SAN FRANCISCO,
April 21 /PRNewswire-FirstCall/ -- BRE Properties, Inc.,
(NYSE: BRE) today reported operating results for the quarter
ended March 31, 2005.
Funds from
operations (FFO), the generally accepted measure of operating
performance for real estate investment trusts, totaled $26.2
million, or $0.50 per diluted share, during first quarter 2005
as compared with $26.9 million, or $0.52 per diluted share for
the quarter ended March 31, 2004. (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
$28.8 million, or $0.56 per diluted share, as compared with
$11.6 million, or $0.23 per diluted share, for the same period
2004. First quarter 2005 results included a net gain on sale
totaling $21.5 million, or $0.42 per diluted share. No
property sales were recorded during first quarter 2004.
Adjusted
EBITDA for the quarter totaled $49.3 million, as compared with
$45.5 million in first quarter 2004. (A reconciliation of net
income available to common shareholders to Adjusted EBITDA is
provided at the end of this release.) For first quarter 2005,
revenues totaled $75.5 million as compared with $67.2 million
a year ago, which excludes revenues from discontinued
operations of $2.0 million in the current period and $4.2
million in the prior period.
BRE's
year-over-year comparative earnings and FFO results were
influenced by increased property-level same-store performance,
income from acquisitions completed during 2004 and properties
in the lease-up phase of development. First quarter 2005,
same-store net operating income (NOI) increased 3.2% as
compared with the 2004 period. (A reconciliation of net income
available to common shareholders to NOI is provided at the end
of this release.)
First quarter
2005 results also include income from the settlement of
bankruptcy proceedings associated with VelocityHSI, Inc.,
totaling $1.0 million or $0.02 per share. VelocityHSI was an
Internet business spun off by BRE in 2000, which later filed
for bankruptcy. BRE was a creditor in the bankruptcy
proceedings, which were finalized during first quarter 2005.
The positive overall NOI variances were offset by: increased
interest expense; increased G&A expenses; and preferred
stock dividends on our Series D cumulative redeemable
preferred stock that was issued in December 2004.
Interest
expense increased to $18.1 million during first quarter 2005,
from $15.7 million in first quarter 2004. The increase was
primarily due to the issuance of $100 million in medium term
notes at the end of first quarter 2004, and an overall
increase in average debt balances. General and administrative
expense increased to $4.8 million in first quarter 2005 from
$3.3 million in first quarter 2004. The year-over-year
increase in G&A expense included anticipated amounts for
the company's long-term incentive compensation program,
increased estimates for professional fees, and additional
staffing expense. The G&A increase also included
approximately $550,000 in audit and legal fees incurred during
the first quarter, including fees related to the
implementation of Sarbanes 404.
Level of Investment and NOI by Region
Quarter Ended March 31, 2005
Gross
Region # Units Investment % Investment
% NOI
Southern California 10,660 $1,258,748 48% 51%
Northern California 5,880 599,648 23% 24%
Mountain/Desert 4,382 383,296 14% 13%
Pacific Northwest 3,572 389,852 15% 12%
($ amounts in 000s) Total 24,494 $2,631,544 100% 100%
Acquisition
activities during 2004 increased first quarter 2005 NOI by
$3.5 million as compared with first quarter 2004. Development
and lease-up properties generated $1.2 million in additional
NOI during the quarter as compared with first quarter 2004
levels. Disposition activities during fourth quarter 2004 and
first quarter 2005 reduced first quarter 2005 NOI $1.5 million
as compared with first quarter 2004.
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
24,006 apartment units owned directly by BRE, same-store units
totaled 20,470 for the quarter.
On a year-over-year basis, overall same-store operating results were
affected by increased market rents and decreased real estate expenses,
consistent with management's expectations. Average same-store market rent for
first quarter 2005 increased 2% to $1,125 per unit, from $1,100 per unit in
first quarter 2004. Same-store physical occupancy levels averaged 93.8% during
first quarter 2005 as compared with 94.1% in the same period 2004. Annualized
resident turnover averaged 55% during the quarter as compared with 58% first
quarter last year.
