â NAV increases 41% over the prior year â
LITTLE ROCK, AR and TORONTO, ON, Nov. 9, 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 nine months ended September 30, 2021 (“Q3 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 Q3 2021 and YTD 2021 and the three and nine months ended September 30, 2020 (“Q3 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 nine months ended September 30, 2021 are available on the REIT’s website at www.bsrreit.com and at www.sedar.com.
“Our core Texas markets continue to generate outsize growth, with same community rental rates for new leases increasing 19.8% year-over-year,” said John Bailey , the REIT’s Chief Executive Officer. “Robust revenue growth across all of our markets drove a 12.6% increase in same community Net Operating Income (“NOI”), which in turn contributed to substantial Net Asset Value (“NAV”) growth of 41% over the prior year. With the culmination of our capital recycling program, we have positioned the REIT for sustained outperformance in the years ahead.”
Q3 2021 Highlights
- NAV per Unit increased 41.0% to $17.77 as of Q3 2021 as compared to $12.60 as of Q3 2020 and 20.3% sequentially from $14.77 at the end of the previous quarter;
- Adjusted Funds From Operations (“AFFO”) for Q3 2021 increased 20.9% over Q3 2020;
- Weighted average rent was $1,275 per apartment unit as of September 30, 2021 compared to $1,011 per apartment unit as of September 30, 2020, representing a 26.1% increase;
- Same Community1 revenues for Q3 2021 increased 7.7% over Q3 2020;
- Same Community1 NOI1 for Q3 2021 increased 12.6% over Q3 2020;
- Debt to Gross Book Value1 as of September 30, 2021 was 43.5%;
- Debt to Gross Book Value1 excluding the convertible debentures as of September 30, 2021 was 40.7%;
- In July 2021, the REIT purchased Hangar 19 located in the Dallas, Texas MSA for $82.8 million, adding 351 apartment units to the portfolio;
- In September 2021, the REIT purchased Aura 36Hundred located in the Austin, Texas MSA for $93.8 million, adding 356 apartment units to the portfolio;
- During Q3 2021, the REIT collected 99% of total monthly revenue, reflecting the minimal ongoing impact of the pandemic on the REIT’s revenue collection;
- In Q3 2021, new lease rental rates increased 16.5% and renewals increased 4.5%, for a weighted average increase of 9.5%;
- As of September 30, 2021, weighted average occupancy was 96.4% compared to 93.7% as of September 30, 2020;
- During Q3 2021, the REIT’s AFFO payout ratio was 82.7% compared to 87.5% during Q3 2020; and
- During Q3 2021, the REIT refinanced $134.6 million in mortgage debt and amended certain credit facilities reducing its weighted average effective interest rate to 3.1% on $742.0 million of total loans and borrowings including the convertible debentures.
Subsequent Highlights
- In October 2021, new lease rental rates increased 22.7% and renewals increased 6.0%, for a weighted average increase of 12.3%; and
- As of October 31, 2021, weighted average occupancy was 96.0%.
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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. |
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 October 31, 2021, BSR has collected $1.1 million in rental assistance related to eligible residents.
