Mr. Dan Oberste reports

BSR REIT ANNOUNCES FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

BSR Real Estate Investment Trust today released its financial results for the three months and year ended Dec. 31, 2023. All comparisons are with the corresponding periods in the prior year. Results are presented in United States dollars. References to "same community" correspond to stabilized properties the REIT has owned for equivalent periods throughout Q4 2023 and FY 2023 and the three months and year ended Dec. 31, 2022, thus removing the impact of acquisitions, dispositions and non-stabilized properties. Audited annual consolidated financial statements and management's discussion and analysis as of and for the three months and year ended Dec. 31, 2023, are available on the REIT's website and at SEDAR+.

A reconciliation of funds from operations (FFO) and adjusted funds from operations (AFFO) to net income and comprehensive income, as well as an expanded discussion of the components of FFO and AFFO, and a reconciliation of net asset value (NAV) to unitholders equity can be found under "non-IFRS measures" in this release. FFO per unit, AFFO per unit and NAV per unit include trust units of the REIT, Class B units of BSR Trust LLC and issued deferred units.

"As expected, 2023 was another healthy operational year with the REIT's performance meeting management's expectations and in line with our 2023 guidance," said Dan Oberste, the REIT's president and chief executive officer. "Demand remains stable, despite new apartment supply, through continued positive migration trends into the REITs primary markets. Long-term rent growth remains intact as new deliveries are expected to slow later in 2024."

Highlights

• Same community revenue for FY 2023 increased 5.9 per cent over FY 2022 and the REIT ended the year with a stable weighted average occupancy of 95.3 per cent;
• Same community NOI (net operating income) for FY 2023 increased 7.8 per cent over FY 2022;
• FFO per unit for FY 2023 of 93 cents increased 8.1 per cent over FY 2022;
• AFFO per unit for FY 2023 of 85 cents increased 6.2 per cent over FY 2022;
• During FY 2023, the REIT's AFFO payout ratio was 60.7 per cent compared with 65.2 per cent during FY 2022;
• Debt to gross book value, excluding the convertible debentures outstanding, as of Dec. 31, 2023, was 42.3 per cent;
• During Q4 2023, excluding short term leases, rental rates for new leases and renewals changed negative 4.1 per cent and 4.1 per cent, respectively, resulting in no change in the blended rental rate over the prior leases;
• During Q4 2023, the REIT purchased and cancelled 3,137,895 units under its normal course issuer bid (NCIB) and automatic securities purchase plan (ASPP) at an average price of $10.65 per unit. The REIT suspended its ASPP in Q4 2023;
• On Nov. 1, 2023, the REIT entered into an interest rate swap on a notional value of $65-million at a fixed rate of 3.270 per cent. The swap is effective beginning on July 1, 2024, and matures on Jan. 31, 2031, subject to the counterparty's optional early termination date of Jan. 2, 2025;
• On Nov. 3, 2023, the REIT entered into an interest rate swap on a notional value of $60-million at a fixed rate of 3.537 per cent. The swap is effective beginning on Jan. 2, 2024, and matures on Jan. 2, 2031, subject to the counterparty's optional early termination date of Jan. 1, 2025;
• On Dec. 6, 2023, the REIT entered into an interest rate swap on a notional value of $40-million at a fixed rate of 3.178 per cent. The swap is effective beginning on Feb. 1, 2024, and matures on Feb. 3, 2031, subject to the counterparty's optional early termination date of Feb. 3, 2025.

Subsequent highlights

• Inclusive of the swaps that became effective on Jan. 2, 2024, and Feb. 1, 2024, as well as loans and borrowings activity subsequent to Dec. 31, 2023, 97 per cent of the REIT's debt comprises fixed rate or economically hedged to fixed rate debt as of this report date, which mitigates the REIT's exposure to interest rate risk in a rising interest rate environment;
• During January and February, 2024, excluding short-term leases, rental rates for new leases and renewals changed negative 5.1 per cent and 3.5 per cent, respectively, resulting in a slight decline of 0.7 per cent in the blended rental rate over the prior leases.

Q4 2023 financial summary

Total portfolio revenue of $42.1-million for Q4 2023 increased 1.1 per cent compared with $41.6-million in Q4 2022. Same community properties contributed $400,000 to the overall increase, as described herein.

Revenue from same community properties of $40.0-million for Q4 2023 increased 1.0 per cent from $39.6-million in Q4 2022, primarily due to a 1.3-per-cent increase in average rental rates from $1,475 per apartment unit as of Dec. 31, 2022, to $1,495 per apartment unit as of Dec. 31, 2023.

The net loss and comprehensive loss change between Q4 2023 and Q4 2022 is primarily due to adjustments to fair value of investment properties and derivatives and other financial liabilities from Sept. 30, 2023, to Dec. 31, 2023, and Sept. 30, 2022, to Dec. 31, 2022, respectively, and is not considered comparable period over period.

The 2.9-per-cent decrease in total portfolio NOI for Q4 2023 to $22.5-million compared with $23.2-million in Q4 2022 was the result of decreases of $700,000 in NOI from same community properties, described herein.

