BSR REIT Announces Outstanding Q2 2021 Financial Results

–       Vibrant Texas Markets Lift NAV 21.9% to $14.77   –

LITTLE ROCK, Ark. and TORONTO, Aug. 10, 2021 /CNW/ - BSR Real Estate Investment Trust ("BSR", or the "REIT") (TSX: HOM.U) (TSX: HOM.UN) today announced its financial results for the three and six months ended June 30, 2021 ("Q2 2021" and "YTD 2021", respectively). All comparisons in the following summary are to the corresponding period in the prior year. Results are presented in U.S. dollars. References to "Same Community" correspond to stabilized properties the REIT has owned for equivalent periods throughout Q2 2021 and YTD 2021 and the three and six months ended June 30, 2020 ("Q2 2020" and "YTD 2020", respectively), thus removing the impact of acquisitions, dispositions and non-stabilized properties. Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis as of and for the three and six months ended June 30, 2021 are available on the REIT's website at www.bsrreit.com and at www.sedar.com.

"As illustrated by the 27% year-over-year increase in AFFO in Q2 2021, our financial results are now beginning to reflect the tremendous impact of the capital recycling program which is now substantially complete," said John Bailey , the REIT's Chief Executive Officer. "As we continue to use the REIT's acquisition capacity, we expect to maintain this strong financial momentum. Moreover, in conjunction with better-than-anticipated revenue growth due to increasing demand in our primary markets of Dallas, Austin and Houston, Texas, the REIT's NAV has increased 21.9% year-over-year to $14.77 per unit."

 Q2 2021 Highlights

Subsequent Highlights

____________________

1 Same Community, NOI, NOI margin, FFO, AFFO, Debt to Gross Book Value and NAV per Unit are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release.

COVID-19 Mitigation

The REIT's highest priority is the health and safety of its residents and team members. Given the fluid nature of the pandemic, management continues to monitor all of its locations to adjust policies and procedures as necessary to provide a safe environment to live and work. A combination of measures has been implemented at each of the REIT's properties based on requirements from state and local governments and recommendations from the Centers for Disease Control and Prevention.

The Emergency Rental Assistance Program makes available $46.5 billion to assist households that are unable to pay rent and utilities due to COVID-19. Eligible households may receive up to 12 months of rent assistance, plus an additional three months if more time is needed to ensure housing stability. An application for rental assistance may be submitted by either an eligible household or by a landlord on behalf of an eligible household. As of July 31, 2021, BSR has collected $0.6 million in rental assistance related to eligible residents.

Q2 2021 Financial Summary

In thousands of U.S. dollars, except per unit amounts


Q2 2021

Q2 2020

Change

Change %

Revenue, Total Portfolio

$

28,046

$

27,288

$

758

2.8%

Revenue, Same Community1 Properties

$

13,873

$

13,166

$

707

5.4%

NOI1, Total Portfolio

$

14,374

$

14,222

$

152

1.1%

NOI1, Same Community1 Properties

$

7,360

$

6,999

$

361

5.2%

FFO1

$

7,000

$

6,635

$

365

5.5%

FFO per Unit1

$

0.13

$

0.15

$

-0.02

-13.3%

Maintenance capital expenditures

$

-690

$

-678

$

-12

1.8%

Escrowed rent guaranty realized

$

1,475

$

$

1,475

100.0%

Severance/retention costs on dispositions

$

59

$

155

$

-96

-61.9%

Straight line rental revenue differences

$

11

$

80

$

-69

-86.3%

AFFO1

$

7,855

$

6,192

$

1,663

26.7%

AFFO per Unit1

$

0.15

$

0.14

$

0.01

7.1%

Weighted Average Unit Count

52,084,576

44,663,118

7,421,457

16.6%

NAV1

$

769,302

$

541,558

$

227,744

42.1%

NAV per Unit1

$

14.77

$

12.12

$

2.60

21.9%

The REIT expects the portfolio to be stabilized by the end of 2021, with another $167 million in acquisitions completed before year end expected to add approximately $4.0 million in AFFO, or $0.08 per Unit, on an annual basis assuming similar economics to the Hanger 19 acquisition discussed above.

Revenue from Same Community properties outperformed Q2 2020 by $0.7 million due to an increase in average rental rates from $1,044 per apartment unit as of June 30, 2020 to $1,079 per apartment unit as of June 30, 2021 representing approximately $0.2 million of the increase in revenue and an increase in occupancy also representing approximately $0.2 million. The remaining $0.3 million of the increase in revenue is related to $0.1 million in additional late fees over Q2 2020, which were not charged in the prior year due to the pandemic, $0.1 million in additional fees associated with moving in or out of an apartment unit and $0.1 million in additional utility reimbursements.

The increase in Same Community NOI for Q2 2021 compared to Q2 2020 was the result of the increase in revenue described above and a $0.1 million decline in real estate taxes, partially offset by increases of $0.1 million in the cost of utilities, $0.1 million in the costs associated with preparing apartment units for new residents and $0.1 million in higher property insurance costs.

