Investor Day - SNL · Acquires TCR West (1997) Connie Moore named President & CEO (2005) ......

1Villa Granada | Santa Clara, CaliforniaVilla Granada | Santa Clara, California

2012

May 16

Investor Day

BRE Properties, Inc.2

Points of Emphasis

• Strength of market fundamentals in California

• Capital allocation and commitment to development pipeline

• Portfolio operating excellence

• Balance sheet strength


BRE Properties

• Publicly traded REIT (NYSE:BRE)

• Multifamily focus; founded 1970

• 76 wholly-owned communities; 21,336 homes(1)

• 10 development sites(2); 3,146 homes

• $5.6 billion total market cap

• Uninterrupted dividends since inception

Data as of May 2012.(1) Excludes 11 JV communities (3,592 homes) representing 1.0% of NOI.(2) Includes 3 land parcels under option contract which will support the future development of 872 homes.


A BRiEf History

Diversified Beginnings Transformation to Multifamily Sharpshooter Focus

IPO – 1995

BankAmerica Realty Investor’s IPO (1970)

Moves to NYSE under new symbol BRE (1980)

Becomes self-administered (1987)

Operates as a diversified REIT

1996 – 2004

Shifts to pure-play apartment REIT (1995)

REIT of CA merger (1996)

Acquires TCR West (1997)

Connie Moore named President & CEO (2005)

Divests $840.6 MM in non-core assets (1996-2004)

2005 – Present

De-levers and reduces development pipeline

Executive Management team & Board in place

Active early cycle acquirer

Shifts to development as recovery firms

Divests $715.0 MM in assets (2005-present)


Homeprint Transformation2004 BRE Homeprint

Seattle 12%

Denver 5%

Sacramento 8%Salt Lake City 2%

Inland Empire 8%Orange County 15%

San Diego 20%

San Francisco Bay Area 18%

Phoenix 7%

Data as of December 31, 2004.

Los Angeles 5%

Core Market Non-Core Market

Market FY2004 Average Rent

San Francisco Bay Area $1,348

San Diego $1,331

LA/OC $1,265

Sacramento $1,017

Seattle $ 954

Phoenix $ 967

Denver $ 798

Salt Lake City $ 753


ts NMa

Markets Exited/ReducedAlbuquerque (2000)Denver (2006)Las Vegas (2000)Phoenix (2006) Portland (2003)Tucson (2001)Sacramento (2008)Salt Lake City (2004)Inland Empire (2010)

Current Portfolio Profile• Avg. Age: 17 years• Avg. Community Size:

283 homes• ~90% of wholly-owned properties

are within 35 miles of the coast

Homeprint TransformationBRE Homeprint: % of Total NOI

Core Markets 70%

Non-core Markets 30%

2004

Q1 2012Core Markets 92%

Non-core Markets 8%

Seattle 13%

Inland Empire 5%

Orange County 17%

San Diego 20%

Los Angeles 16%

Data as of March 31, 2012. Non-core markets (3%) and joint ventures (1%) are not shown on the map but are included in the percentage calculations.

San Francisco Bay Area 25%


$1,002

$1,103 $1,098 $1,091 $1,118 $1,186

$1,284

$1,398

$1,478 $1,410 $1,424

$1,506

$800

$1,000

$1,200

$1,400

$1,600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sold Albuquerque,

Phoenix,Las Vegas,

Tucson

Monthly Revenue per Occupied Same Store Home

Strong Per Unit Cash Flows

2000-2005 CAGR 3.4% 2005-2011 CAGR 4.1%

Sold Portland

Sold Salt Lake City

Sold Denver & Phoenix to

JVSold

Sacramento

Sold Eastern Inland Empire


Board Independence and Strength

* Denotes Independent Director

Irving F. “Bud” Lyons III* (Chairman)Lead Independent Director, ProLogisDirector, EquinixFormer Vice Chairman & CIO, ProLogis

Paula F. Downey*President & CEOAAA Northern California, Nevada andUtah Insurance Exchange

Christopher J. McGurk*Chairman & CEOCinedigm Digital CinemaFormer Vice Chairman & COO, MGM

Matthew T. Medeiros*President & CEOSonicWALL, Inc.

Constance B. MoorePresident & CEOBRE Properties, Inc.

