BSR REIT Completes Strategic Sale of Dallas Portfolio to AvalonBay Communities for $431.5 Million

BSR REIT Completes Strategic Sale of Dallas Portfolio to AvalonBay Communities for $431.5 Million

LITTLE ROCK, Ark. and TORONTO, April 30, 2025 /CNW/ - BSR Real Estate Investment Trust ("BSR" or the "REIT") (TSX: HOM.U) (TSX: HOM.UN) today announced that it has closed the previously announced contribution transaction (the "Contribution Transaction"), pursuant to which BSR Trust, LLC ("BSR Trust"), the operating subsidiary of the REIT, sold six properties comprising 1,844 apartment units located in Dallas, TX to AvalonBay Communities, Inc. ("AVB") (NYSE: AVB) valued at $431,500,000 in the aggregate. Under the Contribution Transaction, BSR Trust received $193,000,000 in cash consideration, a portion of which was used to extinguish all existing mortgage debt on the contributed properties, and the remainder of which is anticipated to be used for transaction expenses and other general corporate purposes. In addition, the previously announced participation offer under the Contribution Transaction was fully subscribed, resulting in the cancellation of 15,000,000 (approximately 75%) of the Class B units of BSR Trust ("Class B Units") on the date hereof. These Class B Units were exchanged for equity ("AVB DownREIT Units") of a newly formed "DownREIT" partnership entity of AVB.

In connection with the Contribution Transaction, the contractual rights held by a subset of legacy holders of Class B Units (the "Bailey/Hughes Holders"), including consent rights over certain fundamental sale transactions, were eliminated pursuant to an amendment and restatement of the investor rights agreement entered into at the time of the REIT's initial public offering in 2018 (the "Amended and Restated Investor Rights Agreement"). Under the Amended and Restated Investor Rights Agreement, the Bailey/Hughes Holders will retain one nominee on the REIT's board of trustees, provided they maintain a collective ownership interest in the REIT above 10%.

Prior to the Contribution Transaction, the Bailey/Hughes Holders beneficially owned, or had control or direction over, 16,079,276 Class B Units and 4,886,506 REIT Units in the aggregate, together representing an approximate 39.06% ownership interest in the REIT (determined as if all Class B Units are redeemed for trust units of the REIT ("REIT Units")). Following the Contribution Transaction, the Bailey/Hughes Holders beneficially own, or have control or direction over, 3,239,398 Class B Units and 4,020,584 REIT Units in the aggregate, together representing an approximate 18.77% ownership interest in the REIT (determined as if all Class B Units are redeemed for REIT Units).

John S. Bailey, W. Daniel Hughes, Jr., Patricia Bailey and their respective controlled entities (together, the "Supporting Unitholders"), all of whom are Bailey/Hughes Holders, participated in the Contribution Transaction in respect of a portion of their Class B Units. Each of the Supporting Unitholders is a "related party" of the REIT for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"), and no other participating holder of Class B Units, including each participating Bailey/Hughes Holder, is a "related party" for purposes of MI 61-101. Prior to the Contribution Transaction, the Supporting Unitholders, beneficially owned, or had control or direction over, 12,259,104 Class B Units and 4,303,936 REIT Units in the aggregate, together representing an approximate 31% ownership interest in the REIT (assuming that all Class B Units are redeemed for REIT Units). Following the Contribution Transaction, the Supporting Unitholders, beneficially own, or have control or direction over, 3,115,109 Class B Units and 4,070,583 REIT Units in the aggregate, together representing an approximate 18.58% ownership interest in the REIT (assuming that all Class B Units are redeemed for REIT Units). The Contribution Transaction was exempt from the minority approval and formal valuation requirements of MI 61-101 in accordance with sections 5.5(a) and 5.7(1)(a) thereof, respectively.

The Amended and Restated Investor Rights Agreement will be available under the REIT's profile on SEDAR+ at www.sedarplus.ca. 

Early Warning Disclosure

This press release is also being disseminated as required by National Instrument 62‐103 – The Early Warning System and Related Take Over Bids and Insider Reporting Issues ("NI 62-103") in connection with the filing of an early warning report (the "Early Warning Report") by John S. Bailey, a founder and former Chief Executive Officer and former Executive Vice Chair of the REIT, in respect of the disposition of 3,779,133 Class B Units beneficially owned, or over which control or direction was exercised, by Mr. Bailey, which Class B Units were cancelled in connection with his participation in the Contribution Transaction. Such Class B Units were exchanged for 267,059 AVB DownREIT Units (as a result of the contractual exchange ratio of 0.0707 AVB DownREIT Units per Class B Unit) valued at US$55,329,283.62 (C$76,614,459.03¹) in the aggregate based on the closing price per share of AVB's stock listed on the New York Stock Exchange on April 29, 2025 of US$207.18 (C$286.88).

