LITTLE ROCK, AR and
TORONTO, Nov. 7, 2018 /CNW/ - BSR Real Estate Investment
Trust ("BSR", or the "REIT") (TSX: HOM.U) today
announced its financial results for the three months ended
September 30, 2018 ("Q3 2018") and
the period from May 18, 2018 to
September 30, 2018 ("YTD 2018"). The
YTD 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 YTD 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 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 six months
ended September 30, 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.
Q3 2018 Highlights
- Weighted average occupancy as of September 30, 2018 was 93.6% compared to 92.7% as
of December 31, 2017.
- Weighted average rent was $806
per apartment unit as of September 30,
2018 compared to $777 per
apartment unit as of December 31,
2017.
- Total revenue was $25.6 million,
1.7% higher than the forecast.
- Net Operating Income1 ("NOI") of $13.5 million was 3.6% higher than the
forecast.
- NOI margin was 52.6%, which exceeded the forecast by 100 basis
points.
- Funds from Operations1 ("FFO") of $7.6 million was 2.7% above the forecast.
- Adjusted Funds from Operations1 ("AFFO") of
$6.3 million, or $0.159 per unit, was in line with the
forecast.
- Debt to Gross Book Value1 as of September 30, 2018 was 44.5%.
YTD 2018 Highlights (May 18,
2018 to September 30,
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 3 million
REIT units increasing the total equity proceeds to $165 million.
- Total revenue was $37.8 million,
2.1% higher than the pro-rated forecast.
- Net Operating Income1 ("NOI") of $20.1 million was 5.6% higher than the pro-rated
forecast.
- NOI margin was 53.2% which exceeded the pro-rated forecast by
180 basis points.
- Funds from Operations1 ("FFO") of $11.3 million was 4.5% above the pro-rated
forecast.
- Adjusted Funds from Operations1 ("AFFO") of
$9.4 million, or $0.237 per unit, was 2.7% above the pro-rated
forecast.
- The REIT's AFFO payout ratio was 77.6% compared with the
pro-rated forecast of 80.2%.
- 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 NOI, FFO, AFFO, and Debt to GBV are non-IFRS
financial measures. See "Non-IFRS Financial Measures" in this
news release.
Acquisition of Towne Park
Subsequent to quarter-end, on October 25,
2018, the REIT completed the accretive acquisition of Towne
Park, a 237-unit, garden style residential community in
Springdale, Arkansas for
$28.9 million. Northwest Arkansas is the fastest growing
region in the state of Arkansas
and the 14th fastest growing metropolitan statistical area in
the United States. Towne Park, which was constructed in two phases
in 2016 and 2017, is BSR's second purchase in this region in two
years, following the acquisition of Mountain Ranch Apartments, a
360 unit garden-style complex less than 10 miles away. The
transaction was funded using the REIT's revolving credit
facility.
"I continue to be very pleased with our operating results as the
benefits of our capital redevelopment program come to fruition,"
stated John Bailey, BSR's Chief
Executive Officer. "I am also excited about our latest acquisition
in Northwest Arkansas which is
consistent with our clustering strategy to maximize efficiencies as
well as allows us to take advantage of our strong management
platform to increase NOI. We will continue to pursue acquisition
opportunities in our target markets that meet our acquisition
criteria and build unitholder value through our capital
redevelopment program and asset rotation. Furthermore, we continue
to be confident in meeting our AFFO forecast."
Financial Summary
– Q3 2018
|
|
|
|
|
|
|
|
|
In thousands of
U.S. dollars (except per unit amounts)
|
|
Q3 2018
(actual)
|
|
Q3 2018
(forecast)
|
|
Variance
|
|
Variance
%
|
Total
revenue
|
$
|
25,597
|
|
$
|
25,177
|
|
$
|
420
|
|
1.7%
|
NOI
1
|
$
|
13,465
|
|
$
|
13,002
|
|
$
|
463
|
|
3.6%
|
NOI Margin
1
|
52.6%
|
|
51.6%
|
|
100bps
|
|
1.9%
|
FFO
1
|
$
|
7,593
|
|
$
|
7,390
|
|
$
|
203
|
|
2.7%
|
Maintenance capital
expenditures
|
$
|
1,147
|
|
$
|
990
|
|
$
|
157
|
|
15.9%
|
AFFO
1
|
$
|
6,334
|
|
$
|
6,318
|
|
$
|
16
|
|
0.3%
|
AFFO per
Unit
|
$
|
0.159
|
|
$
|
0.159
|
|
$
|
–
|
|
– %
|
AFFO payout
ratio
|
78.4%
|
|
78.6%
|
|
-20bps
|
|
-0.3%
|
For the three months ended September 30,
2018, revenues totalled $25.6
million, compared to the forecast of $25.2 million. The 1.7% 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, which is
impacting revenue more quickly than forecasted. As of September 30, 2018, weighted average occupancy
was 93.6% and average monthly in-place leases were $806 per apartment unit.
NOI1 for the three months ended September 30, 2018 totalled $13.5 million, compared to the forecast of
$13.0 million. The 3.6% increase over
forecast was primarily the result of the increase in total revenue,
mentioned above.
FFO1 was $7.6 million
for the three months ended September 30,
2018, compared to the forecast of $7.4 million. The 2.7% outperformance resulted
from increased NOI, partially offset by higher interest expense
primarily due to higher than forecasted amortization of discounts
on loans and borrowings related to the fair valuation of debt that
occurred upon the REITs acquisition of BSR at the time of the
IPO.
