BRE Properties Reports First Quarter 2008 Results 
Funds from operations (FFO), the generally accepted measure of operating performance for real estate investment trusts, totaled $35.7 million, or $0.68 per share, for first quarter 2008, as compared with $32.2 million, or $0.61 per share, for the quarter ended March 31, 2007, an increase of 11.5%. (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 $14.2 million, or $0.28 per share, as compared with $11.9 million, or $0.23 per share, for the same period 2007.
Total revenues from continuing operations for the quarter were $86.6 million, as compared with $79.7 million a year ago. Adjusted EBITDA for the quarter totaled $59.9 million, as compared with $56.5 million in first quarter 2007. (A reconciliation of net income available to common shareholders to Adjusted EBITDA is provided at the end of this release.)
BRE's positive year-over-year earnings and FFO results were driven primarily by improved same-store property-level operating results, income from newly developed properties, and occupancy stabilization at the Mission Peaks redevelopment property in Fremont, California.
Same-store net operating income (NOI) growth was 4.2% for the quarter, as compared with the same period in 2007. (A reconciliation of net income available to common shareholders to NOI is provided at the end of this release.) For the first quarter, same-store NOI increased $2.3 million relative to the same period in the prior year. Developed properties generated $1.8 million in additional NOI during the quarter, as compared with first quarter 2007. Mission Peaks' NOI increased $0.8 million over first quarter 2007 levels.
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 22,680 apartment units owned directly by BRE, same-store units totaled 19,357 for the quarter.
On a year-over-year basis, overall same-store NOI growth was driven by revenue growth of 4.6% for the quarter. Average same-store market rent for the first quarter 2008 increased 4.2% to $1,475 per unit, from $1,415 per unit in first quarter 2007. Same-store physical occupancy levels averaged 94.3% during first quarter 2008, as compared with 93.3% in the same period 2007. Physical occupancy at the end of the first quarter was 94.8%. Rent concessions in the same-store portfolio totaled $680,000, or 3.7 days rent, for first quarter 2008, as compared with $540,000, or 3.0 days, for the same period 2007.
Property-level operating expense increased 5.6% from first quarter 2007. Year-over-year expense growth was related to repair and maintenance items and the timing of these activities, as compared with similar maintenance programs in 2007. The absolute level of operating expense was in line with management's expectations for the quarter. Property expense growth guidance for 2008 is maintained in a range of 3.0% to 4.0%.
Same-store results reflect favorable operating fundamentals in the company's San Diego and San Francisco, California markets, and in Seattle, Washington. The combination of resilient local economic conditions and an absence of supply provide an opportunity to grow market rents and maintain physical occupancy at or about 95%. Quarterly sequential results in Los Angeles reflect the impact of the recent writers' strike in the entertainment industry, which was resolved in February, and mortgage-related job losses. Results in the Orange County, Inland Empire (San Bernardino and Riverside Counties), and Sacramento, California markets, and in Phoenix, Arizona reflect the impact of the recession in the single-family housing industry, in terms of job losses and excess supply. Management's range of expectations for same-store revenue and NOI growth for 2008 remain consistent with estimates provided in December 2007.
Community Development Activity
During the first quarter, construction was completed at two Southern California properties and one Northern California community: The Stuart at Sierra Madre Villa, Pasadena; Renaissance at Uptown Orange, Orange; and Avenue 64, Emeryville.
BRE currently has four communities under construction, two in Southern California and two in Seattle, Washington, with a total of 1,097 units, an aggregate projected investment of $366.9 million and an estimated balance to complete totaling $147.3 million.
BRE owns three land parcels representing 1,156 units of future development, and an estimated aggregate investment of $478.9 million upon completion. Construction starts for the three parcels range from the first half of 2008 to the second half of 2009. Two land parcels are in Northern California, and one is in Southern California.
Common and Preferred Dividends Declared
On April 24, 2008, the BRE Board of Directors approved regular common and preferred stock dividends for the quarter ending June 30, 2008. All common and preferred dividends will be payable on Monday, June 30, 2008 to shareholders of record on Friday, June 13, 2008.
The quarterly common dividend payment of $0.5625 is equivalent to $2.25 per share on an annualized basis, and represents a yield of approximately 4.61% on yesterday's closing price of $48.77 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 Maintained
The company maintains its previously announced 2008 guidance as follows: FFO per share in a range of $2.70 to $2.85, and EPS in a range of $1.15 to $1.30. EPS estimates for 2008 do not include projected gains or losses associated with property sales.
Annual Meeting of Shareholders
The company will hold its 38th Annual Meeting of Shareholders on Thursday, May 15, 2008 at Le Meridien Hotel, 333 Battery Street, San Francisco, CA 94111, at 10:00 a.m. Pacific. The proxy statement and voting materials, the company's Form 10-K, and annual report to shareholders 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 ir@breproperties.com.
Q1 2008 Analyst Conference Call
The company will hold a conference call on Wednesday, April 30, 2008, 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 2008 Earnings Dates
The company will report second quarter 2008 earnings after close of market on July 29, 2008, followed by a conference call on July 30, 2008 at 11:00 a.m. Eastern (8:00 a.m. Pacific).
