HOM.UN BSR Real Estate Investment Trust

LITTLE ROCK, Ark. and TORONTO, Aug. 9, 2023 /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, 2023 ("Q2 2023" and "YTD 2023", respectively). All comparisons are to the corresponding periods 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 2023 and YTD 2023 and the three months and six months ended June 30, 2022 ("Q2 2022" and "YTD 2022", 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, 2023 are available on the REIT's website at www.bsrreit.com and at www.sedar.com.

A reconciliation of Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") to net income and comprehensive income, as well as an expanded discussion of the components of FFO and AFFO, and a reconciliation of Net Asset Value ("NAV") to unitholders equity can be found under "Non-IFRS Measures" in this release. FFO per Unit, AFFO per Unit and NAV per Unit include trust units of the REIT ("Units"), Class B Units of BSR Trust, LLC ("Class B Units") and issued Deferred Units.

"The REIT delivered Same Community NOI growth of 11.7% and FFO per Unit growth of 9.5% in Q2 2023 over Q2 2022, reflecting the strong fundamentals in our core sunbelt multifamily markets and the outstanding performance of the BSR management platform," said Dan Oberste, the REIT's President and Chief Executive Officer. "With our prudent balance sheet and leverage profile, the REIT is well positioned to capitalize on new growth opportunities that are expected to emerge as the Federal Reserve continues to respond to improving inflation numbers."

Q2 2023 Highlights

• FFO per Unit¹ for Q2 2023 of $0.23 increased 9.5% over Q2 2022;
• AFFO per Unit¹ for Q2 2023 of $0.20 increased 5.3% over Q2 2022;
• Weighted average rent increased 6.3% to $1,501 per apartment unit as of June 30, 2023 compared to $1,412 as of June 30, 2022 and 0.8% sequentially from $1,489 as of March 31, 2023;
• Excluding short term leases, rental rates for new leases and renewals increased 1.1% and 6.7%, respectively, over the prior leases, resulting in a blended increase of 3.7%;
• Same Community¹ revenues for Q2 2023 increased 8.5% over Q2 2022;
• Same Community¹ Net Operating Income ("NOI")¹ for Q2 2023 increased 11.7% over Q2 2022;
• During Q2 2023, the REIT's AFFO Payout Ratio¹ was 63.9% compared to 71.8% during Q2 2022;
• Weighted average occupancy was 95.3% as of June 30, 2023 compared to 95.0% as of June 30, 2022;
• Debt to Gross Book Value¹ excluding Convertible Debentures (as defined below) as of June 30, 2023 was 37.3%;
• In May 2023, the REIT entered into a $50 million interest rate swap at a fixed rate of 2.25% effective October 1, 2024 and maturing July 1, 2031, subject to the counterparty's optional early termination date of February 1, 2027;
• In June 2023, the REIT exercised its option pursuant to the terms of its revolving credit facility (the "Credit Facility") to extend the maturity for a 12-month period, now maturing on September 30, 2026; and
• During Q2 2023, the REIT purchased and canceled 390,477 Units under its normal course issuer bid ("NCIB") and automatic securities purchase plan ("ASPP") at an average price of $12.43 per Unit. Through June 30, 2023, the REIT has purchased and canceled 1,469,984 Units under its NCIB at an average price of $13.25 per Unit.

Q2 2023 Financial Summary

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

Total portfolio revenue of $42.0 million for Q2 2023 increased 8.4% compared to $38.8 million in Q2 2022. Same Community properties contributed $3.1 million, as described below, and the non-stabilized property contributed $0.1 million to the overall increase.

Revenue from Same Community properties of $40.0 million for Q2 2023 increased 8.5% from $36.9 million in Q2 2022, primarily due to a 6.5% increase in average rental rates from $1,403 per apartment unit as of June 30, 2022 to $1,495 per apartment unit as of June 30, 2023.

The net (loss) income and comprehensive (loss) income change between Q2 2023 and Q2 2022 is primarily due to non-cash adjustments to fair values of investment properties and derivatives and other financial liabilities from March 31, 2023 to June 30, 2023 and March 31, 2022 to June 30, 2022, respectively, and is not considered comparable period over period.

The 9.7% increase in total portfolio NOI for Q2 2023 to $23.0 million compared to $21.0 million in Q2 2022 was the result of increases of $2.3 million from Same Community properties, described below, partially offset by a $0.3 million reduction due to property dispositions.

The 11.7% increase in Same Community NOI to $22.0 million for Q2 2023 compared to $19.7 million in Q2 2022 was the result of the increase in revenue described above, partially offset by an increase in property operating expenses of $0.8 million due to higher payroll costs and property insurance.

FFO was $13.3 million, or $0.23 per Unit, for Q2 2023 compared to $11.6 million, or $0.21 per Unit, for Q2 2022. The increase was primarily the result of the higher NOI discussed above, partially offset by an increase of $0.2 million in finance costs (net of finance income primarily from interest rate swaps) and an increase of $0.2 million in general and administrative expenses.

