BSR REIT Reports Strong Q2 2019 Results and Continues Capital Recycling Program

LITTLE ROCK and TORONTO, Aug. 6, 2019 /CNW/ - BSR Real Estate Investment Trust ("BSR", or the "REIT") (TSX: HOM.U and HOM.UN) today announced its financial results for the three and six month periods ended June 30, 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. In order to provide investors with a more complete understanding of the REIT's comparative performance, the REIT has provided total revenue, NOI and Same Community metrics in this news release that encompass the entire three-months and six-month periods ended June 30, 2018 for the properties that were acquired by the REIT upon completion of the IPO. Results are presented in U.S. dollars. Financial Statements and Management's Discussion and Analysis are available on the REIT's website at www.bsrreit.com and at www.SEDAR.com.

Q2 2019 Highlights

Year to Date 2019 Highlights

Subsequent to June 30, 2019, for the third consecutive year, BSR was named as one of the best places to work in the state of Arkansas by Arkansas Business and the Best Companies Group.

"BSR delivered strong second quarter results while also recycling capital, on a tax deferred basis, to take advantage of a historically low spread between capitalization rates in primary and secondary markets," stated John Bailey, BSR's Chief Executive Officer. "BSR will continue to recycle capital into high growth suburban areas within markets that meet the REIT's acquisition criteria, modernize the portfolio, and, so long as market conditions remain favourable to do so exit the Baton Rouge, Beaumont, Blytheville, Hot Springs, Pascagoula, Shreveport and Tulsa markets. As previously communicated, BSR will continue to implement its growth strategy which includes acquiring more modern properties, clustered in target markets with above average population growth with a clear potential for higher rent utilizing the BSR platform."

FFO1 for the three months ended June 30, 2019 was $7.4 million, or $0.185 per Unit, which was 8.5% below the three months ended March 31, 2019 of $8.1 million, or $0.203 per Unit. The decrease relates primarily to an increase in general and administrative expenses associated with share based compensation, as NOI for the full portfolio was flat compared to the first quarter of 2019, despite the sale of six properties and an increase in real estate taxes during the second quarter of 2019.

AFFO1 was $6.2 million, or $0.156 per Unit, for the three months ended June 30, 2019, compared to the three months ended March 31, 2019 of $7.5 million, or $0.188 per Unit. The change was due to the decrease in FFO discussed above as well as the timing of maintenance capital expenditures which are incurred unevenly through out the year.

Financial Summary

The following comparisons of the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018 encompasses the full three-months and six-months ended June 30, 2018 for the properties that were acquired by the REIT upon completion of the IPO to provide investors with a more complete understanding of the REIT's comparative performance to the prior year.

In thousands of U.S. dollars


Three months
ended June 30,
2019


Three months
ended June 30,
2018


Change


Change %

Revenue, Total Portfolio

$

27,993


$

24,926


$

3,067


12.3%

Revenue, Same Community1 Properties

$

23,260


$

22,511


$

749


3.3%

NOI 1, Total Portfolio

$

15,168


$

13,543


$

1,625


12.0%

NOI 1, Same Community 1 Properties

$

12,713


$

12,288


$

425


3.5%

The increase in revenue for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 was primarily the result of property acquisitions contributing $3.5 million in revenue as well as higher rental rates across the portfolio, partially offset by dispositions reducing revenue by $1.2 million.

Same Community Properties outperformed the three months ended June 30, 2018 by $0.8 million due to increased rental rates achieved through the REIT's capital redevelopment program, which increased Same Community rental rates from $815 per apartment unit as of June 2018 to $837 per apartment unit as of June 2019.

The increase in NOI for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 was primarily the result of property acquisitions contributing $1.7 million in NOI, partially offset by dispositions reducing NOI by $0.7 million.

Same Community Properties outperformed the three months ended June 30, 2018 by $0.4 million due to the increase in revenue, as described above, offset by higher property taxes, insurance costs and repair and maintenance expenses related to the timing of additional expenses incurred in the second quarter of 2019 that were not incurred in the first quarter of 2019.

In thousands of U.S. dollars


Six months
ended June 30,
2019


Six months
ended June 30,
2018


Change


Change %

Revenue, Total Portfolio

$

55,702


$

48,983


$

6,719


13.7%

Revenue, Same Community1 Properties

$

46,211


$

44,447


$

1,764


4.0%

NOI 1, Total Portfolio

$

30,302


$

25,803


$

4,499


17.4%

NOI 1, Same Community 1 Properties

$

25,424


$

23,717


$

1,707


7.2%

The increase in revenue for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 was primarily the result of property acquisitions contributing $6.0 million in revenue as well as higher rental rates across the portfolio, partially offset by dispositions reducing revenue by $1.2 million.

