BRE Properties, Inc. SUPPLEMENTAL OPERATING AND FINANCIAL DATA For the Quarter Ended June 30, 2013 Q2 bre Be here, be home.

 

BRE Properties, Inc.

Second Quarter 2013

Earnings Release and

Supplemental Financial Data

 

Table of Contents	Page
Financial and Operating Highlights	1
Consolidated Balance Sheets	2
Consolidated Statements of Income - Comparative Quarters and Year to Date Periods	3
Consolidated Statements of Income - Past Five Quarters	4
Reconciliation of FFO and Core FFO	5
Capital Improvement Activity Detail	6
Market Summaries "Same-Store" Data
- Quarter vs. Quarter	7
- YTD 2013 vs. YTD 2012	8
- Same-Store Operating Expense Summary and Joint Venture Disclosure	9
- Sequential "Same-Store" Operating Data	10
- Summary of Revenue and Occupancy Changes	11
- Operating, Renewal and Leasing Metrics	12
Debt Summary	13
Development Communities and Land Held for Development	14
Exhibit A - Share Analysis	15
Exhibit B - Non-GAAP Financial Measure Reconciliations and Definitions	16-17

 

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained herein, this document contains forward-looking statements regarding BRE and its operating performance, and is based on BRE's current expectations and judgment. Actual results could vary materially depending on risks and uncertainties inherent to general and local real estate conditions, future interest rate levels or capital market conditions. For more details, please refer to BRE's SEC filings, including its most recent Annual Report on Form 10-K and quarterly report on Form 10-Q.

 

Information included in this supplemental package is unaudited.

 

        

 

BRE Properties, Inc.

Financial and Operating Highlights

Second Quarter 2013

(Unaudited; in thousands, except per share, ratio and community data)

 

(1)

Revenues reported exclude results from discontinued operations, partnership income and other income. Expenses exclude discontinued operations.

(2)

Please refer to Exhibit B for definitions and reconciliations of all non-GAAP financial measures presented in this package.

(3)

Represents diluted per share amounts.

(4)

For the purpose of this calculation, EBITDA excludes NOI from communities sold during the quarter.

(5)

Includes GAAP interest and capitalized interest (gross interest incurred). Fixed charges include gross interest incurred, preferred dividends and recurring cash amortization on secured debt.

(6)

For comparison purposes, 2013 data represents results for same-store pool established 1/1/2013; 2012 data represents results for same-store pool established 1/1/2012.

(7)

Represents Q2'13 non same-store homes as of the end of each period presented. Excludes partially delivered communities. Non same-store communities may not be consistent in each period.

(8)

Represents percentage of total NOI for the six months ended June 30, 2013.

 

 

BRE Properties, Inc.

Consolidated Balance Sheets

Second Quarter 2013

(Unaudited, in thousands, except per share, unit and per unit data)

       

		June 30,				December 31,
ASSETS		2013				2012
Real estate portfolio:
Direct investments in real estate:
Investments in rental communities		$	3,758,556			$	3,722,838
Construction in progress			431,704				302,263
Less: accumulated depreciation			(852,289	)			(811,187	)
			3,337,971				3,213,914
Equity investment in real estate joint ventures:			6,438				40,753
Real estate held for sale, net			23,481				23,065
Land under development			36,544				104,675
Total real estate portfolio			3,404,434				3,382,407
Cash			3,377				62,241
Other assets			49,882				54,334
Total Assets		$	3,457,693			$	3,498,982
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unsecured senior notes		$	950,000			$	990,018
Unsecured revolving credit facility			-				-
Mortgage loans payable			711,624				741,942
Accounts payable and accrued expenses			84,066				75,789
Total liabilities			1,745,690				1,807,749
Redeemable noncontrolling interests			4,751				4,751
Shareholders' equity:
Preferred Stock, $0.01 par value; 20,000,000 shares authorized:  2,159,715 shares with $25 liquidation preference issued and outstanding at June 30, 2013 and December 31, 2012, respectively.			22				22
Common stock, $0.01 par value, 100,000,000 shares authorized. Shares issued and outstanding: 77,154,677 and 76,925,351 at June 30, 2013 and December 31, 2012, respectively.			772				769
Additional paid-in capital			1,706,458				1,685,691
Total shareholders' equity			1,707,252				1,686,482
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	3,457,693			$	3,498,982

 

 

BRE Properties, Inc.

Consolidated Statements of Income

Quarters and Six Months Ended June 30, 2013 and 2012

(Unaudited, in thousands, except per share, unit and per unit data)

 

		Quarter ended				Quarter ended				Six months ended				Six months ended
REVENUES		6/30/13				6/30/12				6/30/13				6/30/12
Rental income		$	97,817			$	91,619			$	193,934			$	181,847
Ancillary income			4,083				3,691				7,766				7,263
Total revenues		$	101,900			$	95,310			$	201,700			$	189,110
EXPENSES
Real estate		$	30,622			$	30,008			$	62,321			$	59,975
Provision for depreciation			26,090				24,244				51,640				48,602
Interest			16,655				16,272				33,987				33,490
General and administrative			5,956				6,211				12,338				12,058
Total expenses			79,323				76,735				160,286				154,125
Other income			290				706				653				1,225
Net income before noncontrolling interests, partnership income and discontinued operations			22,867				19,281				42,067				36,210
Income from unconsolidated entities			112				728				429				1,456
Net gain on sale of unconsolidated entities (1)			3,608				-				18,633				-
Income from continuing operations			26,587				20,009				61,129				37,666
Discontinued operations:
Discontinued operations, net (2)			585				1,424				1,028				2,891
Net gain on sales of discontinued operations(2)			17,394				8,279				17,394				8,279
Income from discontinued operations			17,979				9,703				18,422				11,170
NET INCOME		$	44,566			$	29,712			$	79,551			$	48,836
Redeemable noncontrolling interest in income			48				105				95				210
Dividends attributable to preferred stock			911				911				1,822				1,822
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	43,607			$	28,696			$	77,634			$	46,804
Net income per common share - basic		$	0.56			$	0.37			$	1.01			$	0.61
Net income per common share - diluted		$	0.56			$	0.37			$	1.00			$	0.61
Weighted average shares outstanding - basic (3)			77,106				76,735				77,047				76,323
Weighted average shares outstanding - diluted (3)			77,280				77,070				77,270				76,700

 

(1)

During the three months ended June 30, 2013, one joint venture property was sold for $6.0 million resulting in a net gain of $3.6 million. During the six months ended June 30, 2013, seven joint venture interests were sold for $53.4 million resulting in a net gain of $18.6 million.

(2)

Includes one community sold during the three months ended June 30, 2013 for $46.8 million resulting in a net gain of $17.4 million and three communities sold during 2012.

 

		Quarter ended				Quarter ended				Six months ended				Six months ended
		6/30/13				6/30/12				6/30/13				6/30/12
Rental and ancillary income		$	1,035			$	2,987			$	2,113			$	6,131
Real estate expenses			(359	)			(938	)			(717	)			(1,941	)
Provision for depreciation			(91	)			(625	)			(368	)			(1,299	)
Discontinued operations, net		$	585			$	1,424			$	1,028			$	2,891

 

(3)

See analysis of weighted average shares and ending shares in Exhibit A.

