BRE Properties Inc. (BRE), a real estate investment trust (REIT) that operates apartment communities, has reported a decline in fourth quarter 2009 FFO (fund from operations) to $16.0 million or 29 cents per share compared to $36.1 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. For full year 2009, FFO was $120.8 million or $2.23 per share compared to $141.8 million or $2.69 per share in the previous year.
Total revenues from continuing operations during the quarter were $85.5 million versus $86.9 million in the year-ago quarter. For full year 2009, total revenues from continuing operations were $344.6 million compared to $345.3 million in the previous year. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $54.6 million and $226.0 million for the fourth quarter and full year 2009 respectively, compared to $59.6 million and $242.4 million in the same period in the previous year.
Overall same-store net operating income decreased 9.5% during the quarter and 6.5% for full year 2009, primarily due to a 9.1% year-over-year decline in average same-store market rent from $1,519 per unit in fourth quarter 2008 to $1,380 in fourth quarter 2009. Average physical occupancy in the same-store portfolio during the quarter was 95.1% versus 93.8% 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 13,500 jobs were lost in the core markets of BRE during the quarter. Stagnant job growth has negatively affected the demand for apartments, and high-end apartment homes could get hit the hardest as renters move down to less expensive ‘B’ class properties.
Currently, BRE has two communities under construction (566 units) at an estimated total cost of $176.1 million. During the quarter, BRE acquired a 6.62 acre land-parcel in California for $14.5 million. In total, 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 repurchased $33.2 million of its 4.125% convertible notes at 97.8% of par, realizing a net loss of approximately $0.9 million. In addition, the company sold 783,000 common shares at $31.86 each, raising total gross proceeds of $25.0 million. For full year 2009, BRE issued approximately 3.8 million common shares, at an average price of $27.52 each, with total gross proceeds of $104.6 million.
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 expects FFO in the range of $1.90 to $2.10 per share.
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