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BRE > SEC Filings for BRE > Form 8-K on 4-Feb-2014All Recent SEC Filings

Show all filings for BRE PROPERTIES INC /MD/

Form 8-K for BRE PROPERTIES INC /MD/


4-Feb-2014

Results of Operations and Financial Condition, Other Events, Financial St


ITEM 2.02. Results of Operations and Financial Condition

On February 3, 2014, we issued a press release and supplemental financial data with respect to our financial results for the quarter ended December 31, 2013. Copies of the press release and supplemental financial data are furnished as Exhibit 99.1 and Exhibit 99.2 to this report, respectively. The information contained in this Item 2.02 and the attached Exhibit 99.1 and Exhibit 99.2 are furnished to, and not filed with, the Securities and Exchange Commission.



ITEM 8.01 Other Events

February 3, 2014 (San Francisco) - We are a leading owner, operator and developer of high-quality apartment communities in targeted growth markets in California and Seattle, and we reported Core Funds from Operations (Core FFO) of $0.67 per share for the quarter ended December 31, 2013, and $2.54 per share for the year ended December 31, 2013. The per share results reflect an increase of 9.8% and 6.3% compared to the fourth quarter and full year periods in 2012, respectively. Core FFO is used to facilitate comparisons of our earnings results and excludes certain non-core items that are not comparable when comparing periods or earnings performance between periods. All per share results are reported on a fully diluted basis.

A reconciliation of net income available to common shareholders to both FFO and Core FFO can be found in Exhibit B of our Supplemental Operating and Financial Data. For the quarter ended December 31, 2013, reconciling Core FFO excluded legal settlement proceeds totaling $19.8 million or $0.255 per share (recorded in Other income), and transaction costs related to the proposed merger transaction with Essex Property Trust, Inc. (NYSE: ESS) totaling $3.4 million or $0.045 per share (recorded in Other expenses). For the year ended December 31, 2013, $585,000, or $0.01 per share, of acquisition related expenses are also excluded from Core FFO. For the year ended December 31, 2012, a $15,000,000, or $0.195 per share, non-cash impairment charge is excluded from Core FFO.

Highlights

Year-over-year fourth quarter 2013 same-store revenues and net operating income (NOI) increased 4.9% and 6.4%, respectively. During the quarter, physical occupancy averaged 95.3%; annualized turnover was 49.0%; and average monthly revenue per occupied home was $1,755.

Annual 2013 same-store revenues and net operating income (NOI) increased 4.8% and 6.1%, respectively. For the annual period, physical occupancy averaged 95.0%; turnover was 59.7%; and average monthly revenue per occupied home was $1,720.

Core FFO results of $0.67 per share for the fourth quarter were $0.01 ahead of the Company's previously provided guidance of $0.63 to $0.66 per share and reflect: (1) higher than expected same-store revenue growth and (2) lower than expected same-store expense growth.

During the fourth quarter, BRE completed the sales of two wholly-owned apartment communities. One located in Riverside, California and the other located in Santa Ana, California for net proceeds of $115.5 million and total gains on sale of $39.9 million.

Fourth Quarter 2013

Funds from Operations (FFO), the generally accepted measure of operating performance for real estate investment trusts, totaled $68.1 million, or $0.88 per share, for the fourth quarter of 2013, compared with $47.0 million, or $0.61 per share, for the fourth quarter of 2012. Core FFO was $0.67 per share for the fourth quarter of 2013 compared with $0.61 per share for the prior year period. (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 fourth quarter of 2013 totaled $79.4 million, or $1.02 per share, compared with net income of $73.8 million, or $0.96 per share, for the same period in 2012. The fourth quarter 2013 results include gains on sales of real estate totaling $39.9 million, or $0.52 per share. The fourth quarter 2012 results included gains on sales of approximately $53.9 million, or $0.70 per share.

Our fourth quarter year-over-year earnings and Core FFO results reflect the impact of the following factors during 2013: (1) increases in same-store community-level operating results over 2012 levels; and (2) incremental NOI from two newly completed communities in the last 12 months; offset by (1) a reduction in NOI from operating communities sold in 2012 and 2013; (2) a reduction of partnership and management fee income from joint venture interests sold in 2012 and 2013; and (3) a reduction in interest expense due to an increased level of capitalized interest in 2013.

We received a legal settlement in the amount of $19.8 million in connection with a construction litigation claim against the general contractor of BRE's Avenue 64 apartment community, located in Emeryville, California. The settlement amount is expected to cover the cost of remediation work, which is expected to commence in 2014. Physical occupancy averaged 97.4% at the Avenue 64 community during the fourth quarter of 2013.

Same-Store Results

We define same-store communities as stabilized apartment communities owned by us for two comparable calendar year periods. Of the 20,724 apartment homes owned directly by us, same-store homes totaled 19,952 for the fourth quarter.

On a year-over-year basis, fourth quarter same-store revenues increased 4.9%. The revenue increase was driven by a 5.2% increase in revenue earned per occupied home during the period, coupled with a 30 basis point decrease in year-over-year financial occupancy levels. Operating expenses increased 1.5%, resulting in a 6.4% increase in NOI.

On a sequential basis, same-store revenue increased 1.4%, expenses decreased 2.1% and NOI increased 2.9%. The sequential quarter increase in revenues was driven by a 50 basis point increase in revenue earned per occupied home during the fourth quarter, coupled with an 80 basis point increase in financial occupancy. The decrease in sequential same-store expenses was driven by lower unit turnover expense in the fourth quarter. Annualized fourth quarter turnover was 49% compared to 71% in the third quarter.

