BSR REIT Announces Strong 2020 Financial Results With Impressive Capital Recycling
- Same Community NOI increased 2.7% for the year, REIT positioned for growth -
LITTLE ROCK, AR and TORONTO, March 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 months and year ended December 31, 2020 ("Q4 2020" and "FY 2020", respectively). All comparisons in the following summary are to the corresponding periods in the prior year. Results are presented in U.S. dollars. References to "Same Community" correspond to properties the REIT has owned for equivalent periods throughout Q4 2020 and FY 2020 and the three months and year ended December 31, 2019 ("Q4 2019" and "FY 2019", respectively), thus removing the impact of acquisitions and dispositions. Audited Financial Statements and Management's Discussion and Analysis as of and for the three months and year ended December 31, 2020 are available on the REIT's website at www.bsrreit.com and at www.sedar.com.
"2020 was an active and successful year for BSR even with challenges presented by the pandemic," said John Bailey, the REIT's Chief Executive Officer. "During the year, we continued to successfully execute our capital recycling and growth program, with the divestiture of 17 non-core properties comprising 3,865 apartment units and the acquisition of six properties comprising 1,978 apartment units in targeted primary growth markets. This program will continue into 2021. With the remaining proceeds of the divestiture program and the additional net proceeds from our recent $69 million unit offering, we are now poised to stabilize and then grow the portfolio by taking advantage of our robust acquisition pipeline while increasing unitholder value though organic rental and asset value growth."
2020 Highlights
- Same Community1 revenues for FY 2020 increased 2.1% over FY 2019;
- Weighted average rent was $1,088 per apartment unit as of December 31, 2020 compared to $937 per apartment unit as of December 31, 2019, representing a 16.1% increase;
- Same Community1 Net Operating Income1 ("NOI") for FY 2020 increased 2.7% over FY 2019;
- During FY 2020, the REIT acquired six apartment communities, in its primary markets, for $338 million of which $129 million relates to two communities acquired in Q4 2020;
- During FY 2020, the REIT added 156 apartment units to the portfolio, through the development of Wimbledon Green II;
- During FY 2020, the REIT sold 17 non-core properties for $346 million, of which $260 million relates to 12 properties sold in Q4 2020, as part of the its capital recycling program, under which the REIT recycles proceeds from asset sales, on a tax deferred basis, into its high growth primary markets;
- These acquisitions and dispositions reduced the average age of the BSR portfolio by 13 years to 16 years;
- 95% of NOI is now derived from the REIT's core markets;
- Debt to Gross Book Value1 as of December 31, 2020 was 46.5%;
- During FY 2020, the REIT issued $42.5 million of 5% convertible debentures maturing September 30, 2025 with a conversion price of $14.40 per Unit;
- During December 2020, the REIT collected 99% of total monthly revenue which is in line with the historical average; and
- For the fourth consecutive year, BSR was named one of the best places to work in the state of Arkansas by Arkansas Business and the Best Companies Group.
Subsequent Highlights
- On February 9, 2021, the REIT completed a follow-on offering of 6,302,000 Units ("February 2021 Offering") for total gross proceeds of $69 million;
- In February 2021, the REIT sold Towne Park located in Northwest Arkansas for a contractual purchase price of $31.7 million for the 237 apartment units. Concurrent with the sale, the buyer assumed an in-place mortgage of $18.8 million with a fixed interest rate of 4.48% resulting in net proceeds of $12.9 million and the avoidance of $5.8 million in prepayment premiums to the REIT;
- Debt to Gross Book Value1 after the sale of Towne Park is 40%; and
- In January and February 2021, the REIT collected 99% of monthly revenue which is in line with the historical average.
_____________________________ | |
1 | Same Community, NOI, NOI margin, FFO, AFFO and Debt to Gross Book Value are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release. |
2021 Winter Storm Update
As of February 28, 2021, the REIT has incurred approximately $0.1 million in expenses associated with the winter storms and freeze damage in Texas, Arkansas and Oklahoma. There are no down apartment units as a result of the storm, and the REIT anticipates total costs, related to storm damage, not to exceed $0.3 million. No insurance claim is being filed at this time.
