venture multifamily communities is approximately $32,000,000, of which the Company anticipates $27,900,000 will be funded by drawings on the joint venture's construction loans and the joint venture partners' equity contribution. The cost to complete of the Company's land under development is still under review and construction contracts are not yet finalized; further, such properties may be funded through joint ventures. To facilitate the acquisition of public capital, the Company filed a universal shelf registration statement in March 1998 providing for the issuance of up to $750,000,000 in equity, debt, preferred or convertible securities, of which approximately $640,000,000 remains unused at September 30, 1999. During the quarter ended March 31, 1999, the Company issued shares of its 17 BRE Properties, Inc. - -------------------------------------------------------------------------------- 8 1/2% Series A Cumulative Redeemable Preferred Stock for net proceeds of approximately $51,600,000. The proceeds from this issuance were used initially to pay down outstanding balances on the line of credit. The Company believes that public capital markets will not be, for the foreseeable future, as significant a source of funding as they have been in the two years ended September 30, 1999. The Company is actively searching for other sources of possible funding, including joint ventures and secured construction debt. The Company has entered into joint venture agreements in which the joint venture partner provides significant equity upon completion of the Pinnacle at Blue Ravine, Pinnacle Sonata and Pinnacle at Queen Creek communities and is reviewing other possible joint venture opportunities. The Company also owns unencumbered real estate assets that could be sold or used as collateral for financing purposes (subject to certain lender restrictions) and has encumbered assets with significant equity that could be further encumbered should other sources of capital not be available. DIVIDENDS AND DISTRIBUTIONS TO MINORITY MEMBERS A cash dividend has been paid to shareholders each quarter since the Company's inception in 1970. On February 22, 1999, the Company increased its dividend on its common shares from $1.44 per year to $1.56 per year. Total dividends paid to common shareholders for the nine months ended September 30, 1999 and 1998 were $52,118,000 and $45,981,000 respectively. Additionally, the Company paid $3,040,000 in dividends on its 8 1/2% Series A Cumulative Redeemable Preferred Stock in the nine months ended September 30, 1999, which was a pro-rated amount for the actual time outstanding during the period. The Company had no preferred stock outstanding during 1998. Total distributions to minority members of the Company's consolidated subsidiaries were $4,202,000 and $3,051,000 for the nine months ended September 30, 1999 and 1998, respectively. 18 BRE Properties, Inc. - -------------------------------------------------------------------------------- ITEM 3: Quantitative and Qualitative Disclosures About Market Risk Information concerning market risk is incorporated herein by reference to Item 7A of the Company's Form 10-K for the fiscal year ended December 31, 1998. There has been no material change in the quantitative and qualitative disclosure about market risk since December 31, 1998. 19 BRE Properties, Inc. - -------------------------------------------------------------------------------- PART II - OTHER INFORMATION ITEM 1. Legal Proceedings None. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11 Statement Re Computations of Per Share Earnings 27 Financial Data Schedule 99.1 Other Exhibits -Ratio of Earnings to Fixed Charges (b) Reports on Form 8-K: None. 20 BRE Properties, Inc. - -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRE PROPERTIES, INC. (Registrant) Dated November 9, 1999 /s/ LeRoy E. Carlson ---------------- ------------------------------------- LeRoy E. Carlson Executive Vice President, Chief Financial Officer and Secretary 21 BRE Properties, Inc. - -------------------------------------------------------------------------------- Index to Exhibits
Exhibit Number Description of Document Page Number - ---------------- ------------------------------------------ ------------------ 11 Statement Re Computations of Per Share Earnings 27 Financial Data Schedule 99.1 Ratio of Earnings to Fixed Charges
22 EX-11 2 STATEMENT RE COMPUTATIONS OF PER SHARE EARNINGS Exhibit 11 Statement Re Computations of Per Share Earnings - -------------------------------------------------------------------------------- (Amounts in thousands, except per share data)
