Common and Preferred Dividends Declared SAN FRANCISCO, May 5
/PRNewswire-FirstCall/ -- BRE Properties, Inc. (NYSE: BRE) today
reported operating results for the quarter ended March 31, 2009.
All per share results are reported on a fully diluted basis. Funds
from operations (FFO), the generally accepted measure of operating
performance for real estate investment trusts, totaled $34.8
million, or $0.66 per share, for first quarter 2009, as compared
with $34.2 million, or $0.65 per share, for the same period in
2008. (A reconciliation of net income available to common
shareholders to FFO is provided at the end of this release.) Net
income available to common shareholders for the first quarter
totaled $13.0 million, or $0.25 per share, as compared with $12.7
million, or $0.25 per share, for the same period 2008. FFO per
share and earnings per share (EPS) results for the 2009 and 2008
periods include noncash charges totaling $0.03 per share associated
with the implementation of the Financial Accounting Standards
Board's (FASB) Staff Position APB 14-1. In May 2008, the FASB
issued FSP APB 14-1, Accounting for Convertible Debt Instruments
That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement) ("FSP APB 14-1"). FSP APB 14-1 specifies that issuers
of such instruments should separately account for the liability and
equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. BRE's 4.125% convertible senior notes are
within the scope of FSP APB 14-1, and the implementation of this
standard resulted in the recognition of additional noncash interest
expense that totaled $1.6 million and $1.5 million for the three
months ended March 31, 2009 and 2008, respectively. Total revenues
from continuing operations for the quarter were $83.7 million, as
compared with $81.5 million a year ago. Adjusted EBITDA for the
quarter totaled $58.4 million, as compared with $59.9 million in
first quarter 2008. (A reconciliation of net income available to
common shareholders to Adjusted EBITDA is provided at the end of
this release.) Same-store net operating income (NOI) decreased 1.1%
for the quarter, as compared with the same period in 2008. (A
reconciliation of net income available to common shareholders to
NOI is provided at the end of this release.) Developed properties
generated $1.9 million in additional NOI during the quarter, as
compared with first quarter 2008. Same-Store Property Results BRE
defines same-store properties as stabilized apartment communities
owned by the company for at least five full quarters. Of the 21,480
apartment units owned directly by BRE, same-store units totaled
18,681 for the quarter. On a year-over-year basis, revenue
decreased 0.6% for the quarter. Average same-store market rent for
the first quarter 2009 declined 1.6% to $1,489 per unit, from
$1,513 per unit in first quarter 2008. Same-store physical
occupancy levels averaged 93.2% during first quarter 2009, as
compared with 94.3% in the same period 2008. Physical occupancy at
the end of the first quarter was 93.4%. Rent concessions in the
same-store portfolio totaled $1.8 million, or 9.2 days rent, for
first quarter, as compared with $635,000, or 3.5 days, for the same
period 2008. Property-level operating expense increased 0.7% from
first quarter 2008. On a sequential basis, same-store revenue
declined 1.5%, expenses increased 3.3% and NOI decreased 3.3%
against fourth quarter 2008 results. Same-store results were
impacted primarily by the increasing job losses in the company's
operating markets. In Southern California, unemployment rates
increased to 10.7% in the first quarter 2009 from 8.8% in the
fourth quarter 2008; the San Francisco Bay area saw unemployment
rates rise to 9.9% in the first quarter, from 7.3% in the previous
quarter; Seattle's unemployment rate increased to 8.7% from 6.3%
during the same period. The following table depicts job losses in
the company's core markets over the last 18 months: Same-Store
Absolute Job Losses 12 months ended 6 months ended Core Markets #
Units % NOI September 2008 March 2009 San Diego 3,958 22.7%
(17,100) (30,100) Inland Empire 3,249 14.0% (55,900) (48,000)
Orange County 2,545 14.4% (38,800) (43,800) Los Angeles 2,075 11.6%
(75,200) (103,100) San Francisco 2,928 20.2% (25,200) (86,700)
Seattle 2,624 13.0% 16,400 (62,200) Total Core Markets 17,379 95.9%
(195,800) (373,900) Community Development & Disposition
Activity During the first quarter, construction was completed and
the final units were delivered at 5600 Wilshire (284 units) in Los
Angeles, Calif. Currently, 214 units are leased; leasing velocity
has averaged 30 units per month since the property opened. During
the first quarter, the company commenced unit deliveries at Park
Viridian in Anaheim, Calif. and Taylor 28 in Seattle, Wash. When
completed, Park Viridian will have 320 units, of which 124 were
delivered, and 115 are currently leased; Taylor 28 will have 197
units, of which 81 were delivered, and 52 are currently leased.
