ITEM 1. BUSINESS
BRE Properties, Inc. ("BRE" or the "company"), a Delaware corporation, has operated since its July 1970 inception as a real estate investment trust pursuant to Sections 856-860 of the Internal Revenue Code, as amended. Its long-range investment policy emphasizes the purchase of fee ownership of both the land and the improvements primarily in garden apartment communities, and secondarily in shopping centers, located in the Western United States. Among other things, this policy is designed to enable management to monitor developments in local real estate markets and to take an active role in managing the company's properties and improving their performance. The policy is subject to ongoing review by the Board of Directors and may be modified in the future to take into account changes in business or economic conditions, as circumstances otherwise warrant, if it determines that such changes are in the best interests of the company and its shareholders.
At July 31, 1994, the company's portfolio of income-producing real estate (including wholly owned properties, land owned and leased to others and limited partnership investments in two shopping centers) consisted of 34 properties, including 17 apartment communities, 4 shopping centers and 13 other income-producing properties. Of these properties, 26 are located in California, 4 in Washington, 3 in Arizona and one in Oregon. See Items 2 and 7 of this report for a description of the company's individual investments and of certain developments during the year with respect to these investments.
The company's current investment profile is different from that of its early years of operations. Initially, the company was investing in both equities and mortgage loans on a variety of property types in markets across the country. Gradually, the company disposed of investments outside of the Western United States. The company has also shifted its overall investment focus to ownership of properties, with an emphasis on apartments. The transition in investment focus has constrained the company's growth in funds from operations and dividends because initial yields on newly purchased equity investments typically have been below those of maturing mortgages. It has also had an impact on investment liquidity, since maturing mortgage loans provide cash which is immediately available for reinvestment in equity properties. Beyond this impact, however, management believes there will be significant benefits for shareholders in the long-term, including improved prospects for growth in funds from operations and portfolio appreciation.
The following table shows the percentage of the company's total rental and partnership revenues contributed by certain classes of properties during the last three fiscal years and the overall occupancy levels for these classes of properties at July 31, 1994. During these years, The Hub Shopping Center in Fremont, California, accounted for approximately 12% (1994), 14% (1993), and 17% (1992) of total rental and partnership revenues, the Westlake Village Apartments in Daly City, California, accounted for approximately 10% (1994), 12% (1993), and 13% (1992), and Sharon Green Apartments in Menlo Park, California, accounted for approximately 10% (1994), 11% (1993), and 12% (1992).
Percent of Revenues -------------------
During the year, the tenant at the 358,000 square foot warehouse/ distribution facility in Pomona, California discontinued business and vacated the premises. BRE pursued legal remedies and collected all rents due on the lease through July 1994, plus the costs of correcting deferred maintenance, and an adjusted allowance for rent due after July 1994. A rehabilitation program has been completed, including a new roof, exterior painting and interior work, and the property is now being marketed to prospective tenants.
Two light industrial buildings are currently vacant: Irvine Spectrum (50,000 square feet in Irvine, California) has been vacant since June 1994, and 515 Ellis (29,000 square feet in Mountain View, California) has been vacant since June 1993. A lease has been signed for the Mountain View building. One previous vacancy was eliminated during the year with the signing of a six-year lease for the entire 64,000 square foot Fremont 3 Building in Fremont, California.
Another tenant leased, for five years, 66% of the 86,000 square foot 525 Almanor Building in Sunnyvale, California. New leases or lease extensions were also reached with tenants at six other light industrial buildings. Of the company's nine fully occupied light-industrial, warehouse/distribution and office properties, three have multiple tenants, each with one tenant occupying more than 50% of the net rental space, and six have single tenants.
The company's investments in income-producing properties may be made subject to mortgage financing or to other indebtedness secured by a prior lien against the property. At present, eight of the company's wholly owned properties are subject to mortgage financing. In addition, BRE is a limited partner in two partnerships that are subject to mortgage financing arranged by the general partner. The company and the general partner may refinance existing indebtedness if more favorable financing is available, and they may also incur new indebtedness, or increase the amount of existing indebtedness, secured through mortgage financing. The extent to which the company and the general partner may mortgage or otherwise finance investments depends upon such factors as the nature of the investment, the cost and availability of borrowed funds and the general economic climate.
