Earnings Call: Q1 2021

May 12, 2021

Earnings release

Good morning. My name is Colin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the BSR REIT Q1 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To the Thank you. Mr. Bailey, you may begin your conference. Call. Well, thank you, Colin, and good morning, everyone. Welcome to BSR REIT's conference call to discuss our financial results Q1 ended March 31, 2021. I'm joined today by Susie Kane, Chief Financial Officer. Also with us are Dan Oberstein, President and CIO, Chief Investment Officer questions following our prepared remarks. I'll begin the call by providing an overview of the Q1 performance and other corporate developments. Susie will then review the financials and I'll conclude by discussing our outlook and strategy. After that, we will hold a Q and A session. Call. Before we begin, I need to remind listeners that certain statements about future events made on this conference call are forward looking in future. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Call. Please refer to the cautionary statements on forward looking information in our news release and MD and A dated May 11, 2021 for more information. During the call, we will reference certain non IFRS financial measures. Although we believe these measures to provide useful supplemental information about our financial performance, They're not recognized measures and do not have standardized meanings under IFRS. Please see our MD and A for additional information regarding our non IFRS financial measures, including call for reconciliations to the nearest IFRS measures. Also please note that all dollar amounts are denominated in U. S. Currency. Our Q1, 2021 financial results were impacted by timing differences related to our capital recycling program. Our portfolio was smaller than it was in Q1 last year. So our total revenue and NOI were negatively impacted. As we continue to deploy our capital raised from the dispositions, you can expect to see a sharp upturn in these numbers. But Q1 also demonstrated the highly positive impact of the program. We ended the quarter with weighted average rent of $11.34 per apartment unit, an increase of 18.6% compared to just $9.56 a year earlier. And we generated continued growth over the prior year same community revenue of 2.5% and NOI of 2.2% Despite the temporary challenges related to COVID-nineteen. Furthermore, the trends in April are strong. Fiscal occupancy of 95.4 percent and rental increases of 4.8% for new leases And 2.7 percent for renewals. Our capital recycling strategy has placed us in an outstanding competitive position. We have reached the stage in the program where we have divested of all properties previously intensified S9 Core. Going forward, we will review the portfolio opportunistically for potential dispositions. We have sold a remarkable 37 properties since starting our capital recycling program in 2019. We are now focused on growth in our target primary markets. At the end of the Q1, we announced the acquisition portfolio of 3 properties in submarkets of Dallas and Houston for a total of 190 $5,000,000,000 Vale Frisco Apartments, Adelaide at Glenok Apartments and Aliyah Longmeadow Farms Boost our portfolio by combined 1,009 suites. Bel Frisco and ALLEA are newly built, It's leased up and located adjacent to other BSR properties, while Adelaide was built 2 years ago. The new properties will add approximately $4,900,000 or $0.09 These are attractive locations and have the amenities that our residents desire. It was another busy quarter for asset sales as well. We sold Towne Park at Harbors in Springdale, Arkansas for 31 point $7,000,000 and we've sold Capri Apartments in Blytheville, Arkansas for $3,100,000 which enabled us to exit that market. Subsequent to quarter end, on April 26, we announced the sale of Mountain Ranch Apartments in Fayetteville, Arkansas for gross proceeds of $49,500,000,000 This price represented a 27 0.2% premium to the property's asset value at the time of DSR's IPO in May 2018. Team. And yet, our shares continue to trade at a significant discount to NAV. With this sale, we exited Northwest Arkansas market. Well, we do consider Northwest Arkansas to be an attractive property market, we lacked scale. Furthermore, it made sense capitalized on a strong market condition to exit Northwest Arkansas and deploy our capital in the other primary markets where we are positioned from which we currently derive 96% of our NOI. Finally, Yesterday, we announced the sale of Regency Woods at Patagoula, Mississippi for $8,300,000 This was our only property in Mississippi. Following the asset sales, we now have acquisition capacity of approximately $287,000,000 So we're in an ideal position to expand our portfolio on an accretive basis. We are looking to complete approximately 2 $150,000,000 of additional acquisitions this year. With the portfolio stabilizing by the end of the year, adding portfolio acquisition in March. Combine that with the strong rent growth we are seeing in Austin, Dallas in Houston. We expect significant growth in NOI and AFFO in the second half of twenty twenty one increased net asset value. It was $13.21 per unit as of March 31, 2021, compared to $12.20 per unit a year