Including the two sites that commenced delivery of units during the
quarter, BRE currently has four communities under construction: one
in Southern California, one in Northern California and two in
Seattle, Washington, 1,083 units in total, an aggregate projected
investment of $322.4 million and an estimated balance to complete
totaling $76.0 million. BRE owns three land parcels representing
960 units of future development, and an estimated aggregate
investment of $455 million upon completion. Two land parcels are in
Southern California, and one is in Northern California. The company
classified as held-for-sale two properties in Sacramento, Calif.
and two in Seattle, Wash., totaling 1,339 units, in the first
quarter, in addition to one property in the Inland Empire
classified as held for sale in 2008. Capital Markets Activity
Subsequent to the end of the first quarter, BRE completed tender
offers for four series of senior unsecured notes. The results of
this activity are detailed in the following table: Principal
Principal Amount Prior Total % Amount to Tender Tendered Tendered
Remaining 5.750% Senior Notes due 2009 $150,000,000 $61,407,000 41%
$88,593,000 4.875% Senior Notes due 2010 $150,000,000 $119,421,000
80% $30,579,000 7.450% Senior Notes due 2011 $250,000,000
$201,455,000 81% $48,545,000 7.125% Senior Notes due 2013
$130,000,000 $89,982,000 69% $40,018,000 TOTAL $680,000,000
$472,265,000 69% $207,735,000 Also subsequent to the end of the
quarter, the company closed a $620 million 10-year, fixed-rate
secured credit facility originated by Deutsche Bank Berkshire
Mortgage for repurchase by Fannie Mae (NYSE:FNM). The facility
consists of two $310 million tranches; the first was drawn in full
upon closing; the second is expected to be drawn on or about August
4, 2009. Collateral for the facility comprises 15 multifamily
properties totaling 4,651 units. The total weighted average coupon
of the senior notes tendered was 6.5%; the effective composite
annual cost of the secured debt is 5.6%. Annualized interest
savings from the recapitalization are estimated at $4.2 million.
Common and Preferred Dividends Declared On April 30, 2009, the BRE
Board of Directors approved the payment of regular common and
preferred stock dividends for the quarter ending June 30, 2009. All
common and preferred dividends will be payable on Tuesday, June 30,
2009 to shareholders of record on Monday, June 15, 2009. The board
also declared that the second quarter 2009 common dividend will
remain unchanged from the previous quarter: $0.5625 per share. The
quarterly common dividend payment is equivalent to $2.25 per share
on an annualized basis, and represents a yield of approximately
8.74% on yesterday's closing price of $25.74 per share. BRE has
paid uninterrupted quarterly dividends to shareholders since the
company's founding in 1970. The company's 6.75% Series C preferred
dividend is $0.421875 per share; the 6.75% Series D preferred
dividend is $0.421875 per share. Earnings Guidance Revised On
December 18, 2008, the company issued initial 2009 earnings
estimates: the FFO per share estimate ranged $2.45 to $2.65; the
EPS estimate ranged $0.76 to $0.96. The EPS estimate did not
include projected gains or losses associated with property sales
for 2009. In addition, the EPS and FFO estimates did not include
projected recognition of nonroutine revenue and expense items, or
the impact from mandatory adoption of FSP APB 14-1. As reported
with the results for first quarter 2009, the company has adopted
FSP APB 14-1 and has adjusted its earnings guidance accordingly. In
addition, the company has adjusted earnings guidance to reflect its
revised outlook for same-store operations for the balance of 2009,
expected level of corporate G&A expense, and debt
recapitalization efforts transacted subsequent to the end of the
first quarter. On a reported basis, the company expects FFO per
share for 2009 to range $2.38 to $2.53, and EPS to range $0.69 to
$0.84. Excluding the noncash interest charges associated with the