The company has obtained funds from a variety of sources, including non-recourse mortgage loans and the sale of equity. In fiscal 1993, the company raised approximately $55 million through a public offering of 1,500,000 shares of common stock and approximately $36,442,000 in new funds through mortgage financing on equity investments. In fiscal 1994, approximately $19,718,000 in new funds was raised through such mortgage financing.
In addition, since its inception, the company has had unsecured lines of credit from one or more commercial banks. These credit lines have had a one-year term and were available for short-term working capital needs, such as financing new tenant improvements at existing properties. The lines of credit totaled $10,000,000 at July 31, 1993. During the quarter ended January 31, 1994, the company negotiated increases in the lines of credit to $30,000,000, lengthened the term to two years and reached agreement with the banks that the proceeds could be used to make real estate equity investments. There were no borrowings outstanding under these lines of credit during the fiscal year ended July 31, 1994. The company pays commitment fees totaling $127,500 annually for the lines of credit, and borrowing costs are based on BRE's choice of the interbank offered rate or the prime rate.
The company may continue to borrow from time to time to fund commitments, although there is no assurance at any given time that borrowed funds will be available or that the terms and conditions of such borrowings will be acceptable. For additional information regarding the company's long-term debt, see Note D in the Financial Statements included in the 1994 Annual Report, incorporated herein by reference. The growth and profitable operation of the company depend in large part upon the availability and cost of borrowed funds, as discussed above. In addition, the success of the company depends, among other factors, upon general business and economic conditions, construction costs, income-tax laws, increases or decreases in operating expenses, governmental regulations, population trends, zoning laws, legislation and the ability of the company to keep its properties leased at profitable levels. The company's properties compete for tenants primarily on the basis of location, rent charged, services provided, and the design and condition of improvements; and its properties encounter competition from similar properties located in their market areas. In many of these market areas, there is an oversupply of available space and competition for tenants has been, and continues to be, intense. In addition, vacancy and rental rates at certain of the company's properties have been adversely affected by the downturn in the national economy. A prolonged economic downturn could have a material adverse effect on the company's operations and financial condition.
PROPERTY ACQUISITIONS
During fiscal 1994, the company purchased the following garden apartment communities:
MIRA MESA (Cimmaron, Hacienda and Westpark), September 1993 and WINCHESTER, March 1994: These properties include 616 units in four adjacent apartment communities in San Diego, California, as follows:
The Mira Mesa and Winchester communities contain a mix of one- and two-bedroom units with monthly asking rents of $595-$725. All units have frost-free refrigerators, gas ranges and water heaters, central thermostat controlled forced air gas heating, wall unit air-conditioning in the living rooms, patios or decks with storage and cable television. Recreational facilities include outdoor heated swimming pools and spas. Central laundry rooms are provided for residents. The properties have been mapped for condominiums, although there are no present plans to pursue any condominium conversions.
The purchase price for Mira Mesa was $24,371,000 in cash. In February 1994, the company obtained a first mortgage loan secured by Mira Mesa in the amount of $13,600,000. The interest rate is 7%, with an 11-year maturity and amortization based on 25 years. Winchester was purchased in March 1994 for $7,400,000 in cash.
TERRA NOVA VILLAS, March 1994 - Located in Chula Vista, California, seven miles south of downtown San Diego, the Terra Nova Villas apartment community was purchased for $14,575,000, subject to $9,240,000 of fixed-rate (5.57%) bond financing. The bond financing matures in March 1995. Depending on market conditions at that time, BRE may repay the bonds in cash, renegotiate the terms of the bonds or refinance the property with another lender. Terra Nova Villas was constructed in 1985 and consists of 18 two-story buildings on 12.8 acres of land with monthly asking rents of $680-$815. All units have frost-free refrigerators, self-cleaning ovens, central air conditioning and heating, patios or decks and cable television hook-ups. Buildings have central gas water heaters. A separate clubhouse building contains leasing offices, a lounge and exercise room. The property offers a pool, spa, play area and two laundry rooms.
