BRE Properties Inc. (BRE), a real estate investment trust (REIT) that operates apartment communities, has reported a decline in third quarter 2009 FFO (fund from operations) to $32.5 million or 59 cents per share compared to $36.3 million or 69 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 revenues from continuing operations during the quarter were $86.5 million versus $87.9 million in the year-ago quarter. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $55.7 million for the quarter, compared to $61.8 million in the prior year quarter.

Overall same-store net operating income decreased 7.9% during the quarter, primarily due to a 6.9% year-over-year decline in average same-store market rent from $1,540 per unit to $1,434. Average physical occupancy in the same-store portfolio during the quarter was 94.7% versus 94.9% 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. About 74,200 jobs were lost in the core markets of BRE during the quarter. Stagnant job growth has negatively affected the demand for aparments, and high-end apartment homes could get hit the hardest as renters move down to less expensive ‘B’ class properties.

During the quarter, BRE completed three development communities totaling 801 apartment units in California and Washington. Currently, the company has two communities under construction (566 units) at an estimated total cost of $176.1 million. Also during the quarter, BRE sold a stabilized community in Sacramento for $15.4 million, realizing a gain of $7.3 million.

During the quarter, BRE repurchased $5.0 million of its 4.125% convertible notes at 90.3% of par, realizing a net gain of approximately $0.4 million. In addition, the company sold 1.5 million common shares at $28.00 each, raising total proceeds of $42.0 million. During the quarter, BRE also received the remaining $310 million of the $620 million secured credit facility obtained from Fannie Mae in Apr 2009. Bulk of the proceeds from the loan was utilized to repay debt.

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 2009, BRE has adjusted its earlier FFO guidance from $2.42 – $2.52 per share to $2.44 – $2.50.
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