Third Quarter Results
-- $66.8 million total revenue
-- $0.46 earnings per share
-- $0.69 FFO per share
-- $0.465 per share cash dividends
-- 67% FFO payout ratio
Year-to-Date Highlights
-- $198.4 million total revenue
-- $1.26 earnings per share
-- $2.04 FFO per share
-- 7% per share FFO growth
-- 9% same-store NOI growth
SAN FRANCISCO, Oct. 8 /PRNewswire/ -- BRE Properties, Inc., (NYSE: BRE)
today reported operating results for the quarter and nine months ended
September 30, 2001. For the third quarter 2001, revenues totaled
$66.8 million, as compared with $64.6 million a year ago. Earnings before
interest, taxes, depreciation and amortization (EBITDA) for the quarter
increased 6% to $46.7 million, up from $44.0 million in the same quarter
2000. Net income available to common shareholders for the third quarter
totaled $21.8 million, or $0.46 per diluted share, as compared with
$(13.3) million, or $(0.29) per diluted share, for the same period 2000.
For the nine months ended September 30, 2001, revenues totaled
$198.4 million, as compared with revenues of $191.6 million for the same
period 2000. Year-to-date, EBITDA totaled $138.4 million, up from
$130.5 million a year ago, an increase of 6%. Net income available to common
shareholders for the nine-month period totaled $58.6 million, or $1.26 per
diluted share, as compared with $23.9 million, or $0.53 per diluted share, for
the same period 2000.
For the third quarter, funds from operations (FFO), the generally accepted
measure of operating performance for real estate investment trusts, achieved a
record level of $33.8 million, or $0.69 per diluted share, a 6.2% per share
increase from $31.6 million, or $0.65 per diluted share, for the same period
2000. For the nine-month period, FFO totaled $99.4 million, or $2.04 per
diluted share, a per share increase of 6.8% over $91.8 million, or $1.91 per
diluted share, in the same period 2000.
BRE's overall increases in revenue, EBITDA and FFO were the result of
positive same-store growth and the operating results associated with
properties developed or acquired during the past 12 months. The positive
operating results were offset by deteriorating market rents in the
San Francisco Bay area, and decreased average occupancy levels in the S.F. Bay
area and Phoenix.
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 19,959 apartment
units owned by BRE, same-store units totaled 17,974 and 17,782 for the quarter
and year-to-date periods, respectively.
Same-Store % Growth Results
Q3 2001 Compared to Q3 2000
Rental Operating % of Total
Revenue Expenses NOI NOI
San Francisco 5% 7% 4% 30%
San Diego 8% -3% 13% 15%
L.A./Orange County 11% 6% 12% 14%
Seattle 3% -3% 6% 11%
Phoenix 1% 0% 1% 11%
Sacramento 7% 5% 8% 9%
Salt Lake City 4% -6% 9% 6%
Portland 7% 1% 12% 2%
Denver 4% 1% 5% 2%
Average/Total 6% 1% 7% 100%
Same-Store % Growth Results
Nine Months Ended 9/30/2001 Compared to
Nine Months Ended 9/30/2000
Rental Operating % of Total
Revenue Expenses NOI NOI
San Francisco 10% 5% 11% 29%
San Diego 9% 3% 11% 15%
L.A./Orange County 11% 9% 12% 13%
Seattle 6% -1% 9% 11%
Phoenix 2% 1% 2% 12%
Sacramento 8% 0% 11% 9%
Salt Lake City 4% 2% 5% 6%
Portland 8% 6% 10% 2%
Denver 7% 3% 8% 3%
Average/Total 8% 3% 9% 100%
Same-store operating results were supported by higher average monthly
rents and stable operating expenses. On a year-over-year basis, average gross
potential rent increased to $1,067 per unit from $997 in the same-store
portfolio. For third quarter 2001, operating margins were 73%, as compared
with 71% in the same period 2000.
In the San Francisco Bay area market, on a year-over-year basis, average
gross potential rent increased to $1,709 per unit from $1,547 in the
same-store portfolio. However, for the first nine months of 2001, market level
rents in the BRE's S.F. Bay area communities declined approximately 15%. The
year-over-year increase in average monthly rents was offset by a reduction in
average occupancy levels and higher turnover rates. During third quarter
2001, occupancy in the S.F. Bay area averaged 93%, as compared with 98% during
the same period 2000. For the nine-month period 2001, annualized turnover
activity in this market was 77%, as compared with 60% for the same period
2000.
For third quarter 2001, occupancy levels for the same-store portfolio
averaged 95%, as compared with 96% for third quarter 2000. For the nine-month
period in 2001, annualized turnover averaged 68%, as compared with 66% for the
same period 2000.
