BSR REIT Continues to Enhance its Portfolio and Achieves Strong Same Community Revenue and NOI Growth

LITTLE ROCK and TORONTO, Nov. 12, 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 nine months ended September 30, 2019 ("Q3 2019" and "YTD 2019", respectively). The REIT had no material operations from the date of inception, January 9, 2018, to the completion of its IPO on May 18, 2018. 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 nine-month period ended September 30, 2018 ("YTD 2018") for the properties that were acquired by the REIT upon completion of the IPO. Results are presented in U.S. dollars. Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis are available on the REIT's website at www.bsrreit.com and at www.SEDAR.com.

"We were pleased with the REIT's financial results in Q3 2019, as we continued to drive growth through improvements in same community revenue and NOI," stated John Bailey, BSR's Chief Executive Officer. "At the same time, the transformation of our portfolio continues as we enhance our portfolio by taking advantage of the historically low spread between capitalization rates in primary and secondary markets. Our team's efforts are focused on recycling capital into leading high growth markets to maximize portfolio value, which should translate into long-term value creation for our unitholders."

Highlights

• Weighted average occupancy was 94.9% as of September 30, 2019 compared to 93.6% as of September 30, 2018.
• Weighted average rent was $900 per apartment unit as of September 30, 2019 compared to $806 per apartment unit as of September 30, 2018.
• Same Community weighted average rent was $849 per apartment unit as of September 30, 2019 compared to $827 per apartment unit as of September 30, 2018.
• Total and Same Community[1] revenues for Q3 2019 increased 8.8% and 3.1%, respectively, over the three months ended September 30, 2018 ("Q3 2018").
• Total and Same Community¹ Net Operating Income¹ ("NOI") for Q3 2019 increased 7.9% and 3.2%, respectively, over Q3 2018.
• Total and Same Community¹ NOI for YTD 2019 increased 14.2% and 6.1%, respectively, over YTD 2018.
• Debt to Gross Book Value¹ as of September 30, 2019 was 46.2%.
• On September 17, 2019, the REIT completed a follow-on offering and private placement of 5,213,300 Units for total gross proceeds of $55.3 million, or $53.1 million net of issue and other transaction costs.
• In August 2019 the REIT acquired Cielo and Madrone, two adjacent garden style apartment communities located in Austin, Texas, totalling 554 apartment units for $104.45 million.
• Subsequent to quarter-end, in October 2019 the REIT acquired two apartment communities, Satori and Auberry, for $92.8 million. Satori has 300 apartment units and is located in the Houston metropolitan statistical area (MSA) and Auberry has 216 apartment units and is located in the Dallas MSA.
• During 2019, The REIT sold 15 noncore properties for $173.0 million, approximately 1.6% above the IPO appraised values, as part of its capital recycling program. BSR is able to recycle the proceeds from the sales, on a tax-deferred basis, into markets with high growth potential that meet the REIT's acquisition criteria.
• 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.

Since the IPO, the portfolio's weighted average age has decreased by six years to 23 years old, from 29 years as of May 18, 2018, directly attributable to the impact of acquisitions and dispositions during this period. The REIT has completed eight acquisitions for $347.9 million since the IPO for a total of 2,213 apartment units with a weighted average year built of 2008 (11 years old) compared to the 15 dispositions in 2019 which total 2,534 apartment units with a weighted average year built of 1981 (38 years old). The effects of the ongoing capital recycling program have increased the percentage of NOI concentrated in BSR's primary markets of Austin, Dallas, Houston, Oklahoma City and Fayetteville/Northwest Arkansas to 71% compared to 52% as of the third quarter of 2018, calculated on a pro forma basis.

