Edited Transcript of HOMu.TO earnings conference call or presentation 13-May-20 3:00pm GMT

Since our IPO in May 2018, we have completed 9 property acquisitions in primary markets that have added 2,562 apartment units to the portfolio. At the same time, we have sold 20 properties in secondary markets comprising 3,666 apartment units. The apartments we acquired are average of 11 years old with the ones we sold are an average of 38 years old. As a result of this turnover, the weighted average of our portfolio has declined from 29 years at the time of the IPO, to 22 years today, a reduction of 7 years. And we now generate 79% of our NOI from our targeted primary markets compared to 55% at the time of the IPO. So our portfolio quality has materially improved.

During the first quarter, we acquired Ariza Plum Creek Apartments in Austin, Texas, MSA for $55 million. This property was built just 2 years ago and comprises 349 apartment units. We now own 1,189 units in Austin, one of the most attractive markets in the country.

We sold 1 noncore property in Q1 2020, and we sold another 4 subsequent to the quarter end, which includes the Summer Lake property in Longview, Texas, which we sold just last week. The gross proceeds from these 5 property sales was $85.8 million. Our capital recycling efforts are far from over. We plan to sell our 5 remaining properties in Beaumont, Longview, Blytheville and Pascagoula markets as well as certain assets in Houston and Little Rock. As long as we continue to see opportunities to preserve and grow unitholder value, we will continue to rotate out of the secondary markets and expand our investment in our targeted primary markets on a tax-deferred basis.

As you can tell from the numbers I just provided, we have been selling assets at a faster pace than we have been buying them. That temporary reduction in our asset base impacted our first quarter results, as Susie will outline shortly.

Total revenue for Q1 2020 declined 0.7% compared to Q1 last year, while total NOI declined 3%. On a same-community basis, revenue increased 2.9%, while NOI was up 3.9%. Those results highlight our past investments and capital redevelopment continue to generate growth in rental rates. Same community weighted average rent was $889 per apartment unit, an increase of 2.7% from $866 a year ago.

Now obviously, the world has changed a great deal since mid-March, having 2 black swan events. The economic disruption from COVID-19 and the crashing of the oil prices have been an unprecedented event, and we are monitoring the impact to our business, our team members and our residents very closely. To date, the financial impact has not been alarming. We have collected 97.3% of April rent and 93.4% of May rent through the 11th of the month. We have received a total of 142 requests for rent deferrals in May or in April and 14 requests in May. This represents an aggregate less than 2% of our apartment units, and we are working to accommodate these requests on a case-by-case basis. We are committed to helping all affected residents through this difficult time. And has suspended all evictions and previously scheduled renewal rent increases until the crisis ends.

In addition, we have made a number of common sense changes in the way we operate to mitigate the spread of COVID-19. These include increased sanitization of frequently touch surfaces, a shift to emergency-only maintenance, allowing team members to work from home wherever possible, the closure of apartment offices to external traffic, virtual or self-guided apartment tours, and contact-less doorstep delivery of packages.

Our liquidity position today is approximately $77.1 million. So we have a very strong financial position during this period of economic uncertainty. Now I’ll turn it over to Susie to review our first quarter results in more detail. Susie?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [3]

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Thank you, John. As John highlighted, our same-community results in Q1 were strong. Same-community revenue increased 2.9% to $22 million primarily reflecting a 2.7% increase in rental rate to $889 at March 31, 2020, from $866 a year earlier. Total revenue for the quarter declined by 0.7% to $27.5 million from $27.7 million in Q1 last year. This reflected the impact of property dispositions related to capital recycling, which reduced revenue by $6.1 million. This impact was partially offset by acquisitions during and subsequent to Q1 2019 which added $5.3 million of revenue as well as higher rental rates across the portfolio.

NOI for the same community properties totaled $12.2 million compared to $11.7 million in Q1 last year. The 3.9% increase was due to the increase in rental rates. NOI for the full portfolio was $14.7 million, down 3% from $15.1 million in Q1 last year. The property disposition reduced NOI by $3.3 million, which was partially offset by a $2.3 million contribution from acquisitions during and subsequent to Q1 2019 and higher same-community NOI.

As John indicated earlier, our capital recycling strategy continues as we successfully retake capital into targeted primary markets on a tax deferred basis. Thus, the more rapid pace of dispositions versus acquisitions had a short-term negative impact on total Q1 2020 NOI. As we continue to recycle this capital into new acquisitions, we expect the accretive impact to be reflected in our financial results going forward.

FFO for the first quarter was $5.3 million or $0.12 per unit compared to $8.1 million or $0.20 per unit last year. The decrease was primarily due to the lower NOI and an increase in finance costs related to a $1.6 million loss on extinguishment of debt. G&A expenses also increased by $0.4 million due to an increase in share-based compensation and other payroll and benefit costs. AFFO was $6.6 million or $0.15 per unit compared with a $7.5 million or $0.19 per unit in Q1 last year. The year-over-year decline was primarily due to the lower AFFO. This was partially offset by the inclusion of the debt extinguishment that I just mentioned and the inclusion of $0.4 million of income related to the rent guarantee on the acquisition of Satori last year.

Maintenance capital expenditures increased by $0.2 million over the prior period due to the acceleration of spending during the second half of 2018, which lowered maintenance CapEx in Q1 2019. The REIT paid quarterly cash distributions of $0.125 per unit in Q1 of both years, representing an AFFO payout ratio of 84.8% in Q1 2020 compared with 66.5% last year. The higher payout ratio obviously reflected the more rapid rate of dispositions versus acquisitions to date. The rate will come down as we continue to deploy funds in the future.

