BSR REIT ANNOUNCES Q2 2022 FINANCIAL RESULTS

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Cision

LITTLE ROCK, Ark. and TORONTO, Aug. 9, 2022 /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, 2022 ("Q2 2022" and "YTD 2022", 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 stabilized properties the REIT has owned for equivalent periods throughout Q2 2022 and YTD 2022 and the three months and six months ended June 30, 2021 ("Q2 2021" and "YTD 2021", 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, 2022 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 diluted trust units of the REIT ("Units") and Class B Units of BSR Trust, LLC ("Class B Units").

"Strong population growth and positive economic trends in our core Texas markets are driving outsized rental demand in our communities," said Dan Oberste, the REIT's President and Chief Executive Officer. "As a result, operating results for the first half of 2022 exceeded expectations, and we expect favorable leasing conditions to continue in the second half of the year."

Q2 2022 Highlights

  • On April 29, 2022, the REIT completed a public offering of 5,888,000 Units ("April 2022 Offering") for gross proceeds of $115.1 million after the full exercise of the underwriters' overallotment option;

  • NAV per Unit1 increased 51.4% to $22.35, inclusive of the Units issued in the April 2022 Offering, as of June 30, 2022 as compared to $14.77 as of June 30, 2021 and 1.7% sequentially from $21.98 as of March 31, 2022;

  • FFO per Unit1 for Q2 2022 increased 61.5% over Q2 2021;

  • AFFO per Unit1 for Q2 2022 increased 26.7% over Q2 2021;

  • Weighted average rent increased 17.1% to $1,412 per apartment unit as of June 30, 2022 compared to $1,206 as of June 30, 2021 and 4.6% sequentially from $1,350 as of March 31, 2022;

  • Same Community1 revenues for Q2 2022 increased 11.5% over Q2 2021;

  • Same Community1 Net Operating Income ("NOI")1 for Q2 2022 increased 16.7% over Q2 2021;

  • During Q2 2022, the REIT's AFFO Payout Ratio1 was 71.8% compared to 82.6% during Q2 2021;

  • During Q2 2022, rental rates for new leases, increased 16.3% and renewals increased 8.8%, for a blended increase of 12.6%;

  • As of June 30, 2022, weighted average occupancy was 95.0% compared to 96.2% as of June 30, 2021; and

  • Debt to Gross Book Value1 excluding Convertible Debentures (as defined below) as of June 30, 2022 was 34.0%.

Subsequent Highlights

  • In July 2022, the REIT entered into three interest rate swaps (the "Swaps"). Two of the Swaps are on notional values of $150 million and $65 million at fixed rates of 2.163% and 2.178%, respectively, and begin on September 1, 2022 and mature on August 31, 2029. The third Swap is on a notional value of $65 million at a fixed rate of 2.087% and begins on January 3, 2023 and matures on July 27, 2029. Following the commencement of the Swaps, 100% of the REIT's debt will be fixed or economically hedged to fixed rates at a weighted average contractual interest rate of 3.4%;

  • In July 2022, the REIT entered into an agreement to jointly develop phase II of Aura 36Hundred in the Austin, Texas metropolitan statistical area. The 238 apartment unit development is expected to be completed in 2024 with a projected total cost of $59.5 million.

  • For the sixth consecutive year, BSR was named as one of the Best Places to Work in Arkansas by Arkansas Business and the Best Companies Group.

____________________________

1Same Community, NOI, NOI Margin, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, Debt to Gross Book Value and NAV per Unit are non-IFRS measures. For a description of the basis of presentation and reconciliations of the REIT's non-IFRS measures, see "Non-IFRS Measures" in this news release.

Q2 2022 Financial Summary

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


Q2 2022


Q2 2021


Change


Change %

Revenue, Total Portfolio

$

38,787


$

28,046


$

10,741


38.3 %

Revenue, Same Community1 Properties

$

23,179


$

20,795


$

2,384


11.5 %

Revenue, Non-Same Community1 Properties

$

15,608


$

7,251


$

8,357


115.3 %

Net income and comprehensive income

$

160,832


$

35,975


$

124,857


nm*

NOI1, Total Portfolio

$

20,998


$

14,374


$

6,624


46.1 %

NOI1, Same Community1 Properties

$

12,718


$

10,901


$

1,817


16.7 %

NOI1, Non-Same Community1 Properties

$

8,280


$

3,473


$

4,807


138.4 %

Funds from Operations ("FFO")1

$

11,637


$

7,000


$

4,637


66.2 %

FFO per Unit1

$

0.21


$

0.13


$

0.08


61.5 %

Maintenance capital expenditures

$

(1,218)


$

(690)


$

(528)


76.5 %

Escrowed rent guaranty realized

$

5


$

1,475



(1,470)


nm*

Severance/retention costs on dispositions

$

-


$

59


$

(59)


nm*

Straight line rental revenue differences

$

54


$

11


$

43


nm*

AFFO1

$

10,478


$

7,855


$

2,623


33.4 %

AFFO per Unit1

$

0.19


$

0.15


$

0.04


26.7 %

Weighted Average Unit Count


56,290,702



52,084,576



4,206,126


8.1 %

Unitholders' equity

$

991,865


$

484,465


$

507,400


104.7 %

NAV1

$

1,300,732


$

769,302


$

531,430


69.1 %

NAV per Unit1

$

22.35


$

14.77


$

7.58


51.4 %

*Percentages have been excluded for changes which are not considered to be meaningful for comparative purposes.

