BSR Real Estate Investment Trust of Little Rock on Tuesday reported a 2.9% decrease in net operating income from its portfolio of multifamily residential properties in three states.
Net operating income, a key measure of performance used by real estate operating companies and REITs, fell to $22.5 million in the period, compared to $23.21 million in the same quarter a year ago.
The decrease came on higher payroll costs, higher insurance costs and an increase in fees for smart home technology being added across BSR’s portfolio. The company also pointed to higher real estate taxes, which rose by about $500,000 due to the timing of adjustments to tax settlements and assessments.
Another key performance metric, adjusted funds from operations, dipped by 0.4% to $12.44 million, compared to $12.5 million a year ago. Adjusted funds from operations measures the cash generated from an REIT’s properties and deducts capital expenditures required to maintain the properties.
For the full year, results showed continued growth. Net operating income was $91.1 million, up 6.5% from $85.5 million in 2022. Adjusted funds from operations totaled $48.4 million, an increase of 8.3% from $44.7 million.
“Demand remains stable, despite new apartment supply, through continued positive migration trends into the REITs primary markets,” CEO Dan Oberste said in an earnings release. “Long term rent growth remains intact as new deliveries are expected to slow later in 2024.”
BSR is publicly traded on the Toronto Stock Exchange (TSX HOM.U). It owns 31 multifamily residential properties consisting of 8,666 apartment units, with 85% located in Texas, 11% in Oklahoma and 4% in Arkansas.
The company reported average monthly rent of $1,376, up 9.2% from the fourth quarter of 2022.
Revenue in the period totaled $42.1 million, up 1.1% from $41.6 million a year ago. The company posted a net loss of $69.5 million. BSR attributed the loss to adjustments in the fair value of investment properties and said the figure is not comparable period over period.
Shares of the company opened at $11.34 on Wednesday and rose about 2%. Year to date, shares were down 3%.
Outlook
BSR’s initial guidance for 2024 predicts slower growth in several categories.
Across its full portfolio, adjusted funds from operations per unit is projected to be between 84 cents and 90 cents, compared to 85 cents in 2023. Growth would be 5.9% on the high end of the projection, down from 6.3% in 2023.
Across same community properties — stabilized properties that BSR has owned since the fourth quarter of 2022 — growth in net operating income is expected to slow from 6.5% to between 1% and 3%.
Revenue growth is expected to slow from 5.9% to between 1% and 3%.
The guidance does not include potential acquisitions, dispositions or future growth from the impact of properties currently under development.
Leadership changes
BSR announced that Brandon Barger resigned as CFO on Feb. 23 after taking a leave of absence in November for health-related reasons.
Susan Rosenbaum, the company’s chief operating officer and former CFO, was appointed to the position on an interim basis. Steven Etchison, vice president of accounting, was appointed chief accounting officer.
BSR also announced that Neil Labatte, chair of the company’s board of directors, plans to retire to spend more time with his family and to pursue personal interests. The board has an internal succession plan in place to determine his replacement.
The company’s annual shareholders meeting is set for May 9.
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