BSR REIT Announces Q1 2021 Financial Results

– Dynamic Texas Markets lift NAV 8.3% to $13.21 –

– Strong property pipeline and substantial acquisition capacity position REIT for significant NOI and AFFO growth in second half of 2021 and throughout 2022 –

LITTLE ROCK, Ark. and TORONTO, May 11, 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 months ended March 31, 2021 ("Q1 2021"). 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 Q1 2021 and the three months ended March 31, 2020 ("Q1 2020"), 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 months ended March 31, 2021 are available on the REIT's website at www.bsrreit.com and at www.sedar.com.

"With the focus of our capital recycling program now primarily oriented to the deployment of our $287 million in acquisition capacity, the REIT is positioned to significantly expand our property portfolio on a highly accretive basis," said John Bailey , the REIT's Chief Executive Officer. "In conjunction with better-than-anticipated revenue growth in our primary markets of Dallas, Austin and Houston, Texas, we expect significant growth in NOI and AFFO in the second half of 2021 and throughout 2022. In addition, the repositioning of the portfolio into these high growth markets has resulted in an 8.3% increase in the REIT's NAV to $13.21 per unit."

 Q1 2021 Highlights

• Same Community¹ revenues for Q1 2021 increased 2.5% over Q1 2020;
• Weighted average rent was $1,134 per apartment unit as of March 31, 2021 compared to $956 per apartment unit as of March 31, 2020, representing a 18.6% increase;
• Same Community¹ Net Operating Income¹ ("NOI") for Q1 2021 increased 2.2% over Q1 2020;
• On February 9, 2021, the REIT completed an offering of 6,302,000 Units ("February 2021 Offering") for total gross proceeds of $69 million;
• During Q1 2021, the REIT announced the $195 million acquisition of three apartment communities in its primary markets, Vale Frisco Apartments located in the Dallas, Texas metropolitan statistical area ("MSA") and Adley at Gleannloch Apartments and Alleia Long Meadow Farms both located in the Houston, Texas MSA; together, the acquisitions comprise 1,009 apartment units. Vale Frisco and Adley at Glennloch closed in March and Alleia Long Meadow Farms is expected to close in May 2021;
• During Q1 2021, the REIT sold three non-core properties comprising 433 apartment units for gross proceeds of $34.8 million as part of its capital recycling program, under which the REIT recycles proceeds from asset sales, on a tax deferred basis, into its high growth primary markets;
• Net Asset Value ("NAV") per Unit increased 8.3% to $13.21 as of Q1 2021 as compared to $12.20 as of Q1 2020;
• Debt to Gross Book Value¹ as of March 31, 2021 was 43.4%; and
• During March 2021, the REIT collected 99% of total monthly revenue, which is in line with the historical average.

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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.

Subsequent Highlights

• In April 2021, the REIT sold Mountain Ranch located in Northwest Arkansas at the contractual sale price of $49.5 million for the 360 apartment units. As a result, the REIT has now exited the Northwest Arkansas market;
• In May 2021, the REIT sold Regency Woods located in Pascagoula MSA for a contractual purchase price of $8.3 million for the 184 apartment units. As a result, the REIT has now exited the Pascagoula market.
• The acquisitions and dispositions reduced the average age of the BSR portfolio by 15 years to 14 years from the time of the REIT's IPO in May 2018;
• The REIT's Debt to Gross Book Value¹ following the dispositions of Mountain Ranch and Regency Woods and acquisition of Alleia is 44.3%, providing approximately $287 million of acquisition capacity without the requirement for additional equity;
• 96% of NOI is now derived from the REIT's core markets;
• In April 2021, the REIT collected 99% of monthly revenue, which is in line with the historical average;
• In April 2021, Same Community rental rates for new leases increased 4.8% and renewals increased 2.7%; and
• As of April 30, 2021, Same Community physical occupancy was 95.4%.

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 Center for Disease Control.