1Same Community, NOI, NOI Margin, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, Debt to Gross Book Value and NAV per Unit are non-IFRS measures. For a description of the basis of presentation and reconciliations of the REIT's non-IFRS measures, see "Non-IFRS Measures" in this news release.

The 38.3% increase in total portfolio revenue for Q2 2022, compared to Q2 2021, was the result of contributions of $2.4 million from Same Community properties, $11.4 million from property acquisitions and $0.2 million from non-stabilized properties, partially offset by property dispositions that reduced revenue by $3.3 million.

Revenue from Same Community properties for Q2 2022 outperformed Q2 2021 by $2.4 million, or 11.5%, primarily due to a 12.6% increase in average rental rates from $1,161 per apartment unit as of June 30, 2021 to $1,307 per apartment unit as of June 30, 2022.

The increase in net income and comprehensive income for Q2 2022 compared to Q2 2021 was primarily due to an increase in the fair value adjustment (gain) to derivatives and other financial liabilities of $178.1 million, over the prior period, partially offset by a decrease in the fair value gain to investment properties of $63.2 million.

The increase in total portfolio NOI for Q2 2022 compared to Q2 2021 of $6.6 million, or 46.1%, was the result of contributions of $1.8 million from Same Community properties and $6.3 million from property acquisitions and non-stabilized properties, partially offset by property dispositions which reduced NOI by $1.3 million. Severance/retention costs on dispositions are excluded from NOI.

The increase in Same Community NOI for Q2 2022 compared to Q2 2021 of $1.8 million, or 16.7%, was the result of the increase in revenue described above, partially offset by an increase in property operating expenses, including real estate taxes, of $0.6 million, or 5.7%, due to an increase in payroll, administrative and repair and maintenance expenses as well as an increase in the cost of insurance over the prior period.

FFO was $11.6 million, or $0.21 per Unit, for Q2 2022 compared to $7.0 million, or $0.13 per Unit, for Q2 2021. The increase was primarily the result of the higher NOI discussed above, partially offset by increases of $0.4 million in general and administrative expenses associated with payroll and insurance and $1.6 million in finance costs associated with additional debt related to additional investment properties over the prior period and an increase in interest rates. As discussed above, subsequent to Q2 2022 the REIT entered into Swaps to hedge an additional $280.0 million in variable rate debt. Losses on extinguishment of debt are excluded from the calculation of FFO.

AFFO was $10.5 million, or $0.19 per Unit, for Q2 2022, compared to $7.9 million, or $0.15 per Unit, for Q2 2021. The improvement was primarily the result of the increase in FFO discussed above, partially offset by an escrowed rent guaranty realized in the prior year of $1.5 million and an increase in maintenance capital expenditures of $0.5 million largely related to the painting of metal railings and replacing of gutters in Q2 2022. Losses on extinguishment of debt and severance/retention costs on dispositions are excluded from the calculation of AFFO.

YTD 2022 Financial Summary

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


YTD 2022


YTD 2021


Change


Change %

Revenue, Total Portfolio

$

76,332


$

53,816


$

22,516


41.8 %

Revenue, Same Community1 Properties

$

45,380


$

40,756


$

4,624


11.3 %

Revenue, Non-Same Community1 Properties

$

30,952


$

13,060


$

17,892


137.0 %

Net income and comprehensive income

$

219,863


$

105,353


$

114,510


nm*

NOI1, Total Portfolio

$

40,643


$

27,729


$

12,914


46.6 %

NOI1, Same Community1 Properties

$

24,837


$

21,323


$

3,514


16.5 %

NOI1, Non-Same Community1 Properties

$

15,806


$

6,406


$

9,400


146.7 %

FFO1


22,702


$

12,806


$

9,896


77.3 %

FFO per Unit1

$

0.42


$

0.25


$

0.17


68.0 %

Maintenance capital expenditures

$

(1,920)


$

(1,186)


$

(734)


61.9 %

Escrowed rent guaranty realized

$

87


$

1,475


$

(1,388)


nm*

Severance/retention costs on dispositions

$

-


$

105


$

(105)


nm*

Straight line rental revenue differences

$

136


$

(35)


$

171


nm*

AFFO1

$

21,005


$

13,165


$

7,840


59.6 %

AFFO per Unit1

$

0.39


$

0.26


$

0.13


50.0 %

Weighted Average Unit Count


54,246,536



50,682,740



3,563,796


7.0 %

*Percentages have been excluded for changes which are not considered to be meaningful for comparative purposes.