Turning to our balance sheet. Our debt to gross book value ratio at March 31, 2020, was 49.4%, below our long-term target of 50% to 55%. Following the 4 property sales we completed subsequent to quarter end, debt to GBV — excuse me, GBV has dropped to 47.1%.

As John mentioned, our current total liquidity is $77.1 million. That includes cash and cash equivalents of $6.3 million, $35.8 million of borrowing capacity under our credit facility and $35 million available under a revolving line of credit. As of March 31, we had total mortgage notes payable of $405 million, excluding the credit facility, with a weighted average contractual interest rate of 3.9% and a weighted average term to maturity of 9.3 years. Total loans and borrowings at quarter end were $559 million and 81% of the REIT’s debt fixed or economically hedged to fixed rates.

I will now turn it back over to John for some closing comments. John?

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [4]

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All right. Well, thank you, Susie. As you can see, we plan to emerge from the current economic health crisis in a strong competitive position. The last couple of months have been a very difficult time in the United States, but there have been some positive developments. More recently, we are encouraged to see that the states we operate in are beginning to reopen their economies. However, we will not attempt to predict how long the crisis will last or how impactful it will ultimately be to the REIT. We will continue to monitor the situation very carefully and respond as needed.

In the longer term, the outlook for BSR REIT is highly positive. The multifamily real estate sector is an attractive asset class that has outperformed most other investments during this crisis. Our primary markets have long-established strong trends of population and job growth that are well above the national average. Once this crisis ends, we believe the economies will resume — these economies will resume a solid growth trajectory. And we will continue to increase our exposure to these primary markets through our capital recycling program in the months ahead in order to drive unitholder value.

That concludes our remarks this morning. Susie, Dan, Blake and I would be more than pleased to answer any questions you may have. Operator, please open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Brad Sturges with IA Securities.

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [2]

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I guess just maybe starting out with what you’re seeing in terms of market rents. Have you seen any impact so far in terms of change in market rents? And how would you compare the REITs in-place rents on average to those market rents?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [3]

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Brad, this is Blake, good to talk to. As of right now, as you know, we’re on LRO and RealPage, which is a system that we use for revenue management. And as of right now, if you compare, since the virus, which I would say the 1st of April hit in to right now, we have not seen a big move at all. Basically, they’re flat in every MSA that we’re in. So no, we have not seen a lot. I feel good about where our [inflation] rents are and where we’ve been adjusting. We look at those every day. And I have not seen, and our team has not seen a big adjustment.

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [4]

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And in terms of the, I guess, the gain-to-lease opportunity. When you’re moving your in-place rents to market on turn, is that still, I guess, was that in the sort of 3% to 5% range, if I recall correctly?

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [5]

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For the new leases…

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [6]

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Or are you talking about the leases were up? I’m sorry, but…

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [7]

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New leases, yes. For new leases.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [8]

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When we start increasing leases right now, we’re not doing rental increases. Are you saying that when it opens up or what?

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [9]

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Yes. On a vacancy, on a turnover, what type of gain to lead can you get from — in terms of the previous in-place rent versus where the market rent is?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [10]

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Right now, we’re not increasing leases…

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [11]

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New leases.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [12]

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New leases right now. We’ve stopped that until the COVID — we see more direction about where it’s heading.

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [13]

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Okay. Makes sense. In terms of the capital recycling program, would you have assets on the market for sale right now? Or are you waiting till later in the year?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [14]

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I’m sorry, Brad, you cut out over here. Could you repeat that question?

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [15]

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Do you have — in terms of identifying additional assets for sale, do you have assets on the market right now being market for sale? Or not at the moment?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [16]

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As of today, I’d say that we’ve kind of shifted our position to not openly marketing assets. With that said, we — as we announced earlier in the year. This is Dan, by the way, Brad, good to talk to you as well. As we announced earlier in the year, the company’s strategic direction is to rotate out of some noncore markets. In those markets, we have potential transactions in various stages. I don’t see a lot of open marketed deals, and I think BSR is probably going to follow suit and call it March 15 to maybe the next month.

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Bradley Sturges, Industrial Alliance Securities Inc., Research Division – Equity Research Analyst [17]

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And just generally speaking, like from a valuation perspective, I know we’re in early days here, but have you seen much of a change in terms of asking price in the market from a cap rate or a price per door perspective?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [18]

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We’ve seen a little bit of a pullback on asking prices, but really, it’s a mixed bag. When we look at acquisitions in the markets we’re looking at, we’re seeing buyers either underwriting, perhaps a little bit lower economics on collections with similar cap rates as pre-COVID. Or the alternative, buyers underwriting more aggressively for year 1 and year 2 and year 3 rent growth and underwriting at the same cap rates.

And I think that you can depict that when you look at the whole period of any multifamily transaction. The impact of a 2- to 6-month slowdown perhaps in collections or some wackiness in margin underwriting is de minimis relative to a 7 and 10-year hold. So we — with that said, we really haven’t seen much movement in the economics or cap rates on the bid-ask.

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Operator [19]

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Your next question comes from Matt Logan with RBC Capital Market.