Jeanne R. Myerson*President & CEOThe Swig Company

Jeffrey T. Pero*Director, Redwood TrustRetired Partner, Latham & Watkins

Thomas E. Robinson*Director, Tanger Factory Outlet CentersSenior Advisor, Stifel Nicolaus WeiselFormer President and CFO, Storage USA

Dennis E. Singleton*Chairperson, Digital Realty Trust, Inc.Founding partner and former CFO, CIO and Director, Spieker Properties

Thomas P. Sullivan*Co-founder & former Managing PartnerWilson Meany Sullivan


Experienced Management Team

Stephen C. DominiakEVP, Chief Investment Officer

Experience: 25 yearsJoined BRE: 2008

Other firms: Archstone, JPI

Scott A. ReinertEVP, Operations

Experience: 29 yearsJoined BRE: 2011

Other firms: Irvine Company

John A. SchisselEVP, Chief Financial OfficerExperience: 24 yearsJoined BRE: 2009Other firms: Carr Properties,Wachovia Securities

Deborah J. JonesEVP, Associate Relations & DevelopmentExperience: 27 yearsJoined BRE: 1997, 2005Other firms: Trammell Crow, Irvine Company

Kerry FanwickEVP, General CounselExperience: 30 years

Joined BRE: 2007 Other firms: First Nationwide Bank

Demonstrated Track Record with Other Firms Prior to BRE

Constance B. MoorePresident & CEO

Experience: 36 yearsJoined BRE: 1977, 2002

Other firms: Security Capital, Security Capital Atlantic, Archstone

Total years: 171Average years: 28


Total years: 322Average years: 19

Deep Leadership Bench

Jeff BaileySVP, Property OperationsExperience: 21 yearsPrior firms: EQR, ConAm

Peter OlsonSVP, Chief Accounting OfficerExperience: 16 yearsPrior firm: E&Y

John WaylandSVP, InvestmentsExperience: 25 yearsPrior firm: Trammell Crow

Residential

John SelindhGroup VP, Marketing & Corp. CommunicationsExperience: 27 yearsPrior firms: Camden, Irvine

Co., Fairfield, ConAm

Stephanie AndreVP, TreasurerExperience: 14 yearsPrior firms: BAML, Credit

Suisse

Tami BusseVP, Internal AuditExperience: 18 yearsPrior firm: E&Y

Jason CrichfieldVP, FinanceExperience: 10 yearsPrior firm: E&Y

Kevin GraniVP, Property OperationsExperience: 23 yearsPrior firms: EQR, Archstone

Dewey HortonVP, Due DiligenceExperience: 25 yearsPrior firms: Security Capital,Travelers Insurance

Steven JensenVP, Information TechnologyExperience: 25 yearsPrior firms: Shorenstein,

Meridian Industrial Trust

Tyler KemmerVP, Operations Mgmt.Experience: 24 yearsPrior firm: Trammell

Crow Residential

Craig KirkendallVP, ConstructionExperience: 23 yearsPrior firm: Sunrise Senior

Living

Ken McCarrenVP, Capital & ProcurementExperience: 25 yearsPrior firm: Irvine Co.

Dan MessingerVP, TrainingExperience: 17 yearsPrior firm: Kimpton Hotels

Dave PowersVP, InvestmentsExperience: 10 yearsPrior firm: Private

developer

Steven SnellVP, Business IntelligenceExperience: 19 yearsPrior firm: Heitman

Properties

Kari WarrenVP, MarketingExperience: 16 yearsPrior firm: AvalonBay


BRE Today

• West Coast sharp shooter apartment REIT

• Leading operator with best-in-class EBITDA margins

• Development pipeline represents embedded growth

• Balance sheet strength & clean capitalstructure

• Experienced management team


Demographics

• 20 to 34-year-old cohort expected to grow 1.6x faster in CA vs. the rest of the nation over the next 10 years

Propensity to Rent

• CA’s homeownership rate is 1100 basis points below national rate

• 75% of CA’s population under age 35 rents

Limited Supply

• New supply in BRE markets estimated to average only 0.8% of existing stock over next 5 years

• Geographic & political barriers deter new supply in coastal CA

Jobs

• Every 4-5 new jobs creates demand for 1 apartment

• CA leads the nation in personal income growth

“Big Four” Drivers of Apartment Fundamentals:

California Style

Sources: US Census Bureau, CA Dept. of Finance, REIS, Moody’s economy.com, and Bureau of Economic Analysis.


31%

41%36%

25%

45%

34%

40%

55%

0%

10%

20%

30%

40%

50%

60%

<35 35-44 45-64 65+

Single-Family Homes Apartments 5+ Units

Demographics<35 and 65+ Age Cohorts Tend to Rent Apartments

Sources: 2009 American Housing Survey, U.S. Census Bureau, and Witten Advisors.


DemographicsGrowing Young Adult Population

Sources: US Census Bureau and Rosen Consulting Group.

Population Turning 18 on an Annual Basis (1960-2020)

Not forecasted to be less than 4.2 million annually

4.7

4.2

3.7

3.2

2.7

2.21960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

(in M

illio

ns)


DemographicsLifestyle

Having Children is a Significant Determinant of Housing Type

Sources: 2009 American Housing Survey, U.S. Census Bureau, and Witten Advisors.

21%

39%

53%

34%37%

56%

39%

24%

38% 37%

0%

10%

20%

30%

40%

50%

60%

Single-PersonHouseholds

Married Coupleswithout Children

Married Coupleswith Children

Single Parent withChildren

Roommates

Single-Family Homes Apartments 5+ Units


Marriage & Childbirth Impact Demand

Source: Zelman & Associates.

