BRE Properties Reports Modestly – Analyst Blog

BRE Properties Inc. (BRE), a real estate investment trust (REIT) that operates apartment communities, reported first quarter 2010 FFO (fund from operations) of $29.4 million or 52 cents per share compared to $34.8 million or 66 cents per share in the year-earlier quarter.

 

Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. Total revenue from continuing operations during the quarter were $85.2 million versus $85.4 million in the year-ago quarter.

 

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $54.0 million for the quarter, compared to $58.4 million in the corresponding period of the previous year.

 

Overall same-store net operating income decreased 7.6% ($4.5 million) during the quarter, primarily due to an 8.1% year-over-year decline in average same-store market rent from $1,497 per unit in first quarter 2009 to $1,376 in first quarter 2010. Average physical occupancy in the same-store portfolio during the quarter was 95.0% versus 93.1% in the year-earlier quarter.

 

The dismal same-store performance was largely due to the continued job losses in most of the BRE’s markets. Stagnant job growth has negatively affected the demand for apartments, and high-end apartment homes have been hit the hardest as renters move down to less expensive ‘B’ class properties.

 

Currently, BRE has a single property under construction (270 units) at an estimated total cost of $89.7 million. In addition, the company owns four land parcels, two in Southern California and two in Northern California, representing 1,298 units of future development, at an estimated aggregate investment of $580 million upon completion.

 

During the quarter, BRE acquired a stabilized property (194-unit community) in San Diego for $46.2 million. Subsequent to the quarter end, the company acquired Museum Park, a stabilized property (117-unit community) in California for $29.6 million, and sold Montebello Apartments in Washington for approximately $39.0 million.

 

Subsequent to the quarter end, BRE offered approximately 8.1 million common shares at $34.25 each. The company raised net proceeds of $264 million, bulk of which was utilized to repay debt under unsecured lines of credit.

 

The company declared a quarterly dividend of $0.375 per share, equivalent to an annualized basis of $1.50 per share. Since its inception in 1970, BRE has paid quarterly dividends uninterruptedly. For full year 2010, BRE revised its earlier FFO guidance from the range of $1.78 – $1.98 per share to $1.72 – $1.87.