adoption of FSP APB 14-1, per share core FFO amounts for 2009 are
expected to range $2.50 to $2.65. The revised FFO and EPS estimates
do not include projected gains or losses on property sales, or the
recognition of nonroutine revenue and expense items. Based on
current judgment, the adoption of FSP APB 14-1 will result in a
noncash interest charge of $1.6 million each quarter, or $0.03 per
share, a charge that will be recognized on a quarterly basis
through the first quarter of 2012. The company has revised its
outlook for same-store operations for the balance of 2009 as
follows: same-store revenue growth is expected to decline in a
range of 2.0% to 3.5%, and same-store NOI is expected to decline in
a range of 4.0% to 5.5%. Previous guidance estimated same-store
revenue to perform flat against 2008 levels or decline 1.5%, and
NOI to decline in a range of 1.0% to 3.5%. Other components of 2009
earnings guidance that have been revised include interest expense,
which is expected to range $79 million to $82 million, excluding
the noncash impact from FSP APB 14-1, and corporate G&A
expense, which is expected to range $18 million to $19 million.
Annual Meeting of Shareholders The company will hold its 39th
Annual Meeting of Shareholders on Thursday, May 21, 2009 at the
Mandarin Oriental Hotel, 222 Sansome Street, San Francisco, CA
94104, at 10:00 a.m. Pacific. The company's proxy statement, voting
materials and Form 10-K are available on the company's Web site at
http://www.breproperties.com/investors/proxy. If you wish to
receive hard copies of these documents, please contact your
securities broker or BRE Investor Relations at 415.445.6500 or . Q1
2009 Analyst Conference Call The company will hold a conference
call on Wednesday, May 6, 2009 at 11:00 a.m. Eastern (8:00 a.m.
Pacific) to review these results. The dial-in number to participate
in the United States and Canada is 888.290.1473; the international
number is 706.679.8398. Enter Conf. ID# 41904968. A telephone
replay of the call will be available for 30 days at 800.642.1687 or
706.645.9291 international, using the same ID# 41904968. A link to
the live webcast of the call will be posted on
http://www.breproperties.com/, in Investors, on the Corporate
Profile page. A webcast replay will be available for one month
following the call. Q2 2009 Earnings Dates The company will report
second quarter 2009 earnings after close of market on August 4,
2009, followed by a conference call on August 5, 2009 at 11:00 a.m.
Eastern (8:00 a.m. Pacific). About BRE Properties BRE Properties,
based in San Francisco, Calif., owns and manages apartment
communities convenient to its residents' work, shopping,
entertainment and transit in supply-constrained Western U.S.
markets. BRE directly owns and operates 73 apartment communities
totaling 21,480 units in California, Arizona and Washington. The
company invests in communities through acquisition and development,
and currently has seven properties in various stages of development
and construction, totaling 1,943 units, and joint venture interests
in 13 additional apartment communities, totaling 4,080 units. BRE
Properties is a real estate investment trust (REIT) listed in the
S&P MidCap 400 Index. For more information on BRE Properties,
please visit our Web site at http://www.breproperties.com/. "Safe
Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Except for the historical information contained
herein, this news release contains forward-looking statements
regarding the Company's capital resources, portfolio performance
and results of operations, and is based on the company's current
expectations and judgment. You should not rely on these statements
as predictions of future events because there is no assurance that
the events or circumstances reflected in the statements can be
achieved or will occur. Forward-looking statements are identified
by words such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or their negative form or other
variations, or by discussions of strategy, plans or intonations.