In addition to these properties, which are complete and income-producing, in October 1993, BRE purchased seven acres of undeveloped land adjacent to the Scottsdale Cove Apartments in Scottsdale, Arizona, on which 116 units are currently being constructed. This addition will expand the total units in the Scottsdale Cove to 316. The estimated total cost is $6,165,000, of which $4,451,000 had been disbursed through July 31, 1994, including $143,000 of capitalized interest expense. A total of 32 units have been completed, of which 11 were occupied at July 31, 1994. All units are expected to be completed by October 1994.
PROPERTY DISPOSITIONS
Two separate sales were completed in the 1994 fiscal year: The James Center Office Building in Bellevue, Washington, and Eastside Industrial Park in Redmond, Washington. A modest gain was recognized on the sale of these properties. The sales prices aggregated $9,800,000, and the cash proceeds are now available to be invested in other properties.
EMPLOYEES
As of July 31, 1994, the company had 19 employees. The company also has engaged 8 independent property management firms to manage 17 of its apartment and multi-tenant commercial properties.
POTENTIAL ENVIRONMENTAL RISKS
Investments in real property create a potential for environmental liability on the part of the owner of, or any mortgage lender on, such real property. If hazardous substances are discovered on or emanating from any of the company's properties, the owner or operator of the property (including the company) may be held strictly liable for all costs and liabilities relating to such hazardous substances. The company's current policy is to obtain a Phase I environmental study on each property it seeks to acquire and to proceed accordingly. The company currently carries no insurance for environmental liabilities, although policies in effect in earlier years may in some cases provide coverage for environmental liabilities which may have occurred during the earlier policy periods.
515 ELLIS STREET
The company has conducted an investigation of possible hazardous materials contamination of the soil and groundwater at its light industrial property at 515 Ellis Street, Mountain View, California (the "Ellis Street Property"). This investigation was conducted in connection with an inquiry by the Environmental Protection Agency ("EPA") into groundwater contamination found at certain third-party sites (the "MEW Sites") now listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). Based on data made available to the company, management believes that the hazardous materials contamination emanating from the MEW Sites has resulted in contamination of the groundwater underlying its Ellis Street Property. Although the Ellis Street Property is not a MEW Site, the company, along with several other entities, has been named as a Potentially Responsible Party for remedial costs with respect to the MEW Sites in order to permit the EPA to determine whether the company might have any liability for contributing to the MEW Sites contamination.
The company's investigation did not reveal significant soil contamination at the Ellis Street Property due to on-site hazardous materials handling practices. However, if the Ellis Street Property is found to have contributed to the contamination emanating from the MEW Sites, the company could be jointly and severally responsible for remedial costs.
At the date of this Annual Report on Form 10-K, certain entities have entered into a consent decree with the EPA for remediation of the contamination emanating from the MEW Sites, and certain other entities have been ordered by the EPA to participate in the remediation. The remediation includes a regional groundwater extraction and treatment system which is expected to be installed and maintained by these parties. The company is not included in either the consent decree or order to participate in the remediation, and neither the EPA or any other party has requested that the company contribute to the MEW Sites cleanup.
Although the ultimate outcome of environmental matters is subject to uncertainties and no assurances can be given, based on its investigation conducted to date, management does not believe that the contamination arising from the MEW Sites will have a material adverse effect on the company's financial condition and results of operations. The cost of the land and improvements at the Ellis Street property, at July 31, 1994, was $1,049,000, before deduction of accumulated depreciation.
