A few months ago, when I looked at BRE Properties
For the fourth quarter and fiscal 2005, BRE Properties turned in funds from operations (FFO) per share of $0.62 and $2.15, respectively. That's a 37.8% and 2.4% improvement over last year's $0.45 and $2.10, respectively. However, the numbers for both periods include a $0.09 benefit from the sale of a partnership interest, and the annual numbers include a $0.02 benefit from a settlement. Netting out the one-time items, growth for the quarter and year was actually 17.8% and -2.9%, respectively.
That's still a respectable performance for BRE Properties, considering the changes that have been occurring in the company's portfolio. It exited certain markets and is repositioning its portfolio in some of the remaining ones. For the quarter and year, the company also grew same-store net operating income by 12.3% and 5.2%, respectively. However, investors should heed the advice the company gave on its conference call: The full-year results are a better indicator of performance than those from the fourth quarter. Still, 5%-6% same-store net operating income growth is healthy.
The company expects roughly 5% same-store revenue growth in 2006, a slight improvement over the 4.2% growth in fiscal 2005. Across its portfolio, occupancy rates are in the 95% range, and the company was able to push through rental increases in some markets. Southern California and Phoenix are the standouts among BRE Properties' many healthy markets.
Putting a slight damper on next year's results, the company expects to incur slightly higher costs as it brings the appliances in many of its older units up to date and gets hit with rising natural gas and property insurance rates. BRE Properties expects FFO for fiscal 2006 to be $2.05 to $2.20, which is 0.5% to 7.8% higher than this year's adjusted FFO of $2.04. The company will also pay a dividend of $2.05 in 2006, a 2.5% increase over 2005. This keeps its FFO-based payout ratio at or near 100%, but the company expects to bring this ratio back in line in coming years.
There are many things to like about BRE Properties. But like AvalonBay Communities
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