BRE Properties Inc.
), a real estate investment trust (REIT), reported second quarter
2012 funds from operations (FFO) of $45.8 million or 59 cents per
share, compared with $34.9 million or 49 cents in the year-earlier
quarter. FFO in the reported quarter marginally beat the Zacks
Consensus Estimate by a penny.
The improved quarterly performance was primarily due to increases
in same-store property-level operating results, incremental net
operating income (NOI) from newly acquired and completed
communities and a reduction in interest expense, which was
partially offset by a higher level of outstanding shares.
Total revenue during the quarter was $98.1 million versus $91.4
million in the year-ago quarter. Adjusted earnings before interest,
tax, depreciation and amortization (EBITDA) were $62.6 million for
the reported quarter compared with $59.6 million in the
year-earlier quarter. Average revenue stood at $1,599 per occupied
Overall same-store revenues and NOI increased 5.1% and 5.6%,
respectively, driven by higher rental rates per unit during the
quarter (up 5.4%) partially offset by a 30 basis-point dip in
financial occupancy. Average physical occupancy in the same-store
portfolio was 95.4% in second quarter 2012.
During the reported quarter, BRE had four communities under
construction, totaling 1,260 homes, with an estimated investment of
$554 million. Additionally, BRE owns four land parcels representing
1,265 homes for future development, with an estimated investment of
$513 million upon completion. The company sold Countryside Village
- a 96-unit apartment community in San Diego for $12.6 million
during the quarter.
The company did not issue any shares under its 'at-the-market'
equity offering during the quarter. BRE declared a dividend of 38.5
cents for the second quarter or $1.54 on an annualized basis. The
company has paid uninterrupted quarterly dividends since its
inception in 1970.
As of June 30, 2012, BRE had cash reserves of $3.0 million. For
third quarter 2012, BRE expects FFO in the range of 58 cents - 61
cents per share.
For full year 2012, the company has revised its earlier FFO
guidance from $2.30 -$2.40 to $2.32 -$2.38 per share. Same-store
revenue is expected to grow by 5.0% to 5.75% during the current
year, while same-store NOI is expected to increase by 5.75% to
BRE PROPERTIES (BRE): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
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The updated guidance is based on strong market fundamentals in the
first half of 2012 in the company's Northern California and Seattle
markets, and relatively tepid growth conditions in the Southern
California markets like San Diego.
We maintain our long-term Neutral recommendation on the stock,
which currently retains a Zacks #3 Rank that translates into a
short-term Hold rating. We also have a Neutral recommendation and a
Zacks #3 Rank for
), one of the competitors of BRE.
Note: 1. FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.
2. Financial occupancy is defined as the percentage of total gross
leasable area for which a tenant is obligated to pay rent under the
terms of the lease agreement, regardless of the actual use or
occupation by that tenant of the area being leased, and excludes
tenants in abatement periods. It is obtained by dividing actual
rental revenue by total possible rental revenue.