BRE Properties Inc (
a real estate investment trust (REIT), reported third quarter
2012 fund from operations (FFO) of $32.5 million or 42 cents per
share, compared with $41.5 million or 55 cents in the
BRE PROPERTIES (BRE): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
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Excluding the non-recurring items, recurring FFO stood at $47.5
million or 62 cents per share in third quarter 2012. Recurring
FFO in the reported quarter beat the Zacks Consensus Estimate by
The recurring FFO in third quarter 2012 also compared favorably
with the year-ago recurring FFO of 55 cents. The increase
in year over year FFO was primarily due to improved performances
in same-store property-level operating results, incremental net
operating income (NOI) from newly acquired and completed
communities, and a reduction in interest expense. It was,
however, partially offset by a higher level of outstanding
Total revenue during the quarter was $100.4 million versus $94.6
million in the year-ago quarter. Total revenue in the quarter
beat the Zacks Consensus estimate of $98 million. Adjusted
earnings before interest, tax, depreciation, and amortization
(EBITDA) were $65.0 million for the reported quarter compared
with $60.9 million in the year-earlier quarter. Average revenue
stood at $1,626 per occupied home.
Overall same-store revenues and NOI increased 5.3% and 6.6%,
respectively, driven by higher rental rates per unit during the
quarter (up 5.5%) partially offset by a 20 basis point dip in
financial occupancy. Average physical occupancy in the same-store
portfolio was 95.5% in third quarter 2012.
During third quarter 2012, BRE purchased a land site in Redwood
City California for $11.4 million. Additionally, BRE sold
interests in three unconsolidated joint ventures for $26.9
Year-to-date, BRE has funded 20% of the $171 million total
estimated development cost on the Pleasanton sites. The company
intends to enter into joint ventures for the development of two
land parcels in Pleasanton, California and sell two land parcels
that compose its Park Viridian II site in Anaheim, California.
These decisions are aimed at reducing the company's development
outlay. To fund the remaining wholly-owned pipeline of projects
under development, the company plans to sell off certain
communities in its existing portfolio and utilize the funds
available under its existing unsecured revolving credit facility.
During the reported quarter, BRE issued $300 million of 10.5 year
senior unsecured notes with a coupon of 3.375%. The company did
not issue any shares under its 'at-the-market' equity offering
during the quarter. BRE declared a dividend of $0.385 for the
third quarter or $1.54 on an annualized basis. The company has
paid uninterrupted quarterly dividends since its inception in
As of September 30, 2012, BRE had cash reserves of $30.0 million.
For fourth quarter 2012, BRE expects FFO in the range of 57 cents
-60 cents per share. For full year 2012, the company has revised
its earlier FFO guidance from $2.32-$2.38 per share to
BRE currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock. One of its competitors,
Equity Residential (
also holds a Zacks #2 Rank, which implies a short term Buy
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.