Demographics

Young individuals are:• Going to college more frequently; and • Getting married and having children later in life

The median age of first marriage:MEN WOMEN

1960: 22.9 years old 20.5 years old2010: 28.2 years old 26.1 years old

The median age of women giving birth to their first child:1970: 21.4 years old2010: 25.3 years old

As people postpone or delay marriage and childbirth, this will continue to drive demand for apartments


California is a “Renter” State

Sources: Current Population Survey/Housing Vacancy Survey, and Bureau of the Census.

“Home-ownership” Era “Rentership” Era

U.S. & California Homeownership Rates

Propensity to Rent

U.S.

CA

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

1950 1960 1970 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 Q12012

U.S. California


Propensity to RentHomeownership is Expensive in Our Markets

Rank Company Own vs. Rent

1 BRE 1.59x

2 ESS 1.58x

3 AVB 1.44x

4 UDR 1.41x

5 HME 1.33x

6 EQR 1.31x

7 CPT 1.29x

8 CLP 1.28x

9 AIV 1.26x

10 PPS 1.15x

Sources: NAHB, CBRE-EA, UBS Investment Research, January 19, 2012.Note: Own vs. Rent is the ratio of the average monthly mortgage payment to the average monthly rent payment in a specific market.


Propensity to Rent

Median Household Income

Median Home Price to Median Household

Income

7.4x

3.7x

0.0x

2.0x

4.0x

6.0x

8.0x

BRE's CoreMarkets

US

$69,205

$51,222

$20,000

$40,000

$60,000

$80,000

BRE's CoreMarkets

US

High Median Incomes and Low Home Affordability

Source: American Community Survey.


Propensity to Rent

Price: $645,750ZIP: 95124Bedrooms: 4Bathrooms: 2Square Ft: 1,300Year Built: 1955Monthly PITI: $3,162Lot size: 6,893 sf / 0.16 acre

Typical Median-Priced Home in San Jose, California


Typical Median-Priced Home in Palo Alto, California

Propensity to Rent

Price: $838,000ZIP: 94301Bedrooms: 2Bathrooms: 1Square Ft: 660Year Built: 1926Monthly PITI: $4,089Lot size: 1,960 sf / 0.06 acre


Typical Median-Priced Home in San Francisco, California

Propensity to Rent

Price: $449,000ZIP: 94134Bedrooms: 3Bathrooms: 1Square Ft: 1,400Year Built: 1947Monthly PITI: $2,214Lot size: 3,049 sf / 0.07 acre


Typical Median-Priced Home in Los Angeles, California

Propensity to Rent

Price: $350,000ZIP: 90065Bedrooms: 2Bathrooms: 1Square ft: 948Year Built: 1912Monthly PITI: $1,737Lot Size: 5,227 sf / 0.12 acre


Typical Median-Priced Home in San Diego, California

Propensity to Rent

Price: $325,000ZIP: 92126Bedrooms: 3Bathrooms: 1Square ft: 1,006Year Built: 1973Monthly PITI: $1,616Lot Size: 5,300 sf / 0.12 acre


Limited Supply

Source: REIS and Moody’s economy.com. Gray areas denote period of U.S. recession.BRE core markets comprise San Francisco Bay area, San Diego, Los Angeles, Orange County, and Seattle.

Completions as % of Total Stock in BRE Core Markets

U.S.BRECore Markets

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

BRE Core Markets US


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

% o

f Tot

al S

tock

Denotes BRE Core MarketSource: Zelman & Associates, April 2012.

LTM Multifamily Permits as % of Total Stock

Limited Supply

BRE Core Market Average 0.9%


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

CLP PPS CPT HME MAA AVB UDR EQR AIV ESS BRE

Current Supply Future Supply

Source: Morgan Stanley research, April 2, 2012.

REIT Exposure to Future Supply

Forecasted Starts as a % of Total Stock2012-2015

(market-weighted by % NOI)

Limited Supply


Source: Bureau of Labor Statistics, March 2012.

YoY % Change in Jobs – March 2012

Jobs

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Denotes BRE Core Market


Source: Zelman & Associates, April 2012, and Bureau of Labor Statistics, March 2012.

Jobs & Supply

Austin

Raleigh

HoustonDallasSeattle

Charlotte

Washington, DC San JoseNashvilleOrange County

DenverRichmondSan Diego Inland Empire

SF Bay AreaBaltimoreTampa PhoenixAtlantaOrlando

Philadelphia Los Angeles

Jacksonville

Las Vegas

Boston NYC Metro MemphisSoutheast FLChicago

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

LTM

Per

mits

as

% o

f Tot

al S

tock

LTM Job Growth

LTM Multifamily Permits vs. LTM Job Growth


Capital AllocationDevelopment & Acquisitions – Not MutuallyExclusive

Benefits• Yield premium to acquisitions

• Locations where renters want to live

• Higher quality cash flows / better growth prospects

• Reduce portfolio age & ongoing capex requirements

Considerations• Execution risk• Longer time horizon to stabilized

cash flows

• Difficult to effectively match-fund capital needs

Benefits• Lower execution risk• Immediate cash flow• Less challenging to match-fund

capital requirement

Considerations• Low initial yields in coastal California• Typically lower quality & older assets• Limited availability of assets• Higher capex mutes yields• Highly competitive environment• Limited product in emerging

submarkets• Prop 13 control premium

Development Acquisitions


$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Total Transaction Volume - BRE Core CA Markets "Institutional Quality" Transaction Volume - BRE Core CA Markets

Limited Acquisition Opportunity Set

Sources: PPR and company data, Q1 2012.