MARYMOOR WAREHOUSE
The company has also conducted an investigation of possible contamination due to on-site handling practices at its Marymoor warehouse property located in Redmond, Washington. The investigation has shown the existence of petroleum hydrocarbon contamination in the soil at the property. As a result, the tenant at the property has conducted certain excavation and remediation activities. Additional testing is presently being conducted to confirm no further remediation is required. The company estimates the costs of this additional testing to be in the range of $10,000; however, if further remediation is required, the costs would be greater, perhaps substantially. The cost of the Marymoor land and improvements, at July 31, 1994, was $2,358,000, before deduction of accumulated depreciation.
The company believes that, under the terms of the tenant's lease, the tenant is responsible for undertaking any remediation or removal of contamination, if any, caused by the tenant. Although the ultimate outcome of environmental matters is subject to uncertainties and no assurances can be given, based on its investigations conducted to date, management believes that the contamination at the Marymoor property will not have a material adverse effect on the company's financial condition and results of operations, regardless of whether the tenant agrees to undertake any necessary remediation.
525 ALMANOR
The former tenant at the company's light industrial property at 525 Almanor, Sunnyvale, California ("525 Almanor") has been named in an action for contribution to the costs of groundwater remediation at certain sites now listed on the National Priorities List under CERCLA. The company has been advised that the California Regional Water Quality Control Board is considering a prospective order naming the former tenant as primarily liable with respect to one area of the contamination and the company, along with certain other property owners in the area, as secondarily liable for such contamination. As of the date of this report, the company has not been named in the order, although the company has notified its former tenant that, under
the terms of the tenant's lease, the tenant is responsible for conducting any remediation or removal of contamination caused by the tenant. However, there can be no assurance that the company ultimately will not have some liability with respect to this site. The cost of the 525 Almanor land and improvements, at July 31, 1994, was $4,245,000, before deduction of accumulated depreciation.
ITEM 2.
ITEM 2. PROPERTIES
Information concerning the company's property portfolio is contained on pages 14-16 of the 1994 Annual Report, which information is hereby incorporated by reference. See also the information set forth in Schedules XI and XII under Item 14 (d).
A majority of the company's commercial properties (i.e., properties other than apartments) are leased to tenants under long-term operating leases. For additional information regarding these leases, see Note B to the Financial Statements included in the 1994 Annual Report, incorporated herein by reference. At July 31, 1994, the company had approximately 123 separate leases with approximately 121 tenants in its commercial properties. Substantially all these leases are net leases, which require the tenant to reimburse the company for, among other things, property- and casualty-insurance. In addition, BRE carries earthquake insurance on all its properties. The annual aggregate limits for Flood and Earthquake are $5,000,000 (in California) and $10,000,000 (outside of California).
The company's apartment communities generally command rental rates in the mid to upper range of the rental market. At July 31, 1994, monthly asking rents for the company's apartment units ranged from $545 at Brookdale Glen in Portland, Oregon, to $2,050 at Sharon Green in Menlo Park, California.
The company maintains its corporate headquarters at One Montgomery Street, Suite 2500, Telesis Tower, San Francisco, California. A sublease with Wells Fargo Bank, for an eleven-year term, is for 10,142 rentable square feet at annual per square foot rents which began at $23 and rise to $34 in the tenth year. The lease term ends December 17, 1998.
CERTAIN SIGNIFICANT PROPERTIES
General
For the fiscal year ended July 31, 1994, one property had a book value equal to 10% or more of total assets or gross revenue equal to 10% or more of aggregate gross revenue: The Hub Shopping Center in Fremont, California.
THE HUB SHOPPING CENTER
The occupancy rates at the following dates are shown below:
The average effective annual rentals per square foot at the following dates are shown below:
Depreciation expense is calculated on The Hub Shopping Center, using the straight-line method and a 30 year life for the original buildings for both financial and tax reporting.
The Hub Shopping Center has 76 tenants and 490,000 square feet of gross leasable space on 37.4 acres of land. Including a retail store owned and operated by Montgomery Ward, the center totals 659,000 square feet of gross leasable area. The open air regional shopping center is located in Fremont, California, 40 miles southeast of San Francisco and 10 miles northeast of San Jose.
