BSR REIT Reports Financial Results for Period Ended June 30, 2018

LITTLE ROCK, AR and TORONTO, Aug. 13, 2018 /CNW/ - BSR Real Estate Investment Trust ("BSR", or the "REIT") (TSX: HOM.U) today announced its financial results for the 44-day period ended June 30, 2018 (the "44 Day Period"). The REIT completed its initial public offering (the "IPO") and commenced trading on the Toronto Stock exchange on May 18, 2018. The REIT had no operations prior to May 18, 2018. Due to the short duration of the reporting period, the REIT's financial results for the 44 Day Period may not be indicative of future full quarters or annualized financial results. In order to provide investors with a more complete understanding of the REIT's performance, the REIT has also provided total revenue and NOI metrics in this news release that encompass the entire three-months ended June 30, 2018 for the properties that were acquired by the REIT upon closing of the IPO.

44 Day Period

The following summary of the REIT's financial results for the 44 Day Period are presented in comparison to the pro-rated financial forecast presented in the REIT's prospectus dated May 11, 2018. All dollar amounts are presented in U.S. dollars. Full Financial Statements and Management's Discussion and Analysis are available on the REIT's website at www.bsrreit.com and at www.SEDAR.com.

Period Highlights

• On May 18, 2018, the REIT completed its IPO, raising gross proceeds of $135 million; in addition $30 million in debt was converted to 3 million REIT units increasing the total equity proceeds to $165 million.
• Weighted average occupancy as of June 30, 2018 was 94.0% compared to 92.7% as of December 31, 2017.
• Weighted average rent was $799 per unit as of June 30, 2018 compared to $777 per unit as of December 31, 2017.
• Total revenue for the 44 Day Period was $12.2 million, 3.0% higher than the pro-rated forecast.
• Net Operating Income¹ ("NOI") of $6.7 million was 10.1% higher than the pro-rated forecast.
• NOI margin was 54.4% for the 44 Day Period which exceeded the pro-rated forecast by 350 basis points.
• Funds from Operations¹ ("FFO") of $3.7 million was 8.3% above the pro-rated forecast.
• Adjusted Funds from Operations¹ ("AFFO") of $3.1 million exceeded the pro-rated forecast by 8.0%.
• The REIT's AFFO payout ratio was 76.0% compared with the pro-rated forecast of 83.9%.
• Debt to Gross Book Value¹ as of June 30, 2018 was 45.1%.
• On June 1, 2018, the REIT completed the acquisition of Brandon Place, a 200-unit, garden-style residential community in Oklahoma City, OK for $23.4 million.
• The REIT paid an initial distribution of $0.0591 per Unit for the 44 Day Period May 18, 2018 to June 30, 2018 on July 16, 2018 to unitholders of record on June 29, 2018.
• For the second straight year, BSR has been named as one of the best places to work in the state of Arkansas by Arkansas Business and Best Companies Group.

"I am pleased with the REIT's operating results in our initial period as a publicly traded entity, as we benefitted from earlier than expected traction from our capital redevelopment program," stated John Bailey, BSR's Chief Executive Officer. "Looking out to the balance of the 12-month forecast period ending March 31, 2019, we are confident in achieving our AFFO¹ forecast of $25.5 million. Longer-term, our capital redevelopment program and strong balance sheet position us well for both organic and acquisition-based growth. BSR will continue to pursue acquisition opportunities in our target markets, such as certain markets in Texas that have a diversified employment base, less than average unemployment and higher renter migration. The REIT intends to build unitholder value by identifying opportunities for acquisitions, value-add investments, and asset rotation."

Financial Summary

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

	44 Day Period		Pro-rated Forecast		Variance		Variance %
Total revenue	$	12,214	$	11,858	$	356	3.0%
NOI 1	$	6,650	$	6,040	$	610	10.1%
NOI Margin 1		54.4%	50.9%		350bps		6.9%
FFO 1	$	3,690	$	3,406	$	284	8.3%
AFFO 1	$	3,088	$	2,859	$	229	8.0%
AFFO per Unit	$	0.078	$	0.072	$	0.006	8.3%
AFFO payout ratio		76.0%	83.9%		790bps		-9.4%

 

For the 44 Day Period, revenues totalled $12.2 million, compared to the pro-rated forecast of $11.9 million. The 3.0% increase over forecast was primarily the result of higher than expected occupancy for the entire portfolio as well as rental rate increases, both of which were attributable to BSR's capital redevelopment program, impacting earnings more quickly than forecasted. As of June 30, 2018, weighted average occupancy was 94.0% and average monthly in-place leases were $799 per apartment unit.