The following factors, among others, could affect actual results
and future events: defaults or nonrenewal of leases, increased
interest rates and operating costs, failure to obtain necessary
outside financing, difficulties in identifying properties to
acquire and in affecting acquisitions, failure to successfully
integrate acquired properties and operations, inability to dispose
of assets that no longer meet our investment criteria under
applicable terms and conditions, risks and uncertainties affecting
property development and construction (including construction
delays, cost overruns, liability to obtain necessary permits and
public opposition to such activities), failure to qualify as a real
estate investment trust under the Internal Revenue Code of 1986, as
amended, and increases in real property tax rates. The Company's
success also depends on general economic trends, including interest
rates, tax laws, governmental regulation, legislation, population
changes and other factors, including those risk factors discussed
in the section entitled "Risk Factors" in the Company's most recent
Annual Report on Form 10-K as they may be updated from time to time
by the Company's subsequent filings with the Securities and
Exchange Commission, or SEC. Do not rely solely on forward-looking
statements, which only reflect management's analysis. The Company
assumes no obligation to update this information. For more details,
refer to the Company's SEC filings, including its most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. BRE
Properties, Inc. Consolidated Balance Sheets First Quarter 2009
(Unaudited, dollar amounts in thousands except per share data)
--------------------------------------------------------------
March 31, December 31, ASSETS 2009 2008 (1) ------ ---- -------
Real estate portfolio: Direct investments in real estate:
Investments in rental properties $2,930,030 $2,907,902 Construction
in progress 204,857 295,074 Less: accumulated depreciation
(501,334) (509,647) -------- -------- 2,633,553 2,693,329 ---------
--------- Equity interests in and advances to real estate joint
ventures: Investments in rental properties 62,507 62,497 Real
estate held for sale, net 84,797 31,936 Land under development
126,841 123,609 ------- ------- Total real estate portfolio
2,907,698 2,911,371 Cash 5,845 7,724 Other assets 89,925 73,521
------ ------ TOTAL ASSETS $3,003,468 $2,992,616 ----------
---------- LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------ Liabilities: Unsecured senior
notes $1,457,662 $1,505,905 Unsecured line of credit 365,000
245,000 Mortgage loans 134,000 151,496 Accounts payable and accrued
expenses 60,775 91,039 ------ ------ Total liabilities 2,017,437
1,993,440 --------- --------- Redeemable noncontrolling interests
23,447 29,972 ------ ------ Shareholders' equity: Preferred Stock,
$0.01 par value; 20,000,000 shares authorized: 7,000,000 shares
with $25 liquidation preference issued and outstanding at March 31,
2009 and December 31, 2008 , respectively. 70 70 Common stock,
$0.01 par value, 100,000,000 shares authorized. Shares issued and
outstanding: 51,241,008 and 51,149,745 at March 31, 2009 and
December 31, 2008, respectively. 512 511 Additional paid-in capital
962,002 968,623 ------- ------- Total shareholders' equity 962,584
969,204 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$3,003,468 $2,992,616 ---------- ---------- (1) Balance sheet is
restated to reflect the adoption of APB 14-1 & SFAS No. 160.
BRE Properties, Inc. Consolidated Statements of Income Quarters
Ended March 31, 2009 and 2008 (Unaudited, dollar and share amounts
in thousands) --------------------------------------------------
Quarter Quarter ended ended REVENUE 3/31/09 3/31/08 ------- -------
------- Rental income $80,437 $78,376 Ancillary income 3,246 3,154
----- ----- Total revenue 83,683 81,530 EXPENSES -------- Real
estate expenses $25,441 $24,381 Depreciation 20,528 19,224 Interest
expense (1) 21,022 22,963 General and administrative 4,326 4,655
------ ------ Total expenses 71,317 71,223 Other income 628 594
Income before minority interests, partnership income and
discontinued operations 12,994 10,901 Partnership income 656 631
--- --- Income from continuing operations 13,650 11,532
Discontinued operations: Discontinued operations, net (2) 2,841
4,705 ----- ----- Total discontinued operations 2,841 4,705 NET
INCOME $16,491 $16,237 Redeemable noncontrolling interest in income
545 580 Dividends attributable to preferred stock 2,953 2,953 -----
----- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $12,993 $12,704
------- ------- Net income per common share - basic $0.25 $0.25
----- ----- Net income per common share - assuming dilution $0.25
$0.25 ----- ----- Weighted average shares outstanding - basic (3)
51,180 50,985 ------ ------ Weighted average shares outstanding -
assuming dilution (3) 51,180 51,379 ------ ------ (1) Income
Statement for the three months ended March 31, 2008 has been
restated to reflect the adoption of APB 14-1. (2) Details of net
earnings from discontinued operations. For 2009, includes five
operating properties classified as held for sale as of March 31,
2009. The 2008 totals include the properties mentioned above and
six properties sold in 2008. Three Three months months ended ended
3/31/09 3/31/08 ------- ------- Rental and ancillary income $4,925
$9,435 Real estate expenses (1,702) (3,294) Depreciation (382)
(1,401) Interest expense - (35) --- --- Income from discontinued
operations, net $2,841 $4,705 ====== ====== (3) Share count for the
three months ended March 31, 2008 restated to reflect retroactive
adoption of EITF 03-6-1. BRE Properties, Inc. Non-GAAP Financial
Measure Reconciliations and Definitions (Dollar amounts in
thousands) ----------------------------- This document includes
certain non-GAAP financial measures that management believes are
helpful in understanding our business, as further described below.
