LITTLE ROCK and TORONTO, March 7,
2019 /CNW/ - BSR Real Estate Investment Trust ("BSR",
or the "REIT") (TSX: HOM.U) today announced its financial
results for the three months ended December
31, 2018 ("Q4 2018") and the period from May 18, 2018 to December
31, 2018 ("FY 2018"). The FY 2018 period reflects the REIT's
operations commencing after completion of its Initial Public
Offering (the "IPO") on May 18, 2018.
The REIT had no operations prior to May 18,
2018. Results are presented in U.S. dollars. Due to the
short duration of the FY 2018 period, the REIT's results may not be
indicative of annualized results. The results for all periods
presented are compared to the financial forecast (the "Forecast")
contained in BSR's IPO prospectus dated May
11, 2018. 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 include the
entire nine months ended December 31,
2018 for the properties that were acquired by the REIT upon
closing of the IPO. 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.
Q4 2018 Highlights
- Weighted average occupancy as of December 31, 2018 was 93.3% compared to 92.7% as
of December 31, 2017.
- Weighted average rent was $821
per apartment unit as of December 31,
2018 compared to $777 per
apartment unit as of December 31,
2017.
- Total and Same Community1 revenues were $26.3 million and $25.6
million, 3.8% and 1.1% higher than the Forecast,
respectively.
- Total and Same Community1 Net Operating
Income1 ("NOI") were $13.8
million and $13.3 million,
3.7% higher than and in line with the Forecast, respectively.
- Funds from Operations1 ("FFO") of $7.7 million was in line with the Forecast.
- Management continued to accelerate certain maintenance capital
expenditures projects previously planned for the first quarter of
2019 to take advantage of milder weather and to avoid a potential
increase in costs associated with federal tariffs.
- Debt to Gross Book Value1 as of December 31, 2018 was 48.6%.
- On October 25, 2018, the REIT
completed the acquisition of Towne Park, a 237-unit, garden style
residential community in Springdale,
Arkansas for $28.9
million.
- On December 20, 2018, the REIT
completed the acquisition of Riverhill, a 334-unit, multifamily
complex in the Dallas-Fort Worth
metropolitan statistical area (MSA) for $45.2 million.
FY 2018 Highlights (May 18,
2018 to December 31,
2018)
- On May 18, 2018, the REIT
completed its IPO, raising gross proceeds of $135 million; in addition, $30 million in debt was converted to three
million REIT units increasing the total equity proceeds to
$165 million.
- Total and Same Community1 revenues were $64.1 million and $63.4
million, 2.8% and 1.7% higher than the pro-rated Forecast,
respectively.
- Total and Same Community1 NOI1 were
$33.9 million and $33.4 million, 4.8% and 3.3% higher than the
pro-rated Forecast, respectively.
- FFO1 of $18.9 million
was 2.5% above the pro-rated Forecast.
- Adjusted Funds from Operations1 ("AFFO") was
approximately $16.0 million or 1.0%
above the pro-rated Forecast when the impact of the timing
associated with the early completion of maintenance capital
expenditures projects previously planned for the first quarter of
2019 described above is removed.
- Management continues to be confident in meeting its pro-rated
AFFO1 Forecast for the twelve months ended March 31, 2019.
- On June 1, 2018, the REIT
completed the acquisition of Brandon Place, a 200-unit,
garden-style residential community in Oklahoma City, Oklahoma for $23.4 million.
- 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.
________________________________
|
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.
|
Acquisitions
As highlighted above, during the fourth quarter of 2018, the
REIT made two accretive acquisitions. Riverhill Apartments is
centrally located in the Dallas-Fort Worth MSA, one of the fastest
growing populations in the United
States, just south of DFW International Airport and the
headquarters of American Airlines. The region has above average
household income, below average unemployment and is home to 22
Fortune 500 companies, one of the highest concentrations in the
country. Towne Park at Har-Ber
Apartments is located in Northwest
Arkansas, the fastest growing region in the state of
Arkansas and the 14th fastest
growing MSA in the United States.
Median household income in Northwest
Arkansas rose 8.1% in the past 12 months and average lease
prices have increased 18% over the past four years. The property is
located less than 15 miles from the headquarters of three Fortune
500 companies, including Walmart. Both acquisitions are consistent
with BSR's clustering strategy to maximize operating efficiencies
and have opportunities for rent growth.