Same-Store % Growth Results
Q1 2005 Compared with Q1 2004
% Change
% NOI Revenue Expenses NOI # Units
L.A./Orange
County,
California 26% 6.3% -1.4% 10.2% 4,901
San Diego,
California 23% 5.5% 3.7% 6.2% 3,711
San Francisco,
California 18% -3.7% -0.4% -5.1% 3,035
Seattle,
Washington 12% -0.2% 1.0% -0.9% 3,149
Sacramento,
California 9% -1.8% -9.5% 2.4% 2,156
Phoenix, Arizona 6% -2.0% -2.5% -1.6% 1,898
Denver, Colorado 6% 1.7% -6.2% 6.1% 1,620
Total 100% 1.8% -1.2% 3.2% 20,470
Same-Store Average Occupancy and Turnover Rates
Physical Occupancy Turnover Ratio
Q1 2005 Q4 2004 Q1 2004 Q1 2005 Q1 2004
L.A./Orange
County,
California 94.7% 95.9% 93.2% 53% 56%
San Diego,
California 94.4% 96.1% 94.6% 58% 59%
San Francisco,
California 92.7% 93.0% 93.9% 50% 56%
Sacramento,
California 93.2% 94.6% 93.2% 60% 71%
Seattle,
Washington 93.3% 93.2% 95.1% 52% 53%
Phoenix, Arizona 94.0% 95.3% 96.1% 66% 60%
Denver, Colorado 92.7% 92.9% 92.8% 55% 55%
Average 93.8% 94.7% 94.1% 55% 58%
On a
sequential basis, same-store NOI improved 0.8% during first
quarter 2005, as compared with fourth quarter 2004. Sequential
same-store revenue increased 1.6% and expenses increased
3.2%.
Acquisition
and Development Activity
During first
quarter 2005, BRE entered into a lease with a purchase option
for Sterling Downs, a recently developed apartment community
with 124 units in Chino Hills, California. Under the terms of
the lease, the company has an option to purchase the property
for an aggregate price of $26 million. At March 31, 2005, this
lease-up community had physical occupancy of 80%. Due to the
lease and option terms, the asset has been consolidated in
accordance with GAAP. The company also acquired a parcel of
land for the future development of 288 units located in Los
Angeles, California. The land purchase totaled $32.5
million.
During first
quarter 2005, the company had one additional community in the
lease-up phase, Pinnacle Westridge, with 234 units, located in
Valencia, California. The community had average physical
occupancy of 91% during the quarter.
BRE currently
has five communities with a total of 1,312 units under
construction, for a total estimated investment of $278.3
million, and an estimated balance to complete totaling $152.6
million. Expected delivery dates for these units range from
fourth quarter 2005 through third quarter 2007. All
development communities are in Southern California. At March
31, 2005, BRE owned four parcels of land, including the first
quarter 2005 acquisition, representing 1,027 units of future
development, for an estimated aggregate cost of $295.9 million
upon completion. The land parcels are located in Northern and
Southern California, and the Seattle, Washington metro
area.
In addition,
at March 31, 2005, the company had entered into agreements
providing options to purchase or lease four parcels of land,
and was actively pursuing local development approvals. Three
sites are located in Northern California, representing 992
units of future development and an estimated total cost of
$245.3 million. One site is located in Southern California,
representing 320 units of future development, and an estimated
cost of $77.2 million. Anticipated construction start dates
range from the second half 2006 to the second half 2007.
Disposition
Activity
During first
quarter 2005, the company sold one apartment community:
Scottsdale Cove, located in Scottsdale, Arizona. The sales
price totaled $36.5 million, generating a net gain on sale of
$21.5 million. The property was sold at a market
capitalization rate of 5.0%; the property-level internal rate
of return was 16%. At March 31, 2005, the company also had two
properties classified as "held for sale," both in Salt Lake
City, Utah, with expected sale dates during second quarter
2005.
Financial and
Other Information
At March 31,
2005, BRE's combination of debt and equity resulted in a total
market capitalization of approximately $3.5 billion, with a
debt-to-total market capitalization ratio of 41%. BRE's
outstanding debt of $1.4 billion carried a weighted average
interest rate of 5.8% for the quarter ended March 31, 2005.
BRE's coverage ratio of Adjusted EBITDA to interest expense
was 2.7 times for the quarter. The weighted average maturity
for outstanding debt is four and a half years. At March 31,
2005, outstanding borrowings under the company's unsecured and
secured lines of credit totaled $385 million, with a weighted
average interest cost of 3.8%.