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 Center for Disease Control ("CDC"), including:
- Closure of non-essential common areas at all properties in higher risk areas;
- Closure of apartment offices to external traffic in higher risk areas;
- Sanitization of regularly touched surfaces on a more frequent basis;
- Virtual or self-guided apartment tours;
- Contactless doorstep delivery of packages; and
- Additional benefits to employees for paid time off, child care and sick leave.
To prevent further spread of the coronavirus, the CDC issued an order to temporarily halt certain residential evictions for non-payment of rent if a declaration is provided to the landlord stating the resident meets specific eligibility requirements. As of February 28, 2021, the REIT has received 21 declarations related to the order, representing approximately $0.1 million in unpaid rent.
During FY 2020, BSR provided $0.4 million of additional benefits to employees including paid time off, onsite bonuses and medical reimbursements, spent $0.1 million on disinfectant foggers and pumps, PPE and other cleaning supplies and chose to forgo $0.3 million in late fee income related to the COVID-19 pandemic. The REIT resumed charging late fees in mid-August 2020. The REIT has not received any government subsidies related to the pandemic.
Q4 2020 Financial Summary
In thousands of U.S. dollars
Three months | Three months | Change | Change % | |||||||
Revenue, Total Portfolio | $ | 28,627 | $ | 28,122 | $ | 505 | 1.8% | |||
Revenue, Same Community1 Properties | $ | 11,970 | $ | 11,878 | $ | 92 | 0.8% | |||
NOI1, Total Portfolio | $ | 15,098 | $ | 14,864 | $ | 234 | 1.6% | |||
NOI1, Same Community1 Properties | $ | 6,498 | $ | 6,501 | $ | -3 | -0.0% | |||
FFO1 | $ | 6,655 | $ | 6,698 | $ | -43 | -0.6% | |||
FFO per Unit1 | $ | 0.15 | $ | 0.15 | $ | – | – % | |||
Maintenance capital expenditures | $ | -846 | $ | -1,196 | $ | 350 | 29.3% | |||
Escrowed rent guaranty realized | $ | 87 | $ | 626 | $ | -539 | -86.1% | |||
Severance/retention costs on dispositions | $ | 382 | $ | 170 | $ | 212 | 124.7% | |||
Straight line rental revenue differences | $ | -153 | $ | -25 | $ | -128 | -512.0% | |||
AFFO1 | $ | 6,125 | $ | 6,273 | $ | -148 | -2.3% | |||
AFFO per Unit1 | $ | 0.13 | $ | 0.14 | $ | -0.01 | -7.1% | |||
Weighted Average Unit Count | 45,626,505 | 45,017,734 | 608,771 | 1.4% | ||||||
The increase in total portfolio revenue for Q4 2020 compared to Q4 2019 was primarily the result of property acquisitions which contributed $7.1 million in revenue as well as higher rental rates across the portfolio, partially offset by dispositions which reduced revenue by $6.7 million.
Revenue from Same Community properties outperformed Q4 2019 by $0.1 million due to an increase in average rental rates from $915 per apartment unit as of December 2019 to $924 per apartment unit as of December 2020.
The increase in total portfolio NOI for Q4 2020 compared to Q4 2019 was primarily the result of acquisitions contributing $3.9 million, offset by property dispositions that reduced NOI by $3.6 million.
NOI from Same Community properties for Q4 2020 was flat compared to the Q4 2019, predominantly due to the higher revenue described above, offset by an increase in real estate taxes and insurance costs over the prior period.
FFO for Q4 2020 of $6.7 million, or $0.15 per Unit, was consistent with Q4 2019 due to the increase in NOI of $0.2 million discussed above, offset by higher severance/retention costs of $0.2 million, related to the capital recycling program. The REIT excluded from FFO loss on extinguishment of debt of $10.0 million, primarily related to the non-cash write off of net discounts, premiums and prepayment embedded derivatives, and has reclassified prior periods to confirm to the current presentation.
AFFO decreased by $0.1 million to $6.1 million, or $0.13 per Unit, for Q4 2020, compared to $6.2 million, or $0.14 per Unit, for Q4 2019. The decrease was primarily the result of a $0.5 million decline in escrowed rent guarantees realized during the periods related to property acquisitions, offset by a decrease in maintenance capital expenditures of $0.4 million.
