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BRE Properties' CEO Discusses Q2 2012 Results - Earnings Call Transcript

We have benefited from better than expected expense savings in our same-store portfolio, but we’ve also lowered the midpoint for our expected growth rate by 75 basis points for expenses.

In the second half of the year, we expect a natural deceleration in revenue growth from the 5.5 we reported in the first half. But, we do expect an increase from the second quarter results of 5.1% as we benefit from some of the momentum we experienced late in the second quarter.

There are a couple of notable data points. First, new leases were signed at an increase of 5.4% during the quarter and the trend throughout the quarter was very encouraging. The monthly trend increased from 3.5% in April to 5.6 in May, to 6.5 in June. The rollout of LRO was completed during the second quarter and we are very pleased with the seamless rollout and adoption by our on-site and pricing team.

We are encouraged to see the improvement in the rental rate activity increases in Southern California. June and July increases were greater than 4% to the 165 basis points higher from the same time a year ago. We also look at peak level rents relative to today’s rents to provide context about potential for continued growth. Rents in Southern California remained 5% below peak levels providing room to run. Although Seattle rents have increased significantly they are still 3% below levels achieved in the third quarter of 2008. Bay area rents on the other hand are now 6% above the previous cycle peak.

However, income levels have dramatically improved and the lack of broad based supply still provide the strong foundation for operating fundamentals in the Bay area. Even with the continued rent increases, move outs due to rent increases in the second quarter declined 50 basis points year-over-year to 13%, sequentially declined from the first quarter by 160 basis points.

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