earlier, an increase of 8.3%. I would now like to provide a brief update related to the COVID-nineteen. Our primary priority We are optimistic that the worst of the pandemic is behind us. As we have previously disclosed, the Dispenser for Disease Control issued an order to temporarily alter residential evictions for non payment of rent if a declaration provided to the landlord stating that the resident meets specific eligibility requirements. As of April 30, 2021, we have received 22, That's 22 declarations related to the order, representing about $100,000 of unpaid rent. So the impact is not material. Also, we collected 99% of expected monthly revenue in the Q1 And in the months of April May, which is in line with the historical average. So both April May and the Q1 were collecting 90 9%. So now I'll turn it over to Susie to review our Q1 financial results in more detail. Sorry about that. I believe we went on mute for a second. Thank you, John. Same community revenue increased 2 2.5% in the Q1 to $14,800,000 from $14,500,000 last year. The improvement reflects an increase in average rental rate From $10.11 per apartment unit as of March 31, 2020 to 10.20 $5 per apartment unit as of March 31st this year, as well as increases in fees associated late rental payments and the flexibility to rent on a month to month basis, plus an increase in utility reimbursement revenue. Total portfolio revenue for Q1 2021 was $25,800,000 compared to 27 $5,000,000 in Q1 last year, a decline of 6.4%. This reflected a more rapid pace of dispositions Compared to acquisitions over the prior 12 months, property dispositions reduced revenue by 10 point $7,000,000 compared to Q1 2020. This impact was partially offset by acquisitions and non stabilized properties, To clarify, non stabilized refers to properties that were undergoing lease up or renovations during at least part of the comparative period. NOI for the same community properties was $8,000,000 an increase of 2.2% from $7,800,000 in Q1 last year. The increase reflects higher same community revenue, partially offset by 0 point $2,000,000 increase in the cost of utilities. Approximately 80% of the increase in the cost of utilities It is expected to be reimbursed to the REIT from residents in the Q2 of 2021. NOI for the total portfolio was $13,400,000 a decline of 9% compared to $14,700,000 in Q1 2020. Property dispositions reduced NOI by $5,900,000 while property acquisitions and non stabilized properties increased NOI by $3,300,000 $1,000,000 respectively. FFO for Q1 2021 was 5,800,000 or $0.12 per unit compared to $7,000,000 or $0.15 per unit last year. The decrease Reflect the lower NOI that I just discussed, partially offset by a reduction in interest expense of 300,000 Related to the timing of acquisitions, dispositions and the equity offering we completed in February. AFFO was 5,300,000 In Q1 2021 or $0.11 per unit compared to $6,600,000 or $0.15 per unit last year. The decrease in AFFO reflects the lower FFO as well as a $400,000 escrowed rent guarantee that was realized in Q1 of last year. This was partially offset by a $300,000 decline in maintenance capital expenditures in the Q1 of this year. As John noted, we expect AFFO and NOI We'll significantly benefit in the second half of twenty twenty one and throughout 2022 from property acquisitions Using our acquisition capacity. The REIT paid quarterly cash distributions of $0.1251 per unit in Q1 1 of both years, representing an AFFO payout ratio of 117% in Q1 of 2021 The higher payout ratio this year reflected the more rapid rate of dispositions versus acquisitions. This will come down as we continue to deploy our acquisition capacity. During Q1, on February 9, We completed a full deal equity offering in which we issued approximately 6,300,000 units at a price of $10.95 per unit, Raising gross proceeds of approximately $69,000,000 Net proceeds of $66,000,000 were used to repay amounts outstanding on the Leak credit facility. Turning to our balance sheet. Our debt to gross book value as of March 31, 2021 was 43 point $3,500,000 available on our credit facility and $35,000,000 available on a line of credit. Subsequent to quarter end. We completed the sales of Mountain Ranch and Regency Woods for a combined 57,800,000 Following these transactions, our debt to GBV is 44.3%, providing $287,000,000 of acquisition capacity without the need for additional equity. As of March 31, we had total mortgage notes payable of 3 6% and a weighted average term to maturity of 7 years. Total loans and borrowings were 503,000,000 Excluding the debentures, an 85% of the REIT's debt was fixed or economically hedged to fixed rates. I will now turn it back over to John We are sitting on significant capacity or acquisition capacity and we're eager to deploy it productively in our primary markets. The market for multifamily properties in the U. S. Sunbelt remains highly liquid. Even during the pandemic, There has been no shortage of opportunities for us to evaluate. I am confident we will identify the purchase and purchase 4 high quality properties this year and we'll upgrade our portfolio quality And drive growth in NOI and AFFO. As always, we will prioritize off market or limited bidding situation and we will not