FY 2020 Financial Summary
In thousands of U.S. dollars
Year ended | Year ended | Change | Change % | |||||||
Revenue, Total Portfolio | $ | 113,286 | $ | 111,664 | $ | 1,622 | 1.5% | |||
Revenue, Same Community1 Properties | $ | 47,733 | $ | 46,734 | $ | 999 | 2.1% | |||
NOI1, Total Portfolio | $ | 59,236 | $ | 59,699 | $ | -463 | -0.8% | |||
NOI1, Same Community1 Properties | $ | 26,001 | $ | 25,306 | $ | 695 | 2.7% | |||
FFO1 | $ | 27,687 | $ | 29,261 | $ | -1,574 | -5.4% | |||
FFO per Unit1 | $ | 0.61 | $ | 0.71 | $ | -0.10 | -14.1% | |||
Maintenance capital expenditures | $ | -3,295 | $ | -3,858 | $ | 563 | 14.6% | |||
Escrowed rent guaranty realized | $ | 524 | $ | 626 | $ | -102 | -16.3% | |||
Severance/retention costs on dispositions | $ | 568 | $ | 388 | $ | 180 | 46.4% | |||
Straight line rental revenue differences | $ | -70 | $ | -27 | $ | -43 | -159.3% | |||
AFFO1 | $ | 25,414 | $ | 26,390 | $ | -976 | -3.7% | |||
AFFO per Unit1 | $ | 0.56 | $ | 0.64 | $ | -0.08 | -12.5% | |||
Weighted Average Unit Count | 45,136,847 | 41,228,567 | 3,908,280 | 9.5% | ||||||
The increase in total portfolio revenue for FY 2020 compared to FY 2019 was primarily the result of property acquisitions, contributing $25.8 million in revenue, and a $1 million increase in Same Community revenue, partially offset by property dispositions that reduced revenue by $25.2 million.
Same Community properties revenue for FY 2020 outperformed FY 2019 by $1.0 million, primarily due to an increase in Same Community rental rates as well as an increase in utility reimbursements of $0.3 million, partially offset by the absence of late rental fees of $0.2 million related to the COVID-19 pandemic. The REIT resumed charging late fees in mid-August of 2020.
The decrease in total portfolio NOI for FY 2020 compared to FY 2019 was primarily the result of property dispositions reducing NOI by $13.9 million, partially offset by acquisitions contributing $12.7 million, as well as the increase in NOI from Same Community properties discussed below.
NOI from Same Community properties for FY 2020 outperformed FY 2019 by $0.7 million, predominantly due to the increase in revenue discussed above, partially offset by an increase in property insurance expense of $0.2 million. The REIT paid $0.3 million in COVID-19 related expenses for Same Community properties in FY 2020, offset by a decline in payroll expenses.
FY 2020 FFO was $27.7 million, or $0.61 per Unit, compared to $29.3 million, or $0.71 per Unit, in FY 2019. The decrease of $1.6 million in FFO was the result of a decrease of $0.5 million in NOI, described above, as well as an increase in general and administrative expenses of $0.3 million resulting from an increase in share-based compensation and other employee benefits, offset by lower legal and professional fees and travel expenses in FY 2020. The amortization of deferred financing fees contributed $0.5 million and severance/retention costs, related to the capital recycling program, contributed $0.2 million to the decrease in FFO over the prior year. The REIT excluded from FFO loss on extinguishment of debt of $11.6 million, primarily related to the non-cash write off of net discounts, premiums and prepayment embedded derivatives, and has reclassified prior periods to confirm to the current presentation.