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Matt Logan, RBC Capital Markets, Research Division – Analyst [20]

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Just following up on some of Brad’s questions. Could you give us any color on the leasing velocity in April and May, maybe just sort of the quantum of move-ins versus move-outs? And how you’re adapting to contactless leasing?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [21]

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Sure. When you look at from April to May, it would probably better to look at from March to April. But I will give you an idea in April. We had 828 leases, and 323 new and 505 of those were renewals. Compared to looking in March, we had 685 leases and 337 of those were new and 347 renewals. So we had a really good uptick in our leases from March to April. And May is starting out very — looking very good, too, also. The velocity of the leases, when you look at our move-in/move-out ratio, I think we stated in our press release that we had a plus of 15 for April, if you take out the lease ups. And if you really look at that, what that equates to is looking at last April, we had a minus 28. And in 2018, we had minus 9 in April. And we gained occupancy every month this year. It’s a long streak past since we went public. And our average increase on lease-ups is 0.17 — 17.5 per month — per — the month.

So what we’re seeing is our new prospect leads year-over-year of 11%. So all of these metrics that we’re looking at are very positive and we continue to see a pent-up — what I think now that things are opening up, we’re seeing a pent-up of demand for leases. So all of these numbers added together. When you look at the number of move-ins we had, which we had 311 move-ins in April, all tied together is pretty positive news for us.

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Matt Logan, RBC Capital Markets, Research Division – Analyst [22]

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And anecdotally, would you attribute any of that demand from tenants shifting from Class A properties to Class B properties?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [23]

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I don’t know. I don’t have enough of a sample size to be able to tell you that right now. We’re looking at these numbers daily. And really try to see if there’s any trends or anything that we’re looking at. And at this point, there probably is some of that, but I’m not willing to say that totally right now. I mean what they — and finishing the answer to your question, we have learned is we have the technology in place to begin with to do virtual tours and self-guided towards. But some interesting set that really have kind of open my eyes is that in April, we conducted 680 virtual tours. And we had a closing ratio of those tours of 34.9%. Well, 33% to 35% is really good in the industry. And we conducted 401 self-guided tours and we had a closing ratio of those of 48.6%. And we’re starting out May along the same lines.

So one, we were in place, we could hit the ground running with the technology side because we’re kind of — we feel like we’re trying to stay ahead of the curve on that. But also, it has helped our closing ratio. So interesting, it opened our eyes and we’ll see if it continues. But I do think it’s something that’s going to be looked at internally on our side going forward.

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [24]

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Matt, I’d like to add on to something in regard to your original question in regard to the drop down. You may have seen some of the Class A REITs that have lost some of their occupancy. And BSR were primarily just had been very steady with our occupancy. And from what I would just depict from some of that is, absolutely, it’s really one of the things that we hold dear about our workforce housing the plus-type of apartment units is that we do believe that this is in the sweet spot and very affordable rental units that we have available. And that — I’m not going to say that, that is what’s happened, as Blake said. But I think if you just put 2 and 2 together that it’s kind of what I would probably assess.

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Matt Logan, RBC Capital Markets, Research Division – Analyst [25]

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John, I appreciate that commentary. Maybe just looking at the margin profile going forward. Do you expect any of the decline in potential turnover may offset higher operating costs and things like cleaning or other operationally intensive activities?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [26]

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Well, Matt, yes, this is Susie. You — yes, I mean, you would see some small declines in expenses related to turnover, right? But as far as margins, yes, you also have to remember that we’re not charging late fees now. So we think we will see some pressure on our margins. If this continues into the third and fourth quarter, where we’re not recording late fees with a smaller decline in turnover cost.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [27]

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And Matt, we monitor closely the amount of work orders that we have out. And we monitor the — what I’m looking at now is the difference in — now we’re doing emergency work orders. That’s all that we’re doing at the current time. So we’ve been comparing the actual work orders that are called in against what are completed. And that’s been shrinking the — we’ve been completing more and more, which tells us that we’re not having as many emergency work order, which in turn is not going to shrink our R&M, our sort of our turnover cost, quite as much as on a go-forward basis each month, which I’m happy with because that means that we’re not going to have a lot of once this opens up. And we have a lot more turnover. We’re not going to have a lot of deferred things that we need to do.

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Matt Logan, RBC Capital Markets, Research Division – Analyst [28]

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Any sense on the quantum for potential increases in costs over the next couple of months?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [29]

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So no. Right now — I mean we, right now, like I said, we would expect more of a decline in operational costs if we have less turnover, which we’ve seen. Again, our concern more is on the revenue side and being able to continue to charge late fees, which we’re not right now.

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Matt Logan, RBC Capital Markets, Research Division – Analyst [30]

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Got you. And maybe one last question for me, and I’ll turn it back. If there’s any commentary that you can provide in your high-level expectations by market, whether that’s Dallas, Houston or Austin, would be great.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [31]

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I didn’t hear the…

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [32]

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High level expectations for Houston and Austin.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [33]

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In terms of performance in rent, collections, what do you…

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Matt Logan, RBC Capital Markets, Research Division – Analyst [34]

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I guess, maybe just bottom line, the combination of rent collections and potential increases in vacancy.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [35]

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Well, I mean, obviously, it’s hard to predict those things, depending on how this COVID go. But I will say this. I think it’s pretty obvious when you look at — I live in Dallas, as most of you know, it’s one of the — that along with the Texas cities that really open up in terms of leading the way and restaurants, employment, everything that’s going to be taking place. So I feel good about that, and based on where our collections are right now. And what we’re seeing early in May, and all of these factors rolled together, I feel like that at this point right now, which is stay fairly stable. But with the caveat that we all have that with this COVID situation, it could — that could change. But right now, all of our indicators have been positive.

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Operator [36]

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Your next question comes from Yash Sankpal.

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Yashwant Sankpal, Laurentian Bank Securities, Inc., Research Division – VP & Equity Research Analyst of REIT [37]

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Laurentian Bank. So just want to think in terms of how you think about your payout ratio and leverage going up as you recycle your portfolio. And at what point you think, okay, now this is how far we want to go, and from here on, we will try to just focus on internal growth instead of capital recycling.