compromise our solid liquidity position. We also expect to continue generating strong organic regrowth from our existing portfolio. The rent increases we generated in the past year were highly impressive Andy underscore the strong fundamentals of our target markets. As I noted earlier, thus far rent growth The impact of COVID-nineteen will not go away overnight, but we're turning a corner where life can begin returning to normal. Given the pent up consumer demand that has been building over the past year, many economists believe the economic activity could begin to shrink Materially. That should be highly positive for rental rates in our core markets. We are grateful to investors for patience as We reoriented our portfolio toward primary markets with some of the strongest economic fundamentals in the country, and we look forward to delivering significant FASB. We fully expect to capitalize on opportunities in primary markets that will drive value for unitholders. That concludes our remarks this morning. Susie, Dan, Blake and I would now be pleased to answer any questions you may have. Operator, please open the line for questions. Thank you. Ladies and gentlemen, we'll now begin the question and answer and your questions will be pulled in the order they are received. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay. Your first question comes from Dean Wilkinson from CIBC. Dean, please go ahead. Thank you and good morning everybody. Good morning, Dean. John, maybe just a higher level question for me. And I mean, there's been a lot of consternation in the paper. I think you know where I'm going with this. On Biden putting the 1031 exchange program in his crosshairs. You're kind of through your disposition program. So it probably would have been more meaningful if this would have happened, say, a year, year and a half ago. But as you look forward, would this change how you're looking at the asset dispositions. And maybe for Susie, when you look at the $500,000 limit that they had put on there, would you have been able to do a lot of this program even if that limit was in place? Well, thank you for your question, Dean. This is John. And in terms of the 1031, What we would expect is that given this company has we successfully rotated about 85% All of our properties that we went into the REIT with and of course we were able to sell those properties at about a 10% premium And what we had put them into the IPO for and we did rotate them into the primary markets that you're referring. And in regard to the tenthirty one strategy, Think about it this way. Our properties that we purchased recently in recent years would have a much lower impact on anyone's taxes, if there were a reason to rotate. But from the standpoint of the overall 1031, That could impact the total volume in our markets, of course. And we do believe that if it impacted the volume to drive it lower, That of course, it would also impact the amount of the rents that we would have in terms of driving rents higher, Especially in a market where you're seeing the renter migration coming in with such a strong renter migration that are in the growth of Houston, Austin and Dallas Fort Worth. And last, I'd like to just add that in terms of our portfolio, when we went public In May of 2018, our average age at that point in time was 29 years. Today, After doing all the rotations that we have announced that we would do, of course, we're going to be opportunistic, especially while the 1031 is still available to the market, Which has been available since the early 1900s in the United States. But as long as it's still available, we're going to be opportunistic on Take on any of the other opportunities we may rotate and extract the value like we did if you saw the one up in Mountain Ranch That was a tremendous opportunity for us to rotate that capital, leave that market, become more efficient for our platform. And we do believe that our investors will benefit greatly from now adding scale into the markets where we're already existing. Hey, Dean. About the $500,000 of course, the answer is it depends, right? It depends on how long you held the property and how large your potential capital gains But the good news here is that CSR has done with our program for the Board. So that's not something we need to worry about in the future. Yes. Well, I guess the base has been reset for a lot of those. So conceptually, maybe Dan and Blake You can chime in on this. And when you look at markets, say, up in Canada, where we don't have this kind of exchange program, The transaction volume is arguably at a scarcity where there's a premium to that. Could something like this actually cause a further compression in cap rates in that you now bid up for transactions that were otherwise maybe a little more available and you have less churn, which if it's simple supply and demand, maybe pricing does go up. Hey, Dean, this is Dan talking. I would say let's not think of it as a compression of cap Our view is that capital is always going to get its return. And if you think about what John was saying earlier, If indeed the tenthirty one is eliminated and if indeed capital gains tax rates in the United States are increased, That capital is going to get its return. Now