For first
quarter 2005, cash dividend payments to common shareholders
totaled $25.3 million, or $0.50 per share, which represents an
increase of 2.5% over prior year per share dividend
levels.
Earnings
Outlook
At April 14th,
13 research analysts had contributed quarterly FFO estimates
on BRE to First Call(TM), a widely referenced source of
consensus earnings. Current analyst estimates of BRE's per
share FFO for first quarter 2005 range from $0.47 to $0.51,
for a consensus average of $0.49 per share.
For the year
2005, 15 analysts have contributed FFO estimates for BRE to
First Call ranging from $2.04 to $2.25, for a consensus
average of $2.17. Given current expectations and judgment, the
company continues to believe that FFO estimates for 2005
should be maintained in a range of $2.17 to $2.27 per share,
which includes litigation costs classified as Other Expenses
that are estimated to range from $0.05 to $0.07 per share. BRE
believes EPS estimates for 2005 should be maintained in a
range of $1.30 to $1.45 per share to reflect a higher level of
gains on the sale of properties. EPS estimates may be subject
to fluctuation as a result of several factors, including
timing of transactions and any gains or losses associated with
disposition activity.
BRE expects
FFO per share for the second quarter 2005 to range from $0.49
to $0.52, which includes litigation costs to be classified as
Other Expenses that are estimated to range from $0.01 to $0.02
per share. BRE expects second quarter 2005 EPS to range from
$0.27 to $0.30. The projected ranges for second quarter 2005
reflect sequential same-store NOI growth and a sequential
decline in corporate G&A expense.
FFO and EPS
estimates may be subject to fluctuation as a result of several
factors, including any change to underlying operating
fundamentals, the timing associated with acquisition and
disposition activity, the incurrence of any unexpected
charges, and any gains or losses associated with disposition
activity.
Q1 2005
Analyst Conference Call
The company
will hold a conference call on Friday, April 22 at 8:30 a.m.
PDT (11:30 a.m. EDT) to review these results. The dial-in
number to participate in the U.S. and Canada is 888-290-1473;
the international number is 706-679-8398. Enter Conf. ID#
5051125. A telephone replay of the call will be available
April 22-May 22, 2005 at 800-642-1687 or 706-645-9291
international, using the same ID#. A link to the live webcast
of the call will be posted on breproperties.com, in Investors,
on the Corporate Profile page. A webcast replay will be
available for 30 days following the call.
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 85 apartment communities totaling 24,006 units in
California, Arizona, Washington and Colorado. The company
currently has nine other properties in various stages of
development and construction, totaling 2,339 units, and joint
venture interests in two additional apartment communities,
totaling 488 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," "peeks"
"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 non-renewal 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 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 Rescue 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. 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, please 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 2005
(Unaudited, dollar amounts in thousands except per share data)
March 31, March 31,
ASSETS 2005 2004
(Restated)
Real estate portfolio:
Direct investments in real estate:
Investments in rental properties $2,568,723 $2,298,862
Construction in progress 125,686 96,695
Less: accumulated depreciation (297,985) (243,464)
2,396,424 2,152,093
Equity interests in and advances to
real estate joint ventures:
Investments in rental properties 10,175 10,338
Real estate held for sale, net 45,296 60,903
Land under development 79,388 49,089
Total real estate portfolio 2,531,283 2,272,423
Other assets 55,189 49,135
TOTAL ASSETS $2,586,472 $2,321,558
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unsecured senior notes $848,092 $848,763
Unsecured line of credit 245,000 135,000
Secured line of credit 140,000 140,000
Mortgage loans 192,111 131,782
Accounts payable and accrued expenses 48,100 37,674
Total liabilities 1,473,303 1,293,219
Minority interests 61,675 38,862
Shareholders' equity:
Preferred Stock, $0.01 par value;
10,000,000 shares authorized:
10,000,000 and 7,000,000 shares with
$25 liquidation preference; issued
and outstanding at December 31, 2004
and December 31, 2003, respectively. 100 70
Common stock, $0.01 par value,
100,000,000 shares authorized.
