Shares in BSR Real Estate Investment Trust touched a 52-week high Tuesday (August 6) as the publicly-traded Arkansas apartment owner and operator boosted second quarter profits, continues to acquire attractive properties in key Sunbelt cities, and exits smaller markets across its five-state footprint.
For the three-month period ended June 30, the Arkansas real estate investment trust (REIT) reported net operating income of $15.2 million, up 12.6% from $13.5 million in the same period a year ago. On an adjusted funds from operations (AFFO) basis, BSR results were $6.2 million, or 15.6 cents per share, versus $7.5 million, or 18.8 cents per share, in the comparable first quarter.
Adjusted FFO is a closely-watched measure in the REIT industry. It takes net income and adds back items such as depreciation and amortization. The company also reported that weighted average rent per apartment rose 3.6% to $837 in the third quarter, up from $815 per apartment at the close of fiscal year 2018.
Revenues for the Arkansas apartment chain jumped 12.2% to $55.7 million in the second quarter compared to $49 million a year ago. Company officials said the double-digit increase in revenue in the second quarter was primarily due to recent acquisitions that contributed an extra $3.5 million to the balance sheet and the higher per-apartment rental rates.
“BSR delivered strong second quarter results while also recycling capital, on a tax deferred basis, to take advantage of a historically low spread between capitalization rates in primary and secondary markets,” said CEO John Bailey. “BSR will continue to recycle capital into high growth suburban areas within markets that meet the REIT’s acquisition criteria, modernize the portfolio, and, so long as market conditions remain favorable to do so, exit the Baton Rouge, Beaumont, Blytheville, Hot Springs, Pascagoula, Shreveport and Tulsa markets.”
Last summer, BSR successfully completed its public offering (IPO) on the lesser known Toronto Stock Exchange, or TSX. When the company first began trading on June 18, 2018, the state’s second publicly held REIT successfully priced 13,500,000 shares at $10 on the TSX and now trades under the stock symbol “HOM.U.”
In Tuesday’s session in Canada, BSR’s stock rose nearly 4.8%, or 53 cents, to $11.60 per share, the highest level in the company’s post-IPO trading history. Over the past 52-weeks, the Arkansas REIT’s shares have traded in the range of $7.12 as a low and yesterday’s yearly high.
As BSR investors and shareholders cheered the quarterly earnings report, Bailey said the fast-growing family-centered apartment chain will continue to implement its post-IPO growth strategy, which includes buying up “more modern properties, clustered in target markets with above average population growth with a clear potential for higher rent utilizing the BSR platform.”
Over the past year, the Little Rock REIT headquartered in the city’s historic Union Station office complex has been on a multi-state acquisition spree across the U.S. Southwest, including the purchase of two large apartment communities in the Dallas/Fort Worth metro area, one in Springdale and another in Oklahoma City. The price tag for those acquisitions was more than $150 million.
On the other hand, BSR sold four non-core apartment properties for $31.7 million in the first quarter as part of the company’s “portfolio enhancement and capital recycling strategy.” In the first and second quarter, BSR said it sold off the Briarwood, Spring Valley, Waterford and Bowman Heights properties in Little Rock, and the Fox Trail and South Pointe communities in Shreveport, La.. The total price tag netted $53.8 million, nearly $3 million higher than the post-IPO appraisal.
BSR officials said proceeds from the sales were used to reduce the outstanding balances under the REIT’s credit facilities. As a REIT, the Little Rock trust will be able to recycle the proceeds from the sales, on a tax deferred basis, into markets with high growth potential that meet the REIT’s acquisition criteria, officials said.
At the end of the second quarter, BSR said it had cash-on-hand of $7.9 million, along with a $110 million revolving credit facility, a $35 million line of credit and total payable mortgage debt of $406.1 million. More than $78 million has been drawn from the credit facility, company officials said, while cash payouts to the Arkansas REIT’s stockholders totaled $5 million during the three-month period.
Locally, BSR has started the $15.6 million second phase expansion of its Wimbledon Green property in Little Rock’s Otter Creek community, which consists of 96 garden style apartment homes constructed in 2005. The new development will more than double Wimbledon Green’s current size to 252 apartment units. Today, BSR owns a portfolio of 45 multifamily garden-style residential properties consisting of 9,714 apartment units located across Arkansas, Louisiana, Mississippi, Oklahoma and Texas.