AFFO1 was in line with the forecast of $6.3 million, or $0.159 per Unit, for the three months ended
September 30, 2018. AFFO was impacted
by higher than forecasted maintenance capital expenditures, which
were due to seasonality (higher maintenance capital expenditures
were incurred during the summer months whereas the forecast assumed
an even weighting throughout the year), as well as an increase in
planned spending on maintenance capital expenditures from
$400 to $437 per apartment unit during the forecast
period. The increase in spending is for the repair of staircases,
landings and a retaining wall; and additional upgrades on
acquisitions related to carpet, landscaping and fitness center
improvements.
As of September 30, 2018, the REIT
had total mortgage notes payable of $348.5
million with a weighted average contractual interest rate of
3.8% and a weighted average term to maturity of 11.0 years. Total
loans and borrowings of the REIT as of September 30, 2018 were $393.2 million. Debt to Gross Book
Value1 was 44.5%.
The total number of REIT Units outstanding as of September 30, 2018 was 16,596,517. There were
also 23,158,236 Class B Units outstanding, which are exchangeable
into REIT Units on a one-for-one basis.
Financial Summary
–YTD 2018 (May 18, 2018 to September 30,
2018)
|
|
|
|
|
|
|
|
|
In thousands of
U.S. dollars (except per unit amounts)
|
|
YTD
2018
(actual)
|
|
YTD
2018
(pro-rated
forecast)
|
|
Variance
|
|
Variance
%
|
Total
revenue
|
$
|
37,811
|
|
$
|
37,035
|
|
$
|
776
|
|
2.1%
|
NOI
1
|
$
|
20,115
|
|
$
|
19,042
|
|
$
|
1,073
|
|
5.6%
|
NOI Margin
1
|
53.2%
|
|
51.4%
|
|
180bps
|
|
3.5%
|
FFO
1
|
$
|
11,283
|
|
$
|
10,796
|
|
$
|
487
|
|
4.5%
|
Maintenance capital
expenditures
|
$
|
1,716
|
|
$
|
1,469
|
|
$
|
247
|
|
16.8%
|
AFFO
1
|
$
|
9,422
|
|
$
|
9,177
|
|
$
|
245
|
|
2.7%
|
AFFO per
Unit
|
$
|
0.237
|
|
$
|
0.231
|
|
$
|
0.006
|
|
2.6%
|
AFFO payout
ratio
|
77.6%
|
|
80.2%
|
|
-260bps
|
|
-3.2%
|
For the YTD 2018 period, revenues totalled $37.8 million, compared to the forecast of
$37.0 million. The 2.1% 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,
which impacted revenue more quickly than forecasted.
NOI1 for the YTD Period totalled $20.1 million, compared to the forecast of
$19.0 million. The 5.6% increase over
forecast was primarily the result of the increase in total revenue,
mentioned above, and lower than expected property operating
expenses, which were primarily the result of lower than forecasted
repairs and maintenance expense and other administrative costs.
FFO1 was $11.3 million
for the YTD Period, compared to the forecast of $10.8 million. The 4.5% outperformance resulted
from increased NOI, partially offset by higher interest expense due
to higher amortization of discounts on loans and borrowings, as
mentioned above, and higher general and administrative costs due to
the timing of non-cash compensation recorded in the second quarter
of 2018. AFFO1 was $9.4
million for the YTD Period, or $0.237 per Unit. The 2.7% higher AFFO compared to
the forecast resulted from increased FFO1, offset by
higher than forecasted maintenance capital expenditures as
discussed above.
Highlights from Six Months Ended September 30, 2018
The following six months ended September
30, 2018 metrics include the combined three months ended
September 30, 2018 and the full
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
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
September 30,
2018
|
|
Forecast
|
|
Variance
|
|
Variance
%
|
Total
revenue
|
$
|
50,523
|
|
$
|
49,701
|
|
$
|
822
|
|
1.7%
|
NOI
1
|
$
|
27,008
|
|
$
|
25,493
|
|
$
|
1,515
|
|
5.9%
|
For the six months ended September 30,
2018, total revenues were $50.5
million, compared to the forecast of $49.7 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 six months ended September 30, 2018 totalled $27.0 million, compared to the forecast of
$25.5 million. The higher NOI is the
result of the increase in total revenue of $0.8 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.
Conference Call
John Bailey, Chief Executive
Officer, and Susan Koehn, Chief
Financial Officer, will host a conference call for analysts and
investors on Thursday, November
8th, 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/1853971/6163569AAC76912CA7046093C9695B47
A replay of the call will be available until Thursday, November 15th, 2018. To
access the replay, dial 416-764-8677 or 888-390-0541 (Passcode:
114275 #). 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 49 multifamily garden-style residential properties
consisting of 10,116 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 September 30,
2018 for a reconciliation of NOI, FFO and AFFO to
standardized IFRS measures.
A reconciliation of NOI for the period ended September 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
September 30,
2018
|
|
Period
from
April 1, 2018
to
May 17, 2018
|
|
Six months
ended
September 30, 2018
|
Total
revenue
|
$
|
37,811
|
|
$
|
12,712
|
|
$
|
50,523
|
Property operating
expenses
|
(14,337)
|
|
(4,674)
|
|
(19,011)
|
Real estate
taxes
|
—
|
|
—
|
|
—
|
|
23,474
|
|
8,038
|
|
31,512
|
Property tax
liability adjustment (IFRIC 21)
|
(3,359)
|
|
(1,145)
|
|
(4,504)
|
NOI
1
|
$
|
20,115
|
|
$
|
6,893
|
|
$
|
27,008
|
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