To prevent further spread of the coronavirus, the CDC issued an order to temporarily halt certain residential evictions for non-payment of rent if a declaration is provided to the landlord stating the resident meets specific eligibility requirements. As of April 30, 2021, the REIT has received 22 declarations related to the order, representing approximately $0.1 million in unpaid rent.

Q1 2021 Financial Summary

In thousands of U.S. dollars

	Three months ended March 31, 2021		Three months ended March 31, 2020		Change		Change %
Revenue, Total Portfolio	$	25,770	$	27,522	$	-1,752	-6.4%
Revenue, Same Community^1 Properties	$	14,826	$	14,470	$	356	2.5%
NOI^1, Total Portfolio	$	13,355	$	14,683	$	-1,328	-9.0%
NOI^1, Same Community^1 Properties	$	8,003	$	7,829	$	174	2.2%
FFO^1	$	5,806	$	6,970	$	-1,164	-16.7%
FFO per Unit^1	$	0.12	$	0.15	$	-0.03	-20.0%
Maintenance capital expenditures	$	-496	$	-813	$	317	-39.0%
Escrowed rent guaranty realized	$	–	$	437	$	-437	-100.0%
Severance/retention costs on dispositions	$	46	$	31	$	15	48.4%
Straight line rental revenue differences	$	-46	$	-18	$	-28	155.6%
AFFO^1	$	5,310	$	6,607	$	-1,297	-19.6%
AFFO per Unit^1	$	0.11	$	0.15	$	-0.04	-26.7%
Weighted Average Unit Count		49,265,328		44,995,099		4,270,228	9.5%
NAV^1	$	688,231	$	544,744	$	143,487	26.3%
NAV per Unit^1	$	13.21	$	12.20	$	1.01	8.3%

The REIT sold $364.6 million in assets with an average age of 29 years located primarily in secondary markets from March 31, 2020 through March 31, 2021, and purchased $283.4 million in assets with an average age of three years located in primary markets, excluding the purchases announced on March 31, 2021, over the same time period. The timing of these asset sales and purchases is the primary driver for the decline in total portfolio NOI, FFO and AFFO for Q1 2021 compared to Q1 2020.

The purchase of Vale Frisco Apartments and Adley at Gleannloch Apartments on March 31, 2021 and the pending purchase of Alleia Long Meadow Farms in May 2021 will add approximately $4.9 million in AFFO, or $0.09 per Unit, on an annual basis. The REIT expects the portfolio to be stabilized by the end of 2021, with another $250 million in acquisitions completed before year end adding approximately $6.0 million in AFFO, or $0.12 per Unit, on an annual basis assuming similar economics to the REIT's last three acquisitions described above.

The decrease in total portfolio revenue for Q1 2021 compared to Q1 2020 was primarily the result of property dispositions that reduced revenue by $10.7 million, partially offset by acquisitions and non-stabilized properties which contributed $7.4 million and $1.2 million in revenue, respectively, as well as higher rental rates across the portfolio.

Revenue from Same Community properties outperformed Q1 2020 by $0.4 million due to an increase in average rental rates from $1,011 per apartment unit as of March 2020 to $1,025 per apartment unit as of March 2021, an increase in fees associated with pets, late rental payments and the flexibility to rent on a month-to-month basis as well as an increase in utility reimbursement revenue.

The decrease in total portfolio NOI for Q1 2021 compared to Q1 2020 was primarily the result of property dispositions that reduced NOI by $5.9 million, partially offset by acquisitions and non-stabilized properties that contributed $3.3 million and $1.1 million in NOI, respectively, as well as the increase in Same Community NOI discussed below.

The increase in NOI from Same Community properties for Q1 2021 compared to Q1 2020 was primarily the result of the higher revenue described above, offset by an increase in the cost of utilities of $0.2 million. Approximately 80% of the increase in the cost of utilities is expected to be reimbursed to the REIT from residents in the second quarter of 2021.

FFO decreased by $1.2 million to $5.8 million, or $0.12 per Unit, for Q1 2021, compared to $7.0 million, or $0.15 per Unit, for Q1 2020. The decrease was primarily the result of the reduction in NOI, discussed above, partially offset by a reduction in interest expense of $0.3 million, due to the timing of acquisitions, dispositions and the follow on offering in February 2021.