AFFO was $7.9 million, or $0.15 per Unit, for Q2 2021, compared to $6.2 million, or $0.14 per Unit, for Q2 2020. The increase was primarily the result of the increase in NOI discussed above and the $1.5 million in escrowed rent guaranty realized in Q2 2021 related to the properties acquired in lease up in 2021, partially offset by additional severance/retention costs added back to AFFO in Q2 2020, related to the capital recycling program, as well as less straight line rent over Q2 2020. AFFO in the second half of 2021 and throughout 2022 is expected to significantly benefit from accretive deployment of the REIT's substantial acquisition capacity, as referenced above.

YTD 2021 Financial Summary

In thousands of U.S. dollars, except per unit amounts


YTD 2021

YTD 2020

Change

Change %

Revenue, Total Portfolio

$

53,816

$

54,810

$

-994

-1.8%

Revenue, Same Community1 Properties

$

27,330

$

26,310

$

1,020

3.9%

NOI1, Total Portfolio

$

27,729

$

28,905

$

-1,176

-4.1%

NOI1, Same Community1 Properties

$

14,605

$

14,052

$

553

3.9%

FFO1

$

12,806

$

13,605

$

-799

-5.9%

FFO per Unit1

$

0.25

$

0.30

$

-0.05

-16.7%

Maintenance capital expenditures

$

-1,186

$

-1,491

$

305

-20.5%

Escrowed rent guaranty realized

$

1,475

$

437

$

1,038

237.5%

Severance/retention costs on dispositions

$

105

$

186

$

-81

-43.5%

Straight line rental revenue differences

$

-35

$

62

$

-97

-156.5%

AFFO1

$

13,165

$

12,799

$

366

2.9%

AFFO per Unit1

$

0.26

$

0.29

$

-0.03

-10.3%

Weighted Average Unit Count

50,682,740

44,829,109

5,853,631

13.1%

The decrease in total portfolio revenue for YTD 2021 compared to YTD 2020 was the result of property dispositions  reducing revenue by $20.7 million, partially offset by acquisitions contributing $16.6 million, non-stabilized properties contributing an additional $2.1 million, and Same Community properties contributing $1.0 million.

The increase in revenue from Same Community properties for YTD 2021 compared to YTD 2020 was due to an increase in average rental rates from $1,044 per apartment unit as of June 30, 2020 to $1,079 per apartment unit as of June 30, 2021, which represented approximately $0.4 million of the increase, as well as an increase in occupancy representing approximately $0.1 million of the increase. The remaining $0.4 million of the increase in revenue is related to $0.1 million in additional late fees over the comparative period, as discussed above, as well as higher utility reimbursement revenues.

The decrease in total portfolio NOI for YTD 2021 compared to YTD 2020 was the result of property dispositions  reducing NOI by $11.3 million, partially offset by acquisitions contributing $7.6 million, non-stabilized properties contributing an additional $2.1 million, and Same Community properties contributing $0.6 million.

The increase in Same Community NOI for YTD 2021 compared to YTD 2020 was primarily the result of the increase in revenue described above as well as a $0.4 million decline in real estate taxes, partially offset by an increase in property operating expenses of $0.8 million due to increases in utility expenses, property insurance, apartment unit turnover expense and other administrative expenses.

AFFO was $13.2 million, or $0.26 per Unit, for YTD 2021, compared to $12.8 million, or $0.29 per Unit, for YTD 2020. The increase was primarily the result of a decline in finance costs, excluding loss on extinguishment of debt,  the increase in  escrowed rent guaranty realized in Q2 2021 compared to Q2 2020 related to the properties acquired in lease up, partially offset by the decrease in total portfolio NOI discussed above.

