BSR REIT's Q1 2019 Results Maintain Trend of Superior Performance

LITTLE ROCK, AR and TORONTO, May 13, 2019 /CNW/ - BSR Real Estate Investment Trust ("BSR", or the "REIT") (TSX: HOM.U) today announced its financial results for the three months ended March 31, 2019 ("Q1 2019"). The REIT had no material operations from the date of inception, January 9, 2018, to the completion of its IPO on May 18, 2018. Results are presented in U.S. dollars. The results for all periods presented are compared to the financial forecast (the "Forecast") contained in BSR's IPO prospectus dated May 11, 2018. Financial Statements and Management's Discussion and Analysis are available on the REIT's website at www.bsrreit.com and at www.SEDAR.com.

Q1 2019 Highlights

As highlighted above, during the first quarter of 2019, BSR made the accretive acquisition of Wimberly as part of the REIT's portfolio enhancement strategy. Wimberly is located within the Dallas-Fort Worth MSA, one of the fastest growing populations in the United States, near the high-traffic interchange of the George Bush Turnpike and Dallas North Tollway. Furthermore, the property is in close proximity to major Dallas-area employers such as Liberty Mutual Insurance, JPMorgan Chase and Toyota USA. The region has above average household income, below average unemployment and is home to 22 Fortune 500 companies, one of the highest concentrations in the country. The acquisition of Wimberly increases the REIT's exposure to this market to 1,492 apartment units, which represents 14% of the total units owned and 18% of the REIT's NOI. This is consistent with BSR's clustering strategy designed to maximize operating efficiencies and provide opportunities for elevated rent growth similar to the REIT's other three acquisitions in high growth areas following the IPO.

Subsequent to March 31, 2019, BSR announced the disposition of four properties referred to as Briarwood and Spring Valley, located in Little Rock, Arkansas, and Fox Trail and South Pointe, located in Shreveport, Louisiana, for $31.7 million. Total consideration exceeded the initial public offering appraised values by $1.3 million or 4.3%. Net cash proceeds from the sales were used to reduce the outstanding balances under the REIT's credit facilities. The sales of these properties are based on opportunities to recycle the proceeds on a tax deferred basis, as part of the portfolio enhancement strategy, into properties with high growth potential. Upon the sale of these properties, Debt to Gross Book Value is approximately 49.7%.

"BSR delivered outstanding first quarter results while increasing our financial flexibility and positioning the REIT for sustained future growth," stated John Bailey, BSR's Chief Executive Officer. "The first quarter of 2019 concluded our Forecast period, and we were pleased that our AFFO of $23.1 million over this period exceeded our pro rated Forecast of $22.1 million by 3.2%. This consistent earnings performance over the Forecast period combined with our portfolio enhancement capital recycling and redevelopment program strategies demonstrate our platform's capabilities to create long-term value for our unitholders."

Financial Summary - Q1 2019

In thousands of U.S. dollars (except per unit amounts)















Q1 2019
(Actual)

Q1 2019
(Forecast)

Change

Change %

Revenue, Total Portfolio



$

27,709

$

25,317

$

2,392


9.4%

Revenue, Same Community1 Properties



$

25,793

$

25,317

$

476


1.9%

NOI 1, Total Portfolio



$

15,134

$

13,276

$

1,858


14.0%

NOI 1, Same Community 1 Properties



$

14,030

$

13,276

$

754


5.7%

NOI Margin 1, Total Portfolio




54.6%


52.4%


220bps


4.2%

NOI Margin 1, Same Community 1 Properties




54.4%


52.4%


200bps


3.8%












FFO 1



$

8,061

$

7,536

$

525


7.0%

FFO per Unit



$

0.203

$

0.189

$

0.014


7.4%

Maintenance Capital Expenditures



$

586

$

990

$

-404


-40.8%

AFFO 1



$

7,474

$

6,552

$

922


14.1%

AFFO per Unit



$

0.188

$

0.165

$

0.023


13.9%

AFFO Payout Ratio




66.4%


75.8%


-940bps


-12.4%

For the three months ended March 31, 2019, revenue totalled $27.7 million and was $2.4 million, or 9.4%, higher than the $25.3 million Forecast. The property acquisitions of Towne Park, Riverhill and Wimberly contributed $1.9 million to the increase. Same Community revenue was $0.5 million, or 1.9%, above the Forecast and was driven by higher than expected occupancy and rental rate increases attributable to BSR's capital redevelopment program. As of March 31, 2019, weighted average occupancy was 94.9% and average monthly in-place rent was $835 per apartment unit.

