Good morning. My name is Hanes and I will be your conference operator today. At this time, I would like to welcome everyone to the BSR REIT Q4 2020 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. Thank you. Mr. Bailey, you may now begin the conference.

All right, well, thank you, Hanes, and good morning everyone. Welcome to BSR REIT’s conference call to discuss our financial results for the fourth quarter and year ended December 31, 2020. I am joined today by Susie Koehn, our Chief Financial Officer. Also with us are Dan Oberste, President and Chief Investment Officer; and Blake Brazeal, Co-President and Chief Operating Officer, who will be available to answer questions following our prepared remarks. I’ll start this call by providing an overview of our annual and quarterly 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&A session.

Thank you, Jon. Same-community revenue increased 0.8% in the fourth quarter to $12 million from $11.9 million last year, reflecting an increase in same-community average rental rate from $915 per apartment unit as of December 2019 to $924 per apartment unit as of December 2020. Total portfolio revenue for Q4 2020 increased 1.8% to $28.6 million compared to $28.1 million in Q4 2019. The increase was primarily the result of property acquisitions, which contributed $7.1 million in revenue as well as higher rental rates across the portfolio, partially offset by dispositions that reduce revenue by $6.7 million. NOI for the same-community properties were $6.5 million in line with Q4 of last year. The increase in revenue was offset by an anticipated increase in real estate taxes and insurance costs. NOI for the total portfolio increased by 1.6% to $15.1 million compared to $14.9 million in Q4 last year. The increase was primarily attributable to acquisitions contributing $3.9 million partially offset by property dispositions; reducing NOI at $3.6 million. FFO for the fourth quarter was $6.7 million or $0.15 per unit, which was consistent with Q4 last year. The increase in NOI was offset by $0.2 million of severance and retention costs.

All right. Thank you, Susie. The past year has been a challenging one, but our solid performance demonstrates the strength and resilience of high quality affordable multifamily housing in primary, suburban Sunbelt markets. As we have said before, our market fundamentals are very robust. They include strong economic and population growth in our key markets over the long-term, as well as the propensity to rent among millennials who make up more than half of our resident base. We continue to evaluate attractive acquisition opportunities in non-core asset sales. The market or multi-family properties remains a very liquid and active one, even during a difficult 2020, we completed a large number of deals. Our acquisitions team is very busy evaluating opportunities, and we are confident we will build value with our external growth strategy. With our current liquidity position of approximately $170 million and debt to gross book value of 40%, we are in an excellent competitive position, and we are excited about the growth opportunities ahead of us. While the pandemic isn't over yet, and economic uncertainty remains elevated, we are optimistic that 2021 will be another successful year for BSR. That concludes our remarks this morning. Susie, Dan, Blake and I would now be pleased to answer any questions you may have.

Thank you. Your first question comes from Liyan Chen with iA Capital. Liyan, please go ahead.

Hi, good morning. Couple of questions for me when, we'll do in Green Phase 2 development. What was your yield on cost on the project and was it in line with your budget and how did the expected yield on cost on your project evolve over the last year in light of the increasing material cost?

Good morning, this Dan Oberste. Original yield on cost, I think we reported our costs there at $16.5 million and our yield looked to be 675 to 7. We've – that properties lease up and current stabilization has outperformed our expectations. So we're probably a little bit higher than numbers. And this a numbers construction costs this week, penciled in and fixed all of our construction costs prior to last year on that development for many run-ups in the prices of lumber or other construction materials. So as our investors have right now they bought a 4.5 cap or seven cap. We're pretty happy with that and we hope our, our investors and stakeholders are as well.

That's great. Thanks. And last one for me, just looking at the single home residential markets of the U.S. particularly in Texas, you and your pricing seems to remain very robust. This is particular environment translates to a stronger then rentals within new markets. Just curious as to what you are seeing on the ground today?

This is John. And from a standpoint of single-family homes, there has been a run-up in pricing and in our markets in particular, you have – let's just go, maybe the Austin, Texas, where you have about $400,000 for your average home price. And our cohort is a middle income cohort that has an income of range of $60,000 to $70,000. And buying a home in Austin, Texas for 400,000, maybe equates to about 10,000 a year, just for the – simply for paying for property taxes. The cohort that we cater to primarily, this particular cohort is much more flexible mobile. They have their balance sheets are pretty well stretched out by having student loan debt, There is about $1.6 trillion of student loan debt to this particular cohort. And we don't see this as being a direct competition, even with the continued demand for housing in these markets. And we don't see the demand for the housing to go away the next several years. I mean, it's quite robust with the amount of population and economic growth that we've seen in these Texas markets, which is exactly why our strategy has been to be moving toward these markets.

