BRE Properties Reports First Quarter 2010 Results

BRE Properties, Inc. (NYSE:BRE) today reported operating results for the quarter ended March 31, 2010. All per share results are reported on a fully diluted basis.

Funds from operations (FFO), the generally accepted measure of operating performance for real estate investment trusts, totaled $29.4 million, or $0.52 per share, for first quarter 2010, as compared with $34.8 million, or $0.66 per share, for the quarter ended March 31, 2009. (A reconciliation of net income (loss) available to common shareholders to FFO is provided at the end of this release.) FFO for the first quarter 2010 included the impact of $925,000, or $0.02 per share, in transaction costs associated with the acquisition of two properties totaling $75.8 million. FFO for the 2010 and 2009 periods both included the impact of additional noncash interest expense totaling $1.5 million, or $0.03 per share, and $1.6 million, $0.03 per share, respectively.

Net income to common shareholders for the first quarter totaled $5.5 million, or $0.10 per share, as compared with net income of $13.0 million, or $0.25 per share, for the same period 2009.

Total revenues from continuing operations for the quarter were $85.2 million, as compared with $85.4 million a year ago. Adjusted EBITDA for the quarter totaled $54.0 million, as compared with $58.4 million in first quarter 2009. (A reconciliation of net income (loss) available to common shareholders to Adjusted EBITDA is provided at the end of this release.)

BRE’s year-over-year earnings and FFO results reflected declines in its same-store property-level operating results, normalized levels of G&A expense, the impact of acquisition costs in 2010 and a higher level of outstanding shares from equity issuance in 2009. Same-store net operating income (NOI) declined $4.5 million for the quarter, as compared with the same period in 2009. (A reconciliation of net income available to common shareholders to NOI is provided at the end of this release.) Recently developed properties generated $2.4 million in additional NOI during the quarter, as compared with first quarter 2009. The decline in same-store results, while expected due to the year-over-year declining rent trend, was more favorable than the company’s expectations. The increased levels of G&A expense were in line with the company’s expectations as the comparable period in 2009 included credits for out-of-the-money stock-based performance awards, an open executive management position and no acquisition pursuit costs in light of the market environment at that time.

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 21,735 apartment units owned directly by BRE, same-store units totaled 20,196 for the quarter.

On a year-over-year basis, overall same-store NOI declined 7.6% for the first quarter. Average same-store market rent for the first quarter 2010 decreased 8.1% to $1,376 per unit, from $1,497 per unit in first quarter 2009. Rent concessions in the same-store portfolio totaled $3.6 million for first quarter 2010, as compared with $1.9 million for the same period in 2009.

In 2009, the company used a higher level of concessions in its operating plan to increase occupancy in advance of a declining rent cycle, and entered 2010 with a strategy of eliminating concessions. During this period in which concessions are being reduced, the company believes that effective rent is a more appropriate measure of pricing power. Effective rents increased 0.8% in the first quarter over fourth quarter 2009 levels, as market rent reductions were more than offset by lower levels of new concessions awarded. Concessions associated with all leases decreased from 12 days rent in the fourth quarter of 2009 to eight days rent in the first quarter of 2010.

Physical occupancy levels averaged 95.0% during first quarter 2010, as compared with 93.1% for the same period in 2009.

Community Development Activity

During the first quarter 2009, BRE had two development communities in lease-up: Taylor 28 in Seattle, Wash. (197 units) and Belcarra in Bellevue, Wash. (296 units). The current physical occupancy at these communities is: Taylor 28, 96%, and Belcarra, 70%; leasing velocity has averaged 19 units and 38 units per month, respectively, since the communities opened. Average occupancy for the first quarter was 90% at Taylor 28 and 48% at Belcarra. The final 93 units at Belcarra were completed during the first quarter.

BRE currently has one community under construction, Villa Granada in Santa Clara, Calif., with a total of 270 units, an aggregate projected investment of $89.7 million and an estimated balance to complete totaling $9.5 million. First units were delivered late in April; final completion is expected during the third quarter.