"We continue to execute our growth strategy, creating value for
our stakeholders through strategic acquisitions and our capital
redevelopment program," stated John
Bailey, BSR's Chief Executive Officer. "We generated
impressive fourth quarter financial results, and we maintain
confidence in meeting our pro-rated AFFO Forecast for the 12 months
ending March 31, 2019. We also
continue to review the portfolio with the goal of recycling
capital in order to maximize total unitholder returns. Looking
ahead, we believe our business outlook is very positive. We have
the right strategy to generate continued accretive growth while
providing an excellent work environment for our employees and an
exceptional living experience for our residents at a community they
are proud to call home."
Financial Summary
– Q4 2018
|
|
In thousands of
U.S. dollars (except per unit amounts)
|
|
Q4 2018
(Actual)
|
Q4 2018
(Forecast)
|
Change
|
Change
%
|
Revenue, Total
Portfolio
|
$
|
26,262
|
$
|
25,300
|
$
|
962
|
3.8%
|
Revenue, Same
Community1 Properties
|
$
|
25,588
|
$
|
25,300
|
$
|
288
|
1.1%
|
NOI 1,
Total Portfolio
|
$
|
13,803
|
$
|
13,310
|
$
|
493
|
3.7%
|
NOI 1,
Same Community 1 Properties
|
$
|
13,319
|
$
|
13,310
|
$
|
9
|
0.1%
|
NOI Margin
1, Total Portfolio
|
52.6%
|
52.6%
|
–
bps
|
– %
|
NOI Margin
1, Same Community
1 Properties
|
52.1%
|
52.6%
|
-50bps
|
-1.0%
|
FFO
1
|
$
|
7,657
|
$
|
7,685
|
$
|
(28)
|
-0.4%
|
FFO per
Unit
|
$
|
0.193
|
$
|
0.193
|
$
|
–
|
– %
|
Maintenance Capital
Expenditures
|
$
|
1,382
|
$
|
990
|
$
|
392
|
39.6%
|
AFFO
1
|
$
|
6,216
|
$
|
6,670
|
$
|
(454)
|
-6.8%
|
AFFO per
Unit
|
$
|
0.156
|
$
|
0.168
|
$
|
(0.012)
|
-7.1%
|
AFFO Payout
Ratio
|
79.9%
|
74.4%
|
550bps
|
7.4%
|
For the three months ended December 31,
2018, revenues totalled $26.3
million, a 3.8% increase over the $25.3 million Forecast. The increase over the
Forecast is the result of the recent property acquisitions
described above, Towne Park and
Riverhill, as well as higher than expected occupancy and rental
rate increases for the entire portfolio, both of which were
attributable to BSR's capital redevelopment program. Same Community
total revenue was $25.6 million, a
1.1% increase over the Forecast. As of December 31, 2018, weighted average occupancy was
93.3% and average monthly in-place leases were $821 per apartment unit.
NOI1 for the three months ended December 31, 2018 totalled $13.8 million, compared to the Forecast of
$13.3 million. The 3.7% increase over
the Forecast was primarily the result of the property acquisitions
described above. Same Community NOI1 totalled
$13.3 million and was in line with
the Forecast.
FFO1 of $7.7 million
for the three months ended December 31,
2018 was in line with the Forecast. The increase in fourth
quarter NOI1 over Forecast was primarily offset by
higher finance costs due to interest expense associated with the
financing of the fourth quarter property acquisitions described
above and higher than expected amortization of discounts on loans
and borrowings related to the fair valuation of debt at the time of
the IPO.
AFFO1 was $6.2 million,
or $0.156 per Unit, for the three
months ended December 31, 2018,
compared to the Forecast of $6.7
million. AFFO1 was impacted by the acceleration
of maintenance capital expenditures projects, that were previously
planned for the first quarter of 2019, to take advantage of milder
weather and to avoid the potential impact of federal tariffs
combined with the previously announced increase in planned
maintenance capital expenditures from $400 to $437 per
apartment unit. The increase in planned spending is for the repair
of staircases, landings and a retaining wall as well as additional
upgrades on acquisitions related to carpet, landscaping and fitness
center improvements. The REIT expects to incur lower than Forecast
maintenance capital expenditures in the first quarter of 2019 with
the expectation of ending the forecast period at $437 per apartment unit.
