Q3 2021 Bluerock Residential Growth REIT Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Blue rock residential growth rates third.
Third quarter 2021 earnings conference call all participants will be I must tell me now after today's presentation there'll be an opportunity to ask questions. Please.
Please note. This event is generic quoted.
I would now like to introduce your host for today's call Mr. Christopher Van.
Chief Financial Officer of flu rock residential Mr. Habayeb. Please go ahead.
Thank you and welcome to <unk> residential growth rates third quarter 2021 earnings conference call. This morning prior to market open we issued our earnings press release and supplement press.
Press release can be found on our website at blue rack residential dot com under the investors tab and.
In addition, we anticipate filing our 10-Q next week.
Following the conclusion of our remarks, we'll be pleased to answer any questions. You may have before we begin. Please note that this call may contain forward looking statements as they are defined under the private Securities Litigation Reform Act of 1995.
There are a variety.
Risks and uncertainties associated with forward looking statements and actual results may differ from those set forth in such statements for a discussion of these risks and uncertainties you should review the forward looking statements disclosure in the earnings press release, we issued this morning as well as our SEC filings.
With respect to non-GAAP measures, we use on this call. Please refer to our earnings supplement for a reconciliation to GAAP and the reasons management uses these non-GAAP measures and the assumptions used with respect to our earnings guidance.
And with that I'll turn the call over to remain campfire, chairman and CEO of <unk> residential growth rate.
Thank you, Chris and good morning, everyone.
In addition to Chris with me today are several key members of our executive team, including Jordan Ruddy, our President and Chief Operating Officer, Ryan Macdonald, Our Chief Investment Officer, Jim Babb, Our Chief strategy Officer, Mike to Franco <unk>.
EVP of operations and Stephen Sip tried our managing director and head of transactions.
To give you an overview our third quarter results reflect the benefits of our strategic positioning.
And owning highly monetized live work play communities in knowledge economy growth markets.
Lease rates for new lease rate growth continued strong month over month acceleration.
<unk> the record setting September at 25, 8% were.
We're active in terms of investments, particularly in the back half of the quarter deploying approximately $132 million in BRG equity.
As we look ahead, we're confident our strategy of focusing on a suburban knowledge economy footprint will continue to deliver peer leading top line growth as we progress throughout the remainder of the year and positions us well to deliver shareholder value throughout the full cycle environment.
I'd like to again note that management has significantly aligned with shareholders.
Substantial ownership of BRG Xactly, and finally before handing the call over to Ryan I want to thank all of our employees for their hard work over the last two years through the pandemic, which has allowed us to deliver top quartile rent growth and has positioned us well heading into the end of the year and beyond with that.
I'll turn the call over to Ray.
Okay.
Thank you Jeremy.
Starting with our results during the quarter, our GAAP net income to common stockholders was 45 cents per diluted share compared to a net loss of 71 cents per diluted share in the prior year quarter.
We achieved 15 cents of core S F O versus 16 in the prior year period.
So I felt it wasn't impacted by a large average cash balance in the quarter and we do expect core <unk> to expand significantly in the fourth quarter as we get a dual benefit from positive rent growth earn in the strong earnings contributions from our robust capital investment.
Large pipeline of closings in the back half of the quarter.
Moving onto the balance sheet during the quarter, we invested 83 million and operating assets across multiple tranches of the capital structure.
33 million of preferred equity into unconsolidated operating properties and committed 68 million of preferred equity investments into four new development properties of which $8 million has been funded.
Lastly, during the quarter, we funded $8 million and two seven existing preferred equity and mezzanine loan investments.
Following quarter end to date, we've invested 28 million of BRG equity into five transactions.
On the disposition front, we sold two consolidated asset during the quarter.
Sales prices totaling $195 million and had one preferred equity investment redeemed.
Together the sales netted BRG, a $100 million in equity proceeds and the three dispositions were sold at an average in place economic cap rate of 3%.
On the capital raising front during.
During the quarter, we raised $115 million in our series T preferred offering.
Which will reach the end of its offering period this month.
Also during the early part of the quarter, we repurchased 34 million common shares an average price of $11 34.
Following our investment and capital markets activities as of the end of October BRG had approximately $272 million available for investment through a combination of cash and availability on our revolving credit facilities.
We expect to significantly reduce this balance as we deploy capital into our committed pipeline through yearend.
And with that I'd like to turn the call over to Mike.