it might show up in a higher price and probably will show up in a higher price For our assets and appreciation of our assets and the other assets in our market. But I don't think it's reflected in the cap rate because that capital is going to get its return. So what that means to me is that the rents for apartment rents are going to increase at a rapid pace if you eliminate that tenthirty 1. And Without getting into opinions here, that's expanding on one of the problems in the United States, which is housing scarcity and affordability of rent costs. If you're a believer that capital is going to get its return and the cap rates as a result of elimination of a tenthirty one, The cap rates aren't going to change. What you're saying is the rent is going to go up at a rapid pace outpacing inflation, right? Yes. I mean, That depots very well as a catalyst for just a small little REIT that's managed to sell everything it owned and buy brand new $1,000,000,000 of bricks and sticks in the last 2.5 years. Yes, it's an interesting dynamic. They ought to look north and see what's happened to our rental markets in the absence of some of that. But that's way above my pay grade. I will hand the call back for others. Thanks guys. Take care. Thanks, Dean. Good to hear you, boys. Your next question comes from Kyle Stanley from Desjardins. Kyle. Please go ahead. Thanks. Good morning, everyone. Good morning, Kyle. So thanks for the new disclosure you provided this quarter. Just looking at kind of the AFFO guidance on transactions already announced or to be announced through the balance of the year. I'm just wondering, can you talk a little bit about what assumptions go into this forecast, whether it be margin just a little more detail there would be helpful. Sure, sure, Paul. So the margins for that, the 3 tax acquisitions That we've already announced, plus the additional $250,000,000 that we do by year end is around 53%. Yes. Okay. Thank you for that. And then you mentioned expecting the portfolio to be stabilized By year end, I just wanted to confirm this includes the potential $250,000,000 of acquisitions to be completed as well? Okay. Thanks for that. And then just on the leasing spread disclosure you gave for April, That's really helpful. And just curious if you can comment on maybe what the spreads were during the quarter, how that is compared to historical and thoughts on where that trend is going forward. Yes, health care would be good. Hey, Kyle. This is Blake. I'll start out and give a little background. When you Really look at our portfolio starting in February. All the metrics that I look at from leads to tours to occupancy to rental increases. I started seeing an uptick, and it has continued During the Q1 and into April and into May. And when you look at the this is tied up in the rental increases and the occupancy. And when you look at Q1, for the blended rate, we were at 2.8% for the total portfolio. That is basically driven by every one of the main submarket orient. Austin had a new 4.7%. Austin bounced back quicker than any submarket that we have looked at in America's 4th lease rates. And Dallas was up 2.1% and Houston was up 2.6% in New. Now contrast that to April and Austin It's up 4.1 again in new. Dallas is up 5.7 in our portfolio in new. And Houston It's up 3.6%. So when you're looking at the blended rates in Texas, we were at 4 percent in April. That's continuing into May. And when you look at Q1, We were at 2.8 for the entire portfolio. So what I see is a really, really well positioned portfolio in the right areas with teams that are laser focused on top of All these assets as we have exited many of these non core entities that were Frankly, when you've got an asset in Pascagoula or you've got an asset in Blytheville, Arkansas or you've got one in there, you have to service it. Well, we don't have those anymore. Now we've got people that are on top of all these assets And the rental increases are showing that they're continuing into May and the occupancy rates on all of the submarkets are increasing. So and also our lease up properties, We can get into that if we want to. Our lease up properties are performing ahead of our projections also. Hey, and Kyle, this is Dan. And I just Blake and I look at it from a look back Look forward, we and I want to talk just a little bit about a look forward. When we began the year, I think everyone in our sector We're searching for a catalyst. And I think a lot of our competitors were forecasting kind of a flat growth and trying to push everyone out a year, 2 years from now and talk about all the great growth in the future. Let's start and just talk about a catalyst. And I just want to speak to there's a Vice President market research named John Afleck for CoStar Group that him and his team came out with an article this week and some analysis. National Apartment Rents, in their analysis, they said national apartment rents aren't just recovering. They're growing at a pace that would equate to the strongest apartment rent games this century, if they maintain it throughout the year. Now a quote from John Affleck, If this current rate of performance that we've seen so far year to date continues, then rents should rise by 9% in 2021 nationally. And