Average Total Core CA Transaction Volume

Total Core CA Transaction Volume

“Institutional Quality”Transaction Volume

in BRE Core CA Markets

Tota

l Tra

nsac

tion

Volu

me

(mill

ions

)


Acquisition EnvironmentProposition 13 Impact

Proposition 13 basics• Caps tax increases to 2% annually

• Reassessments only upon >50% change in ownership

Market impact

• Lowers “natural” volume of acquisition levelsDiscourages selling and reinvesting into higher basis/lowermargin properties

• Contributes to older, maintenance-deferred nature of housing stockBy discouraging sales and creating control premiums, acquirers’ going-in basis reduces ability to economically reinvest in property


25.1% 25.8% 25.0%

8.5%

13.9%

1.7%

0

100,000

200,000

300,000

400,000

500,000

Before 1970 1970-1979 1980-1989 1990-1999 2000-2009 After 2009

Num

ber o

f Apa

rtm

ent U

nits

Year Built

Inventory By Age in BRE Core Markets

California Housing Stock is Old

75.9% of apartment units in BRE’s core markets were built before 1989

Source: REIS, Q1 2012. BRE core markets include San Francisco Bay Area, San Diego, Los Angeles, Orange County and Seattle.


Active Early Cycle InvestorAcquisition Cap Rates in BRE California Core Markets

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

Allure at Scripps Ranch194 Homes, $46.2MM

Museum Park117 Homes, $29.6MM

Aqua Marina del Rey500 Homes, $166.0MM

Vistas of West Hills220 Homes, $56.5MM

Lafayette Highlands150 Homes, $48.8MM

Notes: Cap rates equal to 1st year NOI/Purchase price + 1.5% transaction costs.(1) Calculated as a percent of the company’s enterprise value as of December 31, 2009.

The Landing at Jack London Square282 Homes, $64.9MM

Fountains at River Oaks226 Homes, $50.3MM

Since January 2010, BRE has invested $462.3 million in seven urban in-fill assets, representing an 11.8% increase in the company’s asset base (1)

Mar

ket C

ap R

ate

Acquisition cap rates in BRE core

CA markets for A&B assets


Focused Investment in Northern CA

Construction in Progress

Land Under Development

Land Under Contract

Development pipeline delivery schedule subject to change.

Project /Location Homes

Est. Costs

Balanceto Fund

Current Status

Nor

ther

nC

alifo

rnia

& S

eattl

e

Lawrence StationSunnyvale, CA 336 $110.0 $34.9 CIP

AviaraSeattle, WA 166 44.5 28.0 CIP

SolsticeSunnyvale, CA 280 121.9 74.4 CIP

Mission BaySan Francisco, CA 360 TBR TBR LUD

Pleasanton IPleasanton, CA 254 TBR TBR LUD

Redwood CityRedwood City, CA 263 TBR TBR Option

Contract

Pleasanton IIPleasanton, CA 251 TBR TBR Option

Contract

Walnut Creek BARTWalnut Creek, CA 358 TBR TBR Option

Contract

Northern CA Total 2,268 $276.4 $137.3

Sout

hern

Cal

iforn

ia

Wilshire La BreaLos Angeles, CA 478 $277.3 $137.1 CIP

Park Viridian IIAnaheim, CA 400 TBR TBR LUD

Southern CA Total 878 $277.3 $137.1

Total Development Pipeline 3,146 $553.7 $274.4

Significant development

presence in Northern California positions BRE to capitalize on

region’s strong growth prospects


Bay Area Economic Drivers

San Francisco, Peninsula & Silicon Valley are knowledge driven markets

S&P 500 technology companies with headquarters in SF Bay Area have a $1.3 trillion market value

SF Bay Area received 40% of all venture capital investments in 2011

Since 2010, more than $35 billion of IPO’s headquartered in the SF Bay Area have occurred

Technology growth companies – social media, advertising, entertainment, software

Source: Dealogic, May 2011; PriceWaterhouseCoopers and Moneytree, Q1 2012.


