BSR Real Estate Investment Trust

Good afternoon. My name is Chloe and I will be your conference coordinator today. At this time, I would like to welcome everyone to the PSR-REIT first quarter 2025 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, then the number two. Thank you. I would now like to turn the conference over to Dan Oversee, President and Chief Executive of PSR-REIT. Please go ahead, sir.

Thank you, Chloe, and good day, everyone. Welcome to BSL REIT's conference call to discuss our financial results for the first quarter ended March 31st, 2025. I'm joined on the call today by Tom Service, our Chief Financial Officer, and Susie Rosenbaum, our Chief Operating Officer. I'll begin the call with an overview of our Q1 performance and highlights. Tom will then review the financials in detail. Susie will provide a quick operational update, and I'll conclude by discussing our business outlook. After that, We will 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 and MD&A dated May 7, 2025 for more information. During the call, we will reference certain non-GAAP financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS accounting standards. Please see our MD&A for additional information regarding our non-GAAP financial measures, including reconciliations to the nearest IFRS accounting standard measures. Also, please note that all dollar amounts are denominated in U.S. currency. Our operational performance in the first quarter continued to exhibit strength. We generated growth in same community revenue and NOI despite the residual impact of supply prevalent in U.S. growth markets these past two years. These results highlight the high quality of our portfolio and the expertise of the BSR management platform. For the quarter, same community revenue increased 0.6% compared to Q1 last year. Same community NOI increased 2.3%. and weighted average occupancy closed the quarter at 95.9%, representing a 60 basis point increase first Q1 2024 and 30 basis points sequential increase first Q4 2024. In addition, our resident retention increased 460 basis points year over year, which together with occupancy levels reflects our strategic focus to own newer best-in-class properties situated in desirable submarkets run by skilled operators. Our results demonstrate that we are well positioned to outperform as rental market conditions improve. As we have discussed for several quarters now, we are on the precipice of a strong expected recovery in rental rates in the next 12 to 24 months, as the burst of new supply that came online in 2023 and 2024 should be fully absorbed throughout 2025. We took numerous steps in the quarter that put us in a stronger position to benefit from improving market conditions. Most notably, of course, was our strategic disposition of nine properties to Avalon Bay, which we announced in February. We completed the first phase of the disposition on March 31st and the second phase subsequent to quarter end on April 30th. The combined sales price of $618.5 million was comprised of $380 million in cash, and the elimination of 15 million Class B units, which represented approximately 75% of the then-outstanding total Class B units. The sale of these fully stabilized and optimized properties at an attractive price unlocked value, which would have otherwise been embedded in these assets, generated capital for redeployment, and positioned the REIT for future growth. The transaction also significantly reduced the ownership of the legacy Class B unit holders. and resulted in the elimination of certain consent and other rights available to these unit holders. As you can imagine, we have received significant interest surrounding the transaction with Avalon Bay. From a high level, I could say this transaction was incredibly complex with few precedents. Completing it successfully required the right partners working proactively together. Avalon Bay is a premier US public owner managed by an absolutely exceptional team and led by a CEO in Ben Shaw of the highest virtue. Our contributing investors demanded no less. If you want more information regarding the strategic disposition and how it benefits unit holders, please view our news release dated February 27, 2025, the transcript of our conference call that same day, and or the material change report filed with the Canadian regulators on CDAR. All of these items are also available through the REITs website. That wasn't the only notable event on the acquisitions and dispositions front in the first quarter. In January, we acquired the venue Craig Ranch Apartments, a 277-unit apartment community in the McKinney sub-market of Dallas-Fort Worth for $61 million. In addition, in March, we sold Bluff Creek Apartments, a 316-unit 1984 vintage apartment community in Oklahoma City for $28 million. which was an 8.4% premium to our IFRS value at the end of Q3 2024 before we increased the value to the purchase price at the end of Q4 2024. These transactions highlight that market conditions are selectively beginning to be favorable for external growth and asset rotations, while allowing us to accretively reduce our exposure to non-core markets. All told, the REIT closed the quarter with nearly $150 million of liquidity, and is in the strongest capital position that we have ever been to pursue accretive growth. Combined with our continued strong operating performance, our best-in-class team and platform, and a gradually improving rental market outlook, we believe the future of BSR is very exciting. One of the other exciting new developments of the quarter was the onboarding of our new CFO, Tom Service. Tom joined BSR in mid-March, following a career in investment banking, where he worked across the real estate coverage and equity capital markets. His investment banking and capital markets experience have already proven to be an ideal complement to our team and will be particularly welcome as we enter a period of significant capital redeployment and growth. I will now invite Tom to review our first quarter financial results in more detail. Tom?

