Quarter off for BSR while real estate trust makes portfolio shift

Net income and total revenue both dropped during the first quarter for Little Rock-based BSR Real Estate Investment Trust, with net operating income down 9% to $13.4 million and revenue falling 6.5% to $25.8 million for the period ending March 31.

Compared with a year ago, BSR has shifted to a smaller real estate portfolio, which resulted in lower revenue and income, Chief Executive Officer John Bailey told analysts on a conference call Wednesday. However, he said investors can "expect to see a sharp upturn in these numbers" as the company pursues acquiring more apartment properties this year.

BSR has sold 37 properties since beginning a strategy of exiting rural markets with older properties in 2019, Bailey told the analysts. The company, in turn, has purchased newer properties in key Texas markets such as Austin, Dallas and Houston, creating an "outstanding competitive position" for BSR, Bailey said.

"We are now focused on growth in our targeted and primary markets," he added.

The three Texas markets today contribute about 86% of BSR's net operating income, compared with a year ago when the contribution totaled about 53%.

Weighted average rent in the first quarter was $1,134 per unit, up nearly 19% from a year ago, when the average rent was $956. Same property revenue was up 2.5% year-over-year and net operating income for same properties was up 2.2%. Occupancy also remains strong at 95% across the company's portfolio.

The company is realizing net asset value of $13.21 per apartment unit, an 8.3% increase from $12.20 a year ago.

Activity in the first quarter demonstrates BSR's strategic approach of selling secondary properties in exchange for buying new apartment complexes in growing Sun Belt areas.

The company sold 433 apartment units in noncore areas for gross proceeds of $34.8 million during the quarter. It also has agreed to purchase two complexes in Houston and one in Dallas -- a total of 1,009 units -- for $195 million.

In April, BSR sold Mountain Ranch apartments in Fayetteville and last week announced the sale of Regency Woods in Pascagoula, Miss., the last properties the company held in those two markets.

BSR has sold 37 properties since starting the capital-recycling program about two years ago. Under the program, the company recycles proceeds from asset sales, on a tax-deferred basis, into high-growth target markets.

"We have reached the stage of the program where we are divested of all properties previously identified as noncore," Bailey said on Wednesday's call. "Going forward, we will continue to review the portfolio for potential dispositions."

The company, Bailey said, has $287 million available to make more acquisitions. "We are in an ideal position to expand our portfolio on an accretive basis," he added. "We are looking to complete approximately $250 million of additional acquisitions this year."

BSR owns and operates 28 multifamily apartment properties with 7,660 units.

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