Active Bay Area IPO MarketNotable SF Bay Area-based IPOs (2010-2012 YTD)

Pricing Date CompanyIPO

($ millions)

Current Market Cap ($ millions)

Apr-12 Splunk Inc $122 $1,573

Mar-12 Yelp Inc $93 $898

Dec-11 Zynga Inc $925 $6,994

Oct-11 Ubiquiti Networks Inc $148 41,346

Jun-11 Pandora Media Inc $109 $2,556

May-11 Solazyme Inc $160 $1,039

May-11 LinkedIn $263 $4,252

Total San Francisco Bay Area Deals (2010-2012YTD) $5,199 $35,666

% of Total US IPO Market 7.4% 10.5%


Venture CapitalCalifornia Attracts the Most Venture Capital Dollars

41.0%

11.2% 9.5%

6.8% 5.2% 5.2% 3.7% 3.5% 3.1% 2.7% 2.4% 2.2% 1.9% 1.7%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2011 Venture Capital Investment by Region ($ millions)

CA 51.1%

MA 10.4%

NY 7.9%

TX 5.2%

Other 25.3%

2011 Venture Capital Investment By State

Source: PriceWaterhouseCoopers& Moneytree, Q1 2012.


BRE Development Process

Underwriting Phase• Revenues

In-house market research team & proprietary revenue growth modelThird-party consumer demand surveys & market rent surveysAppropriate controls: revenue underwriting independent of development personnel

• ConstructionConstruction cost templates by product typeStrong focus on Division II (site) workAppropriate controls: construction underwriting independent of development personnel

• Land residual value

• Underwrite to high single-digit / low double-digit IRRs

• Risk premium of 150 bps over acquisitions

Entitlement / Construction Phase• Rigid internal controls

• Fully-bid GMAX contracts & fully documented construction plans

• Appropriately staffed for complexity of jobs


Consumer Profile & Preferences

Gender 59% Female

Age Distribution 67% 18-34 years old

Household Make-up 80% no children

College Degreeor Higher 78%

Average Income$105,645 NorCal$85,528 SoCal$83,659 Seattle

Top Preferences

• Washer/dryer in home• Controlled access• Walk-in closet• Interior noise insulation• High-speed wi-fi• Kitchen pantry• Hall entry closet• Patio or balcony


Embedded Growth in DevelopmentBRE Expected Home Deliveries 2012-2017

Source: Company data. Assumes delivery of homes 18-24 months after start of construction. Timing of delivery pipeline subject to change.

21,336 21,56022,094

22,97923,873

24,482 24,738

15,000

17,500

20,000

22,500

25,000

27,500

CurrentHomes

2012 2013 2014 2015 2016 2017

Tota

l Hom

es

Cumulative new home deliveries


Wilshire La Brea

3rd Street Office, Restaurant, &

Retail

Wilshire Corridor:6.9MM Sqft Office1.7MM Sqft Retail5,988 Employees

Century CityWestwood

Samsung Mobile Building:Various talent management & entertainment companies

Future subway stop

The Grove

5600 Wilshire

Wilshire LaBrea


Wilshire La Brea Overview

• Total Homes: 478

• Total Retail: 40,000 sq. ft.

• Total Est. Cost: $277.3 million

• 1st Home Deliveries – Q4 2013

• Last Home Deliveries – Q4 2014

• High density urban infill site at one of the busiest intersections in L.A.

• Adjacent to future site of a Metro subway station

• The Miracle Mile has one of the lowest office vacancy rates in the city

• Neighborhood transformation over the past eight years

• Close proximity to Century City,Hollywood and Downtown L.A.


Aviara


Aviara Overview

• Total Homes: 166

• Total Est. Cost: $44.5 million

• 1st Home Deliveries – Q1 2013

• Last Home Deliveries – Q2 2013

• Wealthiest zip code in Washington state with per capita income of $123,000

• Top-ranked school district within the state and nationwide

• High median home price of $740,000

• Easy commute to major employers in Bellevue and downtown Seattle

BRE Aviara


Mission Bay Background

1870s– 1906

303 acres of SF Bay filled in post-1906 earthquake

1906– 1990s Railyards for major railroad cos.

1990 Santa Fe Pacific transfers land to Catellus Development

1998 San Francisco approves current master redevelopment plan

2004Catellus sells remaining interest in undeveloped land to Farallon Capital Mgmt. which now acts as master developer

2004– 2012

Build-out of Mission Bay North completeOngoing build-out of Mission Bay South, anchored by 2.7MM sq. ft. UCSF medical campus

Source: Mission Bay Development Group.


Mission Bay Master Plan

BRE BLOCK 11

BRE BLOCK 5


Mission Bay Overview

• Comprehensive redevelopment of 303 acres of urban in-fill land located in one of the strongest residential markets in the country

• Proximity to office, retail, transportation and AT&T Park

• Anchored by 43 acre UCSF Medical Center at Mission Bay

2.7MM sq.ft. campus comprised of research, education and medical facilities

UCSF annually recognized as one of the nation’s top ten hospitals

• Commercial and biotech hub

Significant corporate presence: Celgene, Bayer, Nektar, Therapeutics, Fibrogen, and Old Navy

• Major employers within 2 mile radius: Salesforce.com, Twitter, Zynga, Yammer, Yelp