BRE's definition and calculation of non-GAAP financial measures may
differ from those of other REITs, and may, therefore, not be
comparable. The non-GAAP financial measures should not be
considered an alternative to net income or any other GAAP
measurement of performance and should not be considered an
alternative to cash flows from operating, investing or financing
activities as a measure of liquidity. Funds from Operations (FFO)
FFO is used by industry analysts and investors as a supplemental
performance measure of an equity REIT. FFO is defined by the
National Association of Real Estate Investment Trusts as net income
or loss (computed in accordance with accounting principles
generally accepted in the United States) excluding extraordinary
items as defined under GAAP and gains or losses from sales of
previously depreciated real estate assets, plus depreciation and
amortization of real estate assets and adjustments for
unconsolidated partnerships and joint ventures. We calculate FFO in
accordance with the NAREIT definition. We believe that FFO is a
meaningful supplemental measure of our operating performance
because historical cost accounting for real estate assets in
accordance with GAAP assumes that the value of real estate assets
diminishes predictably over time, as reflected through
depreciation. Because real estate values have historically risen or
fallen with market conditions, management considers FFO an
appropriate supplemental performance measure because it excludes
historical cost depreciation, as well as gains or losses related to
sales of previously depreciated property, from GAAP net income. By
excluding depreciation and gains or losses on sales of real estate,
management uses FFO to measure returns on its investments in real
estate assets. However, because FFO excludes depreciation and
amortization and captures neither the changes in the value of our
properties that result from use or market conditions nor the level
of capital expenditures to maintain the operating performance of
our properties, all of which have real economic effect and could
materially impact our results from operations, the utility of FFO
as a measure of our performance is limited. Management also
believes that FFO, combined with the required GAAP presentations,
is useful to investors in providing more meaningful comparisons of
the operating performance of a company's real estate between
periods or as compared to other companies. FFO does not represent
net income or cash flows from operations as defined by GAAP and is
not intended to indicate whether cash flows will be sufficient to
fund cash needs. It should not be considered an alternative to net
income as an indicator of the REIT's operating performance or to
cash flows as a measure of liquidity. Our FFO may not be comparable
to the FFO of other REITs due to the fact that not all REITs use
the NAREIT definition. Quarter Ended Quarter Ended 3/31/2009
3/31/2008 Net income available to common shareholders $12,993
$12,704 Depreciation from continuing operations 20,528 19,224
Depreciation from discontinued operations 382 1,401 Redeemable
noncontrolling interest in income 545 580 Depreciation from
unconsolidated entities 449 402 Less: Redeemable noncontrolling
interest in income not convertible into common shares (106) (106)
---- ---- Funds from operations $34,791 $34,205 ======= =======
----- ----- Allocation to participating securities - diluted FFO
(1) $(355) $(181) ===== ===== ---- ---- Allocation to participating
securities - diluted EPS (1) $(83) $(58) ==== ==== Diluted shares
outstanding - EPS 51,180 51,379 Net income per common share -
diluted $0.25 $0.25 ===== ===== Diluted shares outstanding - FFO
51,965 52,224 FFO per common share - diluted $0.66 $0.65 =====
===== (1) Adjustment to the numerators for diluted FFO per common
share and diluted net income per common share calculations when
applying the two class method under EITF 03-6-1. BRE Properties,
Inc. Non-GAAP Financial Measure Reconciliations and Definitions
(Dollar amounts in thousands) -----------------------------
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) and Adjusted EBITDA EBITDA is defined as earnings before