Financial Summary
–FY 2018 (May 18, 2018 to December 31, 2018)
|
|
In thousands of
U.S. dollars (except per unit amounts)
|
|
FY 2018
(Actual)
|
FY 2018 (Pro-
Rated
Forecast)
|
Change
|
Change
%
|
Revenue, Total
Portfolio
|
$
|
64,073
|
$
|
62,335
|
$
|
1,738
|
2.8%
|
Revenue, Same
Community 1 Properties
|
$
|
63,399
|
$
|
62,335
|
$
|
1,064
|
1.7%
|
NOI 1,
Total Portfolio
|
$
|
33,918
|
$
|
32,352
|
$
|
1,566
|
4.8%
|
NOI 1,
Same Community 1 Properties
|
$
|
33,434
|
$
|
32,352
|
$
|
1,082
|
3.3%
|
NOI Margin
1, Total Portfolio
|
52.9%
|
51.9%
|
100bps
|
1.9%
|
NOI Margin
1, Same Community
1 Properties
|
52.7%
|
51.9%
|
80bps
|
1.5%
|
FFO
1
|
$
|
18,940
|
$
|
18,481
|
$
|
459
|
2.5%
|
FFO per
Unit
|
$
|
0.477
|
$
|
0.465
|
$
|
0.012
|
2.6%
|
Maintenance Capital
Expenditures
|
$
|
3,098
|
$
|
2,459
|
$
|
639
|
26.0%
|
AFFO
1
|
$
|
15,638
|
$
|
15,847
|
$
|
(209)
|
-1.3%
|
AFFO per
Unit
|
$
|
0.394
|
$
|
0.399
|
$
|
(0.005)
|
-1.3%
|
AFFO Payout
Ratio
|
78.5%
|
77.8%
|
70bps
|
0.9%
|
For the FY 2018 period, revenues totalled $64.1 million, compared to the Forecast of
$62.3 million. The 2.8% increase over
Forecast was primarily the result of higher than expected occupancy
and rental rate increases for the entire portfolio, both of which
were attributable to BSR's capital redevelopment program. The
property acquisitions in the fourth quarter of 2018 contributed
revenues of $0.7 million. Same
Community revenue was $63.4 million,
a 1.7% increase over the Forecast.
NOI1 for the FY Period totalled $33.9 million, compared to the Forecast of
$32.4 million. The 4.8% increase over
Forecast was primarily the result of the increase in revenue,
discussed above, offset by incremental property operating expenses
from the property acquisitions in the fourth quarter of 2018. Same
Community NOI1 totalled $33.4
million, a 3.3% increase over the Forecast.
FFO1 was $18.9 million
for the FY Period, compared to the Forecast of $18.5 million. The 2.5% outperformance resulted
from increased NOI, partially offset by higher finance costs due to
higher amortization of discounts on loans and borrowings and
interest expense associated with the financing of property
acquisitions in the fourth quarter of 2018, both discussed above,
and higher general and administrative costs due to the timing of
non-cash compensation recorded in the second quarter of 2018.
AFFO1 was $15.6 million
for the FY Period, or $0.394 per
Unit, compared to the Forecast of $15.8
million. FY 2018 higher FFO1 was offset by the
acceleration of maintenance capital expenditures projects and the
previously announced increase in planned spending from $400 to $437 per
apartment unit discussed above. Maintenance capital expenditures in
the first quarter of 2019 are expected to be below Forecast amounts
with the expectation of ending the Forecast period at $437 per apartment unit.
Highlights from Nine Months Ended December 31, 2018
The following nine months ended December
31, 2018 metrics include the combined full nine months ended
December 31, 2018 for the properties
that were acquired by the REIT upon closing of the IPO .
