BRE Properties Inc. (BRE), a real estate investment trust (REIT) that operates apartment communities, reported fourth quarter 2010 fund from operations (FFO) of $9.8 million or 15 cents per share versus $16.0 million or 29 cents in the year-earlier quarter.
Funds 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.
Excluding the non-recurring items, FFO for fourth quarter 2010 stood at 51 cents per share versus 55 cents in the prior-year quarter. The recurring FFO for the quarter marginally beat the Zacks Consensus Estimate by 2 cents
For full year 2010, BRE properties reported FFO of $98.9 million or $1.58 per share versus $120.8 million or $2.23 per share in 2009. Excluding the non-recurring items, FFO for full year 2010 stood at $1.96 per share versus $2.45 per share in 2009.
Total revenues from continuing operations during the quarter were $89.2 million versus $81.0 million in the year-ago quarter. Total revenues during the reported quarter were well ahead of the Zacks Consensus Estimate of $87.0 million. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $57.1 million for fourth quarter 2010 compared with $54.6 million in the year-earlier quarter.
Total revenues for fiscal 2010 increased to $341.9 million from $326.2 million in 2009. Adjusted EBITDA were $222.8 million for 2010 compared with $225.9 million in the previous year.
Overall same-store revenues and net operating income inched up 0.4%, driven by higher rental rates per unit during the quarter. Average physical occupancy in the same-store portfolio was 95.5%.
Same-store revenues and net operating income for full year 2010 decreased 2.0% and 3.7%, respectively. The drop resulted from a 3.5% decline in rental rates per unit. Average physical occupancy in the same-store portfolio during fiscal year 2010 was 95.6%.
During the quarter, the company started construction on Lawrence Station, a 336-unit community in Sunnyvale, California. BRE owns five land parcels (two in Southern California, two in Northern California and one in Seattle) representing 1,400 units of future development with an aggregate investment of $635 million upon completion.
During fiscal 2010, BRE acquired four stabilized properties (1037 units) for $292.0 million. In addition, the company also purchased one land parcel (280 units) for $19.0 million.
Currently, BRE has a single property in Santa Clara, California, in lease-up stage (270 units). The property was 72% occupied on an average during the quarter. BRE sold a property (304 units) in the Inland Empire for approximately $30.0 million during the quarter, resulting in a profit of $15.2 million. For full year 2010, the company sold four communities for approximately $165.0 million, resulting in a gain of $40.1 million.
During the quarter, BRE completed a tender offer of 4.125% convertible notes concurrent with a $300 million unsecured notes offering, with a coupon of 5.20% due March 2021.
During the quarter, BRE issued approximately 581,000 common shares at an average price of $43.02 each, raising total gross proceeds of $25.0 million.
The company declared a quarterly dividend of 37.5 cents per share, equivalent to $1.50 on an annualized basis. Since its inception in 1970, BRE has paid quarterly dividends uninterruptedly.
For the first quarter of 2011, BRE expects FFO to be in the range of $ 0.50–$0.52. For full year 2011, FFO is expected to be in the range of $2.06 to $2.18, as per the company. Same-store net operating income for fiscal 2011 is likely to rise in the range of 3.0% to 5.3%. BRE currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Outperform recommendation on the stock. One of its peers, AvalonBay Communities Inc. (AVB), currently retains a Zacks #1 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on AvalonBay.
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