HOM.UN BSR Real Estate Investment Trust

BSR Real Estate Investment Trust (“BSR” or the “REIT”) (TSX:HOM.U and HOM.UN) announced today that it has completed the purchase of two adjacent Class A garden style apartment communities, Cielo and Madrone, located in Austin, Texas, totaling 554 apartment units, for an aggregate purchase price of US$104.4 million (the “Acquisition”). Pro-forma the Acquisition, BSR’s portfolio is comprised of 47 multifamily garden-style residential properties consisting of 10,268 apartment units.

Concurrently with the announcement of the Acquisition, the REIT also announced that it has entered into an agreement to sell to a syndicate of underwriters led by BMO Capital Markets on a bought deal basis 3,302,000 trust units of the REIT (“Units”) at a price of US$10.60 per Unit (“Offering Price”) for gross proceeds to the REIT of approximately US$35 million (“Public Offering”). In addition, the REIT has also granted the underwriters an option (the “Over-Allotment Option”), exercisable at any time, in whole or in part, for a period of 30 days following the closing of the Public Offering to purchase up to an additional 495,300 Units at the Offering Price, which, if exercised in full, would increase the gross proceeds of the Public Offering to approximately US$40 million.

Concurrently with the Public Offering, the REIT has also agreed to sell 1,416,000 Units to Vision Capital Corporation on behalf of investment funds that it manages (“Vision”) on a non-brokered private placement basis, at the Offering Price, for gross proceeds of approximately US$15 million (the “Private Placement”, and together with the Public Offering, the “Financing”). The REIT will raise gross proceeds of approximately US$50 million from the Financing (assuming the Over-Allotment Option is not exercised) and approximately US$55 million from the Financing (assuming the Over-Allotment Option is exercised in full).

The REIT has also increased its senior secured revolving credit facility from US$110 million to US$175 million, increasing liquidity and acquisition capacity.

"Cielo and Madrone are modern properties with a clear potential for rental growth using the BSR platform. These properties increase our scale in Austin, a target market for BSR with above average population and employment growth” stated John Bailey, BSR’s Chief Executive Officer. “These acquisitions fit within the previously communicated BSR growth strategy and take advantage of the historically low capitalization rate spreads between Class A properties and Class B and C properties. The BSR growth strategy also includes recycling capital, on a tax deferred basis, into our target markets, taking advantage of historically low capitalization rate spreads between primary and secondary markets. Since the REIT’s initial public offering in May of 2018, BSR has sold six properties in secondary markets comprising 1,109 apartment units and acquired six properties in target markets comprising 1,697 apartment units. In this fashion, the REIT is upgrading both the quality of its portfolio and its growth potential.”   

Key Highlights:

• Compelling Austin Rental Market Outlook – Austin ranks at the top U.S. market in terms of employment growth outlook and number two for population growth outlook for 2017-20221 and was recently named by the Wall Street Journal as the hottest job market in the United States.
• Increased Economies of Scale in the Austin Market – Pro forma the Acquisition, BSR owns three properties in Austin, Texas, representing 840 apartment units, supporting economies of scale for the REIT in the Austin market.
• High barriers to Entry in the Austin Submarket known as Hill Country – REIS anticipates only 312 units being constructed in this Austin submarket over the next five years due to limited availability of land and required/challenging development approvals.
• Immediately Accretive Transaction – The Acquisition is expected to be immediately accretive to the REIT’s adjusted funds from operations (“AFFO”) on a per Unit basis.
• Improved Portfolio Average Age – Pro-forma the Acquisition and recently announced dispositions, BSR’s portfolio average age now stands at 25 years, down from 28 years as at the IPO. The average age of acquisitions, post the IPO, is 13 years.
• Maintain Strong Liquidity and Balance Sheet – Pro forma the Acquisition and Financing, the REIT will have an estimated liquidity position, including cash on hand and availability on its lines of credit, of approximately US$69 million and pro-forma leverage of approximately 48% Debt to Gross Book Value, well below its target debt levels. Accordingly, post-closing of the Acquisition and the Financing, BSR will have acquisition capacity of US$100 million to US$150 million to pursue its acquisition and value add opportunity pipeline.