that's easily the strongest gains this century. So if anyone in our industry is looking for a catalyst, my thoughts John Affleck's thoughts from CoStar would be that catalyst occurred in the Q1 and things are looking up And I guess put a bow on Dan's statement. We did 2.5% year over year in the Q1. And you just heard the stats For the April and into May and your Q1 Awesome. So yes, I think we are looking for our income to grow more than we told you on the last call. As long as everything that we our leads are up 33% staff that we look at and our visual of online And our which is another thing I stress to you guys every quarter, but it's a big thing we found is our self guided And all this is playing in together. And Dan's comment is well said because at this point right now, We've got a lot of positives that we're looking at. Okay. That's great color and very helpful. Thanks and I'll turn it back. Your next question comes from Brad Sturges from Eman James. Brad, please go ahead. Hey, there. Just to follow-up on AFFO guidance and disclosure that you provided. It seems like you have some degree of confidence For that $250,000,000 of acquisition, you could still be in that sort of 4% to 5% range for going in yields. Is that fair to say? Yes, that's fair to say. Okay. And what would you be assuming from a long term debt cost or financing perspective on $250,000,000 of acquisitions. Hey, this is Dan. We would assume something similar to what we're enjoying today on our current BMO led syndicate facility. Program. That's a you can call that a LIBOR spreads at around 200 on short term debt, 185 to 200. Long term debt rates right now range agency, life insurance and private bank range from anywhere to $275,000,000 to $340,000,000 loan to value dependent. By long term, I'm talking about 10 year fixed. Okay. I guess maybe to take a different view on valuation. If you were to look at the replacement cost In your core markets right now, what would that kind of look like today on a price per door? And then what would your expectations be for replacement cost growth, let's say, in the next 12 months. To total insured value from an insurance standpoint or how much would it cost to replicate the portfolio? Yes. And from like a construction cost perspective to replicate the portfolio. Sure. Now it's no surprise this is Dan again, I'm sorry. It's no surprise Construction costs are going up, labor is going up, materials are going up. That's I think that's every news article we see right now. I think it wouldn't be unreasonable to see replacement costs for our assets have a 2 on the front end of the numbers. So $195,000,000 to $230,000,000 a unit for new construction in these locations, probably $230,000,000 creep enough. I'm probably conservative on that 230 number. Okay. Yes, that's not counting the Not counting the dirt. And how much would land be? Well, land in Texas ranges anywhere between 15 20% of total asset value. But you're talking about a fun this is a fun discussion topic. I mean, What have the lumber prices gone? They were at $200,000,000 this time last year and now they're at $1600,000,000 I mean there's a I want to remind everyone that we own about $1,000,000,000 And lumber and about $300,000,000 in dirt. So, God, if we could only translate those lumber gains What is that? That's an 800 percent lumber price or construction cost increase for all the lumber we own. I'm not being serious, but could you imagine what would happen if we just deconstructed our apartments and sold the lumber? Yes. I'll jump in here. I live in Dallas and have been The assets that we're buying and I stress But I think it's really important. When you just say Dallas, Houston, Austin, you can't really look at it from that perspective. You got to look at the In the areas where we're buying, one of the reasons that you're seeing this rent growth, you're seeing Our income of our tenants going up is because we're in some really, really good areas. So when you ask that question About DIRTT. The DIRTT that we own currently and the DIRTT that you would have the cost that you would have to pay to procure dirt in these areas is really, really high. Because everybody is in shoes America. I mean, we're seeing in our portfolio just Real uptick in Californians and New Yorkers moving in. And so you've got A real, real, dirt. People are wanting dirt. And it used to be in Texas up north, especially in the Dallas area, for Well, there's a lot of land up there. Well, when you start looking at Frisco and some of the areas that we're in right now, Frisco has 8 high schools. So that dirt is shrinking, and we're right in the middle of all of this. Tollway and 121 in the Dallas area and 380 Where we are. It's the hottest area really if you look at from a real estate value standpoint in America. Yes, that's right. And this is Dan again. I mean, all jokes aside, I'm not advocating that the management team all get Clawhammers and rip nails out of wood and shovel lumber. I think what I'm really getting at here is, the cost to construct competitors of ours in our locations is going up. And those competitors are going to get their returns in the form of higher rents. They're going to have to underwrite that new construction to higher