Q3 2021 Financial Summary
In thousands of U.S. dollars, except per unit amounts
|
Q3 2021 |
Q3 2020 |
Change |
Change % |
||||
|
Revenue, Total Portfolio |
$ |
31,705 |
$ |
29,849 |
$ |
1,856 |
6.2% |
|
Revenue, Same Community1Properties |
$ |
14,490 |
$ |
13,459 |
$ |
1,031 |
7.7% |
|
NOI1, Total Portfolio |
$ |
16,504 |
$ |
15,233 |
$ |
1,271 |
8.3% |
|
NOI1, Same Community1Properties |
$ |
7,775 |
$ |
6,902 |
$ |
873 |
12.6% |
|
Funds from Operations (“FFO”)1 |
$ |
8,160 |
$ |
7,427 |
$ |
733 |
9.9% |
|
FFO per Unit1 |
$ |
0.16 |
$ |
0.16 |
$ |
– |
0.0% |
|
Maintenance capital expenditures |
$ |
(948) |
$ |
(958) |
$ |
10 |
-1.0% |
|
Escrowed rent guaranty realized |
$ |
677 |
$ |
– |
$ |
677 |
– % |
|
Straight line rental revenue differences |
$ |
(40) |
$ |
21 |
$ |
(61) |
-290.5% |
|
AFFO1 |
$ |
7,849 |
$ |
6,490 |
$ |
1,359 |
20.9% |
|
AFFO per Unit1 |
$ |
0.15 |
$ |
0.14 |
$ |
0.01 |
7.1% |
|
Weighted Average Unit Count |
52,109,042 |
45,255,977 |
6,853,066 |
15.1% |
|||
|
NAV1 |
$ |
926,471 |
$ |
574,092 |
$ |
352,379 |
61.4% |
|
NAV per Unit1 |
$ |
17.77 |
$ |
12.60 |
$ |
5.17 |
41.0% |
With the focus of the REIT’s capital recycling program now primarily oriented to the deployment of approximately $70 million before year end, the REIT has positioned itself to expand its property portfolio on a highly accretive bases. With the deployment of approximately $70 million before year end, the REIT expects to add approximately $1.7 million in AFFO, or $0.03 per Unit, on an annualized basis assuming similar economics to the Hangar 19 and Aura 36Hundred acquisitions discussed above. The full acquisition capacity of the REIT is approximately $250 million as of September 30, 2021. In conjunction with better-than-anticipated revenue growth in its primary markets of Dallas, Austin and Houston, Texas, the REIT expects continued growth in NOI and AFFO in the fourth quarter of 2021 and throughout 2022.
The increase in total portfolio revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was the result of Same Community properties contributing $1.0 million, property acquisitions contributing $10.8 million and non-stabilized properties contributing $0.5 million, partially offset by property dispositions reducing revenue by $10.5 million.
Revenue from Same Community properties outperformed Q3 2020 by $1.0 million due to an increase in average rental rates from $1,048 per apartment unit as of September 30, 2020 to $1,116 per apartment unit as of September 30, 2021 representing approximately $0.5 million of the increase, as well as higher occupancy versus the comparative period that contributed approximately $0.4 million. The remaining $0.1 million of the increase in revenue is related to higher utility reimbursement revenues as well as late fees, which were not charged to residents for a portion of the comparative period due to COVID-19 relief efforts by management.
The increase in total portfolio NOI for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was the result of Same Community properties contributing $0.9 million, property acquisitions contributing $5.6 million and non-stabilized properties contributing $0.3 million, partially offset by property dispositions reducing revenue by $5.5 million.
The increase in Same Community NOI for Q3 2021 compared to Q3 2020 was the result of the increase in revenue described above, partially offset by an $0.1 million increase in real estate taxes and higher property insurance costs.
FFO was $8.2 million, or $0.16 per Unit, for Q3 2021, compared to $7.4 million, or $0.16 per Unit, for Q3 2020. The increase was primarily the result of the increase in NOI discussed above, partially offset by a $0.3 million increase in general and administrative expenses and a $0.2 million increase in the amortization of deferred financing costs. Losses on extinguishment of debt are excluded from the calculation of FFO.
AFFO was $7.8 million, or $0.15 per Unit, for Q3 2021, compared to $6.5 million, or $0.14 per Unit, for Q3 2020. The increase was primarily the result of the increase in FFO discussed above and the $0.7 million in escrowed rent guaranty realized in Q3 2021 related to the properties acquired during the lease up phase in 2021. Losses on extinguishment of debt are excluded from the calculation of AFFO. AFFO throughout 2022 is expected to benefit from accretive deployment of the REIT’s acquisition capacity.