The Acquisition:

Cielo, built in 2014, is a 326 apartment unit multifamily complex located on approximately 37.5 acres in the Austin submarket known as Hill Country, and comprising 26 two and three-story apartment buildings. Madrone, built in 2015, is a 228 apartment unit multifamily complex located on approximately 40.9 acres adjacent to Cielo, and comprising eight three and four-story apartment buildings. These are BSR's second and third properties in the Austin-Texas metropolitan statistical area (MSA), an area the REIT has targeted for acquisitions. With the addition of Cielo and Madrone, BSR now owns 840 apartment units in Austin providing enhanced economies of scale for BSR in the Austin market.

Cielo and Madrone are also the REIT's fifth and sixth property acquisition since completing its IPO on the Toronto Stock Exchange on May 18, 2018. Additional acquisitions since the IPO include Brandon Place in Oklahoma City, Towne Park in Springdale Arkansas, Riverhill in Grand Prairie Texas and Wimberly Apartments in Dallas, Texas. These acquisitions have added a combined 1,697 apartment units to the REIT's portfolio, which now includes 47 multifamily properties comprising 10,268 apartment units.

The Financing:

Concurrent with the announcement of the Acquisition, the REIT also announced that it has entered into an agreement to sell to a syndicate of underwriters led by BMO Capital Markets on a bought deal basis 3,302,000 Units at the Offering Price for gross proceeds to the REIT of approximately US$35 million.

Concurrent with the Public Offering, the REIT has also agreed to sell 1,416,000 Units to Vision on a non-brokered private placement basis, at the Offering Price for gross proceeds of approximately US$15 million. The REIT will raise gross proceeds of approximately US$50 million from the Financing.

The REIT intends to use the net proceeds from the Financing to fund a portion of the purchase price of the Acquisitions. The balance of the purchase price was funded with cash on hand and the REIT’s credit facility. The REIT may subsequently place new mortgage financing on the properties at today’s attractive rates.

The Units forming part of the Public Offering will be offered in Canada pursuant to a short form prospectus to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada, pursuant to National Instrument 44-101 – Short Form Prospectus Distributions.

The Financing is expected to close on or about September 17, 2019 and is subject to the REIT receiving all necessary regulatory approvals.

The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States or to, or for the account or benefit of, U.S. persons.

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 47 multifamily garden-style residential properties aggregating 10,268 apartment units located across five bordering states in the Sunbelt region of the United States.

Additional information about the REIT is available at www.bsrreit.com or www.sedar.com.

ABOUT VISION

Vision Capital Corporation (“Vision”), a registrant under applicable securities laws, manages the Vision Opportunity Funds (the “Vision Funds"), which are private equity funds and liquid alternative mutual funds focused on publicly-traded real estate securities.

For more information, please visit www.visioncap.ca

Non-IFRS Financial Measures

Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value are key measures of performance commonly used by real estate operating companies and real estate investment trusts. They are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value as calculated by the REIT may not be comparable to similar measures presented by other issuers. Please refer to the REIT's Management's Discussion and Analysis for the three and six months ended June 30, 2019 for a reconciliation of Same Community, NOI, NOI Margin, FFO, AFFO and Debt to Gross Book Value to standardized IFRS measures.

Forward-Looking Information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the REIT, including statements regarding the extent to which the acquisition of Cielo and Madrone is expected to be accretive to AFFO per Unit, statements regarding the Financing and the expected use of proceeds thereof and pro-forma information regarding the age of the REIT’s properties, liquidity position and leverage. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. The forward-looking statements in this news release are based on certain assumptions, including assumptions regarding the expected financial performance of Cielo and Madrone and the REIT’s ability to satisfy all conditions of the Financing. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the failure of the REIT to satisfy the conditions of the Financing or otherwise close the Financing as well as the factors discussed under the heading "Risk Factors" in the REIT's Annual Information Form for the year ended December 31, 2018, dated March 7, 2019, which is available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

For further information: Susan Koehn, Chief Financial Officer, BSR Real Estate Investment Trust, Tel: 501.371.6335, Fax: 501.374.3383

1 Moody’s Analytics