TSX:HOM.DB.U - Post by User
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retiredcfon May 12, 2021 9:06am
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Post# 33181407
RBC
RBCThere's potential for them to raise their current $15 target. GLTA
May 11, 2021
BSR REIT
NAV growth is bigger in Texas
Impact: Positive
While BSR REIT's ("BSR") Q1 FFOPU was a tad shy of our estimate and consensus (owing to capital recycling), we're pleased to see stronger-than- expected IFRS NAVPU growth underpinned by gains in Texas.
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FFOPU: $0.12, -20% YoY, vs. RBC/consensus at $0.14E/$0.14E.
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IFRS BVPU (pre-tax): $13.21, +$0.91 QoQ (+7%) and +$1.01 YoY (+8%)
IFRS fair value gains: $63MM QoQ ($1.20/unit)
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SP-NOI growth: +2.2% (SP-Revenue: +2.5%, SP-Expenses: +2.7%)
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SP-Avg. monthly rent: $1,025, +1.4% YoY from $1,011
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SP-Occupancy: 94.2%, -30 bps YoY
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D/GBV (incl. converts): 43.4%, -310 bps QoQ and -600 bps YoY
First impression
Our view: As we wrote in our April 1 deep dive "Going long the Lone Star State", we see BSR's pivot away from smaller metros into its three core Texas markets (86% of NOI) as both well-timed and well-executed. While this capital recycling program has created meaningful short-term FFOPU drag—which will subside as proceeds are redeployed—it has also underpinned above-average IFRS NAVPU growth of 8% year-over-year to $13.21 in Q1/21. This compares with our $12.75 NAVPU and ~6% YoY NAVPU growth for BSR's Sun Belt apartment peers (based on consensus). IFRS NAV growth was supported by: 1) ~60 bps of cap rate compression in BSR's Texas markets, according to RCA (incl. ~10 bps QoQ); and, 2) SP-NOI growth of 2%, compared with BSR's 2% TTM average and peers at +/-0%. Looking ahead, BSR remains well-positioned to capitalize on substantial acquisition opportunities, with D/GBV of just 43% (-600 bps YoY). C/C Wednesday, May 12, at 11AM ET (1-888-390-0546).
Capital deployment set to lift AFFOPU run-rate to ~$0.64. In its Q1 release, BSR highlighted that it expects $195MM of March/May 2021 acquisitions and $250MM of planned acquisitions, will generate ~$0.09 and ~$0.12 of annualized AFFOPU, respectively. With a $0.43 run-rate in Q1/21, this would lift BSR's AFFOPU to $0.64 annualized—putting it on par with: 1) 2019 levels of $0.64, with a much higher quality portfolio; and, 2) our 2022 estimate of $0.65, without any further growth in NOI. On a pro forma basis, we estimate that $250MM of acquisitions would increase BSR's D/GBV by ~940 bps to ~53%. This compares with our expectations for acquisitions totaling $200–210MM in the balance of 2021.
FFOPU below our call due to asset sales. As detailed herein, FFOPU of $0.118 was well-below our $0.135 estimate (-13%), and consensus at $0.144 (-18%). Relative to our forecast, notable variances included 3% (0.8¢) lower NOI and 8% (0.9¢) higher interest costs. Thematically, the NOI variance and debt charges were largely attributable to BSR's substantial capital recycling activity.