NOI¹ for the 44 Day Period totalled $6.7 million, compared to the pro-rated forecast of $6.0 million. The 10.1% increase over forecast was the result of the increase in total revenue, mentioned above, and lower than expected property operating expenses of $0.3 million, which was primarily the result of lower than forecasted repairs and maintenance expense and other administrative costs.

FFO¹ was $3.7 million for the 44 Day Period, compared to the pro-rated forecast of $3.4 million. The 8.3% outperformance resulted from increased NOI, partially offset by higher general and administrative costs and interest expense. AFFO¹ was $3.1 million for the 44 Day Period, or $0.078 per Unit. The 8.0% increase over forecast resulted from increased FFO¹, partially offset by higher than forecasted maintenance capital expenditures due to the timing of maintenance projects completed during the 44 Day Period when compared to the entire quarter.

As of June 30, 2018, the REIT had total mortgage notes payable of $349.4 million with a weighted average actual interest rate of 3.8% and a weighted average term to maturity of 11.2 years . Total loans and borrowings of the REIT as of June 30, 2018 were $393.1 million. Debt to Gross Book Value¹ was 45.1%.

The total number of REIT Units outstanding as of June 30, 2018 was 16,571,600. There are currently 23,158,236 Class B Units outstanding.

Second Quarter 2018 Highlights

The following second quarter 2018 metrics encompass the three-months ended June 30, 2018 for the properties that were acquired by the REIT upon closing of the IPO.

In thousands of U.S. dollars

	Three-months ended June 30, 2018		Forecast		Variance		Variance %
Total revenue	$	24,926	$	24,524	$	402	1.6%
NOI 1	$	13,543	$	12,491	$	1,052	8.4%

 

For the three-months ended June 30, 2018, total revenues were $24.9 million, compared to the forecast of $24.5 million. The higher revenue is primarily the result of stronger than forecasted occupancy for the entire portfolio as well as rental rate increases that occurred more quickly than forecasted, and were attributable to BSR's capital redevelopment program.

NOI¹ for the three-months ended June 30, 2018 totalled $13.5 million, compared to the forecast of $12.5 million. The higher NOI is the result of the increase in total revenue of $0.4 million, mentioned above, and a decrease in property operating expenses of $0.7 million, which is mainly the result of lower than forecasted repairs and maintenance expense, employee wages and benefits expense and utility costs.

Maintenance capital expenditures were in line with our forecast at $105 per apartment unit for the three-months ended June 30, 2018.

Conference Call

John Bailey, Chief Executive Officer, and Susan Koehn, Chief Financial Officer, will host a conference call for analysts and investors on Tuesday, August 14th, 2018 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/1799731/CFC00D98D0B907EEFDCD6BE35704D36C.

A replay of the call will be available until Tuesday, August 21, 2018. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 087513 #). 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 48 multifamily garden-style residential properties consisting of 9,879 apartment units located across five bordering states in the Sunbelt region of the United States.

Non-IFRS Financial Measures

NOI, FFO and AFFO 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. NOI, FFO and AFFO 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 period ended June 30, 2018 for a reconciliation of NOI, FFO and AFFO to standardized IFRS measures for the 44 Day Period. 

A reconciliation of NOI for the period ended June 30, 2018 is stated below to the IFRS measures presented in our condensed consolidated interim financial statements:

In thousands of U.S. dollars

	Period from May 18, 2018 to June 30, 2018 (44 Day Period)		Period from April 1, 2018 to May 17, 2018		Three-months ended June 30, 2018
Total revenue	$	12,214	$	12,712	$	24,926
Property operating expenses	(4,456)		(4,674)		(9,130)
Real estate taxes	—		—		—
	7,758		8,038		15,796
Property tax liability adjustment (IFRIC 21)	(1,108)		(1,145)		(2,253)
NOI 1	$	6,650	$	6,893	$	13,543

 

Forward-Looking Statements

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the REIT. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements, which include statements regarding the REIT's anticipated AFFO for the year ended March 30, 2019 and ability to achieve organic and acquisition-based growth, are based on the REIT's expectations, estimates, forecasts and projections. The forward-looking statements in this news release are based on certain assumptions, including the assumptions described under the heading "Financial Forecast" in the REIT's prospectus dated May 11, 2018 (the "Prospectus"), which is available at www.sedar.com. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading "Risk Factors" in the Prospectus. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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1} NOI, 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

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