Financial Summary 

The following comparisons of the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018  encompasses the full nine-months ended September 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 September 30, 2019		Three months ended September 30, 2018		Change		Change %
Revenue, Total Portfolio	$	27,840	$	25,597	$	2,243	8.8%
Revenue, Same Community^1 Properties	$	22,206	$	21,529	$	677	3.1%
NOI ^1, Total Portfolio	$	14,533	$	13,465	$	1,068	7.9%
NOI ^1, Same Community^1 Properties	$	11,902	$	11,531	$	371	3.2%
FFO ^1	$	7,123	$	7,593	$	-470	-6.2%
FFO per Unit ^1	$	0.18	$	0.19	$	0.01	5.3%
Maintenance capital expenditures	$	722	$	1,147	$	-425	-37.1%
AFFO ^1	$	6,455	$	6,334	$	121	– %
AFFO per Unit ^1	$	0.16	$	0.16	$	–	– %

The increase in total portfolio revenue for the Q3 2019 compared to Q3 2018 was primarily the result of property acquisitions, which contributed $4.1 million in revenue, as well as higher rental rates across the portfolio, partially offset by dispositions reducing revenue by $2.5 million.

Same Community Properties revenue outperformed the Q3 2018 period by $0.7 million due to increased rental rates achieved through the REIT's capital redevelopment program, which increased rental rates from $827 per apartment unit as of September 2018 to $849 per apartment unit as of September 2019.

The increase in total portfolio NOI for Q3 2019 compared to Q3 2018 was primarily the result of property acquisitions  contributing $2.0 million in NOI, partially offset by dispositions reducing NOI by $1.4 million, combined with the increase from the Same Community Properties described below.

Same Community Properties NOI outperformed Q3 2018 period by $0.4 million due to the increase in revenue, described above, offset by higher property taxes and insurance costs, as well as higher repair, maintenance and turnover expenses, due to timing. Repair, maintenance and turnover costs are 2.5% less on a year to date basis when compared to the prior period.

FFO was $7.1 million for Q3 2019, or $0.18 per Unit, compared to $7.6 million, or $0.19 per Unit, in Q3 2018. The decrease of $0.5 million in FFO is the result of the increase of $1.1 million in NOI described above, offset primarily by an increase in finance costs of $1.2 million resulting from property acquisitions, the timing of the follow on offering and private placement in relation to the acquisition of Cielo and Madrone described above and the amortization of deferred loan costs. Furthermore, G&A increased $0.3 million over the prior year due to an increase of $0.2 million in payroll expenses primarily related to the recognition of expense in Q3 in the current year versus Q4 in the prior year as well as an additional $0.1 million in share based compensation.

AFFO was $6.4 million, or $0.16 per Unit, for Q3 2019, compared to $6.3 million or $0.16 per Unit, in Q3 2018. The increase of $0.1 million is primarily the result of the change in FFO, described above, offset by a decrease in $0.4 million in maintenance capital expenditures for the third quarter of 2019 and the exclusion of $0.1 million in severance costs related to the capital recycling program.

In thousands of U.S. dollars

	Nine months ended September 30, 2019		Nine months ended September 30, 2018		Change		Change %
Revenue, Total Portfolio	$	83,542	$	74,580	$	8,962	12.0%
Revenue, Same Community^1 Properties	$	65,843	$	63,439	$	2,404	3.8%
NOI ^1, Total Portfolio	$	44,835	$	39,268	$	5,567	14.2%
NOI ^1, Same Community^1 Properties	$	35,959	$	33,880	$	2,079	6.1%

The increase in revenue for YTD 2019 as compared to YTD 2018 was primarily the result of property acquisitions, which contributed $10.2 million in revenue as well as higher rental rates across the portfolio, partially offset by dispositions reducing revenue by $3.6 million.

Same Community Properties outperformed the YTD 2018 period by $2.4 million, due to increased rental rates generated by the REIT's capital redevelopment program which increased Same Community rental rates, as described above.

The increase in NOI for YTD 2019 as compared to YTD 2018 was primarily the result of property acquisitions contributing $5.2 million in NOI, partially offset by dispositions reducing NOI by $1.9 million and the higher Same Community NOI described below.