 

 

BRE Properties, Inc.

Consolidated Statements of Income

Past Five Quarters

(Unaudited, in thousands, except per share, unit and per unit data)

 

		Jun. 30,				Mar. 31,				Dec. 31,				Sept. 30,				Jun. 30,
REVENUES		2013				2013				2012				2012				2012
Rental income		$	97,817			$	96,117			$	95,269			$	93,755			$	91,619
Ancillary income			4,083				3,683				3,957				3,776				3,691
Total revenues		$	101,900			$	99,800			$	99,226			$	97,531			$	95,310
EXPENSES
Real estate		$	30,622			$	31,698			$	30,825			$	30,827			$	30,008
Provision for depreciation			26,090				25,551				26,237				24,501				24,244
Interest			16,655				17,332				17,979				16,998				16,272
General and administrative			5,956				6,382				5,696				5,093				6,211
Other expenses			-				-				-				15,000				-
Total expenses			79,323				80,963				80,737				92,419				76,735
Other income			290				363				565				740				706
Net income before noncontrolling interests, partnership income and discontinued operations			22,867				19,200				19,054				5,852				19,281
Income from unconsolidated entities			112				318				519				669				728
Net gain on sale of unconsolidated entities			3,608				15,025				-				6,025				-
Income from continuing operations			26,587				34,543				19,573				12,546				20,009
Discontinued operations:
Discontinued operations, net (1)			585				443				1,386				1,360				1,424
Net gain on sales of discontinued operations			17,394				-				53,856				-				8,279
Income from discontinued operations			17,979				443				55,242				1,360				9,703
NET INCOME		$	44,566			$	34,986			$	74,815			$	13,906				29,712
Redeemable noncontrolling interest in income			48				48				99				105				105
Dividends attributable to preferred stock			911				911				911				911				911
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	43,607			$	34,027			$	73,805			$	12,890				28,696
Net income per common share - basic		$	0.56			$	0.44			$	0.96			$	0.17			$	0.37
Net income per common share - diluted		$	0.56			$	0.44			$	0.96			$	0.17			$	0.37
Weighted average shares outstanding - basic (2)			77,106				76,990				76,872				76,813				76,735
Weighted average shares outstanding - diluted (2)			77,280				77,250				77,180				77,130				77,070
(1) Details of earnings from discontinued operations, net:			Jun. 30,				Mar. 31,				Dec. 31,				Sept. 30,				Jun. 30,
			2013				2013				2012				2012				2012
Rental and ancillary income		$	1,035			$	1,077			$	2,620			$	2,819			$	2,987
Real estate expenses			(359	)			(358	)			(850	)			(863	)			(938	)
Provision for depreciation			(91	)			(276	)			(384	)			(596	)			(625	)
Income from discontinued operations, net		$	585			$	443			$	1,386			$	1,360			$	1,424

 

(2)  See analysis of weighted average shares and ending shares in Exhibit A.

 

 

 

Reconciliation of Funds from Operations (FFO)

(Unaudited, in thousands, except per share, unit and per unit data)

 

		Jun. 30,				Mar. 31,				Dec. 31,				Sept. 30,				Jun. 30,
CALCULATION OF FFO		2013				2013				2012				2012				2012
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	43,607			$	34,027			$	73,805			$	12,890			$	28,696
Add back/ exclude:
Depreciation from continuing operations			26,090				25,551				26,237				24,501				24,244
Depreciation from discontinued operations			91				276				384				596				625
Depreciation from unconsolidated entities			101				297				392				512				504
Net (gain) on sales from unconsolidated entities			(3,608	)			(15,025	)			-				(6,025	)			-
Net (gain) on sales of discontinued operations			(17,394	)			-				(53,856	)			-				(8,279	)
FUNDS FROM OPERATIONS (1)		$	48,887			$	45,126			$	46,962			$	32,474			$	45,790
NON CORE ITEMS IN PERIODS PRESENTED
Non cash asset impairment charge(2)			-				-				-				15,000				-
CORE FUNDS FROM OPERATIONS (3)		$	48,887			$	45,126			$	46,962			$	47,474			$	45,790
Weighted average shares and equivalents outstanding - diluted			77,280				77,250				77,180				77,130				77,070
Funds from operations  (per share) -  diluted		$	0.63			$	0.58			$	0.61			$	0.42			$	0.59
Core funds from operations  (per share) -  diluted		$	0.63			$	0.58			$	0.61			$	0.62			$	0.59

 

(1)

Funds From Operations (FFO) is calculated in accordance with the White Paper adopted by the National Association of Real Estate Investment Trusts in October 1999 (as amended in April 2002).  See Exhibit B for further definition.

(2)

For the quarter ended September 30, 2012,  EPS and FFO totals included a $15 million impairment charge related to Land under development in Anaheim, California that was transferred to Real estate held for sale, net. The land is recorded in Real estate held for sale, net at $23.5 million as of June 30, 2013 on the consolidated balance sheet.

(3)

Core Funds From Operations ("Core FFO") begins with FFO as defined by the NAREIT White Paper and is adjusted for the following:

-

The impact of any expenses relating to non-operating asset impairment and valuation allowances;

-

Property acquisition costs and pursuit cost write-offs (other expenses);

-

Gains and losses from early debt extinguishment, including prepayment penalties and preferred share redemptions;

-

Executive level severance costs;

-

Gains and losses on the sales of non-operating assets, and

-

Other non-comparable items

 

 

BRE Properties, Inc.

Capital improvement activity detail

(Dollar amounts in thousands, except per home data)

 

CAPITAL EXPENDITURES		Q2 '13				Q1 '13				Q4 '12				Q3 '12				Q2'12
Recurring capital expenditures		$	7,665			$	3,334			$	5,698			$	6,378			$	5,496
Average apartment homes in period			21,321				21,160				21,101				21,240				21,288
Capital expenditures per apartment home in period		$	359			$	158			$	270			$	300			$	258
Capital expenditures per apartment home-trailing four quarters		$	1,087			$	986			$	947			$	956			$	892
Revenue enhancing rehabilitation and other		$	10,135			$	8,508			$	12,564			$	9,174			$	8,922

 

Recurring Capital Expenditure Detail for Q2'13		Q2 '13				Cost per Home				YTD 2013				Cost per Home
Exteriors (roof, structural, paint etc.)		$	2,454			$	115			$	2,785			$	131
Common Areas (clubhouse, parking, pool, other infrastructure)			2,927				137				3,432				162
Equipment			680				32				1,568				74
Turnover related			1,604				75				3,214				151
Total Recurring Capital Expenditures		$	7,665			$	359	(1)		$	10,999			$	518	(1)
Revenue enhancing rehabilitation and other (2)		$	10,135				n/a			$	18,643				n/a

 

(1)

Annual capital expenditures are expected to range from $1,025 to $1,175 per home for 2013.