Total Highlights from Recent Four Quarters

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

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


June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Operational Information





Number of real estate investment properties

28

29

30

40

Total apartment units

7,660

7,804

7,628

9,681

Average monthly rent on in-place leases

$

1,206

$

1,134

$

1,088

$

1,011

Average monthly rent on in-place leases,

     Same Community1 Properties

$

1,079

$

1,058

$

1,054

$

1,046

Weighted average occupancy rate

96.2%

94.3%

93.8%

93.5%

Retention rate

55.6%

57.5%

56.5%

53.4%

Debt to Gross Book Value1

41.5%

43.4%

46.5%

50.8%







Three months
ended June 30, 2
021

Three months
ended March 31,
2021

Three months
ended December 31,
2020

Three months
ended September 30,
2020

Operating Results





Revenue, Total Portfolio

$

28,046

$

25,770

$

28,627

$

29,849

Revenue, Same Community1 Properties

$

13,873

$

13,457

$

13,342

$

13,459

NOI1, Total Portfolio

$

14,374

$

13,355

$

15,098

$

15,233

NOI1, Same Community1 Properties

$

7,360

$

7,245

$

7,183

$

6,902

NOI Margin1, Total Portfolio

51.3%

51.8%

52.7%

51.0%

NOI Margin1, Same Community1 Properties

53.1%

53.8%

53.8%

51.3%

FFO1

$

7,000

$

5,806

$

6,655

$

7,427

FFO per Unit

$

0.13

$

0.12

$

0.15

$

0.16

Maintenance capital expenditures

$

-690

$

-496

$

-846

$

-958

Escrowed rent guaranty realized

$

1,475

$

$

87

$

Severance/retention costs on dispositions

$

59

$

46

$

382

$

Straight line rental revenue differences

$

11

$

-46

$

153

$

21

AFFO1

$

7,855

$

5,310

$

6,125

$

6,490

AFFO per Unit1

$

0.15

$

0.11

$

0.13

$

0.14

AFFO Payout Ratio

79.2%

117.3%

92.9%

87.5%

Weighted Average Unit Count

52,084,576

49,265,328

45,626,505

45,255,977

Liquidity and Capital Structure

As of June 30, 2021, the REIT had liquidity of $96.6 million, consisting of cash and cash equivalents of $8.2 million, $53.4 million available on the REIT's credit facility and $35 million available on a line of credit.

As of June 30, 2021, the REIT had total mortgage notes payable of $403.0 million, excluding the credit facility and line of credit, with a weighted average contractual interest rate of 3.3% and a weighted average term to maturity of 6.1 years. Total loans and borrowings of the REIT as of June 30, 2021 were $524.2 million, excluding the Debentures. 78% of the REIT's debt was fixed or economically hedged to fixed rates.

Additionally, as of June 30, 2021, the REIT had $42.5 million in Convertible Debentures outstanding at a contractual interest rate of 5%, maturing on September 30, 2025 with a conversion price of $14.40 per Unit.

Distributions and Units Outstanding

Cash distributions declared to REIT unitholders and Class B unitholders of BSR Trust, LLC totalled $6.5 million for Q2 2021, representing an AFFO payout ratio of 79.2%. AFFO in the second half of 2021 and throughout 2022 is expected to significantly benefit from accretive deployment of the REIT's acquisition capacity, as referenced above. 100% of the REIT's cash distributions were classified as return of capital. As of June 30, 2021, the total number of REIT Units outstanding was 30,332,306. There were also 21,562,206 Class B Units of BSR Trust, LLC outstanding, which are redeemable for REIT Units on a one-for-one basis.

Change in senior management structure

The REIT also announced today, effective December 31, 2021, John Bailey will assume the role of Executive Vice Chairman of the board of trustees and Dan Oberste has been appointed to become Chief Executive Officer at that time consistent with the REIT's succession plan. Mr. Oberste will also continue to serve as President and Chief Investment Officer to the REIT. Mr. Bailey has served as Chief Executive Officer of the REIT and its predecessor since 1991. "We have assembled an outstanding professional team of people who are largely responsible for where we are today," said Mr. Bailey. "I am extremely blessed to work with such a fine professional team, and we have only begun to realize the potential of this great enterprise. Going forward, I will assist the team as the need arises. Dan's leadership qualities are a perfect fit for taking BSR to the next level."

Mr. Oberste initially worked for the REIT's predecessor in 2002 and returned in 2009 after exiting his legal practice. Since that time he has served in progressively senior roles within the organization. "I am honored to have worked closely with John and our team for some time, and I look forward to leading the team into the next round of growth for our investors, " said Mr. Oberste. 

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 11th, 2021 at 11:00 am (ET). The dial-in numbers for participants are 416-764-8688 or 888-390-0546. In addition, the call will be webcast live at:

https://produceredition.webcasts.com/starthere.jsp?ei=1480029&tp_key=adf15f91fa

A replay of the call will be available until Wednesday, August 18th, 2021. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 892744 #). 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 multifamily garden-style residential properties located in attractive primary and secondary markets in the Sunbelt region of the United States.

Non-IFRS Financial Measures

Same Community, NOI, NOI Margin, FFO, AFFO, Debt to Gross Book Value, NAV and NAV per Unit 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, Debt to Gross Book Value, NAV and NAV per Unit 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 months ended June 30, 2021 for a reconciliation of Same Community, NOI, NOI Margin, FFO, AFFO, Debt to Gross Book Value, NAV and NAV per Unit to standardized IFRS measures.

Forward-Looking Statements

This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events, including the accretive impact of the REIT's capital recycling efforts on future financial results and the potential impact of COVID-19, and in some cases can be identified by such terms as "will" and "expected". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. The REIT's estimates, beliefs and assumptions, which may prove to be incorrect, including those relating to the REIT's ability to finance and complete future acquisitions, as well as that COVID-19 will not have a material impact on the REIT's business. The risks and uncertainties that may impact such forward-looking information include, but are not limited to, the impact of COVID-19 on the REIT's operations, business and financial results and the factors discussed under "Risks and Uncertainties" in the REIT's Management's Discussion and Analysis for the three months ended June 30, 2021 and in the REIT's annual information form dated March 9, 2021, both of which are available on SEDAR (www.sedar.com). The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.

SOURCE BSR Real Estate Investment Trust