BSR REIT Acquiring Strategic Portfolio of 1009 Units in Three Core Texas Markets for $195 Million
REIT also exits Blytheville, Arkansas market
LITTLE ROCK, Ark. and TORONTO, March 31, 2021 /CNW/ - BSR Real Estate Investment Trust ("BSR" or the "REIT") (TSX: HOM.U) (TSX: HOM.UN) announced today that it is acquiring a portfolio of three garden style communities in its core Texas markets for total consideration of $195 million. The REIT is satisfying 100% of the purchase price for the portfolio through its existing credit facility. The addition of the properties is expected to be immediately accretive to the REIT's adjusted funds from operations ("AFFO") on a per unit basis.
Vale Frisco Apartments is a newly constructed community located in the Dallas, Texas submarket of Frisco and comprises 349 apartment suites. Located adjacent to the December 2020 acquisition referred to as Satori Frisco, Vale Frisco received its certificate of occupancy on March 23, 2021. Amenities include balconies, resort-style pool, outdoor grilling areas, a two-story fitness center, gaming lounge, theater room, yoga studio, dog park with pet spa, and car care center. All units have nine-foot ceiling heights, granite counter tops and stainless-steel appliances.
Adley at Gleannloch Apartments is located in the Houston, Texas submarket of Spring and comprises 260 apartment suites. The community was constructed in 2019. Amenities include balconies, a social lounge with fireplace and catering kitchen, dog park with pet spa, car care center, resort-style pool, modern fitness center, outdoor kitchens, cinema theater, package delivery room, fenced playground, and business center with meeting rooms. All units have nine-foot ceiling heights, granite counter tops and stainless-steel appliances.
Alleia Long Meadow Farms is another newly constructed community, located in the Houston, Texas submarket of Richmond and comprising 400 suites. Alleia is located adjacent to the October 2019 acquisition referred to as Satori at Long Meadow. Amenities include balconies, walk in showers with separate soaking tubs, resort-style pool, outdoor kitchen with lounge, fitness center with yoga and flex space, dog park, pet spa, car care center and bike repair center with storage. All units have nine-foot ceiling heights, granite counter tops and stainless-steel appliances.
"With the purchase of Adley, Vale Frisco and Alleia, we are enhancing our portfolio positioning in Dallas and Houston," stated John Bailey, BSR's Chief Executive Officer. "BSR has gained impressive scale in these markets, and we are continuing to build greater scale by acquiring two additional phases of prior acquisitions, allowing us to use our experience to manage these modern communities to their fullest potential."
To mitigate any potential lease up risk, BSR and the seller have entered into a Rent Guaranty Escrow Agreement, allowing the REIT to collect monthly stabilized rental revenue from the seller through the first 12-months of ownership. Demand for apartment units at Vale Frisco and Alleia Long Meadow is robust and the REIT expects to reach stabilization by the second quarter of 2022, generating an IRR range of 11-15%. Both assets are expected to exceed average market returns for Dallas Fort Worth and Houston, respectively, on the account of submarket positioning. The third-party appraised value of the portfolio at stabilization is $205 million.
The acquisitions of Vale Frisco Apartments and Adley at Gleannloch Apartments have closed and the closing of Alleia Long Meadow Farms will occur following BSR's receipt of the Certificate of Occupancy.
The REIT also announced the recent sale of Capri Apartments located in Blytheville, Arkansas for gross proceeds of $3.1 million. The net proceeds, after closing costs, of $2.7 million were used to reduce the amount outstanding under the credit facility.
Since BSR completed its IPO on May 18, 2018, the portfolio's weighted average age has decreased from 29 years to 15 years old, directly attributable to the capital recycling program. The REIT's 17 acquisitions following the IPO added 5,200 apartment units with a weighted average year built of 2014 (seven years old) compared to 35 dispositions totaling 6,832 apartment units with a weighted average year built of 1988 (33 years old). Following the transaction announced today, the REIT's debt to gross book value ratio ("Debt to GBV") is 48.7%.
About BSR Real Estate Investment Trust
BSR Real Estate Investment Trust is an internally managed, unincorporated, and 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 multifamily garden-style residential properties located in attractive primary and secondary markets in the Sunbelt region of the United States.
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 are based on the REIT's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the intended monthly distributions of the REIT. The forward-looking statements in this news release are based on certain assumptions including, without limitation, that the REIT will have sufficient cash to pay its distributions. 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 REIT's 2020 Management's Discussion & Analysis dated March 9, 2021 which is available at www.sedar.com. 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.
Non-IFRS Financial Measure
AFFO is a key measure of operating performance commonly used by real estate operating companies and real estate investment trusts. It is not a measure recognized under International Financial Reporting Standards ("IFRS") and does not have a standardized meaning prescribed by IFRS. AFFO 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 dated March 9, 2021 for a reconciliation of AFFO to standardized IFRS measures.
SOURCE BSR Real Estate Investment Trust