Well I.
Thank you Ryan and good morning, everyone.
I am pleased to report that we had a strong third quarter operational.
Our team delivered consistently strong occupancy throughout the quarter, averaging 95, 8%, while accelerating average and new lease rate growth each month of the quarter.
For the third quarter average lease over lease growth finished at 16, 5% with new lease new lease growth, leading the way at 24, 3%.
As mentioned, both average and new lease trade outs built sequentially month over month throughout the quarter.
With September finishing at 17, 9% and 25, 8% respectively.
<unk> were up 153 basis points on a quarter over quarter basis at 8% and like new and average leases accelerated month over month to finished September at 9%.
We believe there was additional opportunity to converge our renewal rate growth with our outsized new lease growth in the coming months and quarters.
Moving onto our same community results same store NOI increased nine 2% on a year over year basis for the quarter and was driven by revenue growth of seven 7% with expense increases of five 5%.
Our seven 7% year over year revenue growth was driven by a 30 basis point increase in occupancy and a seven 1% improvement in rental rates.
For the quarter 12 of our 15 same store Msas and 21 of our 25 same store communities posted revenue growth exceeding 4%.
We continue to be well positioned heading into the shoulder months with availability today sitting at around 6%.
On the expense front year over year same store expenses increased five 5% or approximately 800000 for the quarter with taxes and insurance together accounting for the largest increase.
Controllable expenses were up 5% versus the prior year and included Covid related eviction costs. If you one time maintenance and admin costs and additional marketing expense from our smart home technology rollout.
<unk> has a corresponding revenue increase that will earn in over the next 12 months.
We expect the controllable expense growth rate to normalize at a lower level going forward.
Finally on the value add front during the quarter, we accelerated our cadence on a quarter over quarter basis above pre COVID-19 levels, completing 368 units at an average ROI of 21%.
At this time I would like to thank our team for a job well done and taken care of our residents our assets and our business throughout the entire COVID-19 impacted period.
And with that I will now hand, it over to Stephen said John Steven.
Thank you Mike in terms of capital allocation and consistent with full year guidance, we were active on the disposition and reinvestment shrunk during the quarter in order to strategically recycle capital into assets in markets with a higher growth profile on a go forward basis.
Majority of our dispositions occurred in the beginning of July with our acquisition volume more heavily weighted towards the back end of the quarter.
During the quarter, we invested $132 million in BRG equity with the majority allocated to operating properties totaling $83 million of equity.
Additional preferred equity investments were made into both on consolidated operating properties and new development projects, which was a strategic area of focus for us This year, given the strong risk adjusted returns and earnings profile.
While we will continue to look for additional mezzanine and preferred equity investments the majority of our investment pipeline heading into the end of the year, our consolidated operating properties with value add focus.
Our active investment cadence has continued post quarter end, including the closing of additional investments totaling $28 million in BRG equity commitments and we expect a significant amount of additional equity capital to be invested through year end, given the robust pipeline of opportunities in house under diligence.
In terms of dispositions during the quarter, we sold three assets at a weighted average economic cap rate of 3% based on $300 per unit replacement reserves and the buyer's year, one real estate tax estimates.
The opportunistic dispositions allowed us to exit core assets at attractive pricing and reallocate capital to assets with value add focus.
With respect to new investment pipeline, we continue to generate relationship and off market opportunities at cap rates that are more attractive than fully marketed deals.
Asset types include both multi and single family rental opportunities that offer solid risk adjusted returns and our focus will continue to primarily be in our core knowledge economy growth markets, such as Raleigh, Phoenix Austin Atlanta to name a few all of which display tremendous demand side tailwind that we believe will drive relative rental rate growth.
And with that we will open it up for Q&A operator.
At this time, we will begin the question answer session. Crushing question you May Press Star then one on your telephone keypad.
Curious on Speakerphone, please pick up your handset before personal keys. So Charlie a question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
As a reminder, if you have a question. Please press Star then one.
At this time it appears that we do not have any questions I would now let's turn the call back over to remain come fall.
<unk> for any closing remarks.
Thank you operator, and thank you everyone for giving US your time today, we look forward to continuing to report to you on our <unk>.
Continued progress in the coming quarters.
Sure and goodbye.
The conference has now concluded thank you for attending today's presentation.
You may now disconnect.
[music].
Okay.
Yes.
[music].
Okay.
Yes.
[music] disappears.