AFFO was $5.3 million, or $0.11 per Unit, for Q1 2021, compared to $6.6 million, or $0.15 per Unit, for Q1 2020. The decrease was primarily the result of the reduction in FFO, discussed above and the $0.4 million in escrowed rent guaranty realized in Q1 2020, offset by a decrease in maintenance capital expenditures of $0.3 million. 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.

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)

	March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Operational Information
Number of real estate investment properties	29		30		40		38
Total apartment units	7,804		7,628		9,681		9,035
Average monthly rent on in-place leases	$	1,134	$	1,088	$	1,011	$	996
Average monthly rent on in-place leases,      Same Community^1 Properties	$	1,025	$	1,022	$	1,014	$	1,007
Weighted average occupancy rate	94.3%		93.8%		93.5%		94.8%
Retention rate	57.5%		56.5%		53.4%		53.5%
Debt to Gross Book Value^1	43.4%		46.5%		50.8%		48.5%
	Three months ended March 31, 2021		Three months ended December 31, 2020		Three months ended September 30, 2020		Three months ended June 30, 2020
Operating Results
Revenue, Total Portfolio	$	25,770	$	28,627	$	29,849	$	27,288
Revenue, Same Community^1 Properties	$	14,826	$	14,740	$	14,848	$	14,494
NOI^1, Total Portfolio	$	13,355	$	15,098	$	15,233	$	14,222
NOI^1, Same Community^1 Properties	$	8,003	$	7,985	$	7,674	$	7,765
NOI Margin^1, Total Portfolio	51.8%		52.7%		51.0%		52.1%
NOI Margin^1, Same Community^1 Properties	54.0%		54.2%		51.7%		53.6%
FFO^1	$	5,806	$	6,655	$	7,427	$	6,635
FFO per Unit	$	0.12	$	0.15	$	0.16	$	0.15
Escrowed rent guaranty realized	$	–	$	87	$	–	$	–
Maintenance capital expenditures	$	496	$	846	$	958	$	678
AFFO^1	$	5,310	$	6,125	$	6,490	$	6,192
AFFO per Unit^1	$	0.11	$	0.13	$	0.14	$	0.14
AFFO Payout Ratio	117.3%		92.9%		87.5%		90.0%
Weighted Average Unit Count	49,265,328		45,626,505		45,255,977		44,663,118

Liquidity and Capital Structure

On February 9, 2021, the REIT completed an offering of 6,302,000 REIT units for total gross proceeds of $69 million. Net proceeds of $66 million were used to repay amounts outstanding on the REIT's credit facility.

As of March 31, 2021, the REIT had liquidity of $44.3 million, consisting of cash and cash equivalents of $5.8 million, $3.5 million available on the REIT's credit facility and $35 million available on a line of credit.

As of March 31, 2021, the REIT had total mortgage notes payable of $336.3 million, excluding the credit facility and line of credit, with a weighted average contractual interest rate of 3.6% and a weighted average term to maturity of 7.0 years. Total loans and borrowings of the REIT as of March 31, 2021 were $503.0 million, excluding the Debentures. 85% of the REIT's debt was fixed or economically hedged to fixed rates.

Additionally, as of March 31, 2021, the REIT had $42.5 million in 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 $6.2 million for Q1 2021, representing an AFFO payout ratio of 117.3%. 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. 100% of the REIT's cash distributions were classified as return of capital. As of March 31, 2021, the total number of REIT Units outstanding was 30,213,484. There were also 21,671,838 Class B Units of BSR Trust, LLC outstanding, which are redeemable for 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, May 12th, 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=1450859&tp_key=4af2407c5b 

A replay of the call will be available until Wednesday, May 19th, 2021. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 967360 #). 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 year ended March 31, 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 March 31, 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

Susan Koehn, Chief Financial Officer, BSR Real Estate Investment Trust, Tel: [phone], Fax: [phone]

Related Links

www.bsrtrust.com