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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 14, 2006
BRE Properties, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-14306 94-1722214
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
525 Market Street, 4th Floor, San Francisco, CA 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 445-6530
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 8.01 OTHER EVENTS
On March 14, 2006, we announced that the Alameda County, Calif., Superior
Court has made a good faith settlement determination relating to the
construction defects litigation regarding Red Hawk Ranch, a 453-unit BRE
property located in Fremont, Calif. Under California law, this
determination releases equitable indemnity and contribution claims.
In March 2003, the company filed suit against the builder of Red Hawk Ranch
and other parties for construction defects. Under terms of the settlement,
BRE will receive an aggregate of $17.5 million from various defendants. The
settlement does not include claims associated with three subcontractors
against whom the company intends to continue litigation.
The company said all parties to the settlement made the required settlement
payments into escrow. The settlement payments will be released to BRE from
escrow subsequent to a 20-day appeal period. Absent a successful appeal,
BRE expects to receive settlement payment proceeds in early April. The
settlement will be recorded as Other Income and included in reported funds
from operations (FFO) per share and earnings per share (EPS).
The company expects to record the income from the settlement during second
quarter 2006. In addition, the company expects Other Expenses relating to
litigation costs to range $1.0 to $1.5 million during 2006, as compared
with the company's previous guidance range of $1.0 to $2.5 million. BRE has
revised 2006 earnings estimates to reflect the impact of this settlement on
FFO and EPS, as follows:
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o FFO guidance has been revised to a range of $2.40 to $2.52 per share,
from a range of $2.05 to $2.20 per share.
o EPS has been revised to a range of $0.95 to $1.07, from a range of $0.60
to $0.75. EPS estimates for 2006 do not include projected gains or losses
associated with property sales.
NON-GAAP FINANCIAL MEASURES
Certain non-GAAP financial measures are used throughout the text of this
release. These measures are defined and explained in Attachment A,
"Reconciliation and Definition of Non-GAAP Financial Measures," at the end
of this news release. See Attachment A.
ABOUT BRE
BRE Properties--a real estate investment trust--develops, acquires and
manages apartment communities convenient to its residents' work, shopping,
entertainment and transit in supply-constrained Western U.S. markets. BRE
directly owns and operates 85 apartment communities totaling 23,954 units
in California, Arizona, Washington and Colorado. The company currently has
nine other properties in various stages of development and construction,
totaling 2,312 units, and joint venture interests in two additional
apartment communities, totaling 488 units. As of 12/31/05.
"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, including
statements related to 2006 results of operations, property development,
acquisitions and dispositions and future capital-raising plans, 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 intonations. The following factors, among others,
could affect actual results and future events: defaults or nonrenewal of
leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to
acquire and in affecting acquisitions, failure to successfully integrate
acquired properties and operations, inability to dispose of assets that no
longer meet our investment criteria under applicable terms and conditions,
risks and uncertainties affecting property development and construction
(including construction delays, cost overruns, liability to obtain
necessary permits and public opposition to such activities), failure to
qualify as a real estate investment trust under the Internal Revenue Code
of 1986, as amended, and increases in real property tax rates. The
Company's success also depends on general economic trends, including
interest rates, tax laws, governmental regulation, legislation, population
changes and other factors, including those risk factors discussed in the
section entitled "Risk Factors" in the Company's most recent Annual Report
on Form 10-K as they may be updated from time to time by the Company's
subsequent filings with the Securities and Exchange Commission, including
it's most recent Quarterly Report on Form 10-Q. Do not rely solely on
forward-looking statements, which only reflect management's analysis. The
company assumes no liability to update this information. For more details,
please refer to the company's SEC filings, including its most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q.
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ATTACHMENT A: RECONCILIATION AND DEFINITION OF NON-GAAP FINANCIAL MEASURES
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 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 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. We calculate FFO in
accordance with the NAREIT definition.
We believe that FFO is a meaningful supplemental measure of our 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
property, 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 our properties that result from use or market conditions nor the level
of capital expenditures to maintain the operating performance of our
properties, all of which have real economic effect and could materially
impact our 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. Our FFO may not be comparable to the FFO of other REITs due to
the fact that not all REITs use the NAREIT definition.
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Below is a reconciliation of diluted EPS to diluted FFO per share:
Full Year 2006
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Low Range High Range
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Diluted Earnings per share $ 0.95 $ 1.07
Depreciation $ 1.43 $ 1.43
Minority interests convertible to common $ 0.02 $ 0.02
Diluted FFO per share $ 2.40 $ 2.52
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits. The following exhibits are furnished as part of this current
Report on Form 8-K:
99.1 Press Release dated March 14, 2006.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRE Properties, Inc.
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(Registrant)
Date: March 14, 2006 /s/ Edward F. Lange, Jr.
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Name: Edward F. Lange, Jr.
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