R
elease Date: November 08, 2024 For the full earnings call transcript, please refer to the complete document. BSR Real Estate Investment Trust (BSRTF) boosted its blended lease rate and maintained strong occupancy during Q3 2024. The company reduced long-term debt by approximately $12 million, enhancing its balance sheet. BSRTF executed a $150 million swap to mitigate interest costs, with additional savings expected from a $42 million forward swap. The board of trustees increased monthly distributions by 7.7%, reflecting cash flow growth and commitment to maximizing returns for unit holders. Texas rental markets continue to show resilience due to robust economic growth and population migration. However, same community NOI decreased slightly due to increased property tax expenses and lower tax refunds. Weighted average occupancy was 94.7%, slightly below recent levels, indicating potential challenges in maintaining occupancy rates. FFO and AFFO per unit remained unchanged from last year, indicating limited growth in these financial metrics. The company did not acquire any new assets in Q3 2024, despite seeing increased opportunities, suggesting potential challenges in finding suitable investments. Austin remains challenging due to new supply, impacting rental rate growth and absorption rates.

    Nationally, supply is peaking now, with absorption expected to outpace deliveries by early next year. In Texas, Houston peaked in Q1, Dallas in Q3, and Austin is peaking now. We expect Austin to recover by Q1 2025, with significant absorption and rate growth resuming in the latter half of 2025 and beyond.

    There might be a slight cash flow drag in the short term as we consolidate the Ora development. However, with 15% leased and 11% occupied, we anticipate it will start generating positive cash flow by mid-next year.

    New developments require rents to be 25-30% higher than current levels due to high interest rates and extended completion times, now averaging 36 months. This has led to a significant reduction in new construction pipelines across our markets.