Thanks, Dan. I'm pleased to be speaking on a BSR earnings call for the first time. Last night, we reported Q1 FFO and AFFO per unit of 23 cents per unit and 22 cents per unit, respectively. As Dan alluded to, the results reflect solid operational performance from all of our team members, which Susie will highlight more of, offset by increases in financing costs. Our first quarter results were driven by the following key items. The REITs same community revenue increased 0.6% in Q1 2020 versus Q1 2024. The increase primarily reflects an increase in other income driven by enhanced resident participation in our credit building services and higher utility reimbursements. Same community NOI increased by 2.3%. The increase reflects the higher same community revenue and a decrease of $0.1 million in controllable operating expenses, primarily related to a $0.2 million decrease in administrative expenses, offset by a $0.1 million increase in payroll expenses. Furthermore, real estate tax expense declined $0.1 million related to property tax refunds in excess of tax increases, and the cost of insurance declined $0.1 million over Q1 of 2024. More broadly, total portfolio revenue and total NOI increased 3.6% and 0.8% versus last year, respectively. In addition to the same community changes I just described, the broader increases were driven by the contribution of acquiring venue Craig Ranch apartments, as well as the continued stabilization of ORR 3550, where we completed development in December. These factors were partially offset by asset-level performance from properties we sold towards the end of the quarter. Perhaps most notably, the total cost of financing increased to $9 million from $7.7 million in Q1 2024, From a consolidated FFO perspective, the increase primarily relates to the interest expense associated with the development of Aura 3550, which was previously capitalized for the majority of 2024 prior to the completion of construction in the fourth quarter. During the quarter, the REITs declared cash distributions totaling 14 cents per unit, a 7.7% year-over-year increase. Turning to our balance sheet. The REITs debt to gross book value as of March 31st, 2025 was 45.3%, a reduction of 120 basis points from 46.5% at the end of December 2024. Total liquidity was $148 million as of March 31st, including cash and cash equivalents of $84 million and $64 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. During the quarter, we redeemed 100% of our convertible debentures, which previously carried a principal balance of $41.5 million, and which resulted in interest savings for the REIT throughout the quarter. In addition, we refinanced the $39 million construction loan related to ORA 3550. Both of these refinancings were funded through the use of our credit facility. All told, as of March 31st, the REIT had $770 million of debt outstanding at a weighted average interest rate of 3.8%. It is important to note that 100% of our debt is either fixed or economically hedged to fixed rates. Subsequent to quarter end and in connection with the closing of the second tranche of our Avalon Bay transaction, we received an additional $193 million of cash consideration, which was primarily used to repay property-level debt. This included the repayment of our only two debt maturities, which were slated to come due in 2025. The REIT now has no remaining 2025 maturities. Also subsequent to quarter end, the REIT opportunistically entered into a new $150 million notional five-year forward SOFR swap agreement at a rate of 2.88%, which is set to take effect on July 1st, 2025. The counterparty has an optional termination right after two years. This swap is designed to partially replace the $230 million of swaps, which carry a weighted average fixed rate of 2.05%, that we expect to be called out of in June and July of this year. It should be noted that this market-based tradeout will result in sequential increase in our financing costs through the balance of 2025 relative to 2024. Finally, as you saw in our press release last night, we are not releasing guidance for 2025 at this time. With the recent closing of the Avalon Bay transactions and with the timing of full capital redeployment impossible to predict, there are simply too many moving pieces right now for us to confidently provide proper guidance. We do intend to reinstitute guidance once those and several other items become more clear. I will turn it over to Suzy for a few comments on the state of operations across the portfolio. Suzy?