interest, taxes, depreciation and amortization. Adjusted EBITDA is
defined by BRE as EBITDA, excluding minority interests, gains or
losses from sales of investments, preferred stock dividends and
other expenses. We consider EBITDA and Adjusted EBITDA to be
appropriate supplemental measures of our performance because they
eliminate depreciation, interest, and, with respect to Adjusted
EBITDA, gains (losses) from property dispositions and other
charges, which permits investors to view income from operations
without the impact of noncash depreciation or the cost of debt, or
with respect to Adjusted EBITDA, other non-operating items
described above. Because EBITDA and Adjusted EBITDA exclude
depreciation and amortization and capture neither the changes in
the value of our properties that result from use or market
conditions nor the level of capital expenditures to maintain the
operating performance of our properties, all of which have real
economic effect and could materially impact our results from
operations, the utility of EBITDA and Adjusted EBITDA as measures
of our performance is limited. Below is a reconciliation of net
income available to common shareholders to EBITDA and Adjusted
EBITDA: Quarter Ended Quarter Ended 3/31/2009 3/31/2008 Net income
available to common shareholders $12,993 $12,704 Interest,
including discontinued operations 21,022 22,998 Depreciation,
including discontinued operations 20,910 20,625 ------ ------
EBITDA 54,925 56,327 Redeemable noncontrolling interest in income
545 580 Dividends on preferred stock 2,953 2,953 Adjusted EBITDA
$58,423 $59,860 ======= ======= Net Operating Income (NOI) We
consider community level and portfolio-wide NOI to be an
appropriate supplemental measure to net income because it helps
both investors and management to understand the core property
operations prior to the allocation of general and administrative
costs. This is more reflective of the operating performance of the
real estate, and allows for an easier comparison of the operating
performance of single assets or groups of assets. In addition,
because prospective buyers of real estate have different overhead
structures, with varying marginal impact to overhead by acquiring
real estate, NOI is considered by many in the real estate industry
to be a useful measure for determining the value of a real estate
asset or groups of assets. Because NOI excludes depreciation and
does not capture the change in the value of our communities
resulting from operational use and market conditions, nor the level
of capital expenditures required to adequately maintain the
communities (all of which have real economic effect and could
materially impact our results from operations), the utility of NOI
as a measure of our performance is limited. Other equity REITs may
not calculate NOI consistently with our definition and,
accordingly, our NOI may not be comparable to such other REITs'
NOI. Accordingly, NOI should be considered only as a supplement to
net income as a measure of our performance. NOI should not be used
as a measure of our liquidity, nor is it indicative of funds
available to fund our cash needs, including our ability to pay
dividends or make distributions. NOI also should not be used as a
supplement to or substitute for cash flow from operating activities
(computed in accordance with GAAP). Quarter Ended Quarter Ended
3/31/2009 3/31/2008 Net income available to common shareholders
$12,993 $12,704 Interest, including discontinued operations 21,022
22,998 Depreciation, including discontinued operations 20,910
20,625 Redeemable noncontrolling interest in income 545 580
Dividends on preferred stock 2,953 2,953 General and administrative
expense 4,326 4,655 NOI $62,749 $64,515 ------- ------- Less Non
Same-Store NOI 7,822 8,964 ----- ----- Same-Store NOI $54,927
$55,551 ======= ======= DATASOURCE: BRE Properties, Inc. CONTACT:
Investors, Edward F. Lange, Jr., +1-415-445-6559, or Media, Thomas
E. Mierzwinski, +1-415-445-6525, both of BRE Properties, Inc. Web
Site: http://www.breproperties.com/
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