Mission Bay Master Plan

Mission Bay North Mission Bay South Complete to Date % Complete

Acreage 65 238 303 100%

Multifamily 2,910 units 3,090 units 3,124 units 52%

Office/Bio-tech NA 4.4 MM s.f. 1.7 MM s.f. 37%

Retail 150,000 s.f. 130,000 s.f. 142,000 s.f. 51%

UCSF Campus NA 2.7 MM s.f. / 43 acres 1.9 MM s.f. 71%

UCSF Medical Center NA 1.6 MM s.f. / 14.5 acres 1st phase under construction

Under construction

Parks & Open Space 41 acres 15 acres 36%

Other Amenities500-room hotel, 500-student public school, public library, fire & police stations

Library built, fire & police station under construction

Infrastructure$700 million in new streets, public utilities, pedestrian amenities, & traffic improvements

Third Street Rail Line, new roads,sidewalks, traffic improvements

65%

Source: Mission Bay Development Group.


Salesforce.com – The Facts

Salesforce.com• Enterprise Value: $20.8 billion• FY 2012 Revenues: $2.3 billion• Employees: 7,785• Employees hired in FY 2011: 2,500• Headquarters: San Francisco, CA

Currently leases over 1.2MM sq.ft. in downtown San Francisco

• One Market St.• One California St.• 123 Mission St.• 50 Fremont• 600 Townsend• Reportedly looking for additional 400,000

to 600,000 sq. ft. in SOMA

Sources: Salesforce.com financials, Cushman & Wakefield.


BRE Mission Bay67.3 mm sq.ft. of office space & 231,765 jobs(a)

Convention Center

(new)

(new)

BRE BLOCK 5

BRE BLOCK 11

(a) Data for San Francisco downtown financial district and Mission Bay submarkets. Source: Cushman & Wakefield.


Mission Bay Market

(a) Source: The Concord Group.(b) Source: Witten Advisors, San Francisco market.(c) Source: BRE Consumer Survey.

Renter Profile

Avg. Household Income: $117,000

Median New Home Price: $857,803

Demographics: 70% under age 35

Renter Profile(c): 91% have college degree or higher44% have graduate degree

Apartment Profile

Institutional occupancy: 97-99%

Annual Supply 2012 – 2014(a): 450 - 500 units

Annual Demand 2012 – 2014(a): 850 units

Rent Growth (annual)2012 – 2014(b): 7.6%


BRE Mission Bay Overview

Investment Highlights• High barrier to entry sub-market for development• Core, infill, transit-oriented location• Proximity to CBD and SOMA employment

High paying, knowledge-based jobs CBD still dominated by professional & business service based companies

• Urban amenities – SF Giants ballpark, restaurants, retail, entertainment, parks

BRE BLOCK 5

BRE BLOCK 11

Purchase Date April 2011

Land Purchase Price $41.4 million

Description Blocks 5 & 11

Total Homes 360 (all market-rate)

Retail 17,000 sq.ft. (Block 5)


BRE Mission Bay Economic Analysis

Net Operating Income• Micro-market research• Third party assessments• BRE Property Operations

Construction Costs• Structural analysis• Product development• Cost estimation/testing

Land/Residual Value


Operational Perspective

• We are in the best markets in the country

• Stable core portfolio generates continuous, growing stream of cash flows

• Sector-leading EBITDA margins

• Target redevelopment opportunities to enhance portfolio quality and growth

• New initiatives should enhance results


Top Priorities

• Operating Excellence

• Pricing and Revenue Management

• Customer Service

• Reinvestment Opportunities


Concentrated in Top Growth Markets

Rank Company

2012-2014Forecasted

Rent Growth

1 BRE 17.6%

2 ESS 17.2%

3 AVB 17.2%

4 EQR 16.7%

5 AIV 16.4%

6 UDR 16.3%

7 CPT 15.9%

8 HME 15.4%

9 PPS 15.1%

10 CLP 14.7%

(1) Sources: Axiometrics, UBS Investment Research, January 19, 2012.(2) BRE core markets include San Francisco Bay Area, Seattle, San Diego,

Orange County and Los Angeles.

BRE Solstice


$2,022

$1,578 $1,573 $1,439

$1,320 $1,302 $1,250 $1,207

$1,038 $1,025

$780 $767

$0

$500

$1,000

$1,500

$2,000

$2,500

AVB EQR BRE ESS PPS UDR AIV HME CPT AEC MAA CLP

High Quality PortfolioAverage Revenue Per Same Store Home

Source: Company supplementals as of March 31, 2012.


30.3

22.819.9 18.5 16.2

12.7

33.631.5

27.3

19.2 19.9

24.7

0

5

10

15

20

25

30

35

40

AIV UDR ESS EQR BRE AVB

Port

folio

Ave

rage

Age

(yea

rs)

Average Age (Year Rehab)

Average Age (Year Built)

Average Portfolio Ages in CA

Total Units in CA: 10,365 11,691 21,147 30,001 16,978 19,631

Source: SNL Financial and company filings.


BRE Core Market Rankings

Market

Q12012Propensity

to Rent

Median Home Price

Avg. Annual Completions(% of Stock)2012-2014

Q1 2012 12 mo.