Same Community Properties NOI outperformed the YTD 2018 period by $2.1 million, due to the increase in revenue described above, partially offset by an increase in taxes and insurance.

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)

	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018
Operational Information
Number of real estate investment properties	44		45		51		50
Total apartment units	9,758		9,714		10,823		10,451
Average monthly rent on in-place leases	$	900	$	858	$	835	$	821
Average monthly rent on in-place leases,
Same Community ^1 Properties	$	849	$	839	$	836	$	831
Weighted average occupancy rate	94.9%		95.0%		94.9%		93.3%
Retention rate	54.0%		55.0%		53.4%		52.4%
Debt to Gross Book Value ^1	46.2%		47.8%		51.2%		48.6%
	Three months ended September 30, 2019		Three months ended June 30, 2019		Three months ended March 31, 2019		Three months ended December 31, 2018
Operating Results
Revenue, Total Portfolio	$	27,840	$	27,993	$	27,709	$	26,262
Revenue, Same Community^1 Properties	$	22,206	$	21,968	$	21,669	$	21,535
NOI ^1, Total Portfolio	$	14,533	$	15,168	$	15,134	$	13,803
NOI ^1, Same Community ^1 Properties	$	11,902	$	12,026	$	12,031	$	11,401
NOI Margin ^1, Total Portfolio	52.2%		54.2%		54.6%		52.6%
NOI Margin ^1, Same Community ^1 Properties	53.6%		54.7%		55.5%		52.9%
FFO ^1	$	7,123	$	7,379	$	8,061	$	7,657
FFO per Unit	$	0.18	$	0.19	$	0.20	$	0.19
Maintenance Capital Expenditures	$	722	$	1,354	$	586	$	1,382
AFFO ^1	$	6,455	$	6,188	$	7,474	$	6,216
AFFO per Unit	$	0.16	$	0.16	$	0.19	$	0.16
AFFO Payout Ratio	80.3%		80.3%		66.4%		79.9%

FFO declined $0.3 million in Q3 2019 compared to Q2 2019 primarily due to the disposition of six properties in Q2 of 2019 and three properties in Q3 of 2019 offset by the acquisition of Cielo and Madrone discussed above. AFFO increased $0.3 million in Q3 2019 compared to Q2 2019 due to the decline in maintenance capital expenditures of $0.6 million quarter over quarter.

Liquidity and Capital Structure

As of September 30, 2019, the REIT had cash and cash equivalents of $20.7 million, a $175.0 million revolving credit facility and a $35.0 million line of credit. $119.1 million was drawn from the credit facility and no balance was drawn on the line of credit, leaving combined availability of $111.6 million. As of September 30, 2019, the REIT had total mortgage notes payable of $389.3 million, excluding the credit facility, with a weighted average contractual interest rate of 4.0% and a weighted average term to maturity of 10.1 years. Total loans and borrowings of the REIT as of September 30, 2019 were $500.1 million. Debt to Gross Book Value¹ was 46.2%. Additionally, the REIT entered into a future interest rate swap, in September of 2019, on a notional value of $20.0 million at a fixed interest rate of 1.21%. The future swap begins on January 2, 2020 and matures on August 30, 2024. As of September 30, 2019, 90% 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 $5.2 million for the third 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 September 30, 2019, the total number of REIT Units outstanding was 22,188,196. There were also 22,735,026 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, November 13th, 2019 at 11:00 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/2105423/C63992C91645F1C2E841F1CF38EFAAC0 

A replay of the call will be available until Wednesday^, November 20^th, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 754597 #). 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 40 multifamily garden-style residential properties consisting of 9,359 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 nine months ended September 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 contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events 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. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risks and Uncertainties" in the REIT's MD&A for the year ended December 31, 2018 and in the REIT's annual information form dated March 7, 2019, 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.

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^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

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

Related Links

www.bsrtrust.com