Toronto traders get a ring by BSR

Leading a real estate company that was started by his parents in 1956, John Bailey raised it to another level when he took it public in May.

BSR Real Estate Investment Trust, traded on the Toronto Stock Exchange, owns 48 garden-style multifamily apartment communities in five states -- Arkansas, Texas, Oklahoma, Louisiana and Mississippi. There are almost 10,000 units in the 48 complexes.

BSR stands for Bailey Summit Residential.

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John Bailey

In Arkansas, BSR owns two apartment complexes in Blytheville, one each in Fayetteville and Hot Springs and 11 in Little Rock and North Little Rock.

BSR's 48 complexes are considered to be Class B properties because they typically are more than 10 years old, Bailey, BSR's chief executive officer, said in a recent interview at company headquarters in Little Rock's Union Station. But they have many of the amenities and professional management of Class A properties, Bailey said.

"We believe we are in one of the most high growth markets in America," Bailey said.

BSR's properties are in markets in the southern and western United States that outpace the national average of population growth and economic growth, Bailey said.

BSR has an average rent of $777 a month and an occupancy rate of 92.7 percent at its 48 complexes.

For about 18 months, BSR worked hard at putting the company in position to go public, including renovations of some apartment complexes, Bailey said.

BSR has done a lot of work in the past five years refining its portfolio, said Harry Hamlin, a real estate attorney for the Mitchell Williams Selig Gates & Woodyard law firm in Little Rock.

"They've sold off smaller, older properties and bought newer larger properties in specific targeted markets -- Houston, Austin, Oklahoma City and Dallas -- markets where they see growing demand for the product they're offering," Hamlin said.

A public stock offering had been on the radar for the past few years, Hamlin said.

"There was always this issue that at some point you needed better access to capital," said Hamlin, who has had the Bailey firm as a client for more than 20 years. Maurice Mitchell was the attorney for Bailey's father beginning in 1954, Hamlin said.

The Mitchell Williams firm was U.S. counsel as legal advisers along with another firm from Canada.

BSR chose to go public with the Toronto exchange instead of a U.S. market.

"Ultimately what it came down to for this size [real estate investment trust] was that it fit a niche at the Toronto exchange that didn't really exist in the U.S.," Hamlin said. "It might have been too small of a company to garner too much attention in the U.S."

BSR has about $890 million in assets, Bailey said. That might have drawn the attention of one analyst to cover the company if it were on an American exchange, Bailey said.

"When you're under $1 billion in this country, you're just not going to be given much attention," Bailey said. "In Canada, we're a midsize company."

BSR expects to have up to seven analysts covering the company by the end of September, Bailey said.

Former Arkansas Lt. Gov. Bill Halter is on BSR's board. Four of the seven board members are residents of Canada.

BSR executives rang the opening bell at the Toronto exchange on Tuesday.

BSR owes more than $365 million on mortgages on 37 of its apartment complexes, with maturity dates ranging from 2019 to 2056. Eight of the maturity dates are beyond 2050.

The average interest rate on the loans is 3.8 percent.

John Bailey and his ex-wife, Patti Bailey, own 37 percent of BSR, excluding ownership of other family members.

The Bailey family and the family of W. Daniel Hughes Jr. of Montgomery, Ala., the founder of Summit Housing Partners, own 51 percent of the business.

John Bailey is not taking any compensation this year. He has forgone compensation from BSR Trust since 2003 and has agreed not to receive compensation for the next two years.

The Bailey family began investing in apartment communities in the 1990s, Bailey said. In 2012, the Baileys, with about 4,400 apartment units, merged with Summit Housing Partners, which had about 4,000 units.

Bailey Properties was one of the largest single-family real estate developers in Arkansas and later became one of the state's largest multifamily investors and managers. Among the developments by the company, led originally by Virginia Bailey and her husband, Dr. H.A. "Ted" Bailey Jr., were the Foxcroft, St. Charles and St. Thomas neighborhoods and the Bowman Curve shopping center, all in Little Rock.

About 20 of BSR's 48 properties are complexes acquired by Ted and Virginia Bailey, John Bailey said.

Virginia Bailey died in 2003. Ted Bailey Jr. still lives in Little Rock and remains active, John Bailey said.

SundayMonday Business on 08/05/2018

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