AFFO was $11.5 million, or $0.20 per Unit, for Q2 2023, compared to $10.5 million, or $0.19 per Unit, for Q2 2022. The improvement was primarily the result of the increase in FFO discussed above, partially offset by higher maintenance capital expenditures. The 45.8% increase in maintenance capital expenditures is primarily due to roof replacements and balcony restoration at Wimbledon Green and Westwood Park.

YTD 2023 Financial Summary

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

Total portfolio revenue of $83.6 million for YTD 2023 increased 9.6% compared to $76.3 million in YTD 2022. Same Community properties contributed $7.1 million, as described below, and the non-stabilized property contributed $0.3 million to the overall increase, partially offset by a reduction in revenue due to property dispositions of $0.1 million.

Revenue from Same Community properties of $79.6 million for YTD 2023 increased 9.7% from $72.5 million in YTD 2022, primarily due to a 6.5% increase in average rental rates from $1,403 per apartment unit as of June 30, 2022 to $1,495 per apartment unit as of June 30, 2023.

The net (loss) income and comprehensive (loss) income change between YTD 2023 and YTD 2022 is primarily due to non-cash adjustments to fair values of investment properties and derivatives and other financial liabilities from December 31, 2022 to June 30, 2023 and December 31, 2021 to June 30, 2022, respectively, and is not considered comparable period over period.

The 12.9% increase in total portfolio NOI for YTD 2023 to $45.9 million compared to $40.6 million in YTD 2022 was the result of an increase of $5.6 million from Same Community properties, described below, partially offset by a $0.4 million reduction due to property dispositions.

The 14.6% increase in Same Community NOI to $43.9 million for YTD 2023 compared to $38.3 million in YTD 2022 was the result of the increase in revenue described above, as well as a $0.4 million decrease in real estate taxes, primarily due to the timing of property tax refunds during Q2 2023, partially offset by an increase in property operating expenses of $1.8 million due to an increase in payroll costs, real estate tax appeals, repair and maintenance expenses and the cost of insurance.

FFO was $26.3 million, or $0.46 per Unit, for YTD 2023 compared to $22.7 million, or $0.42 per Unit, for YTD 2022. The increase was primarily the result of the higher NOI discussed above, partially offset by an increase of $1.1 million in finance costs (net of finance income primarily from interest rate swaps) associated with an increase in interest rates versus the comparative period as well as an increase of $0.5 million in general and administrative expenses due to higher payroll expenses, travel costs and consulting fees.

AFFO was $24.0 million, or $0.42 per Unit, for YTD 2023, compared to $21.0 million, or $0.39 per Unit, for YTD 2022. The improvement was primarily the result of the increase in FFO discussed above, partially offset by an increase in maintenance capital expenditures of $0.4 million. The increase in maintenance capital expenditures is primarily due to roof replacements and balcony restoration at Wimbledon Green and Westwood Park.

Highlights from Recent Four Quarters

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

Liquidity and Capital Structure

As of June 30, 2023, the REIT had liquidity of $189.9 million, consisting of cash and cash equivalents of $6.3 million and $183.6 million available under its revolving credit facility. The REIT also can obtain additional liquidity by adding properties to the borrowing base of the revolving credit facility.

As of June 30, 2023, the REIT had total mortgage notes payable of $498.2 million, excluding the credit facility and construction loan for the investment property under development, with a weighted average contractual interest rate of 3.3% and a weighted average term to maturity of 4.2 years. In aggregate, mortgage notes payable and the revolving credit facility total $746.2 million as of June 30, 2023 with a weighted average contractual interest rate of 3.3%, which excludes the convertible unsecured subordinated debentures (the "Convertible Debentures") and the construction loan for the investment property under development. Debt to Gross Book Value excluding the convertible debentures as of June 30, 2023 was 37.3%. As of June 30, 2023, 97% of the REIT's debt was fixed or economically hedged to fixed rates.

As of June 30, 2023, the REIT had outstanding Convertible Debentures valued at $41.8 million at a contractual interest rate of 5%, maturing on September 30, 2025 with a conversion price of $14.40 per Unit.

On October 3, 2022, the Toronto Stock Exchange accepted the REIT's notice of intention to make a NCIB for up to a maximum of approximately 3.3 million of its issued and outstanding Units. The REIT may purchase Units for a twelve-month period ending on October 5, 2023. The REIT purchased and canceled 1,079,507 Units under its NCIB and automatic securities purchase plan ("ASPP") at an average price of $13.55 per Unit through December 31, 2022. During the six months ended June 30, 2023, the REIT purchased and cancelled 390,477 Units under its NCIB and ASPP at an average price of $12.43.

Distributions and Units Outstanding

Cash distributions declared to holders of Units and holders of Class B Units totalled $7.4 million for Q2 2023, representing an AFFO Payout Ratio¹ of 63.9%. 100% of the REIT's cash distributions were classified as return of capital. As of June 30, 2023, the total number of Units outstanding was 36,059,551. There were also 20,519,791 Class B Units outstanding, which are redeemable for Units on a one-for-one basis.

