Fast-growing BSR Real Estate Investment Trust Inc. of Little Rock continued its year-long spending spree with the purchase of two garden-style apartment communities in the high-growth Austin, Texas market for more than $100 million. The Little Rock REIT also unveiled a plan to raise another $50 million to increase the company’s cash flow and “acquisition capacity.”
BSR officials revealed the Arkansas REIT’s updated strategy on Tuesday (Aug. 27) after the close of market in Canada, first announcing that the company had purchased the Cielo and Madrone apartment complexes in Austin, Texas for a combined price tag of $104.4 million. The purchase of those adjacent, Class A two-phase properties will add 554 apartment units to the company’s current portfolio of nearly 50 multi-family, garden-style residential properties across the Southwest U.S., officials said.
“Cielo and Madrone are modern properties with a clear potential for rental growth using the BSR platform. These properties increase our scale in Austin, a target market for BSR with above average population and employment growth,” said BSR CEO John Bailey. “These acquisitions fit within the previously communicated BSR growth strategy and take advantage of the historically low capitalization rate spreads between Class A properties and Class B and C properties.”
In support of its current expansion program, BSR also announced that it has agreed to sell to a syndicate of underwriters 3,302,000 units of the company’s TSX shares at a strike price of $10.60 per share for gross proceeds of nearly $35 million. The Little Rock apartment operator has also granted the underwriters, led by the investment subsidiary of the Canadian Bank of Montreal, an over-allotment option for an additional 495,300 shares exercisable within 30 days of the public offering.
BSR also agreed to sell another 1,416,000 shares of the company’s stock to London-based Vision Capital Corp. through a non-brokered private placement for gross proceeds of nearly $15 million. If the over-allotment is fully exercised, the public offering and share sale could potentially empty another $55 million into the company’s budget coffers.
Meanwhile, BSR said it has hiked its senior secured revolving credit facility from $110 million to $175 million, increasing the Little Rock REIT’s liquidity and acquisition capacity. Bailey said BSR’s growth strategy also includes recycling tax-deferred capital into its target markets, taking advantage of historically low capitalization rate spreads between primary and secondary markets.
BSR is bolstering its financial flexibility nearly one month after the Arkansas apartment owner’s stock that trades on the REIT-friendly Toronto Stock Exchange (TSX) touched a 52-week high of $11.67 per share after the company reported first quarter profits of $15.2 million. In Wednesday’s session in Toronto, BSR’s shares were down 35 cents at $10.66 per share.
Last summer, BSR successfully completed its public offering (IPO) on the lesser known TSX, now trading under the stock symbol “HOM.U.” When the company first began trading on June 18, 2018, on the Canadian stock exchange, the state’s second publicly-held REIT successfully priced 13,500,000 shares at $10.
Following the close of the Austin deal, BSR said it will have an “acquisition capacity” of $100 million to $150 million to pursue other deals and opportunities. Today, the Little Rock real estate trust owns and manages 47 family apartment complexes with a total of 10,268 apartment units across Arkansas, Mississippi, Oklahoma, Louisiana and Texas.