rents. And fortunately, We are right in the middle of 3 of the 4 highest growing MSAs Into Dallas, Houston and Austin is not going to stop. Those people are going to continue to move to those markets at a clip as high And Austin is 3% a year compounded. So with that supply continuing, the developers have no I mean, They will continue to build housing for those new residents and new employees. And with construction costs increasing, it's just a math game. It's arithmetic. The rents that are going to be needed to service those new constructions are going to have to be higher, which only bodes well for just a little rate with 96% of its NOI generated out of 3 of the 4 fastest growing markets in the country right now. And I want to add, I'll tie this up because I'm really passionate about this, Dan is too, when you look at our assets. You look at the income growth that we've had, and I just told you, we're expecting that to increase and based on what I'm And I'll look out too much in advance. But when we put together our projections Dan and me are sitting side by side, and we go through these things about 3 times at the end of the year when we're putting them together. And Dan is using CoStar, he's using 2 or 3 different publications to help us look at rent growth. And we really look at that closely. And to be frank with you right now, what's happening is we're just flat beating Those CoStar other projections in these areas. And I don't see it letting up. It sure isn't right now, not based on all of our leads. So I think that's really, really important. And I think we've done a good job and Dan has done a fantastic job and his team of picking areas in the right growth pockets with the right schools, which I've stressed to you guys for years. Schools are important in Texas. They are very important. So just a little color for me and Dan, but I think it's important to understand all these different elements Considering plan. That's great color. I'll turn it back. Thank you very much. Thank you, Brad. Your next question comes from Matt Logan from RBC. Matt, please go ahead. Thank you and good morning. Good morning, Marshall. When we think about your capital deployment, there's Certainly a lot of supply coming online in your submarkets. Can you talk a little bit about, A, how that could impact the rent growth in the near term and B, if that also provides some opportunity to acquire assets that are coming online this year. Sure, Matt. This is Dan. When we think about new supply from an opportunity point of view, It's always a tale of 2 cities. It's not necessarily the supply that we're looking at. It's the demand net of supply or the absorption. And I mean, Austin, Dallas and Houston lead the country. I think they lead the country in absorption and they have from a quarterly and annual standpoint for as long as we've been public. So that demand net of supply, that net absorption number, It definitely prompts up operating numbers, right. It helps us deliver returns Operationally, they're in excess of peers that own properties in other markets. Now from an acquisition standpoint, it makes acquiring in these markets a highly competitive endeavor. Because just economically, When you're leasing up properties in half the time it takes to lease them up in another market, then your cap rates are driving down lower than you're seeing in other markets. So it's a mixed bag. It's I want to highlight here BSR is an operating company. So we would prefer to own properties in markets like we own, where you have demand net of supply year over year that drives operating metrics. We happen to have been rotating in the last 2 years. But at our core, our platform is an operating platform. And so from that, I've heard someone say to me once, the world is still difficult decisions. And if you got to make one, you make the one you can live with. And in this case, we can live with demand net of supply in all of our markets. I would rather have our teams going out and really conducting hand to hand combat to find the best assets in the best locations in these markets than the alternative, having supply net of demand and having a very easy acquisition market. I absolutely agree, Dan. Well, it certainly seems like you're outperforming your competitive set when we dive a little bit deeper into the submarkets, which is good to see. But when we look at the revenue growth outlook that you talked about last quarter at 1% to 2%. Certainly, with the trend being at the upper end of that range and trending higher in April. Do you have any sense for where that top line figure might end up for 2021? I would say that I believe we're 2.5 right now. So If I was this is a real tough one, as I told you all last month, because it's quarter you look quarter to quarter, But it will be higher than the 2% that I told you last quarter. And you heard me go over and I can do it again offline or anything You heard me go over the rent growth numbers in our areas. So where will it end up at the end of the year? I hesitate to give you a number. I just know it's going to be higher than the 2 to 2.5 than the 2.5 that we're doing right now. Yes. And Matt, this is Dan. I mean moving out of BSR, if we're just looking at what the market experts are