For the quarter ended September 30, 1999 1998 ------------------------ ----------------------- Numerator: Net income available to common shareholders $17,939 $14,116 Less adjustment for gain (loss) on sales of investments in rental properties available to common shareholders - 202 ------------------------ ----------------------- Numerator for basic earnings per share - income from continuing operations available to common shareholders 17,939 14,318 Effect of dilutive securities: Minority interest in income convertible into common shares 1,198 1,018 ------------------------ ----------------------- Numerator for diluted earnings per share $19,137 $15,336 ======================== ======================= Denominator: Denominator for basic earnings per share - weighted average shares 44,680 43,480 ------------------------ ----------------------- Effect of dilutive securities: Weighted average convertible operating company units 3,060 2,820 Stock options 120 270 ------------------------ ----------------------- Dilutive potential common shares 3,180 3,090 ------------------------ ----------------------- Denominator for diluted earnings per share adjusted for weighted average shares and assumed conversion 47,860 46,570 ======================== ======================= Basic earnings per share excluding gains (loss) on sale $ 0.40 $ 0.33 ======================== ======================= Diluted earnings per share excluding gains (loss) on sale $ 0.40 $ 0.32 ======================== ======================= For the nine months ended September 30, 1999 1998 ------------------------ ---------------------- Numerator: Net income available to common shareholders $50,317 $43,999 Less adjustment for gain (loss) on sales of investments in rental properties available to common shareholders (54) 1,073 -------------------------- ------------------------ Numerator for basic earnings per share - income from continuing operations available to common shareholders 50,263 45,072 Effect of dilutive securities: Minority interest in income convertible into common shares 3,659 3,051 -------------------------- ------------------------ Numerator for diluted earnings per share $53,976 $47,050 ========================== ======================== Denominator: Denominator for basic earnings per share - weighted average shares 44,500 42,560 -------------------------- ------------------------ Effect of dilutive securities: Weighted average convertible operating company units 3,120 2,820 Stock options 120 380 -------------------------- ------------------------ Dilutive potential commons shares 3,240 3,200 -------------------------- ------------------------ Denominator for diluted earnings per share adjusted for weighted average shares and assumed conversion 47,740 45,760 ========================== ======================== Basic earnings per share excluding gains (loss) on sale $ 1.13 $ 1.06 ========================== ======================== Diluted earnings per share excluding gains (loss) on sale $ 1.13 $ 1.05 ========================== ========================
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JUL-01-1999 SEP-30-1999 3,244 0 25,705 0 0 28,949 1,721,475 (100,870) 1,649,554 17,362 719,399 0 53,750 447 858,596 1,649,554 59,829 59,829 18,587 18,587 10,408 0 10,400 20,434 0 0 0 2,495 0 17,939 0.40 0.40 Includes $88,864 of minority interest. Includes $8,977 of depreciation, a non cash charge. Includes $1,353 of minority interest and $1,142 of dividends to preferred shareholders. Represents net income available to common shareholders.
EX-99.1 4 RATIO OF EARNINGS TO FIXED CHARGES Exhibit 99.1 Statement of Computation of Ratio of Earnings to Fixed Charges - -------------------------------------------------------------------------------- (Dollar amounts in thousands)
For the quarter ended September 30, 1999 1998 ------------------------- ------------------------ Income before net gain (loss) on sales of investments in rental $20,434 $15,336 properties and minority interest Less-minority interest not convertible into common stock (155) - ------------------------- ------------------------ Earnings $20,279 $15,336 ========================= ======================== Fixed charges: Interest $10,400 $ 8,604 Capitalized interest 2,191 3,838 Preferred stock dividend 1,142 - Other 12 12 ------------------------- ------------------------ Fixed Charges $13,745 $12,454 ========================= ======================== Earnings plus fixed charges, excluding capitalized interest and preferred stock dividends $30,691 $23,952 ========================= ======================== Divided by fixed charges $13,745 $12,454 ========================= ======================== Ratio of earnings to fixed charges 2.2 1.9 ========================= ======================== For the nine months ended September 30, 1999 1998 ------------------------- ------------------------ Income before net gain (loss) on sales of investments in rental properties and minority interest $57,407 $48,123 Plus-provision for non-recurring charge 1,250 - Less-minority interest not convertible into common stock (445) - ------------------------- ------------------------ Earnings $58,212 $48,123 ========================= ======================== Fixed charges: Interest $30,535 $25,966 Capitalized interest 7,226 8,695 Preferred stock dividends 3,040 - Other 35 84 ------------------------- ------------------------ Fixed Charges $40,836 $34,745 ========================= ======================== Earnings plus fixed charges, excluding capitalized interest and preferred stock dividends $88,782 $74,173 ========================= ======================== Divided by fixed charges $40,836 $34,745 ========================= ======================== Ratio of earnings to fixed charges 2.2 2.1 ========================= ========================
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