(2)

Includes rehab programs on the stabilized portfolio including properties renovated in conjunction with an acquisition.  The details associated with communities currently undergoing significant rehab are noted below.  May include large scale items that represent  unusual out of cycle deferred maintenance.

 

Community specific detail on significant revenue enhancing rehab           

 

		Homes				Estimated Cost				Cost per Home				Costs Incurred Project to Date				Balance to Fund				Costs Incurred Q2 '13				Project Start Date		Estimated Completion		Physical Occupancy Q2 '13
Orange County
The Havens			440			$	20,789			$	47,000			$	17,102			$	3,687			$	1,784			Q4'11		Q4'14			92.2	%
Fountain Valley, CA
Pinnacle at MacArthur Place			253				4,275				17,000				2,722				1,553				339			Q3'12		Q3'15			93.2	%
South Coast Metro, CA
Los Angeles
The Fairways at Westridge			234				4,326				18,000				2,292				2,034				412			Q3'12		Q3'15			91.2	%
Valencia, CA
Aqua Marina Del Rey			500				12,640				25,000				579				12,061				579			Q2'13		Q2'16			92.5	%
Marina Del Rey, CA
San Diego
Cambridge Park			320				6,137				19,000				2,904				3,233				619			Q3'12		Q3'15			90.7	%
San Diego, CA
Carmel Creek			348				8,882				26,000				280				8,602				280			Q2'13		Q2'16			92.7	%
San Diego, CA
Seattle
Parkwood at Mill Creek			240				7,010				29,000				4,211				2,799				987			Q3'12		Q3'15			92.6	%
Millcreek, WA
BellCentre			248				5,519				22,000				3,281				2,238				712			Q3'12		Q3'15			94.9	%
Bellevue, WA
San Francisco
Foster's Landing			490				12,517				26,000				270				12,247				270			Q2'13		Q2'16			94.8	%
Foster City, CA
The Landing at Jack London Square			282				6,481				23,000				236				6,245				236			Q2'13		Q2'16			94.1	%
Oakland, CA
Total			3,355			$	88,576			$	26,000			$	33,877			$	54,699			$	6,218								92.9	%

 

 

BRE Properties, Inc.

"Same-Store" Markets Summary

For the Quarters ended June 30, 2013 and 2012

(Dollar amounts in thousands)

 

										Revenues												Expenses
		No. of				No. of												%												%
Region		Communities				Homes				Q2'13				Q2'12				Change				Q2'13				Q2'12				Change
California
San Diego			11				3,640			$	17,066			$	16,762				1.8	%		$	4,899			$	5,084				-3.6	%
Inland Empire			5				1,173				4,955				4,891				1.3	%			1,554				1,557				-0.2	%
Orange County			12				3,789				17,494				16,927				3.3	%			5,425				5,173				4.9	%
Los Angeles			13				3,067				16,321				15,677				4.1	%			4,793				5,045				-5.0	%
San Francisco Bay Area			15				4,197				25,125				23,211				8.2	%			6,393				6,513				-1.8	%
Subtotal; California			56				15,866			$	80,961			$	77,468				4.5	%		$	23,064			$	23,372				-1.3	%
Washington
Seattle			13				3,456				14,333				13,437				6.7	%			4,923				4,784				2.9	%
Non Core Markets (1)			3				1,302				3,944				3,920				0.6	%			1,380				1,443				-4.4	%
Total Same-Store (2)			72				20,624			$	99,238			$	94,825				4.7	%		$	29,367			$	29,599				-0.8	%

 

										Net Operating Income
		No. of				No. of												%				%
Region		Communities				Homes				Q2'13				Q2'12				Change				of Total
California
San Diego			11				3,640			$	12,167			$	11,678				4.2	%			17.4	%
Inland Empire			5				1,173				3,401				3,334				2.0	%			4.9	%
Orange County			12				3,789				12,069				11,754				2.7	%			17.2	%
Los Angeles			13				3,067				11,528				10,632				8.4	%			16.5	%
San Francisco Bay Area			15				4,197				18,732				16,698				12.2	%			26.8	%
Subtotal; California			56				15,866			$	57,897			$	54,096				7.0	%			82.8	%
Washington
Seattle			13				3,456				9,410				8,653				8.7	%			13.5	%
Non Core Markets (1)			3				1,302				2,564				2,477				3.5	%			3.7	%
Total Same-Store (2)			72				20,624			$	69,871			$	65,226				7.1	%			100.0	%

 

										Net Operating  Income								Avg. Physical Occupancy				Gross Carrying Value
"Non Same-Store" Summary		No. of Communities				No. of Homes				Q2'13				Q2'12				Q2'13				Q2'13
Lease up communities (3)			2				502			$	1,392			$	(5	)			66.7	%		$	147,726
Joint venture income (4)			1				252				112				728
Commercial and Other (5)			n/a				n/a				15				81
Other income			n/a				n/a				290				706
Discontinued operations (6)			4				712				676				2,049
Total  Non Same-Store			7				1,466			$	2,485			$	3,559				66.7	%		$	147,726
Less: Communities Sold in 2012 and 2013			(4	)			(712	)
Total All Homes / NOI			75				21,378			$	72,356			$	68,785

 

 

(1)

Consists of one community in Sacramento, CA (400 homes) and two communities in Phoenix, AZ (902 homes).

(2)

Consists of communities completed, stabilized and owned by BRE for at least two comparable calendar year periods. The term stabilized refers to communities that have reached a physical occupancy of at least 93% as of 1/1/2012.

(3)

Consists of NOI from two fully delivered communities under lease up.

(4)

Consists of the percentage of net income derived from joint venture investments in rental communities.  See page 9 for a reconciliation of the components of BRE's share of joint venture net income (including our proportionate share of NOI).

(5)

Consists of NOI from retail tenants associated with the operating communities and NOI from commercial communities that will later be developed as multifamily and other real estate expenses.

(6)

Includes results from three communities sold in 2012 and one community sold in 2013.

 

 

BRE Properties, Inc.

"Same-Store" Markets Summary

For the Six months ended June 30, 2013 and 2012

(Dollar amounts in thousands)

 

										Revenues												Expenses
		No. of				No. of												%												%
Region		Communities				Homes				YTD 2013				YTD 2012				Change				YTD 2013				YTD 2012				Change
California
San Diego			11				3,640			$	34,039			$	33,494				1.6	%		$	9,851			$	9,968				-1.2	%
Inland Empire			5				1,173				9,967				9,782				1.9	%			3,137				3,093				1.4	%
Orange County			12				3,789				34,760				33,603				3.4	%			10,887				10,469				4.0	%
Los Angeles			13				3,067				32,557				31,221				4.3	%			10,231				10,323				-0.9	%
San Francisco Bay Area			15				4,197				49,777				45,996				8.2	%			13,235				13,176				0.4	%
Subtotal; California			56				15,866			$	161,100			$	154,096				4.5	%		$	47,341			$	47,029				0.7	%
Washington
Seattle			13				3,456				28,248				26,418				6.9	%			9,827				9,219				6.6	%
Non Core Markets (1)			3				1,302				7,910				7,732				2.3	%			2,911				2,872				1.4	%
Total Same-Store (2)			72				20,624			$	197,258			$	188,246				4.8	%		$	60,079			$	59,120				1.6	%