NOI1 for the three months ended March 31 2019 totalled $15.1 million, compared to the Forecast of $13.3 million. The 14.0% increase over Forecast was primarily the result of the property acquisitions, which contributed $1.1 million to NOI in the first quarter of 2019. Same Community NOI of $14.0 million was $0.8 million, or 5.7%, above the Forecast and was attributable to higher revenue, as described above, as well as lower than Forecast property operating expenses. NOI margin for the three months ended March 31, 2019 was 54.6%, which exceeded the Forecast NOI margin of 52.4% by 220 basis points.

FFO1 for the three months ended March 31, 2019 was $8.1 million, or $0.203 per Unit, which was 7.0% above the Forecast of $7.5 million, or $0.193 per Unit. The increase in first quarter NOI over Forecast was primarily offset by higher finance costs due to additional interest expense associated with acquisitions and higher than forecasted amortization of discounts on loans and borrowings related to the fair valuation of debt at the time of the IPO.

AFFO1 was $7.5 million, or $0.188 per Unit, for the three months ended March 31, 2019, compared to the Forecast of $6.6 million, or $0.165 per Unit. The outperformance was due to the increase in FFO as well as lower than Forecast maintenance capital expenditures, as expected, due to the acceleration of maintenance capital expenditures projects in prior quarters.

Liquidity and Capital Structure

As of March 31, 2019, prior to the subsequent sales of the properties discussed above, the REIT had cash and cash equivalents of $8.4 million, a $110.0 million revolving credit facility and a $35.0 million line of credit. $107.8 million has been drawn from the credit facility and $2.1 million has been drawn on the line of credit. As of March 31, 2019, the REIT had total mortgage notes payable of $423.0 million, excluding the credit facility, with a weighted average contractual interest rate of 4.0% and a weighted average term to maturity of 10.3 years. Total loans and borrowings of the REIT as of March 31, 2019 were $524.1 million. Debt to Gross Book Value1 was 51.2%.

Distributions and Units Outstanding

Cash distributions declared to REIT unitholders and Class B unitholders totalled $5.0 million for the first quarter of 2019, representing an AFFO payout ratio of 66.4% compared to the Forecast of 75.8%, respectively. 100% of the REIT's cash distributions were a return of capital.

As of December 31, 2018, the total number of REIT Units outstanding was 16,550,000. There were also 23,158,226 Class B Units outstanding, which are exchangeable into REIT Units on a one-for-one basis. Therefore, the REITS fully diluted unit count is 39,708,226.

Total Highlights from All Forecasted Quarters

The following table highlights certain financial performance of the REIT reported for the corresponding forecasted quarters of the REIT from May 18, 2018 to March 31, 2019, presented in comparison to the pro-rated Forecast.

In thousands of U.S. dollars (except per unit amounts)