About BRE Properties
BRE Properties -- a real estate investment trust -- develops, acquires 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 80 apartment communities totaling 22,680 units in California, Arizona and Washington. The company currently has seven other properties in various stages of development and construction, totaling 2,253 units, and joint venture interests in 13 additional apartment communities, totaling 4,080 units.
"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 liability 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 2008
(Unaudited, dollar amounts in thousands except per share data)
March 31, December 31,
ASSETS 2008 2007
Real estate portfolio:
Direct investments in real estate:
Investments in rental properties $2,841,107 $2,823,279
Construction in progress 219,578 297,939
Less: accumulated depreciation (455,282) (458,474)
2,605,403 2,662,744
Equity interests in and advances to
real estate joint ventures:
Investments in rental properties 62,354 62,966
Real estate held for sale, net 112,337 30,548
Land under development 130,664 125,382
Total real estate portfolio 2,910,758 2,881,640
Cash 8,493 6,952
Other assets 63,559 65,068
TOTAL ASSETS $2,982,810 $2,953,660
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unsecured senior notes $1,540,000 $1,540,000
Unsecured line of credit 265,000 205,000
Mortgage loans 162,300 174,082
Accounts payable and accrued expenses 74,272 80,406
Total liabilities 2,041,572 1,999,488
Minority interests 30,980 30,980
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, 2008 and
December 31, 2007 70 70
Common stock, $0.01 par value,
100,000,000 shares authorized.
Shares issued and outstanding:
51,007,395 and 50,968,448 at March
31, 2008 and December 31, 2007,
respectively. 510 510
Additional paid-in capital 909,678 922,612
Total shareholders' equity 910,258 923,192
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,982,810 $2,953,660
BRE Properties, Inc.
Consolidated Statements of Income
Quarters Ended March 31, 2008 and 2007
(Unaudited, dollar and share amounts in thousands)
Three months ended Three months ended
REVENUE 3/31/08 3/31/07
Rental income $83,181 $76,371
Ancillary income 3,384 3,309
Total revenue 86,565 79,680
EXPENSES
Real estate expenses 26,099 23,909
Depreciation 20,116 18,213
Interest expense 21,461 19,772
General and administrative 4,655 4,816
Total expenses 72,331 66,710
Other income 594 1,167
Income before minority interests,
partnership income
and discontinued operations 14,828 14,137
Minority interests (580) (579)
Partnership income 631 443
Income from continuing operations 14,879 14,001
Discontinued operations:
Discontinued operations,
net (1) 2,280 2,381
Net gain on sales - -
Total discontinued operations 2,280 2,381
NET INCOME $17,159 $16,382
Dividends attributable to
preferred stock 2,953 4,468
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $14,206 $11,914
Net income per common share - basic $0.28 $0.24
Net income per common share -
assuming dilution $0.28 $0.23
Weighted average shares outstanding -
basic 50,985 50,620
Weighted average shares outstanding -
assuming dilution 51,580 51,860
(1) Details of net earnings from discontinued operations. For 2008,
includes six operating properties held for sale as of March 31, 2008.
For 2007, totals also include two properties sold in the third quarter
of 2007 and two properties sold in the fourth quarter of 2007.
Three months ended Three months ended
3/31/08 3/31/07
Rental and ancillary income $4,400 $6,313
Real estate expenses (1,576) (2,383)
Depreciation (509) (1,301)
Interest expense (35) (248)
Income from discontinued
operations, net $2,280 $2,381
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
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
03/31/2008 03/31/2007
Net income available to common
shareholders $14,206 $11,914
Depreciation from continuing
operations 20,116 18,213
Depreciation from discontinued
operations 509 1,301
Minority interests 580 579
Depreciation from unconsolidated
entities 402 254
Less: Minority interests not
convertible to common (106) (105)
Funds from operations $35,707 $32,156
Diluted shares outstanding - EPS 51,580 51,860
Net income per common share - diluted $0.28 $0.23
Diluted shares outstanding - FFO 52,425 52,770
FFO per common share - diluted $0.68 $0.61
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
03/31/08 03/31/07
Net income available to common
shareholders $14,206 $11,914
Interest, including discontinued
operations 21,496 20,020
Depreciation, including discontinued
operations 20,625 19,514
EBITDA 56,327 51,448
Minority interests 580 579
Dividends on preferred stock 2,953 4,468
Adjusted EBITDA $59,860 $56,495
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
03/31/08 03/31/07
Net income available to common
shareholders $14,206 $11,914
Interest, including discontinued
operations 21,496 20,020
Depreciation, including discontinued
operations 20,625 19,514
Minority interests 580 579
Dividends on preferred stock 2,953 4,468
General and administrative expense 4,655 4,816
NOI $64,515 $61,311
Less Non Same-Store NOI 8,099 7,181
Same-Store NOI $56,416 $54,130
Source: BRE Properties, Inc.
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