BSR Real Estate Investment Trust

Good afternoon. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the BSR-REIT Q1 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, followed by the two. Thank you, Mr. Oberstein. You may begin your conference.

Thank you, Joanna, and good day, everyone. Welcome to BSR REIT's conference call to discuss our financial results for the first quarter ended March 31st, 2024. I'm joined on the call by Suzy Rosenbaum, the REIT's COO and Interim Chief Financial Officer. I'll begin the call with an overview of our Q1 performance and highlights, and Suzy will then review the financials in detail. and I'll conclude by discussing our business outlook. After that, we'll be pleased to take your questions. To begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward-looking information in our news release in MD&A, dated May 8, 2024 for more information. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meetings under IFRS. Please see our MD&A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Also, Please note that all dollar amounts are denominated in U.S. currency. We generated continued growth in all of our key financial metrics in the first quarter. This performance was supported by higher average monthly rent and relatively stable occupancy compared to Q1 last year, despite the short-term increase in apartment deliveries in our core Texas markets. For the quarter, same community revenues increased 1%, Same community NOI rose 4.4%. FFO per unit was $0.25 compared to $0.23 last year. And AFFO per unit was $0.24 compared to $0.22 last year. The results reflect the continued solid demand for rental housing in our markets, which continue to have very strong underlying fundamentals. They also reflect the tremendous efforts of our community management teams and the strength of our operating platforms. Weighted average rent at quarter end was $1,502 a month, an increase of 0.9% from $1,489 a month a year earlier. Weighted average occupancy was 95.3% compared to 95.9% at the end of Q1 2023. Blended rental rates in the first quarter declined less than 1% compared to the prior quarter, excluding short-term leases. Suburban Class A apartment rental rates, as evidenced by our portfolio, have been slightly impacted by new apartment deliveries, an expected phenomenon that we discussed in our last conference call. We still firmly believe that this, in fact, is temporary. One benefit of a higher rate environment is fewer construction starts and a future strong rent growth trajectory. I will speak more about this later on in the call. In addition to our solid financial performance, we were delighted to have recently been ranked second in online reputation score among U.S. multifamily REITs for 2023. The ORA score, which is published by J. Turner Research, measures online review sentiment across major websites and is the industry standard measurement of resident satisfaction. We also rank first overall in the subcategories of customer service, communication, cleanliness, and security. This is a very strong endorsement of our team, our product, and our operating platform. We take the questions and concerns of our residents very seriously and move quickly to address them. Our strong online reputation is an important tool to help us maintain strong occupancy and drive rent growth over time. We continue to be in a strong financial position with good liquidity, a conservative payout ratio, and 100% of our interest rate exposure effectively hedged. We will continue to focus on prudent capital allocation as we pursue growth. I will now invite Suzy to review our first quarter financials in more detail. Suzy?

Thank you, Dan. To begin, I want to note that I will reference same community performance only as all properties were owned in Q1 of both periods. Same community revenue increased 1% in Q1 2024 to $42 million. compared to 41.6 million in Q1 last year. This improvement reflects a 0.9% increase in average rental rates from $1,489 per apartment unit as of March 31st, 2023 to $1,502 as of March 31st, 2024, as well as year-over-year increases in other rental income and utility reimbursements. Same community NOI increased 4.4% to $23.8 million, compared to $22.8 million in Q1 last year, reflecting the higher revenue and a reduction of $1 million in real estate taxes, primarily due to tax refunds received during Q1 of 2024 and the change in Texas tax legislation during Q4 of 2023. This was partially offset by a $0.4 million increase in property operating expenses due to higher insurance costs. FFO for Q1 2024 was $13.6 million or $0.25 per unit, an increase of 4.6% compared to $13 million or $0.23 per unit last year. The increase reflected higher NOI, partially offset by higher interest costs. The repurchase of approximately 3.5 million units during 2023 also positively impacted FFO per unit this year. ASFO for Q1 2024 increased 3% to 12.9 million or 24 cents per unit compared to 12.5 million or 22 cents per unit in Q1 last year. The improvement was primarily due to the higher FFO partially offset by higher maintenance capital expenditures due to the timing of projects in the first quarter. The REIT paid quarterly cash distributions of 13 cents per unit in Q1 of both years, representing an ASFO payout ratio of 53.9% in Q1 2024 and 59.1% in Q1 of 2023. All distributions were classified as a return of capital. Turning to our balance sheet. The REIT's debt to gross book value as of March 31st, 2024 was 46.5%, or 44.3% excluding the convertible debentures. Total liquidity was $107.4 million, including cash and cash equivalents of $7.7 million and $99.7 million available under our revolving credit facility. We have the ability to obtain additional liquidity by adding properties to the current borrowing base of the facility. As of March 31st, we had total mortgage notes payable of $458.8 million with a weighted average contractual interest rate of 3.5% and a weighted average term to maturity of 4.1 years. Those figures exclude the credit facility and a construction loan for an investment property under development. In total, the mortgage notes payable and revolving credit facility totaled $779.9 million at quarter end with a weighted average contractual interest rate of 3.4%, excluding the debentures and the construction loan, and 100% of our debt was fixed or economically hedged to fixed rates at a weighted average contractual interest rate of 3.5%, excluding the construction loan. The outstanding convertible debentures were valued at $39.8 million as of March 31st at a contractual interest rate of 5%, maturing on September 30th, 2025, with a conversion price of $14.40 per unit. The major increase in the fixed component of our debt reflects the impact of the eight interest rate swaps we have entered into since July 2022, as well as other debt management activities. The last of those swaps took effect in February of this year. I'll now turn it back over to Dan for closing comments. Dan.