March 31,

2019

December 31,

2018

September 30,

2018

June 30,

2018

Operational Information






Number of real estate investment properties


51

50

48

48

Total apartment units


10,823

10,451

9,879

9,879

Average monthly rent on in-place leases


$

835

$

821

$

806

$

799

Weighted average occupancy rate


94.9%

93.3%

93.6%

94.0%

Retention rate


53.4%

52.4%

52.0%

53.9%

Debt to Gross Book Value 1


51.2%

48.6%

44.5%

45.1%








Three months
ended March 31,
2019

Three months
ended December
31, 2018

Three months
ended September
30, 2018

Period from May
18, 2018 to June
30, 2018

Period from May
18, 2018 to
March 31, 2019

Operating Results






Revenue, Total Portfolio

$

27,709

$

26,262

$

25,597

$

12,214

$

91,782

Revenue, Same Community1 Properties

$

25,793

$

25,588

$

25,597

$

12,214

$

89,192

NOI 1, Total Portfolio

$

15,134

$

13,803

$

13,465

$

6,650

$

49,052

NOI 1, Same Community 1 Properties

$

14,030

$

13,319

$

13,465

$

6,650

$

47,464

NOI Margin 1, Total Portfolio

54.6%

52.6%

52.6%

54.4%

53.4%

NOI Margin 1, Same Community 1 Properties

54.4%

52.1%

52.6%

54.4%

53.2%

FFO 1

$

8,061

$

7,657

$

7,593

$

3,690

$

27,001

FFO per Unit

$

0.203

$

0.193

$

0.191

$

0.093

$

0.680

Maintenance Capital Expenditures

$

586

$

1,382

$

1,147

$

569

$

3,684

AFFO 1

$

7,474

$

6,216

$

6,334

$

3,088

$

23,112

AFFO per Unit

$

0.188

$

0.156

$

0.159

$

0.078

$ 0.581

AFFO Payout Ratio

66.4%

79.9%

78.4%

76.0%

74.6%









Period from May
18, 2018 to
March 31, 2019
Actual Results

Pro-Rated 2
Forecast

Change

Change %

Operating Results






Revenue, Total Portfolio


$

91,782

$

87,652

$

4,130

4.7%

Revenue, Same Community1 Properties


$

89,192

$

87,652

$

1,540

1.8%

NOI 1, Total Portfolio


$

49,052

$

45,628

$

3,424

7.5%

NOI 1, Same Community 1 Properties


$

47,464

$

45,628

$

1,836

4.0%

NOI Margin 1, Total Portfolio


53.4%

52.1%

130bps

2.5%

NOI Margin 1, Same Community 1 Properties


53.2%

52.1%

110bps

2.1%

FFO 1


$

27,001

$

26,017

$

984

3.8%

FFO per Unit


$

0.680

$

0.655

$

0.025

3.8%

Maintenance Capital Expenditures


$

3,684

$

3,449

$

235

6.8%

AFFO 1


$

23,112

$

22,399

$

713

3.2%

AFFO per Unit


$

0.581

$

0.564

$

0.011

3.0%

AFFO Payout Ratio


74.6%

77.0%

-240bps

-3.1%

Conference Call

John Bailey, Chief Executive Officer, and Susan Koehn, Chief Financial Officer, will host a conference call for analysts and investors on Tuesday, May 14th, 2019 at 10:00 am (ET). The dial-in numbers for participants are 416-764-8609 or 888-390-0605. In addition, the call will be webcast live at: https://event.on24.com/wcc/r/1978004/223D6753EBF4427868148C3F1A77EC14

A replay of the call will be available until Tuesday, May 21st, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 159872 #). A transcript of the call will be archived on the REIT's website.

Annual Meeting of Unitholders

The REIT's Annual Meeting of Unitholders will take place on Tuesday, May 14, 2019 at 2:00 pm ET. The meeting will be held at the offices of Goodmans LLP, at Bay Adelaide Centre - West Tower, 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7.

About BSR Real Estate Investment Trust

BSR Real Estate Investment Trust is an internally managed, unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT owns a portfolio of 51 multifamily garden-style residential properties consisting of 10,823 apartment units located across five bordering states in the Sunbelt region of the United States.

Non-IFRS Financial Measures

Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value are key measures of performance commonly used by real estate operating companies and real estate investment trusts. They are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value as calculated by the REIT may not be comparable to similar measures presented by other issuers. Please refer to the REIT's Management's Discussion and Analysis for the period ended March 31, 2019 for a reconciliation of Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value to standardized IFRS measures.

Forward-Looking Statements

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the REIT. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements, which include statements regarding the REIT's anticipated AFFO for the year ended March 31, 2019 and ability to achieve organic and acquisition-based growth, are based on the REIT's expectations, estimates, forecasts and projections. The forward-looking statements in this news release are based on certain assumptions, including the assumptions described under the heading "Financial Forecast" in the REIT's prospectus dated May 11, 2018 (the "Prospectus"), which is available at www.sedar.com. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading "Risk Factors" in the Prospectus. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

__________________________

1

Same Community, NOI, NOI margin, FFO, AFFO and Debt to GBV are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release.

2

The pro-rated forecast has been calculated by dividing the financial forecast for the three months ended June 30, 2018 by 91 days and multiplying by 44 days, representing the actual number of days from May 18, 2018 to June 30, 2018. This has been added to the forecast for the six months ended December 31, 2018 to calculate the pro-rated forecast shown above.

SOURCE BSR Real Estate Investment Trust