BRE owns four land parcels, two in Southern California and two in Northern California, representing 1,298 units of future development, and an estimated aggregate investment of $580 million upon completion.

Capital Markets Activity

During the first quarter, the company did not issue any stock under its at-the-market equity program. The company may sell up to $250 million of its common stock through the program on file. Subsequent to the end of the first quarter, the company priced an offering of 8,050,000 shares of common stock, including underwriters’ over-allotment option for 1,050,000 shares, at a price of $34.25 per share. Net proceeds totaling approximately $264 million were used to pay down the company’s unsecured line of credit and to position the company for potential future investment activity.

Investment Activity

On March 23, 2010, the company purchased Allure at Scripps Ranch, a stabilized property in San Diego for $46.2 million. The 194-unit community was built in 2002. On April 20, 2010, the company purchased Museum Park, a stabilized property in San Jose, Calif., for $29.6 million. Museum Park, built in 2002, has 117 units. Associated transaction costs incurred though the end of the quarter totaled $925,000 and were recorded in Other Expenses.

On April 5, 2010, the company sold Montebello Apartments in the Seattle suburb of Kirkland, Wash., for approximately $39.0 million. The company will record a gain on sale of approximately $11.7 million during the second quarter of 2010.

Common and Preferred Dividends Declared

On April 29, 2010, the BRE Board of Directors approved regular common and preferred stock dividends for the quarter ending June 30, 2010. All common and preferred dividends will be payable on Wednesday, June 30, 2010 to shareholders of record on Tuesday, June 15, 2010. The quarterly common dividend payment of $0.375 is equivalent to $1.50 per share on an annualized basis, and represents a yield of approximately 3.5% on Monday’s closing price of $43.26 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.

2010 Earnings Outlook

The company has updated its FFO per share guidance for the year to reflect the aggregate impact of the following transactions not included in the company’s original guidance provided in a press release dated February 2, 2010: (1) the April common equity offering; (2) additional NOI from the reported community acquisitions; and (3) a reduction in NOI from the reported community sale. These factors, combined with improved same-store expectations, have led the company to adjust its estimate for 2010 FFO to a range of $1.72 to $1.87 per share from the previously guided range of $1.78 to $1.98.

The company also estimates that same-store NOI for 2010 will decline from 2009 same-store NOI levels in a range of 5.0% to 7.5%, from a previously guided decline ranging from 5.50% to 8.50%. Same-store 2010 revenues are now expected to decline from 2009 same-store revenue levels in a range of 3.0% to 4.5%, from a previously guided decline ranging from 3.5% to 5.5%. The 2010 increase in same-store expense over 2009 levels is unchanged from prior guidance of 1.0% to 2.0%.

Additional details regarding the updated guidance will be provided on the Q1 2010 analyst conference call.

Q1 2010 Analyst Conference Call

The company will hold a conference call on Wednesday, May 5, 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 888.290.1473; the international number is 706.679.8398. Enter Conf. ID# 60447197. A telephone replay of the call will be available for 31 days at 800.642.1687 or 706.645.9291 international, using the same ID# 60447197. A link to the live webcast of the call will be posted on www.breproperties.com, in Investors, on the Corporate Profile page. A webcast replay will be available for one month following the call.

Q2 2010 Earnings Dates

The company will report second quarter 2010 earnings after close of market on Tuesday, August 3, 2010, followed by a conference call on Wednesday, August 4, 2010 at 11:00 a.m. Eastern (8:00 a.m. Pacific).

About BRE Properties

BRE Properties, based in San Francisco, Calif., owns 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 75 apartment communities totaling 21,735 units in California, Arizona and Washington. The company invests in communities through acquisition and development, and currently has five properties in various stages of development and construction, totaling 1,568 units, and joint-venture interests in 13 additional apartment communities, totaling 4,080 units. BRE Properties is a real estate investment trust (REIT) listed in the S&P MidCap 400 Index. For more information, please visit our Web site 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 property 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.