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [38]

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Yash, this is John. And we have mentioned and has said that we had approximately $350 million worth of properties that we thought that we would be selling this year. The COVID situation has impacted the whole market. As Dan was saying before, things have pretty much grinded to a halt, except for those deals that had been under contract that may have gone out of contract that may still be looking for some type of solution for the near term.

However, Dan mentioned, too, that we’re still — end up working with our sales that we’ve been going through. I can’t really talk too much about where we are in the process of those sales, but they are in different phases and stages within the process of selling. And we had, as Dan had discussed with all of us is that we’ve selected buyers who have performed on all of the sales that we had contracted for in 2020. So we’ve had 5 properties that have come through. And Dan had, and his team, selected the typical — or the type of buyer that we felt was strong and that would follow through with their contract. And they did, even in this most difficult time and environment. And in terms of the stages of where we are, we’re going to continue to look to recycle and cycle our capital back into the primary markets as we go this year as planned, unless things start getting — or worsening. Dan, do you want to add?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [39]

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Yes. And this is Dan. I’ll add to that a little bit. So I think in the past, we’ve kind of discussed where we see our ideal leverage just to fall anywhere between 50% and 55%. And looking at where our leverage sits today at 46%, 47%. We think we’ve got a little bit of room to run, call it, $100 million and a fair acquisition powder and AFFO generation on acquisitions levered at 50% rates to generate that gap in AFFO that’s been created by the dispositions and the acquisitions, the kind of the dispositions outpacing acquisitions in the past 1.5 years. So you can apply that at some percentage of that $100 million at some percentage of AFFO return. But that’s where we see the opportunity, and that’s what we’re going to look for opportunities looking forward.

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Yashwant Sankpal, Laurentian Bank Securities, Inc., Research Division – VP & Equity Research Analyst of REIT [40]

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Okay. And in terms of occupancy, given what you know at this point, and you’ve got feeling about your business, do you think your year-end occupancy would be higher or lower than where it is right now?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [41]

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As I said earlier on that, that’s a really tough question. And we look at it right now, as discussed earlier, we have been netting up in the last 4 months. And obviously, I’m looking at a lot post-COVID which really starts in April or May. And we had a really good April, and we had a — April compared to the last 2 years was actually higher on a same-store basis. So I feel — at this moment, I feel good about where we are on an occupancy basis. Now in terms of netting up, I think that’s going to be totally — or just now, that’s going to be approaching somewhat of the next phases of the COVID. If the states we’re in continue at the pace they’re at right now in terms of opening up, which is I said before is ahead of many other states in America, aside from Georgia, then I would feel good about our standing the way it is or ending it somewhat. If we have a target for the worst on that, then that would be different. But right now, all our sites are pointing towards stability.

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Yashwant Sankpal, Laurentian Bank Securities, Inc., Research Division – VP & Equity Research Analyst of REIT [42]

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Okay. That’s good. And one more question for Susie. Your Q1 NOI margins, I thought last quarter, you were saying that you will be shifting some of your G&A cost into your operating property operating line. Is that still true? Or you guys have decided to not do that?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [43]

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Yes. Yashwant, we’ve always included a portion of our G&A and property operating expenses. And yes, those expenses continue to increase property operating expenses as we sell more properties than we’re buying. But then, of course, it’s going to flip the other way when we have — were a net acquirer of assets, and at that point, then the G&A starts to go down drastically.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [44]

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Yes, Yash, is Dan Oberste. And I want to hit on the question that Blake answered previously. Because right now, I mean, it is very early to be able to determine whether BSR will experience higher occupancy in December than it experiences in March or April. But when we look at our markets and we look at the consumer behaviors right now, it’s evident that the consumers are moving more to an online review. An online lease audit or lease walk and online applications. And I think it’s important to note that BSR is currently ranked, I think, the fifth highest online reputation assessment score of the public REITs that operate in the United States. That’s 1 key, I think, tailwind for BSR.

And if you dig into just supply and demand functions in our markets, if we’re talking about the 3 core markets in Texas, Austin, Houston and Dallas, each of those 3 has experienced positive absorption in the past. And on a look forward, while we were somewhat concerned about the supply metrics in those markets, as can be assumed, anytime you have some event like the COVID crisis, the new developments tend to fall off by, I would say, 50% to 60%. And that’s not uncommon to what we’ve seen in the past. It’s not uncommon to what we’re seeing in the future. So when you look at those markets and then project it, I’ll say, end user migration, each of those 3 markets is, I would say, in the top — I would say Dallas and Houston is for sure, is projected to have the #1 and #2 fastest growing populations between 2020 and 2028. Houston, I think, has been — it’s the fourth largest MSA. It had the second highest population growth. It’s projected to have the second highest population growth between 2020 and 2029 at 1.2 million people.

So we’re continuing to see people flood into our markets. Those markets are currently open, as Blake mentioned. And supply is dropping off. And those markets already had a gap of net absorption in the past 3 years of — in Houston, it would be 30,000 units. And in Austin and Dallas, very similar numbers. So while it’s too early to think about BSR and where — our small town of people that go to bed with us each night, how many of those units and suites are going to be occupied in December, I think from an overall health standpoint, our 3 focused markets in Texas look fantastic right now, relatively speaking. And we see tailwinds relative to other property operators and other MSAs.

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Operator [45]

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Your next question comes from Sairam Srinivas.