Same Community Properties outperformed the six months ended June 30, 2018 by $1.8 million, due to increased rental rates as a result of the REIT's capital redevelopment program which increased Same Community rental rates, as described above.

The increase in NOI for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 was primarily the result of property acquisitions contributing $3.4 million in NOI offset by dispositions reducing NOI by $0.7 million.

Same Community Properties NOI outperformed the six months ended June 30, 2018 by $1.7 million, due to the increase in revenue, as described above, with operating expenses remaining flat over the prior period.

Total Highlights from Recent Four Quarters

The following table highlights certain financial performance of the REIT reported for the most recent four quarters of the REIT.

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


June 30,

2019

March 31,

2019

December 31,
2018

September 30,
2018

Operational Information





Number of real estate investment properties

45

51

50

48

Total apartment units

9,714

10,823

10,451

9,879

Average monthly rent on in-place leases

$

858

$

835

$

821

$

806

Average monthly rent on in-place leases,










Same Community 1 Properties

$

837

$

833

$

832

$

826

Weighted average occupancy rate

95.0%

94.9%

93.3%

93.6%

Retention rate

55.0%

53.4%

52.4%

52.0%

Debt to Gross Book Value 1

47.8%

51.2%

48.6%

44.5%







Three months
ended June 30,
2019

Three months
ended March
31, 2019

Three months
ended
December 31,
2018

Three months
ended
September 30,
2018

Operating Results





Revenue, Total Portfolio

$

27,993

$

27,709

$

26,262

$

25,597

Revenue, Same Community1 Properties

$

23,260

$

22,951

$

22,823

$

22,823

NOI 1, Total Portfolio

$

15,168

$

15,134

$

13,803

$

13,465

NOI 1, Same Community 1 Properties

$

12,713

$

12,711

$

12,101

$

12,229

NOI Margin 1, Total Portfolio

54.2%

54.6%

52.6%

52.6%

NOI Margin 1, Same Community 1 Properties

54.7%

55.4%

53.0%

53.6%

FFO 1

$

7,379

$

8,061

$

7,657

$

7,593

FFO per Unit

$

0.185

$

0.203

$

0.193

$

0.191

Maintenance Capital Expenditures

$

1,354

$

586

$

1,382

$

1,147

AFFO 1

$

6,188

$

7,474

$

6,216

$

6,334

AFFO per Unit

$

0.156

$

0.188

$

0.156

$

0.159

AFFO Payout Ratio

80.3%

66.4%

79.9%

78.4%

Liquidity and Capital Structure

As of June 30, 2019, the REIT had cash and cash equivalents of $7.9 million, a $110.0 million revolving credit facility and a $35.0 million line of credit. $78.1 million was drawn from the credit facility and no balance was drawn on the line of credit, leaving combined availability of $66.9 million. As of June 30, 2019, the REIT had total mortgage notes payable of $406.1 million, excluding the credit facility, with a weighted average contractual interest rate of 3.9% and a weighted average term to maturity of 10.1 years. Total loans and borrowings of the REIT as of June 30, 2019 were $476.3 million. Debt to Gross Book Value1 was 47.8%. Additionally, the REIT entered into an interest rate swap, in June of 2019, on a notional value of $80.0 million at a fixed interest rate of 1.84%. As of June 30, 2019, 96% of the REIT's debt was fixed or economically hedged to fixed rates.

Distributions and Units Outstanding

Cash distributions declared to REIT unitholders and Class B unitholders totalled $5.0 million for the second quarter of 2019, representing an AFFO payout ratio of 80.3%. 100% of the REIT's cash distributions were a return of capital. As of June 30, 2019, the total number of REIT Units outstanding was 16,663,507. There were also 23,048,050 Class B Units outstanding, which are exchangeable into REIT Units on a one-for-one basis.

Conference Call

John Bailey, Chief Executive Officer, and Susan Koehn, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, August 7th, 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/2047626/0134383F4E282A6DE6825D0756005A4D

A replay of the call will be available until Wednesday, August 14th, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 174881 #). A transcript of the call will be archived on the REIT's website.

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 45 multifamily garden-style residential properties consisting of 9,714 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 three and six months ended June 30, 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 June 30, 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 guaranteeing 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.

SOURCE BSR Real Estate Investment Trust