saying in Dallas, Austin and Houston right now, annualized rent growth expectations in Austin are 5.7% and Dallas Fort Worth are 4.3%. And in Houston, They're 1.9%, but let's break that down. And Houston has 43 submarkets. And in the 2 submarkets we're in, in Houston quarter over quarter sequential rent growth right now looks to be at about 11.2% in that Katy Cinco Ranch. That's the Satori Richmond and the Eylea product. And then quarter over quarter, 4.6% of Conroe, that's just North Houston. As we've said all along, we like to be positioned in the right submarkets in a market. We understand that Houston is highly competitive. And in In that last few sentences that I've said, Houston is definitely running up the caboose at 1.9% relative to Dallas' 4.3% and Austin's 5.7% for the year. But in our 2 submarkets, we're in the top quartile of those Houston's 43 submarkets. That's right where you want to be. And I think that's just a product of having our team live where we own and And having been in the Houston market for 21 years now, I think our team is pretty effective at picking the right locations and the right submarkets in the right side of the street to maximize forward looking rent growth. And Matt, just to Give you a little better guide what I'm aware of the company will be looking at. Just to refresh everybody, in Q1, Austin blended in our was 3.1 and in April it was 4.0, which is in line with what Dan said. Dallas was blended 2.5 And in April, it's 4.4%. So Houston, which you heard him talk about 1.9 which is what we were kind of looking at. And if you look at our same store Houston properties, just some color, They hit our expectations. We were expecting a flat year over year NOI curve on the ones We had, but they beat those actually. So when you look at Houston from a rent standpoint, Lend, it was 2.8 in Q1. April, it was 3.3. So All of those when you look at April and we're looking at a 4.0, 4.4 and a 3.3. Great color. And maybe just turning to the margin, Should we still be thinking about something in that 54% range? Hey, Matt. It's Cindy. So yes, our same store has been consistently performing at about 54% margins. However, we have bought a lot and we're buying a lot. And like I said earlier, it looks like the margins on acquisitions for 2021 are looking more like 53%. So I'm guessing in 2022, margins will be closer to 53% than the 54% given the volume of acquisitions that we plan to make this year. It makes sense to me. And maybe one last one there before I turn it back. In terms of the cap rate compression, ShinsuZu this quarter. Could you give us a sense for how much of that was driven by mix shift into newer better quality assets How much of that was driven by just cap rate compression in your markets? Yes, sure. So comparing NAB from March 31, 2020 until March 31, 2021, about 66%. So the lion's share of the increases come cap rate compression when we're comparing the same set of properties we had last year to this year. Appreciate the commentary. I'll turn it back. Thank you. Your next question comes from Matt call of Cormark from National Bank. Matt, please go ahead. Hey, guys. Just a quick follow-up on Matt's comments there. I'm wondering if in terms of the NOI that you're capping in those figures, if it reflects kind of the more positive bias you seem to be having post quarter and what seems to be market moves as well. Yes. It does. I mean, we as Cindy stated in her opening remarks, I mean, we're running ahead of our NOI projections. And assuming that we don't have expense issue to this and we continue with the income that I've been talking about. It seems like all for the hour. We're expecting continued uptick in our NOI. Okay. And sorry, so For your fair value, that is or isn't captured in the NOI that you're using for your fair value assumptions? Yes. So we are excluding the increases we currently seeing in NOI as well as the lower cap rate trades in our market. However, that will continue to go up. That means the Fair values will go up as we proceed throughout the year and NOI continues to increase. Right. Okay. No, that makes sense. And I mean, I got a slight sense of that you're looking at where you're trading relative to the value of the assets on the book, but also relative to peers and I think you'd see the current trading prices are pretty deep discounts in a bargain. We do, Matt. This is John. We see it as a deep discount, especially compared to the U. S. Market, where most of REITs are trading at a large premium to their NAV. So it's a tremendous opportunity as you look at relative values between U. S. REITs located in the markets where we are compared to where we're located Comparable hour price traded against our NAV on the TSX. Yes. No, it's a fair point. And I think we've recognized that as well. But the trends that you're seeing. I think we're even more encouraging than what we were expecting. So the last one for me just on homeownership. The markets you're in have seen some pretty torrid increases in terms of house prices as well. Is that starting to send people back towards the rental market. Is that an aspect of this increased demand? Well, this is Dan. The The problem that we actually have in our markets is supply. There's not a lot of net