Same-Store Occupancy and Turnover Rates
September 30, 2001 Compared to September 30, 2000
Occupancy Levels Turnover Ratio
Q3 2001 Q3 2000 YTD 2001 YTD 2000
San Francisco 93% 98% 77% 60%
San Diego 97% 98% 63% 64%
L.A./Orange County 97% 97% 49% 56%
Sacramento 97% 98% 74% 71%
Seattle 95% 97% 56% 56%
Portland 94% 97% 66% 61%
Salt Lake City 96% 95% 86% 89%
Denver 97% 98% 77% 85%
Phoenix 93% 95% 75% 74%
Total/Average 95% 96% 68% 66%
Acquisition and Development Activity
BRE acquired one community in third quarter 2001: La Scala Apartments,
located near the central business district of Seattle, Washington. The
137-unit property was acquired for approximately $21 million.
There were no scheduled construction completions during third quarter
2001. Year-to-date, BRE delivered two communities with 500 units and
transferred these communities from construction-in-progress to investments in
real estate. At September 30, 2001, the company had four communities with
790 units in the lease-up phase. Average occupancy for these lease-up
communities was 67% at the end of Q3 2001.
BRE currently has 10 communities with 2,339 units in development at a
total estimated cost of $331.2 million. Expected delivery dates for these
communities range from fourth quarter 2001 to first quarter 2003. The
company's development properties are concentrated in the Southern California
and Denver, Colorado regions.
Disposition Activity
During third quarter 2001, BRE sold two Tucson communities with 445 units
for an aggregate sales price of $11.0 million, pursuant to an agreement with
G&I III Residential One, LLC, an affiliate of DRA Advisors, Inc. The Tucson
sale completes a $280 million portfolio sale of apartment communities
initiated by the company in third quarter 2000. Under the terms of the sale
and a joint venture agreement with DRA, BRE retains a 15% interest in the
properties, which totaled $14.1 million at September 30, 2001. In addition,
BRE sold its minority interest in a nonmultifamily asset for approximately
$1.1 million. The transactions resulted in an aggregate net loss of
approximately $300,000.
Financial Information
At September 30, 2001, BRE's combination of debt and equity resulted in a
total market capitalization of approximately $2.4 billion, with a
debt-to-total market capitalization ratio of 37%. BRE's outstanding debt of
$888.2 million carried a weighted average interest rate of 7.0%. For the
quarter, BRE's coverage ratio of EBITDA to interest expense was 3.9 times. The
weighted average maturity for BRE's debt is 10 years, excluding amounts drawn
on the company's line of credit, and nine years when amounts currently drawn
are included.
During third quarter 2001, BRE's board of directors authorized the
purchase of the company's common stock in an amount up to $60 million. The
timing of repurchase activity is dependent on the market price of the
company's shares, and other market conditions and factors. To date, the
company has repurchased a total of $20.6 million of common stock, representing
714,900 total shares, at an average price of $28.79 per share.
For Q3 2001, cash dividend payments to common shareholders totaled
$21.7 million, or $0.465 per share, a 9.4% per share increase, from $19.2
million, or $0.425 per share, for the same period 2000. Correspondingly, the
FFO payout ratio for Q3 2001 was 67%, as compared with 65% for Q3 2000. Cash
dividend payments for the nine months ended September 30, 2001, reached
$64.9 million, or $1.395 per share, as compared to $57.5 million, or
$1.275 per share in the same period last year. The year-to-date 2001 FFO
payout ratio was 68%, as compared to 67% for the first nine months in 2000.
Earnings Outlook
At October 7, 2001, 11 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 third quarter
2001 ranged from $0.69 to $0.71, for a consensus average of $0.70 per share.
For the year 2001, 12 analysts have contributed FFO estimates to First Call
for BRE ranging from $2.70 to $2.77 per share, for a consensus average of
$2.75. Given current expectations and judgment, the company expects FFO for
2001 to total $2.73 to $2.74 per share.
For 2002, 12 analysts have contributed FFO estimates on BRE to First Call
ranging from $2.82 to $3.04, for a consensus average of $2.92. The company
believes that FFO per share results for 2002 will be adversely affected by the
depressed national economy, the continuing decline in market rents in the
San Francisco Bay area and a reduced level of acquisition opportunities. Given
current expectations and judgment, the company believes that FFO estimates for
2002 should be set at a range of $2.83 to $2.88 per share. In addition, BRE
believes that earnings per share (EPS) estimates for 2002 should be set at a
range of $1.83 to $1.90 per share. EPS estimates may be subject to fluctuation
as a result of several factors, including changes in the recognition of
depreciation expense and any gains or losses associated with disposition
activity.