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [46]

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This is Sairam from BMO Capital Markets. My question is around the Satori leasing. Can you give us any color on how the leasing is going on and how it compares to your underwriting assumptions?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [47]

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Satori. Underwrite, how…

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [48]

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Sure. Blake, do you want to answer this or would you like me to?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [49]

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Sure. We can both take it. When we acquired the property, it was roughly 37% occupancy — lease-up.

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [50]

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Lease-up of Satori.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [51]

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Yes, lease-up.

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [52]

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Yes.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [53]

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We acquired the property, it was roughly 37% occupancy. And that’s enabled us to really kind of go at and start attack it. And what we did was we went to a philosophy of some higher rent rates and this helps us in terms of getting to higher rates, but it did not do the leasing velocity that we wanted.

So in January, we kind of changed our course and began to see higher velocity by sacrificing rates a little bit. And this really took off, and the impact is now showing more of a traditional lease-up with much higher leasing velocity than we’ve got going right now. And at this point, we’re at least at 79.66%, and it’s performing as we expect. We expected, as of April, it was at a breakeven and we feel like that we hit the sweet spot, actually have been able to increase the rents back on some of the 4 [plants] in the last couple of weeks.

So overall, we’re pleased with the asset, our lead and our move-in/move-out and have really continued to just shoot up. We’ve got 37 pre-lease units right now. So it was a matter of — we made a business decision on the rates going in. And we changed that in January and it changes trajectory. And now we’re on a really good pace.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [54]

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Yes, and this is Dan. And that’s really precisely the purpose of the rent escrow. It allows us to attack rates and confirm those higher rates and then treat the property as a traditional lease-up that offers standard concessions. And as Blake pointed out, our occupancy right now is ahead, I would say, ahead of our original expectations on lease-up velocity and stabilization. And as a result, we’re probably originally anticipating a stabilized occupancy in a kind of a claw up and burn-off of concessions in October of 2020. Now I think we’re prepared to push that back to more of an August date so we like what we see.

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [55]

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Blake and Dan, those are good color. Probably related to leasing, I had another question on something which I think Blake clarified earlier on the call, and this is on the new leases. Blake, I know you mentioned that we signed about 300 new leases in April. So like were you saying there’s no rent left on the new leases? Like were they like in line with the previous rent?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [56]

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Yes. Right now, we are not — on new leases, we are not doing rent increases right now.

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [57]

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Okay. Okay. I just thought I want to clarify that. And my final question was it’s not an operational question, I guess, and that’s to the late fee. I know you guys mentioned that there’s no late fee right now during the pandemic. But generally, when it comes to — let’s say, if a tenant goes ahead and has not paid the lease on date. How long would you consider the tenant to be on late — how long would you consider a rent to be late versus a total like a default on rent? Like what is the period generally?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [58]

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So you’re asking how long they have to pay their rent before they’re assessed a late fee?

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [59]

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I’m basically kind of wonder as to how long would you consider the tenant to be late versus to a point that you would say what the tenant is in default.

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [60]

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Yes. Well, [rent day] on the third of the month, correct? Any payment made after the third of the month, we would assess a late fee, normally. But we’re not doing that right now.

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [61]

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Right. And let’s say — would it be like, let’s say, 15 days after that, you would consider that this guy is in default? Or would you — like, would you still consider that to be late?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [62]

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Got it. It seems default when they’re too late, don’t make the payment in the third, then it’s in default. But it’s probably a good time to say to this. And we are under — in all the areas we’re in, we’re under eviction moratorium. So we can’t evict resident at the current time. And so that throws another occurrence into it.

But at this current time, that only affects 24 of our units across the portfolio. So as far as being delinquent, I think we answered your question. I mean is that correct? I mean does that answer your question?

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Sairam Srinivas, BMO Capital Markets Equity Research – Associate [63]

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Yes. It did.

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Operator [64]

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And your next question comes from Kyle Stanley with Desjardins.

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Kyle Stanley, Desjardins Securities Inc., Research Division – Associate [65]

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So just going back to turnover. Can you speak to how that’s been trending over the last little while? I mean I assume it’s coming down a bit, but just curious to see how it is now versus kind of historical.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [66]

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Hi, Kyle, this is Blake. It has, if you look at our April numbers, it is going down. It’s the lowest it’s been for us. It’s obviously in the last system, you can keep a track. So it is going down, which is not unexpected. But in terms of where it is compared to what it has been running annually or in the past, I would say, how probably about a 15% to 16% decrease in what we have been running from a historical standpoint. And that’s through April, and that’s very preliminary. But obviously, if you think about what I said to begin with in comparing April to March, I mean we signed 505 renewals in April compared to 347 renewals in March. So — and our occupancy is staying right on top of large [payment] and May is heading for the same direction.

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Kyle Stanley, Desjardins Securities Inc., Research Division – Associate [67]

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Okay. Great. And this question probably for Susie. Would you be able to speak a bit about your bad debt expense, maybe kind of how it’s trended over the past few years and any changes you’ve seen early on in this new COVID environment?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [68]

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Sure. Yes. I — yes, we’ve got something we’re usually very proud to talk about and still are. Normally about 1% of revenue. We don’t think that changed. As part of the COVID environment right now, we have set up people on deferred rent plans. I think it was 142 in April, and then 14 more in May, but they’re on a payment plan, and they’re making payments as scheduled, so we have no reason to believe we would have to write that run off. So yes, 100% of revenue is still a great number for us.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [69]

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Yes. To tag onto that, we really been watching and keeping the operator. We’re trying to be focused on how many people are really out there that have cadence that we — in what Susie explained is exactly right. I think we’re on top of that, and our bad debt should not be any more than that right now is what it shows. Because one thing I would like to add that we talked about earlier, but we collected 93.4%. But if you look at the — what we collected in April, as of the 11th, we’ve collected 91.5%. So we got 2% more on the same-store portfolio. If you just look at April to May, which is a good sign, which kind of tied into Susie’s comment about the bad debt. And the — I think another thing that really is sticking out to me is that, right now, we’ve collected 2% more money through the 11th. And also, if you look at the amount of referrals that we’ve been at, that 14 is quite a bit less than what we had this time last month. So those 2 factors together really play into our thinking about the bad debts.