supply of single family homes in our market. And if you're a home developer, You're in a tough spot. Your prices for labor and materials have skyrocketed this And you're in 3 markets that don't have enough supply to meet the demand of just simple homeownership. So I mean, you're really in a tough spot for single family home development in our 3 markets. Austin, I think we spoke about it in the last quarterly call where we talked about how the inventory in Austin is about 9 days right now. That's just an unheard of lack of supply of single family homes. But number 2, I want to highlight that the our average resident makes about $60,000 a year. And Austin is a good example, but so is Dallas and Houston. The average single family home there costs about $400,000 to $450,000 Now In the U. S, it's exceedingly difficult to make $60,000 to $120,000 a year From depending on whether you're calling it median or household income and a $400,000 to a $450,000 home. So you have 2 things competing. Number 1, it is just precipitously more affordable to rent one of our apartments right now That is to pay a mortgage and taxes and insurance, not to even speak of the down payment you have to pay to buy that $400,000 to $450,000 house. Number 2, if the house was available, there's no houses in our markets that are available right now. And if they want to build them, it's going to cost more to build them Than it did last year and really than it did last month. Yes. And just to highlight that, I I can give you an example, real life example, Cielo in Austin. When you look at the Q1, 62 leases that I've highlighted. The median income on those leases for the individuals It is in the $90,000 range. Now that tells you Exactly the type of resin we're getting, but also what's happening in these markets. So I think that kind of panels on to Dan's point that the home prices in these areas. And that asset that you're talking about right there It is in the Lake Travis School District in Austin, which anybody can look it up and it's similar to the assets we have in this portfolio. You're talking about people They want to be there, but they can't afford a house as the guys that they are even at that income level. That's right. This is John, Matt. And that's exactly you do have to track the competition about how much houses, costs and the but it's really about the affordability factor. And the wonderful thing that we've been talking about in our markets We are viewing our rents for maintaining about 20% of the median income of our cohort. And when you think about affordability, many of our cohorts, half of them are millennials and they have debt on their own balance sheet, makes it It's extremely difficult to come up with the cash that Dan was talking about to afford these higher cost homes in all the markets. So we don't see the competition as being single family housing at this point in nature, especially with the demand in higher cost. And right now, we're sitting in a very good spot where we're located for all the right reasons. And then John And Blanco, right on. So we kind of this is Dan. So we come back to the themes of today. We talked about catalysts. The catalysts of multifamily are not unlike, I don't know the catalyst of the candy bar industry. It's just it's supply and demand. And if you drive in nationally, Right. And look at the catalyst for multifamily as a sector of real estate. The top line growth is right now at a potential To outpace any annual number we've seen in 21 years, this century. And if you zoom in and You look at the epicenter of that growth, it's sitting in I mean, the majority of it is sitting in 3 or 4 markets. It's sitting in Austin, it's sitting in Dallas, and it's sitting in packets of Houston, right? Phoenix is another fantastic market for growth. That's that 4th one that we're talking about. But it's a simple formula, supply and demand. And now with the commodity prices increasing to what they are and the housing supply available in our markets, it's just in our mind, The sky is the limit, exponentially growing that catalyst for BSR. And Dan said this a couple of times in this call, but I think Just look at the migration rate into Austin, Dallas, it is Blow you away. How many people are moving into those cities daily? Yes, Blake's right on. You take Dallas And just we can just use the census numbers. So based on the recent census figures that came out for Dallas, Dallas in the last decade grew by the population Wyoming and Vermont in the aggregate, the states of Wyoming and Vermont, one of these markets. It's about 1,700,000 people if I'm doing my math right. Wow, no, that's impressive. Guys, I appreciate the color as you sound very positive. I think there's a lot of upside to the name and hopefully between now and this time next year, we'll be able to see you in person. We look forward to it, Matt, and everyone on the call. There are no further questions at this time. I'll turn it back to John. Well, thank you, Colin. That concludes our call this morning, And thank you for your interest in BSR REIT. We look forward to speaking with you again after we report our 2nd quarter 2021 results during the summer. So God bless everyone. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.