 

										Net Operating Income
		No. of				No. of												%				%
Region		Communities				Homes				YTD 2013				YTD 2012				Change				of Total
California
San Diego			11				3,640			$	24,188			$	23,526				2.8	%			17.6	%
Inland Empire			5				1,173				6,830				6,689				2.1	%			5.0	%
Orange County			12				3,789				23,873				23,134				3.2	%			17.4	%
Los Angeles			13				3,067				22,326				20,898				6.8	%			16.3	%
San Francisco Bay Area			15				4,197				36,542				32,820				11.3	%			26.6	%
Subtotal; California			56				15,866			$	113,759			$	107,067				6.3	%			82.9	%
Washington
Seattle			13				3,456				18,421				17,199				7.1	%			13.4	%
Non Core Markets (1)			3				1,302				4,999				4,860				2.9	%			3.7	%
Total Same-Store (2)			72				20,624			$	137,179			$	129,126				6.2	%			100.00	%

 

										Net Operating  Income								Avg. Physical Occupancy				Gross Carrying Value
"Non Same-Store" Summary		No. of Communities				No. of Homes				YTD 2013				YTD 2012				YTD 2013				YTD 2013
Lease up communities (3)			2				502			$	2,133			$	(5	)			57.8	%		$	147,726
Joint venture income (4)			1				252				429				1,456
Commercial and Other (5)			n/a				n/a				67				14
Other income			n/a				n/a				653				1,225
Discontinued operations (6)			4				712				1,396				4,190
Total  Non Same-Store			7				1,466			$	4,678			$	6,880				57.8	%		$	147,726
Less: Communities Sold in 2012 and 2013			(4	)			(712	)
Total All Homes / NOI			75				21,378			$	141,857			$	136,006

 

 

(1)

Consists of one community in Sacramento, CA (400 homes) and two communities in Phoenix, AZ (902 homes).

(2)

Consists of communities completed, stabilized and owned by BRE for at least two comparable calendar year periods. The term stabilized refers to communities that have reached a physical occupancy of at least 93% as of 1/1/2012.

(3)

Consists of NOI from two fully delivered communities under lease up.

(4)

Consists of the percentage of net income derived from joint venture investments in rental communities.  See page 9 for a reconciliation of the components of BRE's share of joint venture net income (including our proportionate share of NOI).

(5)

Consists of NOI from retail tenants associated with the operating communities and NOI from commercial communities that will later be developed as multifamily and other real estate expenses.

(6)

Includes results from three communities sold in 2012 and one community sold in 2013.

 

 

BRE Properties, Inc.

"Same-Store" Operating Expense Summary and Joint Venture Disclosure

(Dollar amounts in thousands)

 

SAME-STORE OPERATING EXPENSES (20,624 homes)

 

Quarters ended June 30, 2013 and 2012            

 

																		% of Q2 '13
Quarter Ended June 30, 2013										$				%				Operating
		Q2'13				Q2'12				Change				Change				Expenses
Property taxes(1)		$	8,226			$	8,682			$	(456	)			-5.3	%			28.0	%
Insurance			1,393				1,240				153				12.3	%			4.7	%
Utilities			2,039				1,919				120				6.3	%			7.0	%
Property management fees (2)			3,225				3,078				147				4.8	%			11.0	%
Other operating expenses (3)			14,484				14,680				(196	)			-1.3	%			49.3	%
Total operating expenses		$	29,367			$	29,599			$	(232	)			-0.8	%			100.0	%

 

Six Months Ended June 30, 2013 and 2012																		% of YTD 2013
										$				%				Operating
		YTD 2013				YTD 2012				Change				Change				Expenses
Property taxes(1)		$	17,668			$	17,894			$	(226	)			-1.3	%			29.4	%
Insurance			2,767				2,506				261				10.4	%			4.6	%
Utilities			4,265				4,032				233				5.8	%			7.1	%
Property management fees (2)			6,411				6,113				298				4.9	%			10.7	%
Other operating expenses (3)			28,968				28,575				393				1.4	%			48.2	%
Total operating expenses		$	60,079			$	59,120			$	959				1.6	%			100.0	%

 

(1)

During the three months and six months ended June 30, 2013, property tax refunds of approximately $1.0 million were received from appeals related to the 2010 and 2011 tax years.

(2)

Management fees based on a percentage of total revenues. Amount approximates the corporate cost to support on-site personnel. Corporate G&A is reduced by the allocation.

(3)

Includes advertising, payroll, property level administrative costs, repairs & maintenance and unit turnover costs.

 

JOINT VENTURE DISCLOSURE- Quarters and Six Months Ended June 30, 2013

 

Joint Ventures			Communities				Regional Breakdown		Homes				BRE equity investment				BRE share of JV Debt				Q2'13 FFO contribution from remaining joint venture community
Relationship - 35% BRE equity ownership				1			PHX			252			$	6,438			$	-			$	145

 

BRE share of:		Q2'13				Q2'12				YTD 2013				YTD 2012
Revenues		$	395			$	1,935			$	1,454			$	3,829
Expenses			182				703				627				1,374
Net Operating Income			213				1,232				827				2,455
Depreciation			101				504				398				999
Net Income		$	112			$	728			$	429			$	1,456
Joint Venture Sales			Q2'13 (4)				Q2'12				YTD 2013(4)				YTD 2012
Communities			1				-				7				-
Homes			432				-				2,612				-
BRE share			Q2'13 (4)				Q2'12				YTD 2013(4)				YTD 2012
Net Proceeds		$	6,000				-			$	53,408				-
Net Gain on Sale		$	3,608				-			$	18,633				-
			Q2'13				Q2'12				YTD 2013				YTD 2012
Management fees earned		$	68			$	431			$	327			$	851

 

(4)

During the quarter ended June 30, 2013, the Company sold one joint venture interest located in Phoenix, AZ that the Company had a 15% equity ownership. During the six months ended June 30, 2013, seven joint venture interests were sold of which six were sold  to the Company's joint venture partner. The sales consisted of four joint venture communities located in Denver, CO and three joint venture communities located in Phoenix, AZ. The Company maintained a 15% equity ownership in all seven joint venture communities prior to the sale.

 

 

BRE Properties, Inc.