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Kyle Stanley, Desjardins Securities Inc., Research Division – Associate [70]

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Okay. Yes, the deferral request seemed to be pretty minimal so far. But are you seeing any markets or assets that are more impacted by a deferral request?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [71]

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No. That’s the interesting thing. We really monitored that hard on a daily basis, actually, breaking down by MSA, by property. And there is the — frankly, the — if I think back to the deferral that we had, there’s not any property that is alarming or interesting at all. And I really — that’s one of the first things, I mean, I would have thought but it hasn’t been up to this point.

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Kyle Stanley, Desjardins Securities Inc., Research Division – Associate [72]

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Okay. Great. And just one last one for me. Are there any early indications on how municipalities, I guess, in particular, in Texas, will be treating property tax assessments kind of in light of COVID?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [73]

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Sure. This is Dan. And I think a lot of our colleagues have made similar comments. Real estate tax assessments are made somewhat in arrears. So our estimate for 2020 tax assessment shouldn’t change. We really have no intention to change it at this time. Where we do see — I see the tailwinds in tax assessments in Texas would come in 2021, when those assessing bodies look at the impact more deeply to individual properties resulting from COVID and then reappraise and reassess.

With that said, I’ll remind the group that Texas past their statute last year, capping real estate tax increases in any municipality at around, call it, 3% to 3.5%. What we did see is some areas of Texas, particular counties, try to get ahead of the effective date of that law, which was 2020, which was this year. So if I’m speaking specifically to Harris County in Houston, we saw — as far as the market is concerned, out of the, I’ll say, the $20.5 billion of garden-style apartments that’s 1- to 3-storey, A, B and C apartments, we saw a 17.2% increase in that field in 2019 from assessments. When we look at the assets that we sold in a Longview in Gregg County, Texas. We saw a 59% increase or — 57% increase in the assessed value of those assets. So had we held on to those assets, we would see — I’d say we’d have a much a much higher hill to climb in our appeals of any of those assessments.

So with that all said, we think our estimate now is pretty sound. We don’t expect much movement in 2020 positive or negative from the impact of COVID or oil. Now in 2021, we would expect to play a little offense on tax appeals and assessments.

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Operator [74]

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(Operator Instructions) And your next question comes from Brendon Abrams from Canaccord.

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Brendon Abrams, Canaccord Genuity Corp., Research Division – Analyst of Real Estate [75]

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Maybe just sticking with new leases. Over the past, call it, 8 weeks or so, have you noticed any differences in the quality of the tenant applications, let’s say, in terms of income or credit scores that you’re typically used to? And also, just on that point, have you had to adjust your application or credit criteria just to factor that many people are out of work right now, at least on a temporary basis? And is that factoring into your approval process?

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [76]

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Good question. No, we have not adjusted our credit criteria. We just have not. And it hasn’t affected, as of this time, our ability to process applications. From a standpoint of what we’re seeing the general — and I’m going to start you a little bit on this because you’re asking a question that I’m trying to get my hands around. We’re not completely closed out in April. And the — but I have asked this internally with our group and our VPs of operation, and they’re saying they are seeing somewhat of an uptick in applications in people that are filling those out. But having said that, I’ll have a better handle on that once we get April closed out and obviously into May and June, because I’m curious myself to see if the early returns are going to continue.

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Brendon Abrams, Canaccord Genuity Corp., Research Division – Analyst of Real Estate [77]

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Yes. Okay. That’s good to know. And maybe I’ll follow-up in a few weeks with you. And just quick question before I turn it over. Just to clarify, the 4 properties disposed of after the quarter, have those actually closed?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [78]

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Yes.

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [79]

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Yes, they are closed.

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Operator [80]

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Your next question comes from Matt Kornack with National Bank.

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [81]

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With regards to the stimulus checks from the government, to what extent do you think that has kind of cushioned the blow for some of your tenant base? And obviously, I think there’s a new proposal out to further stimulate with checks potentially going to families across the country. But how do you see government’s intervention at this point as being kind of a stabilizing impact?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [82]

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Sure, Matt. This is Dan Oberste. So let’s take Texas as a good example, and Oklahoma and Arkansas and the other states are similar. But when combining the unemployment benefits with the recently announced federal unemployment benefits that were part of the CARES Act, winners across a wide range from C to A actually are better positioned to cover monthly rent as well as daily essentials.

I think what’s interesting about it is an individual earning of $58,000 or less who is recently unemployed and filing for unemployment in the state of Texas would receive more in unemployment benefits from the combination of the federal and state unemployment benefits than they would be earning in income prior to their employment termination. Now the existing bill for federal aid, which accounts for $600 a month of that, call it, $4,858 a month at that $56,000 level, set to expire on July 31. And as you did mention, I believe the House came — United States House of Representatives came out with a plan yesterday to extend those federal benefits through December 31.

I would say, generally, from a market standpoint, it’s again too early to tell whether we’ve moved to somewhat of a subsidy. But it certainly doesn’t hurt. When your resident profile at, call it, $900 to $1,200 a month rent level is better positioned to pay rent and essentials being unemployed in the month of March or April than they were previously.

