BSR Real Estate Investment Trust (TSE:HOM.UN) reported sequential improvement in occupancy, revenue, total property net operating income and funds from operations for the second quarter of 2026, while lowering its full-year FFO and AFFO per-unit guidance because lease-up at an August 2025 acquisition is occurring later than initially expected.
Chief Executive Officer Dan Oberste said the company’s portfolio benefited from improving apartment supply-demand conditions, though the recovery in rental markets has progressed more slowly than management had hoped. He said apartment demand exceeded deliveries during the first half of 2026, particularly in the second quarter, as deliveries and construction starts continued to decline from earlier-decade peaks.
Leasing Trends Improve, With Regional Differences
Chief Financial Officer Tom Cirbus said effective rates on new leases declined 2.4% during the quarter, while renewal rates increased 2.9%, resulting in a 0.5% increase in blended rates. The result represented a 1.5% improvement in blended lease rates from the first quarter.
In July, new-lease rates declined 90 basis points and renewal rates rose 2.2%, producing a 1% blended increase. Cirbus said April through July each showed sequential improvement on a blended basis.
Chief Operating Officer Susie Rosenbaum said the company may choose to lower rates somewhat in the third quarter to increase occupancy, with the goal of generating more overall rental revenue. She described Austin leasing conditions as favorable, with concessions declining across the market. In Round Rock, concessions had fallen to six to eight weeks free from 10 to 12 weeks previously, she said.
In contrast, northern Dallas submarkets, including Frisco, McKinney, Prosper and Celina, continue to face additional supply. At The Ownsby, BSR’s August 2025 acquisition in Celina, concessions remain around the equivalent of 12 weeks free when incentives such as gift cards are included.
Physical occupancy at the August 2025 acquisition reached 91% at quarter-end, up nearly 20 percentage points from March. However, Rosenbaum said the asset may need another 12 to 14 months to burn off concessions and reach the expected level of economic stabilization.
Revenue and NOI Results
Same-community revenue totaled $26.4 million in the second quarter, down 1% from a year earlier. Cirbus attributed the decline primarily to lower average occupancy, which was 94.6% compared with 95.6% a year earlier, and lower average monthly in-place rent. Higher utility reimbursements and resident amenity programs partly offset the decrease.
Total portfolio revenue rose 1.5% year over year to $34.2 million. Revenue from 2025 acquisitions added $4 million, while 2025 dispositions reduced revenue by $3.2 million and same-community properties reduced revenue by $0.3 million. Total portfolio revenue rose 1.1% from the first quarter, primarily reflecting contributions from the acquisition portfolio.
Same-community NOI was $13.9 million, down 2.8% from the prior-year quarter, affected by lower revenue and the timing of real estate tax refunds. The second quarter of 2025 included an outsized amount of tax refunds, Cirbus said. Total portfolio NOI increased 0.5% from a year earlier to $17.9 million and rose 1.9% sequentially.
BSR said its non-same-community NOI margin was about 450 basis points below its same-community NOI margin year to date. Management expects that gap to narrow as occupied units contribute rent for full periods, concessions burn off and expenses normalize at the five assets in the group.
Operating Initiatives and Expense Savings
Management highlighted resident amenity programs and platform centralization as sources of incremental growth and cost savings. The company said its Bulk Internet program was live at six of its 26 properties, with work underway at seven additional properties and the remaining locations expected to begin implementation in the second half of the year.
Valet Trash was live at eight properties. Oberste said both amenity programs had received a positive reception from residents and were at break-even to FFO accretion during the second quarter. Cirbus said the five recently implemented Bulk Internet properties had reached 37% penetration on a blended basis and were ramping somewhat ahead of schedule.
BSR also completed an assistant community manager centralization effort during the quarter. Management expects the initiative to generate annualized savings equivalent to $0.02 of FFO per unit. Cirbus said the company is also in final negotiations for technology enhancements expected to create an additional $0.01 to $0.02 of savings.
The company maintained its target of generating $0.13 to $0.22 per unit of incremental growth by early 2028, excluding changes in market rents, expenses and interest rates. Cirbus said BSR had realized about $2.9 million of a previously identified $4.5 million revenue opportunity associated with increasing occupancy.
FFO, Balance Sheet and Guidance
FFO totaled $7.1 million, or $0.18 per unit, compared with $9.2 million, or $0.21 per unit, in the prior-year quarter. The year-over-year decrease reflected changes in same-store NOI and higher finance costs, partly offset by improvement in the non-same-community portfolio. Sequentially, FFO increased from $6.9 million, while remaining at $0.18 per unit.
Net finance costs increased 35% year over year and 3.7% sequentially. Cirbus said the year-over-year comparison was affected by the company’s transition period in the second quarter of 2025, when the portfolio did not carry full leverage. Sequentially, higher costs resulted from interest-rate resets in the company’s derivative portfolio.
At June 30, BSR had $732.2 million of debt outstanding, a weighted average interest rate of 4.1%, a weighted average term to maturity of 3.9 years and $39.7 million of total liquidity. Debt to gross book value was 51.7%, compared with 51.2% at year-end 2025.
The company updated its same-community guidance to reflect a slower-than-expected pace of top-line recovery while reducing expense expectations because of savings in areas including property taxes, insurance, payroll and bad debt. Management said it did not expect an overall change to its initial same-community NOI guidance. However, BSR lowered its 2026 FFO-per-unit and AFFO-per-unit guidance ranges slightly because The Ownsby’s stabilization is occurring later than anticipated.
About BSR Real Estate Investment Trust (TSE:HOM.UN)
BSR Real Estate Investment Trust is an open-ended real estate investment trust. It is engaged in the business to acquire and operate multi-family residential rental properties, with a focus on garden-style multifamily communities in select high growth markets across the Sunbelt region of the United States. The REIT operates in Arkansas, Texas, Oklahoma and Mississippi. Its key revenue source is rental income.