Company Initiatives

Development. We funded approximately $60 million of development advances on our four active construction projects during the fourth quarter. As of December 31, 2013 we had four communities under construction with a total estimated cost of approximately $725 million, of which approximately 75% has been funded, leaving approximately $180 million remaining to be funded. The current communities under construction are expected to be substantially delivered by the fourth quarter of 2014.

Dispositions. In November 2013, we completed the sale of Mission Grove Park, a 432-home, wholly-owned apartment community in Riverside, California, for total net proceeds of $74.8 million. In December, we completed the sale of Villa Santana, a 240-home wholly-owned apartment community in Santa Ana, California for total net proceeds of $40.7 million. The sale of these communities resulted in a combined net gain of $39.9 million. Both communities were held on an unencumbered basis. We are currently in various stages of marketing $250 to $300 million of operating communities for sale. A portion of the proceeds will be used to repay amounts outstanding under our revolving credit facility with the balance to fund development advances. The communities being marketed for sale are located in Phoenix, Sacramento and San Diego with weighted average same-store revenue and net operating income growth of approximately 1.6% and 1.8%, respectively, for the year ended December 31, 2013 compared to the similar period in 2012. Our annual same-store revenue and net operating growth in 2013 would have improved by 22 basis points to 5.0% and 28 basis points to 6.4%, respectively, if all of the communities currently marketed for sale were excluded from 2013 same-store results.

During 2013, we did not issue any stock under our at-the-market (ATM) equity program.

Common Dividends Declared

On February 3, 2014, our Board of Directors approved regular common stock dividends for the quarter ending March 31, 2014. All common dividends will be payable on Monday, March 31, 2014 to shareholders of our common stock of record as of the close of market on Friday, March 14, 2014. The quarterly common dividend payment of $0.395 is equivalent to $1.58 per share on an annualized basis and represents a yield of approximately 2.7% on the closing price of $59.10 per share as of Friday, January 31, 2014. We have paid uninterrupted quarterly dividends to its shareholders since our founding in 1970. If the pending merger with Essex closes prior to the close of the market on March 14, 2014, this regular common stock dividend for the quarter ending March 31, 2014 will not be paid on BRE common stock. Rather, each share of our common stock will be converted into the right to receive (i) 0.2971 shares of Essex common stock and (ii) $12.33 in cash, without interest, each subject to certain adjustments provided for in the merger agreement and subject to any applicable withholding tax. As holders of Essex common stock, the former holders of our common stock will be entitled to the regular quarterly dividend for the quarter ending March 31, 2014 declared by Essex, if such former shareholders continue to be holders of Essex common stock as of the close of market on March 14, 2014. If the pending merger with Essex closes after the close of market on March 14, 2014 but before March 31, 2014, this regular common stock dividend for the quarter ending March 31, 2014 will be paid by the successor company in the merger.

Series D Preferred Stock Redemption

We issued a Notice of Redemption on January 21, 2014 to all holders of record of its outstanding 6.75% Series D Cumulative Redeemable Preferred Stock (or Series D Preferred Stock) at a redemption price of $25.23438 per share. The redemption price is equal to the original issue price of $25.00 per share, plus accrued and unpaid dividends through the redemption date, which is February 20, 2014. From the redemption date forward, none of the 2,159,715 shares of Series D Preferred Stock called for redemption will remain outstanding and dividends will no longer accrue. In accordance with accounting guidance, the initial issuance costs totaling approximately $1.9 million associated with this series of perpetual preferred stock will be recognized as a reduction of earnings in arriving at both the net income available to common shareholders and funds from operations (FFO). We will record this charge in the first quarter of 2014.

About BRE Properties

BRE Properties, based in San Francisco, California, focuses on the development, acquisition and management of apartment communities located primarily in the major metropolitan markets of Southern and Northern California and Seattle. BRE directly owns 73 multifamily communities (totaling 20,724 homes) with an additional four communities under construction (totaling 1,382 homes) and a joint venture interest in one apartment community (totaling 252 homes). BRE Properties is a real estate investment trust (REIT) listed in the S&P MidCap 400 Index. For more information on BRE Properties, please visit our website at www.breproperties.com.

On January 29, 2014 Essex filed with the SEC a registration statement on Form S-4 that includes a joint proxy statement of Essex and BRE that also constitutes a prospectus of Essex. Essex and BRE also plan to file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the joint proxy statement/prospectus and other relevant documents filed by Essex and BRE with the SEC at the SEC's website at www.sec.gov. Copies of the documents filed by Essex with the SEC will be available free of charge on Essex's website at www.essexpropertytrust.com or by contacting Essex Investor Relations at (650) 494-3700. Copies of the documents filed by BRE with the SEC will be available free of charge on BRE's website at www.breproperties.com or by contacting BRE Investor Relations at (415) 445-3745.

Essex and BRE and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. You can find information about Essex's executive officers and directors in Essex's definitive proxy statement filed with the SEC on April 1, 2013. You can find information about BRE's executive officers and directors in BRE's definitive proxy statement filed with the SEC on March 11, 2013. Additional information regarding the interests of such potential participants is included in the joint proxy statement/prospectus and will be included in other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from Essex or BRE using the sources indicated above.

This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

"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 . . .



ITEM 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
Number        Description
  99.1        Press release of BRE Properties, Inc. dated February 3, 2014
              including attachments.

  99.2        Supplemental Financial data dated December 31, 2013 including
              attachments.

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