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [83]

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Yes. No, that makes sense. Discretionary spending is down as well to some extent.

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F. Blake Brazeal, BSR Real Estate Investment Trust – President & COO [84]

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But I’ll add on to that, too, is that what I was — and Dan and me talked about this quite a bit, and we all do internally. But I was thinking that April, obviously, it could help once the stimulus checks hit in. But after the stimulus checks, what I was thinking, “Okay, where will we be in May after that.” And the early returns, as I’ve told you guys, is that our collections are ahead of where we were in April. And we’ve had less deferrals and the stimulus checks have run through. So — or I think they’ve run through some. So your question is one that is, I guess, the early returns for me to say that — from our standpoint, we’re not able to know how many people are unemployed in our properties. But the early returns would indicate that they’re — we’re in the right spot in America right now to withstand this.

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [85]

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Right. No, that makes sense. And also the supply destruction that you hinted at earlier. Is the view — I mean presumably, that’s going to take a while to come back. And — or is it COVID related at this point? Or is it lending? What’s driving the ultimate reduction in supply? And if that starts, obviously, completions will happen, but maybe on a delayed basis.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [86]

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Yes. I think it’s a little bit of both, Matt. And the COVID-related pullback in supply is certainly expected. I think you had somewhat of a frozen credit in equity market for a period of time. So if you didn’t have your equity and your debt lined up prior to March 11 or 12, it’s very — I’ll say it’s — look, it’s just a matter of deployment of capital. It’s impossible to move forward with your planned development that is scheduled to have a completion by the end of 2020. We’re seeing a lot of — I’d say a lot of early-stage developments pull back and that certainly was related to COVID. I think a little bit — might have been related to oil concerns as well. I think the one positive thing that we see about just the general development environment as we were experiencing, I would say, a 2 or 3-year sustained period of labor cost increases in the range of 6% and 8% a year. And on a look forward, there could be some opportunities. I’ll say, to enjoy increases that aren’t at 6% to 8% in the next, call it, 12 to 24 months would certainly benefit our redevelopment platform on any of our suite improvements and our use of NOI-generating CapEx.

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [87]

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Okay. That makes sense. And with regards to — and I guess this is for Susie, on the lending side. And I apologize if this has already been answered. But the availability of mortgage debt LTVs, I mean, you guys are in an enviable position given the duration of your mortgage debt. But how is that evolving in the U.S. at this point in spreads generally? I know the underlying has come down, but what would all-in cost be?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [88]

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Yes. And I can let Susie speak a little bit to how we view debt internally in our viewpoints of our turned out facility or how we want to treat our existing facilities. I’ll generally talk about the agencies and life insurance companies.

When we think about the 2 sides of the coin, let’s call it, pre-COVID and post-COVID. Pre-March 12, March 11, we were looking at agency spreads of [1 95] to [2 25] over benchmarks of the, call it, the 5-, 7-, 10-year treasury. In a post-COVID environment, those agencies are pricing out at, call it, [2 95] to [3 05] a little bit higher in some cases. So that turns into an all-in rate increase of anywhere between 25 basis points to 125 basis points. So spreads are certainly — credit spreads have certainly widened out.

Some unique aspects of those agency debts that have changed. Number one, in a post-COVID environment, those agencies are going to put a floor on your benchmark. Let’s say, a floor on a 10-year of 75 bps, 90 bps. And that will certainly impact your all-in effective rate more so than the spread increase. The next, I think, unique change that we’ve seen in agency debt is their requirement of reserves. In a pre-COVID environment. We saw much heavier use of full-term IO, fixed rate debt. And I’ll say, a smaller requirement for reserves related to taxes, insurance and replacement reserves. In a post-COVID environment, we’re seeing 6 to 9 — quotes for 6 to 9 months of principal interest in taxes and insurance reserves. We’re seeing 6 to 18 months of P&I. We’re seeing 6 to 12 months of random reserves related to collections or rent deferment. And I think the 1 key differential that we’re seeing today versus a pre-COVID environment is, in a pre-COVID environment, in order to lock in your constant on your debt against your cap rate on your asset, you’d execute some form of an early rate lock, taking volatility of interest rates off the table. In a post-COVID environment, we’re not seeing the agency’s rate lock very far, really at all, other than the day of close. So you’re really dealing if you’re using agency debt with volatility up through and to the date of closing on a transaction.

As it relates to live companies, we’re seeing a different treatment at a — on a loan-to-value. But we’re looking — the life companies are looking more towards a debt yield closer to an 8% floor as opposed to a 7.5% floor in a pre-COVID environment. That I’d say, moves closer to probably a 60% loan-to-value. So a borrower is not able to maximize their proceeds on their capital stack. So — and the next thing that we’re seeing as just across the board, fixed rate pricing floors between 3.75 and 4.25 fixed for the duration.

Now as it relates to the commercial banking environment, I know that you all are all well versed on the corporate paper and the commercial banking environment, but we’re seeing a little bit of a pullback in conservative loan-to-value ranges similar to the life insurance companies. So 55% to 65% pricing range is between 4% and 4.5%.

Susie, do you want to talk a little bit about how we want to treat our current debt facility?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [89]

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[I were thinking we’re fine]. Yes, we’re fine. Given the current credit environment, yes, we’re fine.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [90]

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Yes, I would have…

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [91]

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And presumably…

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [92]

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Go ahead.