Q3 2001 Analyst Conference Call
The company will hold a conference call on Tuesday, October 9, 2001 at
8:30 PDT (11:30 EDT) to review these results. The dial-in number to
participate is 888-290-1473. Reservations are required for telephone
conference call participants. BRE takes reservations to ensure an adequate
number of phone lines are available for all investors. A replay of the call
will be available at 800-642-1687 (Conference ID# 1868118). A live webcast of
the conference call will be available on the Analyst Resource page in the
Shareholder section of the company's website. An online playback of the
webcast 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 Customers' work, shopping,
entertainment and transit in supply-constrained Western U.S. markets. BRE
directly owns and operates 71 apartment communities totaling 19,959 units in
California, Arizona, Washington, Oregon, Utah and Colorado. The company
currently has 10 other apartment communities in various stages of development
and construction, totaling 2,339 units, and joint venture interests in three
additional apartment communities, totaling 780 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 company and property
performance, and is based on the company's current expectations and judgment.
Actual results could vary materially depending on risks and uncertainties
inherent to general and local real estate conditions, competitive factors
specific to markets in which BRE operates, legislative or other regulatory
decisions, future interest rate levels or capital markets conditions. 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.
Financial Summary
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands)
Sept. 30, 2001 Dec. 31, 2000
Assets
Real estate portfolio
Direct investments in real estate:
Investments in rental properties $1,703,884 $1,646,486
Construction in progress 66,809 57,961
Less: accumulated depreciation (148,902) (124,618)
1,621,791 1,579,829
Equity interests in and advances
to real estate joint ventures:
Investments in rental properties 30,189 27,477
Construction in progress 44,457 34,439
74,646 61,916
Land under development 25,310 30,144
Total real estate portfolio 1,721,747 1,671,889
Cash 3,671 262
Other assets 52,905 45,978
Total assets $1,778,323 $1,718,129
Liabilities and shareholders' equity
Liabilities
Unsecured senior notes $483,000 $243,000
Mortgage loans 211,243 214,253
Unsecured line of credit 194,000 368,000
Accounts payable and accrued expenses 29,758 22,048
Total liabilities 918,001 847,301
Minority interest 59,190 69,712
Shareholders' equity
Preferred stock, $.01 par value; 10,000,000
shares authorized: 8 1/2% Series A
cumulative redeemable, liquidation
preference $25 per share. Shares
issued and outstanding: 2,150,000. 53,750 53,750
Common stock; $.01 par value, 100,000,000
shares authorized. Shares issued and
outstanding: 46,279,096 at September 30,
2001; 45,895,281 at December 31, 2000. 463 459
Additional paid-in capital 746,919 746,907
Total shareholders' equity 801,132 801,116
Total liabilities and shareholders' equity $1,778,323 $1,718,129
BRE Properties, Inc.
Financial Summary
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Quarter ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
REVENUE
Rental income $61,926 $60,298 $182,883 $178,028
Partnership and
ancillary income 4,267 3,247 11,898 9,711
Other income 595 1,068 3,590 3,913
Total revenue 66,788 64,613 198,371 191,652
EXPENSES
Real estate expenses 17,867 18,537 52,808 55,155
Depreciation 10,426 9,881 29,585 28,541
Interest expense 12,000 11,154 36,207 34,882
General and
administrative 2,212 2,042 7,127 5,999
Internet business
segment (A) -- 1,258 7,163 3,076
Total expenses 42,505 42,872 132,890 127,653
Income before gain (loss)
on sales of real estate
investments and
minority interest in
consolidated
subsidiaries 24,283 21,741 65,481 63,999
Gain (loss) on sales
of real estate
investments (327) (32,711) (327) (32,711)
Income (loss) before
minority interest in
consolidated
subsidiaries 23,956 (10,970) 65,154 31,288
Minority interest 1,048 1,220 3,143 4,002
NET INCOME (LOSS) $22,908 $(12,190) $62,011 $27,286
Dividends attributable
to preferred stock 1,142 1,142 3,426 3,426
Net Income (LOSS)
Available to Common
Shareholders $21,766 $(13,332) $58,585 $23,860
Net income (loss) per
share -- Basic $0.47 $(0.29) $1.26 $0.53
Net income (loss) per
share -- Assuming
dilution $0.46 $(0.29) $1.26 $0.53
Funds from
operations (B) $33,810 $31,577 $99,398 $91,819
Per share funds from
operations --
Assuming dilution (B) $0.69 $0.65 $2.04 $1.91
Weighted average shares
outstanding -- Basic 46,470 45,250 46,360 44,990
Weighted average shares
outstanding --
Assuming dilution 48,810 48,510 48,720 48,160
(A) Expenses related to VelocityHSI were added back to operations to
determine FFO from real estate. Our investment in VelocityHSI was recorded
under the equity method of accounting. The recognition of our portion of
income or losses was recorded on a 90-day lag basis, with losses applied to
the extent of our investment in and receivables from VelocityHSI. The effect
of including this business in FFO would be ($0.0) and ($0.15) for the quarter
and nine months ended September 30, 2001, respectively.
(B) Calculated using the FFO definition from NAREIT's October 1999 White
Paper.
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