Sequential "Same-Store" Multifamily Markets Summary

Last five quarters     

REVENUES

 

		Q2'13				Q1'13				Q4'12				Q3'12				Q2'12
California
San Diego			0.5	%			-0.8	%			0.4	%			1.7	%			0.2	%
Inland Empire			-1.2	%			0.1	%			1.3	%			1.1	%			0.0	%
Orange County			1.3	%			0.1	%			0.8	%			1.1	%			1.5	%
Los Angeles			0.5	%			0.5	%			0.5	%			2.5	%			0.8	%
San Francisco Bay Area			1.9	%			0.4	%			2.3	%			3.4	%			1.9	%
Subtotal; California			1.0	%			0.1	%			1.1	%			2.2	%			1.1	%
Washington
Seattle			3.0	%			-0.4	%			1.5	%			2.5	%			3.5	%
Non Core Markets (1)			-0.5	%			1.3	%			0.3	%			-0.5	%			2.8	%
Total Same-Store (3)			1.2	%			0.1	%			1.2	%			2.1	%			1.5	%

 

EXPENSES ⁽²⁾

 

		Q2'13				Q1'13				Q4'12				Q3'12				Q2'12
California
San Diego			-1.1	%			-1.5	%			-1.2	%			0.1	%			4.1	%
Inland Empire			-1.8	%			-2.5	%			-1.5	%			5.9	%			1.4	%
Orange County			-0.7	%			0.9	%			0.9	%			3.7	%			-2.3	%
Los Angeles			-11.9	%			3.1	%			-4.2	%			9.1	%			-4.4	%
San Francisco Bay Area			-6.6	%			1.1	%			0.7	%			3.2	%			-2.2	%
Subtotal; California			-5.0	%			0.7	%			-0.9	%			4.1	%			-1.2	%
Washington
Seattle			0.4	%			5.7	%			4.5	%			-7.3	%			7.9	%
Non Core Markets (1)			-9.9	%			12.3	%			-9.2	%			4.0	%			1.0	%
Total Same-Store (3)			-4.4	%			2.0	%			-0.5	%			2.3	%			0.3	%

 

NET OPERATING INCOME  

 

		Q2'13				Q1'13				Q4'12				Q3'12				Q2'12
California
San Diego			1.2	%			-0.5	%			1.0	%			2.4	%			-1.4	%
Inland Empire			-0.8	%			1.3	%			2.8	%			-1.2	%			-0.6	%
Orange County			2.3	%			-0.2	%			0.7	%			-0.1	%			3.3	%
Los Angeles			6.8	%			-0.7	%			3.0	%			-0.7	%			3.6	%
San Francisco Bay Area			5.2	%			0.1	%			3.0	%			3.5	%			3.6	%
Subtotal; California			3.6	%			-0.2	%			2.1	%			1.4	%			2.1	%
Washington
Seattle			4.4	%			-3.5	%			0.0	%			7.9	%			1.3	%
Non Core Markets (1)			5.4	%			-4.6	%			6.3	%			-3.1	%			4.0	%
Total Same-Store (3)			3.8	%			-0.8	%			1.9	%			2.1	%			2.1	%

 

(1)

Consists of one community in Sacramento, CA (400 homes) and two communities in Phoenix, AZ (902 homes).

(2)

Expenses fluctuate from quarter to quarter due to timing of repairs and maintenance, utilities and other items.

(3)

Data reflects sequential results for the Company's current same-store pool totaling 20,624 homes for all periods shown.

 

 

BRE Properties, Inc.

Summary of Revenue and Occupancy Changes - "Same-Store" Communities 

 

Q2'13 vs. Q1'13 Change						Avg. Revenue per Occupied Home (1)												Financial Occupancy (2)												Rental Revenue
		Homes				Q2'13				Q1'13				%  Change				Q2'13				Q1'13				%  Change				Q2'13				Q1'13				%  Change
San Diego			3,640			$	1,657			$	1,633				1.5	%			94.3	%			95.2	%			-0.9	%		$	17,066			$	16,973				0.5	%
Inland Empire			1,173				1,488				1,490				-0.1	%			94.6	%			95.6	%			-1.0	%			4,955				5,013				-1.2	%
Orange County			3,789				1,629				1,601				1.7	%			94.5	%			94.9	%			-0.4	%			17,494				17,266				1.3	%
Los Angeles			3,067				1,889				1,852				2.0	%			93.9	%			95.3	%			-1.4	%			16,321				16,236				0.5	%
San Francisco Bay Area			4,197				2,098				2,054				2.1	%			95.1	%			95.3	%			-0.2	%			25,125				24,652				1.9	%
																																			-
Seattle			3,456				1,446				1,416				2.1	%			95.6	%			94.8	%			0.8	%			14,333				13,915				3.0	%
																																			-
Non Core Markets			1,302				1,070				1,052				1.7	%			94.4	%			96.5	%			-2.1	%			3,944				3,965				-0.5	%
Same-Store			20,624			$	1,694			$	1,664				1.8	%			94.7	%			95.2	%			-0.5	%		$	99,238			$	98,020				1.2	%

 

Q2'13 vs. Q2'12 Change						Avg. Revenue per Occupied Home (1)												Financial Occupancy (2)												Rental Revenue
		Homes				Q2'13				Q2'12				%  Change				Q2'13				Q2'12				%  Change				Q2'13				Q2'12				%  Change
San Diego			3,640			$	1,657			$	1,616				2.5	%			94.3	%			95.0	%			-0.7	%		$	17,066			$	16,762				1.8	%
Inland Empire			1,173				1,488				1,475				0.9	%			94.6	%			94.2	%			0.4	%			4,955				4,891				1.3	%
Orange County			3,789				1,629				1,559				4.5	%			94.5	%			95.5	%			-1.0	%			17,494				16,927				3.3	%
Los Angeles			3,067				1,889				1,790				5.5	%			93.9	%			95.2	%			-1.3	%			16,321				15,677				4.1	%
San Francisco Bay Area			4,197				2,098				1,945				7.9	%			95.1	%			94.8	%			0.3	%			25,125				23,211				8.2	%
Seattle			3,456				1,446				1,356				6.6	%			95.6	%			95.6	%			0.0	%			14,333				13,437				6.7	%
Non Core Markets			1,302				1,070				1,051				1.8	%			94.4	%			95.5	%			-1.1	%			3,944				3,920				0.6	%
Same-Store			20,624			$	1,694			$	1,611				5.2	%			94.7	%			95.1	%			-0.5	%		$	99,238			$	94,825				4.7	%

 

2013 vs. 2012 Change						Avg. Revenue per Occupied Home (1)												Financial Occupancy (2)												Rental Revenue
		Homes				YTD 6/30/13				YTD 6/30/12				%  Change				YTD 6/30/13				YTD 6/30/12				%  Change				YTD 6/30/13				YTD 6/30/12				%  Change
San Diego		3,640				$1,645				$1,613				2.0%				94.7%				95.1%				-0.4%				$34,039				$33,494				1.6%
Inland Empire			1,173				1,489				1,469				1.4	%			95.1	%			94.6	%			0.5	%			9,967				9,782				1.9	%
Orange County			3,789				1,614				1,550				4.1	%			94.7	%			95.3	%			-0.6	%			34,760				33,603				3.4	%
Los Angeles			3,067				1,870				1,778				5.2	%			94.6	%			95.4	%			-0.8	%			32,557				31,221				4.3	%
San Francisco Bay Area			4,197				2,076				1,922				8.0	%			95.2	%			95.0	%			0.2	%			49,777				45,996				8.2	%
Seattle			3,456				1,431				1,332				7.4	%			95.2	%			95.6	%			-0.4	%			28,248				26,418				6.9	%
Non Core Markets			1,302				1,061				1,041				2.0	%			95.4	%			95.1	%			0.3	%			7,910				7,732				2.3	%
Same-Store			20,624			$	1,679			$	1,598				5.1	%			94.9	%			95.2	%			-0.3	%		$	197,258			$	188,246				4.8	%

 

(1)

Average revenue per occupied home includes rental and ancillary income earned on occupied homes during the period.  Ancillary income per occupied home totals approximately $64 per home per month for the six months ended June 30, 2013 and $61 per home per month for the six months ended June 30, 2012. Amounts reflect the effect of concessions amortized over the average lease term.