FY 2020 AFFO was $25.4 million, or $0.56 per Unit, compared to $26.4 million, or $0.64 per Unit, for FY 2019. The decrease of $1.0 million over the prior year was primarily the result of the change in FFO described above, partially offset by a decrease in maintenance capital expenditures of $0.6 million due to emergency only maintenance during the second quarter of 2020. The severance/retention costs, discussed above, are excluded from 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)
December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | ||||||
Operational Information | |||||||||
Number of real estate investment properties | 30 | 40 | 38 | 40 | |||||
Total apartment units | 7,628 | 9,681 | 9,035 | 9,460 | |||||
Average monthly rent on in-place leases | $ | 1,088 | $ | 1,011 | $ | 996 | $ | 961 | |
Average monthly rent on in-place leases, Same Community1 Properties | $ | 924 | $ | 920 | $ | 910 | $ | 919 | |
Weighted average occupancy rate | 93.8% | 93.5% | 94.8% | 94.2% | |||||
Retention rate | 56.5% | 53.4% | 53.5% | 52.8% | |||||
Debt to Gross Book Value1 | 46.5% | 50.8% | 48.5% | 49.4% | |||||
Three months | Three months | Three months | Three months | ||||||
Operating Results | |||||||||
Revenue, Total Portfolio | $ | 28,627 | $ | 29,849 | $ | 27,288 | $ | 27,522 | |
Revenue, Same Community1 Properties | $ | 11,970 | $ | 12,089 | $ | 11,814 | $ | 11,860 | |
NOI1, Total Portfolio | $ | 15,098 | $ | 15,233 | $ | 14,222 | $ | 14,683 | |
NOI1, Same Community1 Properties | $ | 6,498 | $ | 6,450 | $ | 6,446 | $ | 6,607 | |
NOI Margin1, Total Portfolio | 52.7% | 51.0% | 52.1% | 53.4% | |||||
NOI Margin1, Same Community1 Properties | 54.3% | 53.4% | 54.6% | 55.7% | |||||
FFO1 | $ | 6,655 | $ | 7,427 | $ | 6,635 | $ | 6,970 | |
FFO per Unit | $ | 0.15 | $ | 0.16 | $ | 0.15 | $ | 0.15 | |
Escrowed rent guaranty realized | $ | 87 | $ | – | $ | – | $ | 437 | |
Maintenance capital expenditures | $ | 846 | $ | 958 | $ | 678 | $ | 813 | |
AFFO1 | $ | 6,125 | $ | 6,490 | $ | 6,192 | $ | 6,607 | |
AFFO per Unit1 | $ | 0.13 | $ | 0.14 | $ | 0.14 | $ | 0.15 | |
AFFO Payout Ratio | 92.9% | 87.5% | 90.0% | 84.8% | |||||
Weighted Average Unit Count | 45,626,505 | 45,255,977 | 44,663,118 | 44,995,099 | |||||
Liquidity and Capital Structure
As of December 31, 2020, the REIT had liquidity of $91.5 million, consisting of cash and cash equivalents of $5.3 million, $51.2 million available on the REIT's credit facility and $35 million available on a line of credit.
As of December 31, 2020, the REIT had total mortgage notes payable of $355.5 million, excluding the credit facility and line of credit, with a weighted average contractual interest rate of 3.8% and a weighted average term to maturity of 7.6 years. Total loans and borrowings of the REIT as of December 31, 2020 were $475.9 million, excluding the Debentures. 87% of the REIT's debt was fixed or economically hedged to fixed rates.
Additionally, as of December 31, 2020, the REIT had $42.5 million in Debentures outstanding at a contractual interest rate of 5%, maturing on September 30, 2025 with a conversion price of $14.40 per Unit.
On February 9, 2021, the REIT completed the February 2021 Offering, referenced above, for total gross proceeds of $69 million. Net proceeds of $66.2 million were used to repay amounts outstanding on the REIT's credit facility.
On February 11, 2021, the REIT sold Towne Park at Har-Ber, located in the Northwest Arkansas MSA, for a contractual purchase price of $31.7 million. The purchaser assumed $18.8 million of mortgage debt, leaving net cash proceeds of $12.3 million and the avoidance of $5.8 million in prepayment premiums to the REIT. Following the sale, the REIT's debt to gross book value is 40.0%, providing approximately $170 million in liquidity.
Distributions and Units Outstanding
Cash distributions declared to REIT unitholders and Class B unitholders of BSR Trust, LLC totalled $5.7 million for Q4 2020, representing an AFFO payout ratio of 92.9%. 100% of the REIT's cash distributions were classified as return of capital. As of December 31, 2020, the total number of REIT Units outstanding was 23,863,511. There were also 21,707,767 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, March 10th, 2020 at 11:00 am (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=1428096&tp_key=ab0fb85c44
A replay of the call will be available until Wednesday, March 17th, 2020. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 123406 #). 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 and Debt to Gross Book Value 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 and Debt to Gross Book Value 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 year ended December 31, 2020 for a reconciliation of Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value 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 year ended December 31, 2020 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
Susan Koehn, Chief Financial Officer, BSR Real Estate Investment Trust, 501.371.6335, Fax: 501.374.3383
Share this article