Separately, on the date hereof, Unity Holdings, LLC, an entity over which Mr. Bailey exercises control or direction, distributed its assets in connection with its dissolution, and as a result  thereof,  the 1,111,167 Class B Units and the 311,137 REIT Units held by Unity Holdings, LLC were distributed to its members, of which 277,791 Class B Units and 77,785 REIT Units were distributed to entities over which Mr. Bailey exercises control or direction. Mr. Bailey did not participate in the Contribution Transaction in respect of such Class B Units.

As a result of the foregoing dispositions, Mr. Bailey's beneficial ownership interest in the REIT has decreased in amount greater than 2% of the outstanding REIT Units (determined as if all Class B Units are redeemed for REIT Units) that were the subject of the most recent report filed by Mr. Bailey pursuant to NI 62-103.

Prior to the dispositions on April 30, 2025, Mr. Bailey beneficially owned or exercised control or direction over 4,098,628 REIT Units and 6,383,625 Class B Units, which together represented an approximate 19.53% interest in the REIT (determined as if all Class B Units are redeemed for REIT Units) and an approximate 12.24% and 31.61% interest in the outstanding REIT Units and Class B Units, respectively.

Following the dispositions on April 30, 2025, Mr. Bailey beneficially owns or exercises control or direction over 3,865,276 REIT Units and 1,771,116 Class B Units, which, following the cancellation of 15,000,000 Class B Units pursuant to the Contribution Transaction, together represents an approximate 14.57% interest in the REIT (determined as if all Class B Units are redeemed for REIT Units) and an approximate 11.54% and 34.11% interest in the outstanding REIT Units and Class B Units, respectively.

The dispositions by Mr. Bailey were made in connection with the Contribution Transaction and dissolution of Unity Holdings, LLC. The remaining REIT Units and Class B Units held by Mr. Bailey are being held for investment purposes and he may, depending on market and other conditions, increase or decrease his beneficial ownership or control of REIT Units or Class B Units, whether through market transactions, private agreements, treasury issuances, exercise of convertible securities or otherwise.

A copy of the early warning report to be filed by Mr. Bailey in connection with the transactions described herein will be available on the REIT's SEDAR+ profile at www.sedarplus.com and may be obtained from Spencer Andrews, Vice President of Marketing and Investor Relations of the REIT, at the telephone number below.

About BSR Real Estate Investment Trust

BSR Real Estate Investment Trust is an internally managed, unincorporated, and open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT owns a portfolio of multifamily garden-style residential properties located in attractive primary and secondary markets in the Sunbelt region of the United States.

The head office of the REIT is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7. John S. Bailey's address is 1400 W. Markham, Suite 202, Little Rock, AR, 72201.

Forward-Looking Statements

This news release contains forward-looking information within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements"). Forward-looking statements in this news release include, but are not limited to the use of proceeds in respect of the Contribution Transaction and future acquisitions. The words "expects", "expectation", "anticipates", "anticipated", "believes", "may", "could", "will" or variations of such words and phrases identify forward-looking statements herein. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. The REIT's estimates, beliefs and assumptions, which may prove to be incorrect, include assumptions relating to: the anticipated benefits of the Contribution Transaction and ability of the REIT to execute value-enhancing growth initiatives; the REIT's future growth potential, results of operations, demographic and industry trends; no changes in legislative or regulatory matters; the tax laws as currently in effect; stability of the general economy over 2025; lease renewals and rental increases; the ability to re-lease or find new tenants; the timing and ability of the REIT to sell and acquire certain properties; project costs and timing; a continuing trend toward land use intensification at reasonable costs and development yields, including residential development in urban markets; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and ability to refinance debts as they mature; the availability of investment opportunities for growth in the REIT's target markets; the valuations to be realized on property sales relative to current IFRS carrying values; and the market price of the REIT Units. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. The risks and uncertainties that may impact such forward-looking information include, but are not limited to, unintended consequences of the Contribution Transaction; potential litigation relating to the Contribution Transaction, including the effects of any outcomes related thereto; the possibility of unexpected costs and liabilities related to the Contribution Transaction; the REIT's ability to execute its growth strategies; the REIT's ability to execute future acquisitions; the impact of changing conditions in the U.S. multifamily housing market; increasing competition in the U.S. multifamily housing market; the effect of fluctuations and cycles in the U.S. real estate market; the marketability and value of the REIT's portfolio; changes in the attitudes, financial condition and demand of the REIT's demographic market; fluctuation in interest rates and volatility in financial markets; the impact of U.S. and global tariffs; developments and changes in applicable laws and regulations; the impact of climate change and the factors discussed under "Risks and Uncertainties" in the REIT's most recent Management's Discussion and Analysis dated March 5, 2025 and in the REIT's Annual Information Form dated March 5, 2025, both of which are available on SEDAR+ (www.sedarplus.ca). If any risks or uncertainties with respect to the above materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.

These forward-looking statements have been approved by management to be made as at the date of this news release. Certain material factors, estimates or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in this news release and actual results could differ materially from such conclusions, forecasts or projections. There can be no assurance that actual results, performance or achievements will be consistent with these forward-looking statements. The forward-looking statements contained in this document are expressly qualified in their entirety by this cautionary statement.

SOURCE BSR Real Estate Investment Trust