(2)

Financial occupancy is defined as gross potential rent less vacancy loss as a percentage of gross potential rent. Gross potential rent is determined by valuing occupied homes at contract rates and vacant homes at market rents. Vacancy loss is determined by valuing vacant homes at current market rents.

 

 

BRE Properties, Inc.

"Same-Store" Operating Metrics

 

		No. of				Occupancy (2)								Occupancy (3)								Turnover Ratio (4)								Turnover Ratio (4)
California		Homes				Q2'13				Q2'12				YTD'13				YTD'12				Q2'13				Q2'12				YTD'13				YTD'12
San Diego			3,640				94.6	%			94.9	%			94.9	%			95.0	%			65.9	%			69.5	%			61.1	%			65.3	%
Inland Empire			1,173				94.6	%			94.2	%			95.1	%			94.6	%			65.1	%			70.9	%			59.5	%			61.2	%
Orange County			3,789				94.7	%			95.8	%			94.7	%			95.5	%			66.6	%			64.7	%			60.5	%			61.0	%
Los Angeles			3,067				94.4	%			95.5	%			94.9	%			95.7	%			69.8	%			67.7	%			63.8	%			62.7	%
San Francisco Bay Area			4,197				95.5	%			95.4	%			95.5	%			95.4	%			61.6	%			60.8	%			58.0	%			57.7	%
Subtotal; California			15,866				94.8	%			95.3	%			95.0	%			95.3	%			65.6	%			65.8	%			60.6	%			61.5	%
Washington
Seattle			3,456				95.9	%			96.0	%			95.4	%			95.9	%			59.1	%			56.8	%			54.6	%			49.7	%
Non Core Markets (1)			1,302				94.2	%			95.4	%			95.1	%			95.0	%			65.1	%			67.3	%			55.9	%			61.1	%
Total/Average Same-Store (5)			20,624				95.0	%			95.4	%			95.1	%			95.4	%			64.5	%			64.4	%			59.3	%			59.5	%

 

⁽¹⁾ Consists of one community in Sacramento, CA (400 homes) and two communities in Phoenix, AZ (902 homes).

⁽²⁾ Represents average physical occupancy for the quarter. 

⁽³⁾ Represents average physical occupancy for the year to date period.

⁽⁴⁾ Represents the annualized number of homes turned over for the period, divided by the number of homes in the region.

⁽⁵⁾ Consists of stabilized communities owned by BRE since January 1, 2012.

 

"Same -Store" New Lease and Renewal Transactions

 

		New Leases																Renewals																Total New Leases/Renewals
						New  Leases				Previous Resident				%								Renewal				Expiring				%								Current				Prior				%
California		Q2'13				Effective (6)				Effective (7)				Change				Q2'13				Effective (6)				Effective (8)				Change				Q2'13				Effective (6)				Effective				Change
San Diego			592			$	1,633			$	1,571				3.9	%			558			$	1,664			$	1,591				4.6	%			1,150			$	1,648			$	1,581				4.2	%
Inland Empire			173				1,481				1,459				1.5	%			188				1,495				1,441				3.8	%			361				1,488				1,449				2.7	%
Orange County			597				1,627				1,579				3.0	%			491				1,631				1,557				4.8	%			1,088				1,629				1,569				3.8	%
Los Angeles			479				1,891				1,838				2.9	%			411				1,904				1,809				5.2	%			890				1,897				1,825				4.0	%
San Francisco Bay Area			627				2,240				2,089				7.2	%			685				2,157				2,015				7.0	%			1,312				2,197				2,051				7.1	%
Subtotal; California			2,468			$	1,825			$	1,749				4.4	%			2,333			$	1,831			$	1,735				5.5	%			4,801			$	1,828			$	1,742				4.9	%
Washington
Seattle			509				1,462				1,368				6.9	%			588				1,439				1,354				6.3	%			1,097				1,450				1,360				6.6	%
Non Core Markets (1)			172				1,033				1,039				-0.6	%			196				1,105				1,062				4.1	%			368				1,071				1,051				1.9	%
Total Same-Store (9)			3,149			$	1,723			$	1,648				4.5	%			3,117			$	1,711			$	1,620				5.6	%			6,266			$	1,717			$	1,634				5.1	%

 

(6)

Represents leased rent per home less the monthly value of concessions awarded on leases and renewals signed during the quarter.

(7)

Represents leased rent per home less the monthly value of concessions awarded on the prior resident for the same home that was leased during the quarter.

(8)

Represents leased rent per home less the monthly value of concessions awarded on the prior lease that expired during the quarter.

(9)

The Q2'13 total same-store pool consists of 20,624 homes. Average lease term for leases signed during the quarter was 10 months. Annualized growth for total new leases/renewals totals 6.1%.

 

 

 

 

BRE Properties, Inc.

Debt Summary as of June 30, 2013

(Dollar amounts in thousands)

 

DEBT MATURITY SCHEDULE
		Secured Debt								Unsecured Debt												Weighted
		Amortization				Balloon				Floating				Fixed				Total				Avg. Rate		(1)		% of Debt
Year
2013		$	163			$	-			$	-			$	-			$	163				5.74	%			0.0	%
2014			3,839				-				-				50,000				53,839				4.77	%			3.2	%
2015			7,962				-				-				-				7,962				5.63	%			0.5	%
2016			9,041				-				-				-				9,041				5.64	%			0.5	%
2017			9,307				-				-				300,000				309,307				5.50	%			18.6	%
2018			9,853				-				-				-				9,853				5.63	%			0.6	%
2019			6,492				317,975				-				-				324,467				5.59	%			19.5	%
2020			3,346				343,646				-				-				346,992				5.61	%			20.9	%
2021			-				-				-				300,000				300,000				5.20	%			18.1	%
2022			-				-				-				-				-				0.00	%			0.0	%
2023			-				-				-				300,000				300,000				3.38	%			18.1	%
Total		$	50,003			$	661,621			$	-			$	950,000			$	1,661,624				5.08	%			100	%

 

WEIGHTED AVERAGE COST OF DEBT
						Weighted				Weighted				Percentage of
		Balance				Avg. Term				Avg. Rate				Total Debt
Fixed Rate
Unsecured		$	950,000				6.66				4.69	%			57.2	%
Secured			711,624				6.37				5.60	%			42.8	%
		$	1,661,624				6.54				5.08	%			100.0	%
Floating Rate
Unsecured(2)			-				1.76								0.0	%
Loan Fees(3)											0.26	%
Total Debt		$	1,661,624				6.54				5.34	%			100.0	%