YTD 2021 Financial Summary
In thousands of U.S. dollars, except per unit amounts
|
YTD 2021 |
YTD 2020 |
Change |
Change % |
||||
|
Revenue, Total Portfolio |
$ |
85,521 |
$ |
84,659 |
$ |
862 |
1.0% |
|
Revenue, Same Community1Properties |
$ |
41,820 |
$ |
39,769 |
$ |
2,051 |
5.2% |
|
NOI1, Total Portfolio |
$ |
44,233 |
$ |
44,138 |
$ |
95 |
0.2% |
|
NOI1, Same Community1Properties |
$ |
22,380 |
$ |
20,954 |
$ |
1,426 |
6.8% |
|
FFO1 |
$ |
20,966 |
$ |
21,032 |
$ |
(66) |
-0.3% |
|
FFO per Unit1 |
$ |
0.41 |
$ |
0.47 |
$ |
(0.06) |
-12.8% |
|
Maintenance capital expenditures |
$ |
(2,134) |
$ |
(2,449) |
$ |
315 |
-12.9% |
|
Escrowed rent guaranty realized |
$ |
2,152 |
$ |
437 |
$ |
1,715 |
392.4% |
|
Severance/retention costs on dispositions |
$ |
105 |
$ |
186 |
$ |
(81) |
-43.5% |
|
Straight line rental revenue differences |
$ |
(75) |
$ |
83 |
$ |
(158) |
-190.4% |
|
AFFO1 |
$ |
21,014 |
$ |
19,289 |
$ |
1,725 |
8.9% |
|
AFFO per Unit1 |
$ |
0.41 |
$ |
0.43 |
$ |
(0.02) |
-4.7% |
|
Weighted Average Unit Count |
51,163,398 |
44,972,437 |
6,190,962 |
13.8% |
|||
The increase in total portfolio revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was the result of Same Community properties contributing $2.1 million, property acquisitions contributing $27.4 million and non-stabilized properties contributing $2.6 million, partially offset by property dispositions reducing revenue by $31.2 million.
The increase in revenue from Same Community properties for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was due to higher average rental rates, discussed above, which represented approximately $0.9 million of the increase, as well as higher occupancy representing approximately $0.5 million. The remaining $0.6 million of the increase in revenue is related to $0.4 million in other income associated with late fees, fees for allowing residents to lease an apartment unit on a month to month basis, pet fees and lease termination fees as well as $0.2 million in higher utility reimbursement revenues.
The increase in total portfolio NOI for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was the result of Same Community properties contributing $1.4 million, property acquisitions contributing an additional $13.1 million and non-stabilized properties contributing an additional $2.4 million, partially offset by property dispositions reducing NOI by $16.8 million.
The increase in Same Community NOI for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily the result of the increase in revenue described above and a $0.3 million decline in real estate taxes, partially offset by an increase in property operating expenses of $0.9 million due to increases in utility expenses, property insurance, apartment unit turnover expense and other administrative expenses.
FFO was $21.0 million, or $0.41 per Unit, for YTD 2021, compared to $21.0 million, or $0.47 per Unit, for YTD 2020. The decrease in FFO per Unit is related to the timing of the REIT’s acquisitions versus dispositions during the execution of the capital recycling program which is now substantially complete. Losses on extinguishment of debt are excluded from the calculation of FFO.
AFFO was $21.0 million, or $0.41 per Unit, for the nine months ended September 30, 2021, compared to $19.3 million, or $0.43 per Unit, for the nine months ended September 30, 2020. The increase in AFFO is primarily related to the increase in escrowed rent guaranty realized in Q3 2021 compared to Q3 2020 and the decrease in AFFO per Unit results from the timing of the REIT’s capital recycling program, as discussed above. Losses on extinguishment of debt are excluded from the calculation of AFFO.
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)
|
September 30, |
June 30, |
March 31, |
December 31, |
|||||
|
Operational Information |
||||||||
|
Number of real estate investment properties |
30 |
28 |
29 |
30 |
||||
|
Total apartment units |
8,367 |
7,660 |
7,804 |
7,628 |
||||
|
Average monthly rent on in-place leases |
$ |
1,275 |
$ |
1,206 |
$ |
1,134 |
$ |
1,088 |
|
Average monthly rent on in-place leases, |
||||||||
|
Same Community1Properties |
$ |
1,116 |
$ |
1,079 |
$ |
1,058 |
$ |
1,054 |
|
Weighted average occupancy rate |
96.4% |
96.2% |
94.3% |
93.8% |
||||
|
Retention rate |
56.6% |
57.5% |
57.5% |
56.5% |
||||
|
Debt to Gross Book Value1 |
43.5% |
41.5% |
43.4% |
46.5% |
||||
|
Three months ended |
Three months ended |
Three months ended |
Three months ended |
|||||
|