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [93]

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I was just going to think presumably, though, this may pose some problems for private guys that are running at higher leverage that could result in a buying opportunity for you guys at some point, given your relative leverage.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [94]

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Yes, certainly. I mean any perceived pullback in pricing in our markets, whether it’s real or not, if you have fixed high term, high-levered debt in pre-COVID environment, it’s that much more opportunistic in a post-COVID environment.

I would point out now, because we’ve danced around cap rates and constants on debt. When we think about a cap rate is just a risk over an index like a 10-year, we’re looking at it. I think we’re looking at a risk premium right now of about 450 to 477 basis points that’s twice the average history since maybe the 1980s when this industry started to really develop and take place. So I think when an investor is looking at an unlevered cap rate against a benchmark comparative return and seeing that 450 basis to 500 basis point spread on cap rates, I think there is more of an appetite for a lower leverage deal. And I think that’s probably why you’re not seeing too dramatic of a pullback in cap rates for multifamily

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Matt Kornack, National Bank Financial, Inc., Research Division – Analyst [95]

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Interesting. Last question for me on a different topic with regards to Satori. How should we think of the rent guarantee and how it would shift between sort of operating performance and the guarantee? And I can’t remember what the term is on that guarantee as well or at least how much you’re on escrow.

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [96]

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Yes, Matt. So we use it now. It was $1.1 million, and it’s been fully recognized at this point as we’re adjusting for in our AFFO. So at this point now, I believe Blake has mentioned earlier, we’re looking to have the property [stabilize on debt].

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Operator [97]

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(Operator Instructions) Your next question comes from Dean Wilkinson CIBC.

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [98]

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I’ll make this quick. The 4 properties that closed post the quarter, Susie can you clarify the gross proceeds received and how much debt was on those assets?

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [99]

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Gross proceeds from the 4 that closed — at $85 million? Is that…

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [100]

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$85 million. Okay. And the debt that was against those?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [101]

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This is Dan. Without — we’ll have to get back to you on that. Off the top of my head, I’d say the debt is probably pegged at…

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Susan Rosenbaum Koehn, BSR Real Estate Investment Trust – CFO & Corporate Secretary [102]

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We’re blanking out.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [103]

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Yes, we’re both blanking out. We’ve got number merged on our heads right now, but we’ll get back to you with that answer.

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [104]

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No problem. And would there have been any defeasement charges or anything related with the debt? Or would that have just really assumed by the purchase?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [105]

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That’s a perfect question. So when we look at the properties we sold in Longview, we didn’t see any defeasance on the retirement of that debt. But specific to Westwood Village, that property carried, I want to say, a 10-year Freddie Mac loan fixed at [4 58]. That’s the property in Shreveport that we sold on January 30. The buyer in that transaction assumed that debt. And at the time of close, that debt would have been out of the money somewhat significantly rather than compared to what the buyer could have gotten. As a result, I mean, we pegged the prepay anywhere between $2.6 million and $3.5 million. BSR took a discount to purchase price to an all-cash deal that was, I will say, a percentage of that prepay, enabling the buyer to buy that property at a lower value than their original all-cash amount. And I would say, saving BSR a little bit of money to advertise a higher sales price in January and a lower net proceeds number. It was a good trade for BSR.

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [106]

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Yes. No, that makes sense. It doesn’t flow through the — and then in terms of the recycling of the $100 million capacity that Dan talked about, I guess it’s fair to say that in the near term, you’re probably more a net seller than you are an acquirer. Should we be thinking about that $100 million theoretical acquisition capacity being sort of in Q4 perhaps into early 2021 as the utilization on that?

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [107]

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I’m weighing my words carefully. Depending on the markets, is it early 2020 dependent on or is it an early 2020 deployment of capital sitting in May of 2020. I’d say we’re moving into the middle of 2020. I think…

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [108]

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Early 2021.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [109]

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Yes. And…

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [110]

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So we’re thinking that, that pushes out into 2021.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [111]

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I would say that there’s no — we see no signal in that the pipeline for acquisitions for the properties that we like are gone. We see a very deep market. I would say, in the last 1.5 months, if I’m looking at the stats internally, our teams reviewed 21 potential transactions totaling 7,000 suites with a collective asset value of $1.4 billion. That’s an average asking price of about $67 million a deal. Not saying all 21 of those cancel out, but given our percentage closing rate that we talked about in the past, perhaps 1 to 2 of those have worked out. And if all we need to do at a $50 million to $60 million purchase prices pick up 1 to 2, I would say that we see that — we see those opportunities in our markets, but we’re just going to proceed with cost.

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Dean Mark Wilkinson, CIBC Capital Markets, Research Division – Director of Institutional Equity Research [112]

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That sounds fair.

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Daniel M. Oberste, BSR Real Estate Investment Trust – Executive VP & CIO [113]

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Yes. And one more thing to that, Dean, I know you finished up, but we’re seeing deals on acquisitions. It’s a balancing act for us, because we like to defer any gains associated with our sales through the use of the United States tax code Section 1031. So as of right now, with the sale of Longview, we don’t — we see a little bit of uncovered gain. And historically, we’ve covered every single — we’ve deferred every gain that we’ve been able to realize or look at from a disposition. So I’ll let that speak for itself.

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Operator [114]

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Mr. Bailey, there are no further questions at this time. Please proceed.

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John Stanley Bailey, BSR Real Estate Investment Trust – CEO & Trustee [115]

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All right. Thank you very much, everyone. That concludes our call this morning. And thank you for your interest in BSR REIT, and we look forward to speaking to you again this summer, following Q2 financial reporting.

In the meantime, remain safe, and we wish you all very good health. God bless.

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Operator [116]

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Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.