 

CAPITALIZED INTEREST

SENIOR UNSECURED DEBT RATING As of July 29, 2013

Q2'13

Q2'12

Capitalized Interest

$

5,997

$

5,369

Moody's

Baa2

(stable)

Standard & Poor's

BBB

(stable)

Fitch

BBB+

(stable)

YTD 2013

YTD 2012

Capitalized Interest

$

11,649

$

10,218

 

 

SUMMARY OF COMPLIANCE - Senior Unsecured Notes										SUMMARY OF COMPLIANCE - Line of Credit
		Requirement				Actual						Requirement				Actual
Total Debt to Gross Assets			< 160	%			39	%		Leverage Ratio			< 160	%			33	%
Debt Service Test			> 11.50				2.79			Maximum Secured Indebtedness			< 140	%			13	%
Total Secured Debt  to Total Assets			< 140	%			17	%		Minimum Unsecured Leverage			> 11.65				4.13
Total Unencumbered Assets to Unsecured Debt			> 11.50				3.40			Minimum Fixed Charge Coverage			> 11.50				2.75

 

 

 

SUMMARY OF PREFERRED SHARES
		Q2'13
Total preferred shares outstanding			2,160
Liquidation value		$	53,993
Dividend yield at par			6.75	%

 

(1) Represents the weighted average coupon interest rates of BRE's debt maturities in the year in which they become due.
(2) The $750 million senior unsecured line of credit priced at LIBOR plus 120 bps plus an annual 20 bps facility fee on the total commitment of the facility, which matures on April 3, 2015, and has a one year extension option.
(3) Includes amortization of all fees associated with all outstanding debt (including annual facility fees on the unsecured line of credit).

 

 

BRE Properties, Inc.

Development Summary

June 30, 2013

(Dollar amounts in millions)

 

		Number				Cost				Estimated				Balance to				Product				First				Final
CONSTRUCTION IN PROGRESS		of Homes				Incurred				Cost				Fund				Type				CO (1)				CO (1)
Solstice
Sunnyvale, CA			280			$	93.2			$	121.9			$	28.7				Podium				Q4'13				Q1'14
Wilshire La Brea
Los Angeles, CA			478				211.6				277.3				65.7				Podium				Q4'13				Q4'14
Radius
Redwood City, CA			264				39.2				97.8				58.6				Podium				Q2'14				Q4'14
MB360
San Francisco, CA			360				87.7				227.2				139.5				Podium				Q2'14				Q4'14
Total CIP			1,382			$	431.7			$	724.2			$	292.5

 

Number

Cost

Estimated

Balance to

Product

Estimated

LAND UNDER DEVELOPMENT (2)

of Homes

Incurred

Cost (3)

Fund

Type

Start Date

Pleasanton I

Pleasanton, CA

251

$

21.7

TBR

TBR

Garden

1H'14

Pleasanton II

Pleasanton, CA

255

14.8

TBR

TBR

Garden

2H'14

Total Land Owned

506

$

36.5

$

171.0

$

134.5

  

Number

Cost

Estimated

Balance to

Product

LAND UNDER CONTRACT (4)

of Homes

Incurred (5)

Cost (3)

Fund

Type

Walnut Creek BART

Walnut Creek, CA

358

$

12.7

TBR

TBR

Podium

 

(1)		Represents estimated quarters in which first and final certificates of occupancy will be received. Projects generally receive phased certificates of occupancy  during the final six to twelve months of construction.
(2)		Represents projects in various stages of pre-construction development. Projects are transferred to Construction in progress when construction contracts are finalized and construction activity has commenced.
(3)		Reflects the aggregate cost estimates including  land. Specific community cost estimates To Be Reported (TBR) once entitlement approvals are received and the Company is prepared to begin construction.
(4)		Land under contract represents land parcels for which the Company: 1) has a signed agreement and the right to acquire the land (but not the obligation), 2) made a non refundable deposit and 3) commenced the entitlement process. Costs incurred on these projects are recorded in Other assets on the Consolidated Balance Sheets.
(5)		Represents deposits, contractual costs, and internal and external entitlement expenses incurred to date.
Note:		Development pipeline totals above do not include a potential future redevelopment site in Emeryville, California.  The site consists of two existing occupied office buildings. The net book value of this investment is $10.2 million and it is recorded in Investment in rental communities. Predevelopment costs associated with this site total $3.8 million and are recorded in Other assets.

 

 

BRE Properties, Inc.		Exhibit A
Share Analysis as of June 30, 2013
(Share amounts in thousands)

 

SUMMARY OF COMMON SHARES
		Qtr. Ended				Qtr. Ended				Qtr. Ended				Qtr. Ended				Qtr. Ended
Weighted Average		6/30/2013				3/31/2013				12/31/2012				9/30/2012				6/30/2012
Weighted average shares outstanding (1)			77,106				76,990				76,872				76,813				76,735
Dilutive effect of stock based awards			174				260				308				317				335
Diluted shares - FFO			77,280				77,250				77,180				77,130				77,070
Diluted shares - EPS(2)			77,280				77,250				77,180				77,130				77,070

 

		YTD				YTD
Weighted Average		6/30/2013				6/30/2012
Weighted average shares outstanding (1)			77,047				76,323
Weighted average OP units			-				40
Dilutive effect of stock based awards			223				377
Diluted shares - FFO			77,270				76,740
Less: Anti-dilutive stock based awards (3)			-				(40	)
Diluted shares - EPS(2)			77,270				76,700

 

		As of				As of				As of				As of				As of
Ending		6/30/2013				3/31/2013				12/31/2012				9/30/2012				6/30/2012
Shares outstanding at end of period			77,155				77,058				76,925				76,831				76,796
Dilutive effect of stock based awards			134				172				330				313				287
Total			77,289				77,230				77,255				77,144				77,083

  

SUMMARY OF PREFERRED  SHARES

Qtr. Ended

Qtr. Ended

Qtr. Ended

Qtr. Ended

Qtr. Ended

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

6.75% Series D, $25 per share liquidation preference

2,160

2,160

2,160

2,160

2,160

 

(1)	Represents denominator for shares in the calculation of basic earnings per share.
(2)	Represents denominator for shares in the calculation of diluted EPS.
(3)	Under FASB guidance, common share equivalents deemed to be anti-dilutive are excluded from the diluted earnings per share calculations.

  

 

BRE Properties, Inc.		Exhibit B
Non-GAAP Financial Measure Reconciliations and Definitions
(Dollar amounts in thousands)

 

This document includes certain non-GAAP financial measures that management believes are helpful in understanding our business, as further described below.  BRE's definition and calculation of non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.  The non-GAAP financial measures should not be considered an alternative to net income or any other GAAP measurement of performance and should not be considered an alternative to cash flows from operating, investing or financing activities as a measure of liquidity.  

             

Funds from Operations (FFO)             

Funds from Operations ("FFO") is used by industry analysts and investors as a supplemental performance measure of an equity REIT. FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income or loss (computed in accordance with accounting principles generally accepted in the United States) excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated real estate assets, plus depreciation and amortization of real estate assets and adjustments for unconsolidated partnerships and joint ventures. The Company calculates FFO in accordance with the NAREIT definition. 