Job Growth

2012-2014 Proj. Rent Growth &

Market Rank

% Below Peak Rents

BREQ1 2012

Occ.

San Francisco Bay Area

44.9%

$437,625

1.0%

2.2%

Top 5 market

0.7%

95.5%

Seattle 40.1%

$267,600

1.8%

2.3%

Top 25 market

-8.4%

95.7%

Los Angeles 50.3%

$315,000

0.4%

0.7%

Top 5 market

-10.5%

95.8%

Orange County 50.3%

$450,000

1.0%

1.8%

Top 5 market

-9.4%

95.3%

San Diego 44.3%

$342,000

0.8%

0.5%

Top 10 market

-6.3%

94.9%

Sources: US Census Bureau, Axiometrics, Dataquick, UBS Research and company data.


Top 4 Reasons for Moveout

Source: Company data.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2006 2007 2008 2009 2010 2011 Q1 2012

Relocate Out Of Area Home Purchase Rent Increase Job Related


Redevelopment Strategy

Portfolio Refinement• Redevelop select assets to enhance value, extend useful life,

and improve growth characteristics

Redevelopment decisions driven by:

• Asset submarket location, positioning and opportunity

• Return on investment

Redevelopment Value Creation • Higher rents + higher growth rate + lower operating expenses

Target redevelopment returns of 7% – 10%


Fountains at River Oaks, San Jose, CA

Redevelopment Case Study

226-home community originally built in 1990

Purchased by BRE in August 2010 for $50.3 million

Centrally located in-fill property in established neighborhood: • ½ mile from Cisco’s headquarters (17,000 employees)

Renovation scope – full interior and exterior renovation • Kitchens & baths (62% completed) • New business center and fitness center• Full exterior paint• Leasing office and signage improvements

Renovation rent premium: $150 to $175 per home

Acquisition cost + Renovation cost = $248,000/home• Recent sales comps in the neighborhood = $340,000/home



Pre-renovation



Post-renovation



Pre-renovation



Post-renovation



Pre-renovation



Post-renovation



Pre-renovation



Post-renovation



Post-renovation


Technology

Prospect Portals Full-service online application and leasing through BRE-branded website

Resident Portals Easy to use web-based/mobile rent payment and service request system

Customer Relationship Management

Fully-integrated CRM module enables onsite associates to manage leads seamlessly within Yardi

Hyperion Planning & Reporting

Centralized web-based planning, budgeting and forecasting solution improves data transparencyand analytics

Revenue Management Implementation of LRO to optimize revenue


LRO Implementation

Schedule

Rainmaker LRO selected, January 2012

Testing and development, February 2012

Commence implementation, March 2012

Status by Market

“Live”: Seattle, San Francisco, San Diego, Los Angeles

Roll-out this week: Orange County

Roll-out by end of Q2 2012: Remaining markets

Benefits

Demand/supply analysis at floor plan level

Ease of applying consistent new lease and renewal strategies

Provides more lease options to customers at move-in and renewal


Integrated Marketing Platform

Marketing & Social Media

Online Marketing Programs

Community and mobile websites drive more qualified traffic

Search Engine Marketing and

Internet Listing Sites

SEO optimizes quality of leads and minimizes costs through pay-for-performance model

CustomerEngagement

Consistent, branded message “Be here, be home” to prospects and residents from first point of contact

Studio Be. Fitness brand focused on overall wellness and a sense of community

Social Media Manage on-line reputation and understand customers’ view of BRE service and brand


6.0x

6.5x

7.0x

7.5x

8.0x

8.5x

9.0x

9.5x

10.0x

Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Net

Deb

t + P

refe

rred

/ EB

ITD

A

(Net Debt + Preferred) / EBITDA

Capital Activity

April 2010: Raised $275MM common equity at $34.25/share

Sept. 2010: Issued $300MM unsecured notes & tendered $321MM convertible notes

Q3 2011 – Q1 2012: Issued $76.4 million common equity via ATM

August 2011: Repurchased $20.4MM Series D Preferred Stock

June 2011: Redeemed $100MM Series C Preferred Stock

Q4 2010 – Q1 2011: Issued $50 million common equity via ATM

May 2011: Raised $441MM common equity at $48.00/share

Source: Company data.


Strong and Flexible Balance Sheet

Financial Position

Metric 12/31/2009 3/31/2012

Debt-to-EBITDADebt plus preferred stock-to-EBITDA

8.5x9.3x

6.7x6.9x

Debt-to-total market capitalizationDebt-to-gross assets

48.0%52.4%

29.6%40.1%

Secured debt-to-gross assets 21.1% 18.0%

Interest coverage ratio (1)Fixed charge coverage ratio (2)

2.2x1.9x

2.8x2.6x

Forward 36 month debt maturitiesas a % of total debt

$827 million44.3%

$127 million7.7%

Moody’sStandard & Poor’sFitch

Baa2 (stable)BBB (negative)BBB (negative)

Baa2 (stable)BBB (stable)

BBB (positive)

(1) Includes GAAP interest and capitalized interest.(2) Fixed charges include GAAP interest, capitalized interest, preferred dividends and

recurring cash amortization on secured debt.


