BSR Real Estate Investment 5 00 convertible unsecured subordinated debentures T.HOM.DB.U

RBC

[retiredcf]

May 10, 2022

BSR REIT
Q1/22 slightly ahead; 2022 guidance maintained

Sentiment: Positive

Outperform

TSX: HOM/U; USD 17.25; TSX: HOM-U

Price Target USD 24.00

All values in USD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).

Our view: BSR REIT (“BSR”) reported FFO/unit of $0.21, +75% y/y, vs. RBC/ consensus of $0.20/$0.20. 2022 FFO guidance was maintained. Consistent with other US multi-family names, pricing power remains in its key Texas markets. Post-quarter de-leveraging will eat into FFO/unit somewhat, but the growth outlook remains strong for the balance of the year.

Key points

• SP NOI growth: +16% (SP-Rev +11%; SP-Exp +5.7%). This compares with larger Sun Belt peers in the 12–14% range. Same-asset pool represented 62% of BSR’s total NOI. While expenses are up, they are reasonably benign considering the current environment. SP NOI margin improved 240 bps y/y to 52.3%. Austin continues to be an outperformer with SP NOI +26%.

• SP occupancy: 94.3%, -10 bps y/y; SP rent $1,238, +9% y/y

• 2022 guidance maintained: FFO/unit $0.86–0.90; midpoint of $0.88; SP NOI growth guidance is 11–13%, based on 8–10% revenue growth and

  4.5–6.5% expense growth.

• Lease spreads: blended +12.5% (+15.3% Q4/21); new lease +17.4%;

  renewal +9.0%; turnover rate 43%.

• Leverage: D/GBV (incl. converts) 40.2%, declining to 35% post April

  $115m equity offering used to pay down credit facility.

• IFRS BV/unit (pre-tax): $21.98, +66% y/y, +11% sequentially from

  $19.81. Average cap rate utilized was 3.9%.

[retiredcf]

Gotta love these markets. They come out with solid results and so naturally, this is one of the only REITs I own that is in the red today. GLTA

[Philbert77]

I just keep reminding myself of the Benjamin Graham quote:  “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”