1Same Community, NOI, NOI Margin, FFO, FFO per Unit, AFFO, AFFO per Unit, AFFO Payout Ratio, Debt to Gross Book Value and NAV per Unit are non-IFRS measures. For a description of the basis of presentation and reconciliations of the REIT's non-IFRS measures, see "Non-IFRS Measures" in this news release.

The 41.8% increase in total portfolio revenue for YTD 2022 compared to YTD 2021 was the result of contributions of $4.6 million from Same Community properties, $25.0 million from property acquisitions and $0.8 million from non-stabilized properties, partially offset by property dispositions that reduced revenue by $7.8 million.

Revenue from Same Community properties for YTD 2022 outperformed YTD 2021 by $4.6 million, or 11.3%, primarily due to a 12.6% increase in average rental rates from $1,161 per apartment unit as of June 30, 2021 to $1,307 per apartment unit as of June 30, 2022.

The increase in net income and comprehensive income for YTD 2022 compared to YTD 2021 was primarily due to an increase in the fair value adjustment gain to derivatives and other financial liabilities of $108.1 million over the prior period.

The increase in total portfolio NOI for YTD 2022 compared to YTD 2021 of $12.9 million, or 46.6%, was the result of contributions of $3.5 million from Same Community properties and $13.2 million from property acquisitions and non-stabilized properties, partially offset by property dispositions which reduced NOI by $3.6 million. Severance/retention costs on dispositions are excluded from NOI.

The increase in Same Community NOI for YTD 2022 compared to YTD 2021 of $3.5 million, or 16.5%, was the result of the increase in revenue described above, offset by an increase in property operating expenses, including real estate taxes, of $1.1 million, or 5.7%, due to higher payroll expenses, administrative expenses, utilities and property insurance expense as well as higher property taxes of $0.3 million.

FFO was $22.7 million, or $0.42 per Unit, for YTD 2022 compared to $12.8 million, or $0.25 per Unit, for YTD 2021. The FFO per Unit increase of 68.0% was primarily the result of higher NOI discussed above, partially offset by increases of $0.6 million in general and administrative expenses associated with payroll and professional fees and $2.5 million in finance costs related to additional debt associated with additional investment properties over the prior period and an increase in interest rates. As discussed above, subsequent to Q2 2022 the REIT hedged an additional $280.0 million in variable rate debt. Losses on extinguishment of debt are excluded from the calculation of FFO.

AFFO was $21.0 million, or $0.39 per Unit, for YTD 2022, compared to $13.2 million, or $0.26 per Unit, for YTD 2021. The AFFO per Unit improvement of 50.0% was primarily the result of the increase in FFO, partially offset by a lower escrow rent guaranty realized of $1.4 million and an increase in maintenance capital expenditures of $0.7 million largely related to the painting of metal railings and replacing of gutters in Q2 2022. Losses on extinguishment of debt and severance/retention costs on dispositions are excluded from the calculation of AFFO.

Highlights from Recent Four Quarters

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


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2021

Operational Information








Number of real estate investment properties


31



31



31



30

Total apartment units


8,666



8,666



8,666



8,367

Average monthly rent on in-place leases

$

1,412


$

1,350


$

1,328


$

1,275

Average monthly rent on in-place leases,


Same Community1 Properties

$

1,307


$

1,238


$

1,228


$

1,199

Weighted average occupancy rate


95.0 %



94.5 %



96.0 %



96.4 %

Retention rate


57.1 %



57.3 %



58.5 %



56.6 %

Debt to Gross Book Value1


36.2 %



43.2 %



45.1 %



43.5 %














Q2 2022


Q1 2022


Q4 2021


Q3 2021

Operating Results











Revenue, Total Portfolio

$

38,787


$

37,545


$

34,061


$

31,705

Revenue, Same Community1 Properties

$

23,179


$

22,201


$

21,981


$

21,702

Revenue, Non-Same Community1 Properties

$

15,608


$

15,344


$

12,080


$

10,003

NOI1, Total Portfolio

$

20,998


$

19,645


$

18,678


$

16,504

NOI1, Same Community1 Properties

$

12,718


$

12,119


$

12,369


$

11,366

NOI1, Non-Same Community1 Properties

$

8,280


$

7,526


$

6,309


$

5,138

NOI Margin1, Total Portfolio


54.1 %



52.3 %



54.8 %



52.1 %

NOI Margin1, Same Community1 Properties


54.9 %



54.6 %



56.7 %



54.8 %

NOI Margin1, Non-Same Community1 Properties


53.0 %



49.0 %



53.7 %



50.2 %

Net income and comprehensive income

$

160,832


$

59,031


$

70,868



106,993

Distributions on Class B Units

$

2,678


$

2,648


$

2,595


$

2,628

Fair value adjustment to investment properties

$

(20,258)


$

(118,789)


$

(114,282)


$

(162,302)

Fair value adj. to investment prop. (IFRIC 21)

$

7,732


$

(22,328)


$

5,057


$

5,606

Property tax liability adjustment, net (IFRIC 21)

...