Operating Results |
||||||||
|
Revenue, Total Portfolio |
$ |
31,705 |
$ |
28,046 |
$ |
25,770 |
$ |
28,627 |
|
Revenue, Same Community1Properties |
$ |
14,490 |
$ |
13,873 |
$ |
13,457 |
$ |
13,342 |
|
NOI1, Total Portfolio |
$ |
16,504 |
$ |
14,374 |
$ |
13,355 |
$ |
15,098 |
|
NOI1, Same Community1Properties |
$ |
7,775 |
$ |
7,360 |
$ |
7,245 |
$ |
7,183 |
|
NOI Margin1, Total Portfolio |
52.1% |
51.3% |
51.8% |
52.7% |
||||
|
NOI Margin1, Same Community1Properties |
53.7% |
53.1% |
53.8% |
53.8% |
||||
|
FFO1 |
$ |
8,160 |
$ |
7,000 |
$ |
5,806 |
$ |
6,655 |
|
FFO per Unit |
$ |
0.16 |
$ |
0.13 |
$ |
0.12 |
$ |
0.15 |
|
Maintenance capital expenditures |
$ |
(948) |
$ |
(690) |
$ |
(496) |
$ |
(846) |
|
Escrowed rent guaranty realized |
$ |
677 |
$ |
1,475 |
$ |
â |
$ |
87 |
|
Severance/retention costs on dispositions |
$ |
– |
$ |
59 |
$ |
46 |
$ |
382 |
|
Straight line rental revenue differences |
$ |
(40) |
$ |
11 |
$ |
(46) |
$ |
153 |
|
AFFO1 |
$ |
7,849 |
$ |
7,855 |
$ |
5,310 |
$ |
6,125 |
|
AFFO per Unit1 |
$ |
0.15 |
$ |
0.15 |
$ |
0.11 |
$ |
0.13 |
|
AFFO Payout Ratio |
82.7% |
82.6% |
117.3% |
92.9% |
||||
|
Weighted Average Unit Count |
52,109,042 |
52,084,576 |
49,265,328 |
45,626,505 |
||||
Liquidity and Capital Structure
As of September 30, 2021, the REIT had liquidity of $79.9 million, consisting of cash and cash equivalents of $5.7 million, $39.2 million available on the Credit Facility and $35.0 million available on a line of credit.
On September 30, 2021, the REIT amended its revolving credit facility which increased the maximum revolving credit availability to $300 million from $285 million, extended the maturity to September 30, 2025 and decreased the interest rate to Adjusted LIBOR rate plus 1.45% to 1.90% subject to certain leverage ratios. Additionally, during Q3 2021, the REIT refinanced $134.6 million in mortgage debt on six mortgages with proceeds from the revolving credit facility as well as the creation of a non-recourse loan with Berkadia at a fixed interest rate of 2.70%. Also, in connection with the acquisition of Aura 36Hundred the REIT amended its mortgage encumbered credit facility with CIBC reducing the margin 20 bps.
As of September 30, 2021, the REIT had total mortgage notes payable of $547.6 million, excluding the credit facility and line of credit, with a weighted average contractual interest rate of 3.1% and a weighted average term to maturity of 5.7 years. Total loans and borrowings of the REIT as of September 30, 2021 were $694.6 million, excluding the convertible unsecured subordinated debentures (the “Convertible Debentures”) 71% of the REIT’s debt was fixed or economically hedged to fixed rates.
As of September 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.
Since the REIT’s existing base shelf prospectus is expiring in December 2021, in the fourth quarter of 2021, the REIT intends to renew its base shelf prospectus by filing and obtaining a receipt for a short form base shelf prospectus, to be valid for a 25-month period, to continue to maintain financial flexibility and to have the ability to offer up to an aggregate of $500 million in trust units, warrants and subscription receipts, or a combination thereof, on an accelerated basis pursuant to the filing of prospectus supplements. There is no certainty that any securities will be offered or sold under the renewed base shelf prospectus.
Distributions and Units Outstanding
Cash distributions declared to REIT unitholders and Class B unitholders of BSR Trust, LLC totalled $6.5 million for Q3 2021, representing an AFFO payout ratio of 82.7%. AFFO in the fourth quarter of 2021 and throughout 2022 is expected to significantly benefit from accretive deployment of the REIT’s acquisition capacity. 100% of the REIT’s cash distributions were classified as return of capital. As of September 30, 2021, the total number of REIT Units outstanding was 30,960,530. There were also 20,948,743 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, November 10th, 2021 at 2:00 pm (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=1502604&tp_key=e22060966d
A replay of the call will be available until Wednesday, November 17th, 2021. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 779681 #). 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 September 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 September 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
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