0.0% 0.5% 0.6%

19.6% 21.0%

4.3%3.3%

0.5%

18.7%18.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Secured Debt Maturity Unsecured debt maturity

% Total Debt Maturing Each Year

Well-Staggered Debt Maturities

Initial maturity of $750MM unsecured line of credit

($222 million outstanding as of Q1 2012)

Source: Company supplemental, March 31, 2012.


Overweight Asset Sales

Capital Planning

Capital Sources

• Overweight asset sales

• ATM

• Revolver /Bondissuance

• Evaluate select land parcel sales

Construction In Progress Homes

Cost Incurred

Balance to Fund

EstimatedTotal Cost

Lawrence StationSunnyvale,CA 336 $75,100 $34,900 $110,000

AviaraMercer Island,WA 166 $16,500 $28,000 $44,500

SolsticeSunnyvale,CA 280 $47,500 $74,400 $121,900

Wilshire La BreaLos Angeles,CA 478 $140,200 $137,100 $277,300

TOTAL C.I.P. 1,260 $279,300 $274,400 $553,700

Land Held For Development 1,014 $104,100 $319,800 $423,900

Land Under Contract 872 $16,300 $303,300 $319,600

Development Pipeline (in thousands, except per home numbers)


Assessing Financial Position Risk

Development – Balance Sheet

• Total cost of pipeline

• Unfunded amount against other capital needs (i.e. acquisitions and forward debt maturities)

• Cash flow sensitivity; impact on dividend

• Cycle evaluation


Financial Principles

• Maintain a strong, well-capitalized balance sheet

• Use unsecured debt to preserve financial flexibility

• Keep debt maturities staggered

• Promote a simple, straight-forward capital structure


2012 and Beyond

• Long-term supply / demand fundamentals favor multifamily and California

• Continued focus on operations

• Development pipeline represents significant embedded growth

• Level of acquisition will be calibrated according to market conditions

• Company committed to maintaining strong balance sheet with ample liquidity and low leverage


EBITDA Reconciliation

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

Net income available to common shareholders 18,108$ 9,645$ Interest, including discontinued operations 17,218 19,748 Depreciation, including discontinued operations 25,032 24,401 EBITDA 60,358 53,794 Redeemable and other noncontrolling interest in income

105 335 Dividends on preferred stock 911 2,953 Other expenses - 143 Adjusted EBITDA 61,374$ 57,225$

Quarter Ended 3/31/2012


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

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined by BREas EBITDA, excluding minority interests, gains or losses from sales of investments, preferred stock dividends and otherexpenses. We consider EBITDA and Adjusted EBITDA to be appropriate supplemental measures of our performancebecause they eliminate depreciation, interest, and, with respect to Adjusted EBITDA, gains (losses) from communitydispositions and other charges, which permits investors to view income from operations without the impact of noncashdepreciation or the cost of debt, or with respect to Adjusted EBITDA, other non-operating items described above.


NOI Reconciliation

Net Operating Income (NOI)

Net income available to common shareholders 18,108$ 9,645$ Interest, including discontinued operations 17,218 19,748 Depreciation, including discontinued operations 25,032 24,401 Redeemable and other noncontrolling interest in income 105 335 Dividends on preferred stock 911 2,953 General and administrative expense 5,847 5,234 Other expenses - 143 NOI 67,221$ 62,459$ Less Non Same-Store NOI 5,632 4,748 Same-Store NOI 61,589$ 57,711$



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

We consider community level and portfolio-wide NOI to be an appropriate supplemental measure to net income because ithelps both investors and management to understand the core community operations prior to the allocation of general andadministrative costs. This is more reflective of the operating performance of the real estate, and allows for an easiercomparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of realestate have different overhead structures, with varying marginal impact to overhead from acquiring real estate, NOI isconsidered by many in the real estate industry to be a useful measure for determining the value of a real estate asset orgroups of assets.


Safe Harbor Statement

“ Safe Harbor ” Statement under the Private Securities LitigationReform Act of 1995: Except for the historical information containedherein, this presentation contains forward-looking statementsregarding Company and property performance and financial andeconomic trends, and is based on the Company’s currentexpectations and judgment. Actual results could vary materiallydepending on risks and uncertainties inherent to general and localreal estate conditions, competitive factors specific to markets inwhich BRE operates, legislative or other regulatory decisions, futureinterest rate levels or capital markets conditions. The Companyassumes no responsibility to update this information. For moredetails, please refer to the Company’s SEC filings, including itsmost recent Annual Report on Form 10-K and quarterly reports onForm 10-Q.

Date post:	09-Aug-2020
Category:	Documents
Upload:	others
View:	3 times
Download:	0 times

Investor Day - SNL · Acquires TCR West (1997) Connie Moore named President & CEO (2005) ......

Documents