The 3.4-per-cent decrease in same community NOI to $21.2-million for Q4 2023 compared with $22.0-million in Q4 2022 was the result an increase in property operating expenses of $700,000 due to higher payroll costs, additional repair and maintenance expenses, which includes an increase in smart-home technology fees as the platform is expanded across the portfolio, and a higher cost of insurance, partially offset by the increase in revenue described herein. Furthermore, real estate taxes increased $500,000 over Q4 2022 as a result of the timing between quarters when adjustments are made for tax settlements and changes in tax assessments.

FFO was $13.3-million for Q4 2023 and Q4 2022, or 24 cents per unit and 23 cents per unit, respectively. The increase in FFO per unit was primarily due to the REIT's repurchase and cancellation of 3.5 million units under its NCIB and ASPP during the year ended Dec. 31, 2023.

AFFO remained stable at $12.4-million, or 22 cents per unit, for Q4 2023, compared with $12.5-million, or 22 cents per unit, for Q4 2022.

Net asset value was $1.0-billion, or $17.71 per unit, as of Dec. 31, 2023, compared with $1.2-billion, or $21.75 per unit, as of Dec. 31, 2022. The decrease is primarily due to a decrease in fair value of investment property values driven primarily by capitalization rate expansion subsequent to Dec. 31, 2022 (net of increases in NOI), related to higher interest rates during FY 2023.

FY 2023 financial summary

Total portfolio revenue of $167.8-million for the year ended Dec. 31, 2023, increased 5.9 per cent compared with $158.5-million for the year ended Dec. 31, 2022. Same community properties contributed $8.9-million, as described herein, and the non-stabilized property contributed $300,000 to the overall increase.

Revenue from same community properties of $159.6-million for FY 2023 increased 5.9 per cent from $150.6-million in FY 2022, primarily due to sequential average rent increases contributing $7.9-million, an increase of $600,000 due to average improved occupancy, and an increase in termination and notice fees of $500,000 for FY 2023.

The net (loss) income and comprehensive (loss) income change between the year ended Dec. 31, 2023, and the year ended Dec. 31, 2022, is primarily due to adjustments to fair value of investment properties and derivatives and other financial liabilities for the respective periods and is not considered comparable.

The 6.5-per-cent increase in total portfolio NOI for FY 2023 to $91.1-million compared with $85.5-million for FY 2022 was the result of increases of $6.3-million in NOI from same community properties, described herein, partially offset by a reduction in NOI from non-same community properties of $700,000 due to real estate tax refunds received during Q4 2022.

The 7.8-per-cent increase in same community NOI to $86.8-million for FY 2023 compared with $80.5-million for FY 2022 was the result of the increase in revenue described herein, as well as a $500,000 decrease in real estate taxes, primarily due to revised 2023 tax assessments and tax refunds related to prior years, partially offset by higher property operating expenses of $3.2-million primarily due to a $1.4-million increase in the cost of insurance, $1.1-million in additional payroll costs, and $500,000 in additional repair and maintenance expenses.

FFO was $52.6-million, or 93 cents per unit, for FY 2023 compared with $48.1-million, or 86 cents per unit, for FY 2022. The increase was primarily the result of the higher NOI discussed above, partially offset by an increase of $800,000 in finance costs (net of finance income and excluding loss on extinguishment of debt) associated with an increase in interest rates versus the comparative period as well as higher debt due to the repurchase of units under the NCIB during FY 2023.

AFFO was $48.4-million, or 85 cents per unit, for the year ended Dec. 31, 2023, compared with $44.7-million, or 80 cents per unit, for the year ended Dec. 31, 2022. The improvement was primarily the result of the increase in FFO discussed herein, partially offset by higher maintenance capital expenditures of $700,000. The increase in maintenance capital expenditures was primarily due to roof replacements and balcony restoration at Wimbledon Green and Westwood Park in the second quarter of 2023.

Highlights from recent four quarters

Liquidity and capital structure

As of Dec. 31, 2023, the REIT had liquidity of $123.4-million, consisting of cash and cash equivalents of $6.7-million and $116.7-million available on the credit facility (defined herein). The REIT can obtain additional liquidity through adding properties to the borrowing base of the revolving credit facility.

As of Dec. 31, 2023, the REIT had total mortgage notes payable of $459.3-million, excluding the revolving credit facility and construction loan for the investment property under development, with a weighted average contractual interest rate of 3.5 per cent and a weighted average term to maturity of 4.4 years. In aggregate, mortgage notes payable and the revolving credit facility total $763.3-million as of Dec. 31, 2023, with a weighted average contractual interest rate of 3.7 per cent, which excludes the convertible unsecured subordinated debentures outstanding and the construction loan for the investment property under development. Debt to gross book value excluding the convertible debentures as of Dec. 31, 2023, was 42.2 per cent. As of Dec. 31, 2023, 88 per cent of the REIT's debt was fixed or economically hedged to fixed rates. Following the commencement of the two swaps effective on Jan. 2, 2024, and Feb. 1, 2024, 97 per cent of the REIT's debt became fixed or economically hedged to fixed rates at a weighted average contractual interest rate of 3.7 per cent.

