BRE Sells 85% Stake in 2,184 Units

A company source tells GlobeSt.com that the transaction involves all of its units in Denver and 30% of its units in Phoenix. According to its 2005 annual report, BRE owns 1,620 units in Denver that were 92% leased at the end of the year and 1,898 units in Phoenix that were 95% leased. Market rents in the markets were $840 and $798, respectively, the lowest of any of the markets in which BRE invests.

Net proceeds to BRE from the transaction were $200 million. The apartment REIT says it will use the money to pay down floating rate debt. Wachovia Securities advised BRE in the transaction. In connection with the transaction, the company expects to record a gain on sale of approximately $38 million, or $0.73 per share. The company has revised 2006 EPS guidance to a range of $1.72 to $1.84 per share, from a range of $0.99 to $1.11. Its 2006 FFO estimate remains at $2.44 to $2.56 per share.

BRE directly owns and operates 86 apartment communities totaling 24,442 units in California, Arizona, Washington and Colorado. The company currently has another 11 properties (2,899 units) in various stages of development and construction, totaling 2,899 units, and joint venture interests in two additional apartment communities, totaling 488 units.

During first quarter 2006, BRE had three Southern California communities in the lease-up phase: The Heights, with 208 units, in Chino Hills; Galleria at Towngate, with 268 units, in Moreno Valley; and Bridgeport Coast, with 188 units, in Santa Clarita. At the end of the quarter, 192 units were delivered at The Heights, 132 of which were occupied. At Galleria at Towngate, 160 units were delivered, 102 of which were occupied. At Bridgeport Coast, 36 units were delivered, eight of which were occupied.

Including the three properties in lease-up, BRE currently has six communities (1,536 units) under construction at an aggregate cost of $356 million. Five of the properties are in Southern California and one is in Northern California. Expected delivery dates for these units range from second quarter 2006 through fourth quarter 2007.

BRE acquired two parcels of land in California in the first quarter: a 14.5-acre site in Anaheim, with a purchase price of approximately $30 million, or $2.1 million per acre; and a 7.3-acre site in Santa Clara, with a purchase price of $28.5 million, or $3.9 million per acre. The Santa Clara development site includes three occupied office buildings with approximately 50,000 sf of space. The company intends to demolish the buildings, rezone the land for both single family and multifamily housing, sell the parcel designated for single family housing and develop the other.

Combined with parcels of land previously acquired, BRE now owns five parcels representing 1,363 units of future development. The land parcels are located in Southern California, Northern California and the Seattle metro area.