In thousands of
U.S. dollars
|
|
Nine months
ended
December 31,
2018
|
Forecast
|
Change
|
Change
%
|
Revenue, Total
Portfolio
|
$
|
76,785
|
$
|
75,001
|
$
|
1,784
|
2.4%
|
Revenue, Same
Community Properties
|
$
|
76,111
|
$
|
75,001
|
$
|
1,110
|
1.5%
|
NOI 1,
Total Portfolio
|
$
|
40,811
|
$
|
38,803
|
$
|
2,008
|
5.2%
|
NOI 1,
Same Community Properties
|
$
|
40,327
|
$
|
38,803
|
$
|
1,524
|
3.9%
|
For the nine months ended December 31,
2018, total revenues were $76.8
million, compared to the Forecast of $75.0 million. The higher revenue is primarily
the result of stronger than expected occupancy for the entire
portfolio as well as rental rate increases that occurred more
quickly than expected, and were attributable to BSR's capital
redevelopment program. The recent property acquisitions in the
fourth quarter generated revenues of $0.7
million. Same Community total revenue was $76.1 million, a 1.5% increase over the
Forecast.
NOI1 for the nine months ended December 31, 2018 totalled $40.8 million, compared to the Forecast of
$38.8 million. The higher NOI is the
result of the increase in total revenue of $1.8 million, mentioned above, and a decrease in
property operating expenses of $0.2
million, which is mainly the result of lower than expected
repairs and maintenance expense, employee wages and benefits
expense and utility costs.
Liquidity and Capital Structure
As of December 31, 2018, the REIT
had cash and cash equivalents of $7.6
million and a $110.0 million
revolving credit facility. $104.8
million has been drawn from this facility, which includes
draws on the revolving credit facility during the fourth quarter to
partially finance the REIT's acquisitions of Towne Park and
Riverhill. As of December 31, 2018,
the REIT had total mortgage notes payable of $373.5 million with a weighted average
contractual interest rate of 3.9% and a weighted average term to
maturity of 10.7 years. Total loans and borrowings of the REIT as
of December 31, 2018 were
$471.0 million. Debt to Gross Book
Value1 was 48.6%.
Distributions and Units Outstanding
Cash distributions declared to REIT unitholders and Class B
unitholders totalled $5.0 million for
the fourth quarter and $12.3 million
for FY 2018, representing an AFFO payout ratio of 79.9% and 78.5% ,
respectively, compared to the Forecast of 74.4% and 77.8%,
respectively. 100% of the REIT's cash distributions for the fourth
quarter and FY 2018 were return of capital.
As of December 31, 2018, the total
number of REIT Units outstanding was 16,550,000. There were also
23,158,226 Class B Units outstanding, which are exchangeable into
REIT Units on a one-for-one basis. BSR intends to make a normal
course issuer bid for a portion of its REIT Units as appropriate
opportunities arise in 2019. The BSR board of trustees believes
that purchases of REIT Units at prices below BSR's view of it's
intrinsic value are in the best interest of BSR and a desirable use
of the REIT's capital.
Conference Call
John Bailey, Chief Executive
Officer, and Susan Koehn, Chief
Financial Officer, will host a conference call for analysts and
investors on Friday, March
8th, 2019 at 10:00 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/1936966/416B9F2DE27940889662BF5095BA37CC
A replay of the call will be available until Friday,
March 15th, 2019. To access the replay, dial
416-764-8677 or 888-390-0541 (Passcode: 433659 #). 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 50 multifamily garden-style residential properties
consisting of 10,451 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 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. Same Community,
NOI, NOI Margin, 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 December 31, 2018 for a
reconciliation of Same Community, NOI, NOI Margin, FFO and AFFO to
standardized IFRS measures.
A reconciliation of NOI for the nine months ended December 31, 2018 is stated below to the IFRS
measures presented in our consolidated financial statements:
In thousands of
U.S. dollars
|
|
Period
from
May 18, 2018
to
December 31, 2018
|
|
Period
from
April 1, 2018
to
May 17,
2018
|
|
Nine months
ended
December 31, 2018
|
Total
revenue
|
$
|
64,073
|
|
$
|
12,712
|
|
$
|
76,785
|
Property operating
expenses
|
(24,350)
|
|
(4,674)
|
|
(29,024)
|
Real estate
taxes
|
(1,205)
|
|
—
|
|
(1,205)
|
|
38,518
|
|
8,038
|
|
46,556
|
Property tax
liability adjustment (IFRIC 21)
|
(4,600)
|
|
(1,145)
|
|
(5,745)
|
NOI
1
|
$
|
33,918
|
|
$
|
6,893
|
|
$
|
40,811
|
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 31, 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.
SOURCE BSR Real Estate Investment Trust