2023 Earnings and Same Community Portfolio Guidance

The REIT's 2023 guidance is outlined below for FFO per Unit and AFFO per Unit, along with its expectations for Same Community Properties for revenue, property operating expenses and NOI in 2023. The guidance does not include potential acquisitions, dispositions or future growth from the impact of properties currently under development.

During July 2023, the Texas House and Senate agreed to lower real estate taxes for Texans, including multi-family residential rental properties. A constitutional election is expected to be held on November 7, 2023. If passed, the decrease in real estate taxes will apply to the 2023 tax year. Initial estimates indicate a potential annualized savings of approximately $1.3 to $1.5 million in real estate taxes. Due to the pending ratification, the potential reduction in real estate taxes is not reflected in the guidance for 2023 and the REIT will address this and any impact to other property operating expenses, including increases in property insurance as well as additional real estate tax refunds in future quarters as necessary. As of June 30, 2023, there have been no revisions to the initial 2023 guidance.

The REIT will update this guidance on a quarterly basis as necessary.

Non-IFRS measures are presented to illustrate alternative relevant measures to assess the REIT's performance. See "Non-IFRS Measures" in this news release. See also "Forward-Looking Information", as the figures presented above are considered "financial outlook" for purposes of applicable Canadian securities laws and may not be appropriate for purposes other than to understand management's current expectations relating to the future growth of the REIT. Although the REIT believes that its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information. The REIT reviews its key assumptions regularly and may change its outlook on a going-forward basis if necessary.

Conference Call

Dan Oberste, President and Chief Executive Officer, and Brandon Barger, Chief Financial Officer, will host a conference call for analysts and investors on Thursday August 10^th, 2023 at 12:00 pm (ET). Participants can register and enter their phone number at: https://emportal.ink/3D2HSP2 to receive an instant automated call back. Alternatively, they can dial 416-764-8688 or 1-888-390-0546 to reach a live operator who will join them into the call. In addition, the call will be webcast live at:
https://app.webinar.net/Y5rv8M58Lw4. 

A replay of the call will be available until Thursday, August 17^th, 2023. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 136726#). 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 markets in the Sunbelt region of the United States.

Non-IFRS Measures

Same Community, NOI, NOI Margin, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, 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, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, 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. For complete definitions of these measures, as well as an explanation of their composition and how the measures provide useful information to investors, please refer to the section titled "Non-IFRS Measures" in the REIT's Management's Discussion and Analysis for the three and six months ended June 30, 2023, which section is incorporated herein by reference.

Forward-Looking Statements

This news release contains forward-looking information within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements"). Forward-looking statements in this news release include, but are not limited to, statements which reflect management's expectations regarding objectives, plans, goals, strategies, future growth (including 2023 guidance for FFO, AFFO, and Same Community metrics Revenue, Property Expenses and NOI growth), results of operations, performance, business prospects, and opportunities for the REIT. The words "expects", "expectation", "anticipates", "anticipated", "believes", "will" or variations of such words and phrases identify forward-looking statements herein. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. 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, include assumptions relating to the REIT's future growth potential, results of operations, demographic and industry trends, no changes in legislative or regulatory matters, the tax laws as currently in effect, a gradual recovery and growth of the general economy over 2023, the impact of COVID-19, lease renewals and rental increases, the ability to re-lease or find new tenants, the timing and ability of the REIT to sell certain properties, project costs and timing, a continuing trend toward land use intensification at reasonable costs and development yields, including residential development in urban markets, access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable refinancing of debts as they mature, the availability of investment opportunities for growth in the REIT's target markets, the valuations to be realized on property sales relative to current IFRS values, and the market price of the Units. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. The risks and uncertainties that may impact such forward-looking information include, but are not limited to, the REIT's ability to execute its growth strategies, the impact of changing conditions in the U.S. multifamily housing market, increasing competition in the U.S. multifamily housing market, the effect of fluctuations and cycles in the U.S. real estate market, the marketability and value of the REIT's portfolio, changes in the attitudes, financial condition and demand of the REIT's demographic market, fluctuation in interest rates and volatility in financial markets, developments and changes in applicable laws and regulations, the impact of climate change, the impact of COVID-19 on the operations, business and financial results of the REIT and the factors discussed under "Risks and Uncertainties" in the REIT's Management's Discussion and Analysis for the three and six months ended June 30, 2023 and in the REIT's Annual Information Form dated March 8, 2023, both of which are available on SEDAR (www.sedar.com). If any risks or uncertainties with respect to the above materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. 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.

Certain statements included in this news release, including with respect to 2023 FFO, AFFO and Same Community portfolio guidance, are considered financial outlook for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than to understand management's current expectations relating to the future growth of the REIT, as disclosed in this news release. These forward-looking statements have been approved by management to be made as at the date of this news release. Certain material factors, estimates or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in this news release and actual results could differ materially from such conclusions, forecasts or projections. There can be no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. The forward-looking statements contained in this document are expressly qualified in their entirety by this cautionary statement.

SOURCE BSR Real Estate Investment Trust