The company purchased The Hub in 1973 for $10,858,000 and has subsequently expanded and remodeled it significantly. Occupancy, 93% at July 31, 1993, dropped to 89% at July 31, 1994. The past several years have been characterized by the leasing of larger spaces to more promotional tenants, including Office Max, Fashion Bug and Michael's Arts & Crafts. During fiscal 1994, BRE leased an 8,400 square foot store to Trader Joe's, which operates 62 specialty food markets, and a 9,600 square foot store to Country Harvest Buffet. These and other new leases are expected to bring occupancy to 95% by October 1994.
The Hub competes for retail tenants and customer traffic with numerous other shopping centers and discount stores (including superstores) in the area. Because large retail tenants generally draw shoppers to a center, they are typically able to negotiate lower per square-foot rents than occupants of smaller spaces.
The following table sets forth certain information regarding the six anchor tenants. Home Express and Safeway are the only tenants occupying 10% or more of the rentable square footage at The Hub.
As of July 31, 1994, the lease expirations for the next 10 years are summarized as follows:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
No matter was submitted to a vote of the shareholders during the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were executive officers of the company as of September 1, 1994:
Mr. Fox and Mr. Wargo were appointed to their current positions in October of 1992. All of the other executive officers have held their respective positions since September 30, 1987. Set forth below is information regarding the business experience of each of the executive officers:
Mr. von Thaden was elected a Director of BankAmerica Realty Investors in 1981. From 1970 to 1987, he was Chief Executive Officer of BankAmerica Realty Services, Inc. ("BARSI"), the former advisor to the company.
Mr. Fox was employed by BRE and appointed Senior Vice President in December 1987. From 1977 to 1987, he was Vice President and General Manager of Dillingham Investment Corporation, a Hawaii land-investment firm.
Mr. Wargo was employed by BARSI in 1978, and was appointed Senior Vice President in charge of Asset Management in 1992. He holds the Certified Property Manager (CPM) designation awarded by the Institute of Real Estate Management.
Mr. Mason was Senior Vice President, Finance of BARSI from October 1980, and was its chief financial and accounting officer from its inception in 1970. He is a Certified Public Accountant and served as Controller for Henry Doelger Builder, Inc. from 1965 to 1970.
Ms. Breslauer was elected Secretary in September 1987 after serving from March 1981 as Treasurer of BARSI, where she had been employed since 1971. She is a Certified Public Accountant.
There is no family relationship among any of the company's executive officers or Directors.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The shares of the company's Class A common stock are traded on the New York Stock Exchange under the symbol BRE. Information concerning the high and low closing prices for the shares and dividends paid is contained on page 31 of the 1994 Annual Report under the caption "Market Price Range and Dividends Paid Per Share," which is incorporated herein by reference. As of July 31, 1994, there were approximately 3,873 recordholders of the company's shares of Class A common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to page 27 of the 1994 Annual Report for the Selected Financial Data required by this Item, which is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to pages 28-30 of the 1994 Annual Report for Management's Discussion and Analysis of Financial Condition and Results from Operations, which is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to pages 18-25 of the 1994 Annual Report for the Financial Statements, which are incorporated herein by reference. See also Item 14 of this report for information concerning financial statements and schedules filed with this report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) EXECUTIVE OFFICERS. See "Executive Officers of the Registrant" in Part I of this report.
(b) DIRECTORS. The information required by this Item is hereby incorporated by reference to the company's Proxy Statement under the heading "Election of Directors" and the caption "Compliance with Section 16(a) of the Securities and Exchange Act of 1934" filed with the Securities and Exchange Commission.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement under the captions "Executive Compensation and Other Information", and "Compensation Committee Report on Executive Compensation of Executive Officers."
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement under the headings "Election of Directors" and "Principal Shareholders."
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART III
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) The responses to these subsections of Item 14 are submitted as a separate section of this report.
