LR-based BSR sees 3Q profit increases

4 apartment sitesin metro area sell

BSR Real Estate Investment Trust increased profits by nearly 5% in the third quarter as the company charged ahead with its plan to shed older properties, announcing that it sold six apartment complexes, including four in the Little Rock metropolitan area.

The Little Rock-based company, which owns and manages apartment properties in the Sun Belt region, reported that net operating income increased to $15.2 million for the quarter ending Sept. 30. That's up from $14.5 million for the same period a year ago.

BSR recorded a 7.2% revenue increase in the quarter, jumping to $29.8 million from $27.8 million in 2019. Adjusted funds from operations, the equivalent to earnings per share, dropped nearly 10% to 14 cents from 16 cents a year ago.

The company also announced that it sold six properties in the Little Rock and Houston, Texas, metropolitan areas for $130 million, generating a net gain of $127 million.

The properties, which have more than 1,400 units, were older complexes that do not fit BSR's strategy of expanding in growing markets in Austin, Dallas, Houston, in Texas; Oklahoma City; and Northwest Arkansas.

"We have continued to deliver solid operating performance while also successfully executing on our capital recycling program," Chief Executive Officer John Bailey told analysts in a conference call Wednesday. "We are looking forward to continued growth in our primary markets."

On Tuesday, the company announced the sale of the Little Rock area properties along with the two complexes in Houston. That sale included Indian Hills and two Overbrook complexes in North Little Rock, and Woodland Oaks in Conway.

BSR said it would use the $127 million in net proceeds to repay $68 million in mortgage debt and reduce its line of credit.

Those sales followed recent acquisitions of newer properties in the Houston and Dallas markets, where BSR invested $102.8 million to buy nearly 650 apartment units.

"The ongoing transformation of our portfolio was evident in our [quarterly] results," Bailey told the analysts. "We expect our financial performance to strengthen further as we continue to redeploy capital into primary Sun Belt markets ... with some of the strongest economic fundamentals in the country."

In the call, Bailey said the company intends to sell more properties valued between $120 million and $140 million before the end of the year. In addition, he said the company's strong liquidity position will allow it to add another $200 million in new properties without further equity.

"We have a robust acquisition pipeline and look forward to continued growth in our target markets," Bailey said.

Since going public in May 2018 on the Toronto Stock Exchange, BSR has reduced the weighted average age of its properties by 11 years. Today, the average age of its portfolio is 18 years old, meaning the properties were built in the past 18 years, and includes 12 acquisitions. Over the same period, the company has sold 26 properties.

Most significantly, properties in the growing Sun Belt markets now make up 88% of the company's net operating income, compared with 52% when the company went public.

Covid-19 has had "relatively minimal disruptions" in operations, Bailey said, noting that rent collections are at 98% versus historic average of 99%. As of Oct. 31, the company had only 21 rent deferral agreements in place, valued at $6,300.

The company also announced that Daniel Oberste has been promoted to president and chief investment officer, and Blake Brazeal will become co-president and chief operating officer. Both will report to Bailey and assist in strategic growth opportunities, Bailey said.

BSR now owns and manages 34 properties with 8,198 apartment units in Arkansas, Mississippi, Oklahoma and Texas.

Upcoming Events