SAN FRANCISCO–BRE Properties, Inc. (NYSE:BRE) today reported operating results for the quarter ended March 31, 2012. All per share results are reported on a fully diluted basis.
First Quarter Operational and Financial Highlights (FULL RELEASE HERE)
- Quarterly funds from operations (FFO) totaled $43.6 million, or $0.57 per share. Quarterly net income available to common shareholders totaled $18.1 million, or $0.24 per share.
- Year-over-year annual same-store revenues and net operating income (NOI) increased 5.8% and 6.7%, respectively. Physical occupancy averaged 95.3%; annual turnover in the same-store portfolio was 55%.
- Issued 815,000 shares at an average price of $49.09 per share, for gross proceeds of $40.0 million, under the company’s at-the-market (ATM) program.
- Second quarter 2012 FFO per share guidance announced in a range of $0.56 – $0.58.
First Quarter 2012
Funds from operations, the generally accepted measure of operating performance for real estate investment trusts, totaled $43.6 million, or $0.57 per share, for first quarter 2012, as compared with $34.8 million, or $0.53 per share, for the quarter ended March 31, 2011. (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 $18.1 million, or $0.24 per share, as compared with $9.6 million, or $0.15 per share, for the same period 2011.
BRE’s year-over-year earnings and FFO results reflect the impact of the following during 2012: (1) increases in same-store property-level operating results over 2011 levels; (2) incremental NOI from acquired and newly completed communities in the last 12 months; and (3) a reduction in interest expense due to lower leverage levels, which was offset by (4) a higher level of outstanding shares from equity issued in 2011 and 2012.
Same-Store Community Results
BRE defines same-store communities as stabilized apartment communities owned by the company for at least two twelve month periods. Of the 21,336 apartment homes owned directly by BRE, same-store homes totaled 19,974 for the quarter.
On a year-over-year basis, overall same-store revenues and NOI increased 5.8% and 6.7%, respectively, for the first quarter. The revenue increase was driven by a 5.4% increase in rental rates per home earned during the period and a 40-basis-point increase in year-over-year financial occupancy levels. Annualized turnover during the first quarter was 55%, as compared with 54% during the first quarter of 2011. Same Store expenses increased 3.9% over first quarter 2011 levels, reflecting the expected increase in property tax expense. In the first quarter of 2011, refunds from successful property tax appeals totaled approximately $500,000.
On a sequential basis, same-store revenue increased 1.0%, NOI increased 0.2% and expenses increased 2.7% over fourth quarter 2011 levels. The sequential quarter increase in revenues was driven by a 1.1% increase in rental rates earned per home during the first quarter, offset by a 10 basis-point reduction in financial occupancy.
BRE currently has four communities under construction, with a total of 1,260 homes, an aggregate projected investment of $554 million and an estimated balance to complete totaling $274 million. BRE owns three land parcels representing 1,014 homes of future development, and an estimated aggregate investment of $424 million upon completion and an estimated balance to complete of $320 million.
Capital Markets Activity
Under the ATM equity distribution agreement filed with the Securities and Exchange Commission on Form 8-K on February 25, 2010, the company issued 815,000 shares of common stock during the quarter ended March 31, 2012, at an average share price of $49.09 per share, with total gross proceeds of $40.0 million. The remaining capacity under the equity distribution agreement totals $123.6 million.
In January of 2012, the company entered into a new $750 million unsecured line of credit, replacing our previous $750 million unsecured line of credit. The new line of credit matures in April 2015. Based on the company’s current debt ratings, the line of credit is priced at LIBOR plus 120 basis points with an annual facility fee of 20 basis points. Funds from the line of credit will be used for acquisition and development activities as well as for general corporate purposes.
During the quarter, the company exercised its right to redeem for cash the remaining $35.0 million of 4.125% Convertible Senior Notes due 2026, at par. In addition, a secured mortgage totaling $65.5 million was paid off at maturity. The revolving credit facility was used to fund both maturities. The balance on the revolving credit facility as of March 31, 2012 totaled $222.0 million.
Common and Preferred Dividends Declared
On May 1, 2012, BRE’s Board of Directors approved regular common and preferred stock dividends for the quarter ending June 30, 2012. All common and preferred dividends will be payable on Friday, June 29, 2012 to shareholders of record on Friday, June 15, 2012. The quarterly common dividend payment of $0.385 is equivalent to $1.54 per share on an annualized basis and represents a yield of approximately 2.9% on Monday’s closing price of $52.50 per share. BRE has paid uninterrupted quarterly dividends to shareholders since the company’s founding in 1970.
The company’s 6.75% Series D preferred dividend is $0.421875 per share.
The company is maintaining annual FFO per share and annual same-store revenue, expense and NOI guidance ranges provided on February 6, 2012. The company has established an FFO guidance range of $0.56 to $0.58 per share for the second quarter of 2012. Sequential revenue increases from the first quarter levels are expected to be offset by a higher level of G&A expense and higher property level expenses in the second quarter than were experienced in the first quarter of 2012.
Second quarter and annual FFO guidance does not include any nonroutine income or expense items.
Annual Meeting of Shareholders
The company will hold its 42nd Annual Meeting of Shareholders on Tuesday, May 15, 2012 at 10:00 a.m. Pacific Daylight Time, at The City Club of San Francisco, 155 Sansome Street, 10th Floor, San Francisco, California. The company’s proxy statement, voting materials and Form 10-K are available on the company’s website at 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 firstname.lastname@example.org.
Q1 2012 Analyst Conference Call
The company will hold a conference call on Wednesday, May 2, 2012 at 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 888.378.0324; the international number is 719.325.2337. Enter Conf. ID# 3442793. A telephone replay of the call will be available for 14 days at 877.870.5176 or 858.384.5517 international, using the same ID# 3442793. A link to the live webcast of the call will be posted on www.breproperties.com, in the Investors section. A webcast replay will be available for 90 days following the call.
Q2 2012 Earnings Dates
The company will report second quarter 2012 earnings after the close of market on Tuesday, July 31, 2012, followed by a conference call on Wednesday, August 1, 2012 at 11:00 a.m. Eastern (8:00 a.m. Pacific).
About BRE Properties
BRE Properties, based in San Francisco, California, focuses on the development, acquisition and management of apartment communities located primarily in major metropolitan markets in Southern and Northern California and Seattle. BRE directly owns 76 multifamily communities (totaling 21,336 homes) and has joint venture interests in an additional 11 apartment communities (totaling 3,592 homes). BRE Properties is a real estate investment trust (REIT) listed in the S&P MidCap 400 Index. For more information on BRE Properties, please visit our website at www.breproperties.com.
“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 intentions. 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 effecting 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 community development and construction (including construction delays, cost overruns, inability 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 obligation 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.
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