 

The Company believes that FFO is a  meaningful supplemental measure of the Company's operating performance because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental performance measure because it excludes historical cost depreciation, as well as gains or losses related to sales of previously depreciated community, from GAAP net income. By excluding depreciation and gains or losses on sales of real estate, management uses FFO to measure returns on its investments in real estate assets.  However, because FFO excludes depreciation and amortization and captures neither the changes in the value of the communities that result from use or market conditions nor the level of capital expenditures to maintain the operating performance of the communities, all of which have real economic effect and could materially impact the Company's results from operations, the utility of FFO as a measure of our performance is limited.

 

Management also believes that FFO, combined with the required GAAP presentations, is useful to investors in providing more meaningful comparisons of the operating performance of a company’s real estate between periods or as compared to other companies. FFO does not represent net income or cash flows from operations as defined by GAAP and is not intended to indicate whether cash flows will be sufficient to fund cash needs. It should not be considered an alternative to net income as an indicator of the REIT’s operating performance or to cash flows as a measure of liquidity. The Company's FFO may not be comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition. 

             

Core Funds from Operations ("Core FFO")            

The Company believes that Core funds from Operations ("Core FFO") is a meangingful supplemental measure of our operating performance for the same reasons as FFO and adjusting for non-routine items that when excluded allows for more comparable periods. Core FFO begins with FFO as defined by the NAREIT White Paper and is adjusted for: the impact of any expenses relating to non-operating asset impairment and valuation allowances; property acquisition costs and pursuit cost write-offs (other expenses); gains and losses from early debt extinguishment, including prepayment penalties and preferred share redemptions; executive level severance costs; gains and losses on the sales of non-operating assets, and other non-comparable items.

 

		Quarter Ended 6/30/2013				Quarter Ended 6/30/2012				Six Months Ended  6/30/2013				Six Months Ended  6/30/2012
Net income available to common shareholders		$	43,607			$	28,696			$	77,634			$	46,804
Depreciation from continuing operations			26,090				24,244				51,640				48,602
Depreciation from discontinued operations			91				625				368				1,299
Depreciation from unconsolidated entities			101				504				398				999
Net gain on sales of discontinued operations			(17,394	)			(8,279	)			(17,394	)			(8,279	)
Net gain on sale of unconsolidated entities			(3,608	)			-				(18,633	)			-
Funds from operations		$	48,887			$	45,790			$	94,013			$	89,425
Core Funds from operations		$	48,887			$	45,790			$	94,013			$	89,425
Diluted shares outstanding - EPS (1)			77,280				77,070				77,270				76,700
Net income per common share - diluted		$	0.56			$	0.37			$	1.00			$	0.61
Diluted shares outstanding - FFO (1)			77,280				77,070				77,270				76,740
FFO per common share - diluted		$	0.63			$	0.59			$	1.22			$	1.17
Diluted shares outstanding -  Core FFO (1)			77,280				77,070				77,270				76,740
Core FFO per common share - diluted		$	0.63			$	0.59			$	1.22			$	1.17

 

(1) See analysis of weighted average shares and ending shares at Exhibit A.

 

 

BRE Properties, Inc.		Exhibit B, Continued
Non-GAAP Financial Measure Reconciliations and Definitions
(Dollar amounts in thousands)

 

 

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA        

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.  Adjusted EBITDA is defined by BRE as EBITDA, excluding minority interests, gains or losses from sales of investments, preferred stock dividends and other expenses. BRE considers EBITDA and Adjusted EBITDA to be appropriate supplemental measures of the Company's performance because they eliminate depreciation, interest, and, with respect to Adjusted EBITDA,  gains (losses) from community dispositions and other charges, which permits investors to view income from operations without the impact of noncash depreciation or the cost of debt, or with respect to Adjusted EBITDA, other non-operating items described above.  

 

Because EBITDA and Adjusted EBITDA exclude depreciation and amortization and capture neither the changes in the value of our communities that result from use or market conditions nor the level of capital expenditures to maintain the operating performance of our communities, all of which have real economic effect and could materially impact the Company's results from operations, the utility of EBITDA and Adjusted EBITDA as measures of the Company's performance is limited.  Below is a reconciliation of net income available to common shareholders to EBITDA and Adjusted EBITDA:

 

		Quarter Ended 6/30/2013				Quarter Ended 6/30/2012				Six Months Ended 6/30/2013				Six Months Ended 6/30/2012
Net income available to common shareholders		$	43,607			$	28,696			$	77,634			$	46,804
Interest, including discontinued operations			16,655				16,272				33,987				33,490
Depreciation, including discontinued operations			26,181				24,869				52,008				49,901
EBITDA			86,443				69,837				163,629				130,195
Redeemable noncontrolling interest in income			48				105				95				210
Net gain on sales			(17,394	)			(8,279	)			(17,394	)			(8,279	)
Net gain on sale of unconsolidated entities			(3,608	)			-				(18,633	)			-
Dividends on preferred stock			911				911				1,822				1,822
Adjusted EBITDA			66,400			$	62,574			$	129,519			$	123,948

 

Net Operating Income (NOI)            

The Company considers community level and portfolio-wide NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core community operations prior to the allocation of general and administrative costs. This is more reflective of the operating performance of the real estate, and allows for an easier comparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of real estate have different overhead structures, with varying marginal impact to overhead from acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets.  

 

Because NOI excludes depreciation and does not capture the change in the value of the communities resulting from operational use and market conditions, nor the level of capital expenditures required to adequately maintain the communities (all of which have real economic effect and could materially impact the Company's results from operations), the utility of NOI as a measure of our performance is limited. Other equity REITs may not calculate NOI consistently with the Company's definition and, accordingly, the Company's NOI may not be comparable to such other REITs' NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of the Company's performance. NOI should not be used as a measure of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to pay dividends or make distributions. NOI also should not be used as a supplement to or substitute for cash flow from operating activities (computed in accordance with GAAP).

 

		Quarter Ended 6/30/2013				Quarter Ended 6/30/2012				Six Months Ended 6/30/2013				Six Months Ended 6/30/2012
Net income available to common shareholders		$	43,607			$	28,696			$	77,634			$	46,804
Interest, including discontinued operations			16,655				16,272				33,987				33,490
Depreciation, including discontinued operations			26,181				24,869				52,008				49,901
Redeemable noncontrolling interest in income			48				105				95				210
Net gain on sales			(17,394	)			(8,279	)			(17,394	)			(8,279	)
Net gain on sale of unconsolidated entities			(3,608	)			-				(18,633	)			-
Dividends on preferred stock			911				911				1,822				1,822
General and administrative expense			5,956				6,211				12,338				12,058
NOI		$	72,356			$	68,785			$	141,857			$	136,006
Less Non Same-Store NOI			2,485				3,559				4,678				6,880
Same-Store NOI		$	69,871			$	65,226			$	137,179			$	129,126