Shares issued and outstanding:
50,776,267 and 50,116,947 at
March 31, 2005 and 2004, respectively. 508 501
Additional paid-in capital 1,050,886 988,906
Total shareholders' equity 1,051,494 989,477
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,586,472 $2,321,558
BRE Properties, Inc.
Consolidated Statements of Income
Quarters Ended March 31, 2005 and 2004
(Unaudited, dollar and share amounts in thousands)
Quarter ended Quarter ended
REVENUE March 31, 2005March 31, 2004
(Restated)
Rental income $72,239 $64,262
Ancillary income 3,230 2,987
Total revenue 75,469 67,249
EXPENSES
Real estate expenses 24,178 21,771
Depreciation 18,220 13,651
Interest expense 18,059 15,677
General and
administrative 4,760 3,310
Other expenses 448 850
Total expenses 65,665 55,259
Other income 1,204 307
Income before minority interests,
partnership income
and discontinued operations 11,008 12,297
Minority interests (790) (718)
Partnership income 145 165
Income from continuing operations 10,363 11,744
Discontinued operations:
Discontinued operations, net (1) 1,420 2,038
Net gain on sales 21,523 -
Total discontinued operations 22,943 2,038
NET INCOME $33,306 $13,782
Dividends attributable to
preferred stock 4,468 2,183
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $28,838 $11,599
Net income per common share - basic $0.57 $0.23
Net income per common share -
assuming dilution $0.56 $0.23
Weighted average shares outstanding -
basic 50,595 50,065
Weighted average shares outstanding -
assuming dilution 51,330 50,500
(1) Details of net earnings from discontinued operations. Quarter ended
March 31, 2005 include results from the community sold during first
quarter 2005 and the two communities classified as held for sale at
March 31, 2005. Quarter ended March 31, 2004 include results from the
community sold during first quarter 2005 and the two communities
classified as held for sale at March 31, 2005 and the three
communities sold during fourth quarter 2004.
Quarter ended Quarter ended
3/31/053/31/04
Rental and ancillary
income $2,057 $4,204
Real estate expenses (637) (1,301)
Depreciation -- (865)
Income from discontinued
operations, net $1,420 $2,038
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 real economic effect and could materially impact
our results from operations, the utility of FFO as a measure
of our performance is limited.
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 Quarter
Ended Ended
3/31/053/31/04
Net income available to common shareholders $28,838 $11,599
Depreciation from continuing operations 18,220 13,651
Depreciation from discontinued operations -- 865
Minority interests 790 718
Depreciation from unconsolidated entities 202 270
Net gain on investments (21,523) --
Less: Minority interests not
convertible to common (280) (244)
Funds from operations $26,247 $26,859
Diluted shares outstanding - EPS 51,330 50,500
Net income per common share - diluted $0.56 $0.23
Diluted shares outstanding - FFO 52,350 51,470
FFO per common share - diluted $0.50 $0.52
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
3/31/053/31/04
Net income available to common shareholders $28,838 $11,599
Interest 18,059 15,677
Depreciation 18,220 14,516
EBITDA 65,117 41,792
Minority interests 790 718
Net gain on sales (21,523) --
Dividends on preferred stock 4,468 2,183
Other expenses 448 850
Adjusted EBITDA $49,300 $45,543
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
3/31/053/31/04
Net income available to common shareholders $28,838 $11,599
Interest 18,059 15,677
Depreciation 18,220 14,516
Minority interests 790 718
Net gain on sales (21,523) --
Dividends on preferred stock 4,468 2,183
General and administrative expense 4,760 3,310
Other expenses 448 850
NOI $54,060 $48,853
Less Non Same-Store NOI 10,003 6,154
Same-Store NOI $44,057 $42,699
SOURCE BRE Properties, Inc.
-0- 04/21/2005
/CONTACT: investors, Edward F. Lange, Jr., +1-415-445-6559, or media,
Thomas E. Mierzwinski, +1-415-445-6525, both of BRE Properties, Inc./
/Web site: http://www.breproperties.com /
(BRE)
CO: BRE Properties, Inc.
ST: California
IN: RLT FIN REA
SU: ERN CCA ERP
MP-HD
-- SFTH092 --
9109 04/21/200516:45 EDThttp://www.prnewswire.com