(a)(3) List of Exhibits -----------------------
3.1 Restated Certificate of Incorporation
3.2 By-Laws (1)
4.1 Rights Agreement, dated as of August 14, 1989, between the company and Chemical Trust Company of California, as successor rights agent to Bank of America N.T. & S.A. (2)
10.1 1984 Stock Option Plan, as amended to date (3)
10.2 1992 Employee Stock Option Plan (3)
10.3 1992 Payroll Investment Plan (3)
10.4 Form of Indemnification Agreement (4)
10.5 Employment agreement with Arthur G. von Thaden (5)
10.6 Supplemental Executive Retirement Benefit agreement with Arthur G. von Thaden (5)
10.7 Supplemental Executive Retirement Benefit agreement with Howard E. Mason, Jr. (5)
10.8 BRE Properties, Inc. Retirement Plan (5)
10.9 Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500, One Montgomery Street, San Francisco, California (5)
10.10 Form of deferred compensation agreement with Eugene P. Carver
11 Computation of earnings per share
13 BRE Properties, Inc. 1994 Annual Report
21 Subsidiaries of the registrant
24 Consent of Ernst & Young LLP
27 Financial Data Schedule
- - --------------------
(1) Incorporated by reference to S-3 Registration Statement (No. 33-58802) filed with the Securities and Exchange Commission on February 26, 1993, as amended.
(2) Incorporated by reference to Exhibit 4.1 to the company's current report on Form 8-K dated August 14, 1989.
(3) Incorporated by reference to the company's 1992 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 19, 1992.
(4) Incorporated by reference to S-4 Registration Statement (No. 33-9014) filed with the Securities and Exchange Commission on September 25, 1986, as amended.
(5) Incorporated by reference to the company's 1988 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 24, 1988.
- - --------------------
(b) The exhibits listed in Item (a)(3) above are submitted as a separate section of this report
(c) The financial statement schedules listed in response to Item (a)(1) and (2) are submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
BRE PROPERTIES, INC.
Dated October 11, 1994 /s/ Arthur G. von Thaden ---------------- ------------------------- Arthur G. von Thaden President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date - - --------- ----- ----
/s/ Arthur G. von Thaden - - ------------------------- President and Director October 11, 1994 (Arthur G. von Thaden) (Principal Executive Officer) ----------------
/s/ Howard E. Mason, Jr. - - ------------------------- Senior Vice President, Finance October 11, 1994 (Howard E. Mason, Jr.) (Principal Financial ---------------- and Accounting Officer)
/s/ C. Preston Butcher Director October 11, 1994 - - ------------------------ ---------------- (C. Preston Butcher)
/s/ Eugene P. Carver Chairman and Director October 11, 1994 - - ------------------------ ---------------- (Eugene P. Carver)
/s/ L. Michael Foley Director October 11, 1994 - - ------------------------ ---------------- (L. Michael Foley)
/s/John McMahan Director October 11, 1994 - - ------------------------ ---------------- (John McMahan)
/s/ Malcolm R. Riley Director October 11, 1994 - - ------------------------ ---------------- (Malcolm R. Riley)
All of the Directors
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(1) AND (2) AND 14 (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
and
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED JULY 31, 1994
BRE PROPERTIES, INC.
SAN FRANCISCO, CALIFORNIA
Form 10-K - Item 14 (a)(1) and (2)
List of Financial Statements and Financial Statement Schedules
Financial Statements:
The following financial statements of BRE Properties, Inc. (the "company") are incorporated by reference in Item 8 to the specified portions of the BRE Properties, Inc. Annual Report to Shareholders for the year ended July 31, 1994.
Balance Sheets July 31, 1994 and July 31, 1993 - page 18
Statements of Income - Years ended July 31, 1994, July 31, 1993 and July 31, 1992 - page 19
Statements of Cash Flows Years ended July 31, 1994, July 31, 1993 and July 31, 1992 - page 20
Statements of Shareholders' Equity Years ended July 31, 1994, July 31, 1993 and July 31, 1992 - page 21
Notes to Financial Statements - pages 22-25
Financial Statements Schedules
The following financial statement schedules are included in Item 14(d):
Schedule X Supplementary income statement information Schedule XI Real estate and accumulated depreciation Schedule XII Mortgage loans on real estate
All other schedules (I, II, III, IV, V, VI, VII, VIII, IX, XIII and XIV) for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and, therefore, have been omitted.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Directors
BRE Properties, Inc.