As of Dec. 31, 2023, the REIT had outstanding convertible debentures valued at $39.7-million at a contractual interest rate of 5.0 per cent, maturing on Sept. 30, 2025, with a conversion price of $14.40 per unit.

On Oct. 3, 2022, the Toronto Stock Exchange (TSX" accepted the REIT's notice of intention to make a NCIB commencing on Oct. 6, 2022, for up to a maximum of 3,322,107 of its issued and outstanding units. The NCIB expired on Oct. 5, 2023.

On Oct. 4, 2023, the TSX accepted the REIT's notice of intention to renew its NCIB commencing on Oct. 6, 2023, for up to a maximum of 3,186,336 of its issued and outstanding units. The REIT concurrently renewed its ASPP in connection with the renewed NCIB. The REIT may purchase units for a 12-month period ending on Oct. 5, 2024. The REIT suspended the ASPP in December, 2023, but the NCIB remains in effect.

During FY 2023, the REIT purchased and cancelled 3,540,072 units under the NCIBs and ASPPs at an average price of $10.86. The REIT purchased and cancelled 1,079,507 units under the NCIB and ASPP at an average price of $13.55 during FY 2022.

Distributions and units outstanding

Cash distributions declared to holders of units and holders of Class B units totalled $7.3-million for Q4 2023, representing an AFFO payout ratio of 58.3 per cent. One hundred per cent of the REIT's cash distributions were classified as return of capital. As of Dec. 31, 2023, the total number of units outstanding was 33,141,180. There were also 20,278,928 Class B units, which are redeemable for units on a one-for-one basis, and 408,483 deferred units outstanding as of Dec. 31, 2023, leaving a total non-weighted unit count of 53,828,591 for the purpose of calculating FFO per unit, AFFO per unit and NAV per unit as defined herein.

Senior management structure

On Nov. 8, 2023, the REIT announced that Brandon Barger, the REIT's chief financial officer, was taking a leave of absence for health-related reasons. Mr. Barger resigned from the REIT effective Feb. 23, 2024. Susan Rosenbaum, the REIT's chief operating officer and former chief financial officer, was appointed as interim chief financial officer by the board and remains in such position. Steven Etchison, the REIT's vice-president of accounting, was appointed by the board as the chief accounting officer of the REIT effective Feb. 23, 2024, consistent with the REIT's succession plan.

2024 earnings and same community portfolio guidance

The REIT's 2024 guidance is outlined herein for FFO per unit and AFFO per unit, along with its expectations for growth in same community properties' revenue, operating expenses and NOI. The guidance does not include potential acquisitions, dispositions or future growth from the impact of properties currently under development.

Conference call

Dan Oberste, president and chief executive officer, and Susan Rosenbaum, Interim chief financial officer and chief operating officer, will host a conference call for analysts and investors on Wednesday, March 13, 2024, at 12 p.m. ET. Participants can register and enter their phone number on-line to receive an instant automated callback. Alternatively, they can dial 416-764-8688 or 1-888-390-0546 to reach a live operator who will join them into the call.

A replay of the call will be available until Wednesday, March 20, 2024. To access the replay, dial 416-764-8677 or 888-390-0541 (pass code: 718349 followed by the pound key). A transcript of the call will be archived on the REIT's website.

Annual general meeting

The REIT is pleased to announce that its upcoming annual general meeting (AGM) of unitholders is scheduled to be held on Thursday, May 9, 2024, at 2 p.m. ET at the offices of Goodmans LLP at Bay Adelaide Centre -- West Tower, 333 Bay St., suite 3400, Toronto, Ont., M5H 2S7. At the AGM, unitholders of record as of March 20, 2024, will consider the election of members of the board of trustees of the REIT, appointment of the auditor of the REIT and the transaction of such other business as may properly come before the AGM. Particulars will be detailed in a management information circular and notice-and-access package mailed to unitholders on or around April 5, 2024.

The REIT also announces today that Neil Labatte, chair of the board, has informed the REIT of his plans to retire to spend more time with his family and to pursue personal interests. Accordingly, Mr. Labatte will not be standing for re-election at the AGM. Mr. Labatte has been chair of the board since the REIT's initial public offering in May of 2018 and has been instrumental in helping guide the REIT over the past six years. The board has an internal succession plan in place to determine an appropriate successor chair to appoint from among the current trustees following the AGM, assuming all other current trustees are re-elected at the AGM. In making such appointment, the board will consider the right mix of skillsets to best support the future direction of the REIT. The REIT sincerely thanks Mr. Labatte for his contributions and leadership.

About BSR Real Estate Investment Trust

BSR Real Estate Investment Trust is an internally managed, unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT owns a portfolio of multifamily garden-style residential properties located in attractive primary markets in the Sunbelt region of the United States.

We seek Safe Harbor.