BSR Positions Itself for Growth — or a Sale — Through $619M Deal With AvalonBay

Wimberly Apartments in Dallas, Texas, one of the multifamily properties sold by BSR Real Estate Investment Trust of Little Rock (Photo provided by BSR)

BSR Real Estate Investment Trust of Little Rock on Thursday announced it had sold nine Texas multifamily properties to one of the largest REITs in the U.S. in a $618.5 million deal that sets the stage for more growth or the possible sale of the company.

The deal with AvalonBay Communities Inc. of Arlington, Virginia (NYSE:AVB) includes an offer for BSR’s Class B unitholders — the company’s non-voting, private investors — to exchange their interests for equity in a new AvalonBay trust at a healthy gain. Participating Class B unitholders, who are among BSR’s longest-tenured investors, would lose their right to block any future transactions involving BSR. They would also lose power over board nominations and equity issuance.

BSR has about 20 million total Class B units, 15 million of which are tied to the deal with AvalonBay. Almost all of those 15 million units are expected to be exchanged. The owners of the remaining units would retain one BSR board seat, down from three.

BSR has about 33 million outstanding shares of public stock, which trades on the Toronto Stock Exchange (TSX HOM.U).

In a statement, BSR CEO Dan Oberste said the deal with AvalonBay “strengthens our governance by reducing the influence of legacy unitholders, better positioning the REIT to pursue growth and value enhancing initiatives.”

The transaction is expected to close in the second quarter of 2025. BSR would realize a $111 million gain on the sale of the Texas properties. “Upon completion of the transaction, the REIT will have substantial dry powder to redeploy into properties in our core Texas Triangle investment markets that could offer higher returns for unitholders,” Oberste said.

The new shareholder balance is also expected to boost BSR’s market value, making it more attractive to investment partners or prospective buyers. The company believes shares have been trading at a significant discount to the company’s net asset value.

Shares of BSR bounced 8% on Thursday on news of the deal, closing at $13.04.

BSR spokesperson Spencer Andrews said AvalonBay approached BSR about the Texas transaction. When asked if BSR was up for sale, Andrews said, “It can always happen. You know, a portion of our company, or all of our company, is for sale at any point in time.”

The transaction is the biggest in BSR’s history and would’ve ranked No. 3 on Arkansas Business‘ 2024 list of the biggest deals. The deal values 2,701 multifamily units in the Dallas-Fort Worth area and Austin at about $230,000 apiece.

BSR said it’s effectively disposing of about 30% of its assets for about 40% of the market value of its total portfolio. The company currently owns 32 multifamily residential properties consisting of 9,181 units in total, with 85% located in Texas, 11% in Oklahoma and 4% in Arkansas.

BSR’s third-quarter net operating income, a key measure of performance used by real estate operating companies and REITs, fell to $22.3 million in the period, compared to $22.7 million in the same quarter a year ago.

The company is scheduled to report fourth-quarter results on Wednesday.