We have audited the financial statements and related schedules of BRE Properties, Inc. listed in Item 14 (a)(1) and (2) of the Annual Report on Form 10-K of BRE Properties, Inc. for the year ended July 31, 1994. These financial statements and related schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and related schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and related schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BRE Properties, Inc., at July 31, 1994 and 1993, and the results of its operations and cash flows for each of the three years in the period ended July 31, 1994 in conformity with generally accepted accounting principles. Further, it is our opinion that the schedules referred to above present fairly, in all material respects, the information set forth therein in compliance with the applicable accounting regulations of the Securities and Exchange Commission.
Ernst & Young LLP
San Francisco, California August 29, 1994
BRE PROPERTIES, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
July 31, 1994
BRE PROPERTIES, INC. SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION JULY 31, 1994 (000 OMITTED)
BRE PROPERTIES, INC. SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) JULY 31, 1994 (000 OMITTED)
See Note A of Notes to Financial Statements for information related to lives on which depreciation is computed and Note E of Notes to Financial Statements for additional information concerning encumbrances at July 31, 1994.
BRE PROPERTIES, INC. SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION JULY 31, 1994 (000 OMITTED)
The activity in equity investments and related accumulated depreciation for the three years ended July 31, 1994 is summarized as follows:
BRE PROPERTIES, INC. SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE JULY 31, 1994 (000 OMITTED)
BRE PROPERTIES, INC. SCHEDULE XII - MORTGAGE LOANS ON REAL ESTATE July 31, 1994 (000 OMITTED)
The activity in mortgage loans for the three years ended July 31, 1994 is summarized as follows:
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
YEAR ENDED JULY 31, 1994
BRE PROPERTIES, INC.
SAN FRANCISCO, CALIFORNIA
3.1 Restated Certificate of Incorporation
3.2 By-Laws(1)
4.1 Rights Agreement, dated as of August 14, 1989, between the company and Chemical Trust Company of California, as successor rights agent to Bank of America N.T. & S.A.(2)
10.1 1984 Stock Option Plan, as amended to date(3)
10.2 1992 Employee Stock Option Plan(3)
10.3 1992 Payroll Investment Plan(3)
10.4 Form of Indemnification Agreement(4)
10.5 Employment agreement with Arthur G. von Thaden(5)
10.6 Supplemental Executive Retirement Benefit agreement with Arthur G. von Thaden(5)
10.7 Supplemental Executive Retirement Benefit agreement with Howard E. Mason, Jr.(5)
10.8 BRE Properties, Inc. Retirement Plan(5)
10.9 Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500, One Montgomery Street, San Francisco, California(5)
10.10 Form of deferred compensation agreement with Eugene P. Carver
11 Computation of earnings per share
13 BRE Properties, Inc. 1994 Annual Report
21 Subsidiaries of the registrant
24 Consent of Ernst & Young LLP
27 Financial Data Schedule
____________________
(1) Incorporated by reference to S-3 Registration Statement (No. 33-58802) filed with the Securities and Exchange Commission on February 26, 1993, as amended.
(2) Incorporated by reference to Exhibit 4.1 to the company's current report on Form 8-K dated August 14, 1989.
(3) Incorporated by reference to the company's 1992 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 19, 1992.
(4) Incorporated by reference to S-4 Registration Statement (No. 33-9014) filed with the Securities and Exchange Commission on September 25, 1986, as amended
(5) Incorporated by reference to the company's 1988 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 24, 1988.
(6) The company is not a party to any instrument with respect to long-term debt for which securities authorized thereunder exceed 10% of the total assets of the company. Copies of instruments with respect to long-term debt of lesser amounts will be provided to the Commission upon request.
____________________