That's great. That's it for me. I will turn back. Thanks everyone.

Thank you.

Thank you. Your next question comes from Brendon Abraham with Canaccord. Brendon, please go ahead.

Hi, good morning, everyone. Maybe just on the capital recycling front, just wondering if you could remind us how much is left within the portfolio that you'd like to dispose of, and maybe in terms of other units or dollar value? And then just on the acquisition friends going forward with about 80% of the NOI in the three big markets in Texas are there any other markets or geographies within the Sunbelt you're looking closely at right now to potentially add to the portfolio?

Sure. This is Dan. First as it relates to the rotations and the capital recycling, we may look to trim the edges of the portfolio a bit with some tactical gardening, but overall the lion's share of the dispositions are complete. And I think we've telegraphed our intentions with Northwest Arkansas and yesterday we sold the Capri Apartments in Blytheville for what I see is a foregone 4.1 cap. If that's not representative of the current disregard for cap rates in our markets, I don't know what is. So I guess in detail, we'll be opportunistic with our capital discipline. If we see sales prices far exceed what we can otherwise produce on a – call it a fair value return on what we believe the market value of the property is, then sure we'll be opportunistic. But I don't think you're going to see us selling what we sell 34 properties last two years? I don't think – I don't think we have the capacity to do that kind of rotation on a look forward. And so smart sales probably further entrenching our NOI in the three markets in Texas is probably what to look out for on. And as it relates to our markets for acquisitions; we're going to continue to focus on Dallas, Houston and Austin. This real estate investment strategy is proven to be a bullseye in the past 36 months and we see no compelling reason whatsoever to throw a dark another direction off the board. So we'll continue to look at those three markets. We like the demographic trends. We liked the fact that every quarter and every year, one of those three markets leads the nation and absorption, employment creation, demographic trends, net migration, population growth these – these are the main ingredients and I would say AFFO after growth and value growth. And so as long as we continue to see those three consistently hit the top mark or the top five mark in every one of those categories year-over-year and decade over decade, since as far back as we can look 1960 we're going to continue to hit the ball into those markets.

And this is John. I'd like to add on to that too, as we've, as you know the REIT owns the management company and our platform and what we want to do is part of our overall strategy, and we haven't backed off. As a matter of fact, we see more and more opportunity to continue to build scale and opportunity with this teams, I would say expert capabilities and their abilities to continue to find product at more favorable prices than what I would think any other competitor out there would be able to do with our relationship purchasing and capabilities. So I'll just go with our platforms efficiency going forward is where we're targeting to continue grow our scale in these markets for every bit of what we talked about our platform scalability.

Okay. That's helpful. That's good color. And then just last question from me before I turn it over. Just in terms of occupancy covered around the adjustment of the 94% mark. Just wondering if you consider that kind of a stabilized figure for your portfolio within your markets or is there a potential for that number to increase as you – you've acquired properties and you deploy some of your active property management techniques on those assets?

This is Blake. 94% is pretty much what we forecast for this year. And that we do consider that to be the stabilized, but I must add that with some of our newer properties that are coming online. We're hopefully expecting that we could pick up some occupancy during that time, because it's probably a pretty good time to remind everybody that our same-store and non same-store is about 50/50 right now. And that ratio is going to keep going up on the non same-store. So we've been on a lot of new product that is performing really, really well right now. And we're hopeful that we can move the needle. So on that 94%.

Okay. That's great. I'll turn it over. Thank you.

Thank you. We have a following question from Brad Sturges with Raymond James. Brad, please go ahead.

Hey, Brad, we can't hear me.

Hello, Brad.

Hi. Can you hear me now?

Brad?

Can you hear me?

Yes. We can hear you now.

Sorry about that. I had to take myself off mute. Just on those money questionings, I guess rent growth year-over-year has been trending around the 1% range and with hopefully a successful role it on the vaccine front. Do you see that being a level that can start to accelerate like rent growth year-over-year start to accelerate from here over the next few quarters? And where would you think that could normalize out to?

Looking at – hello Brad it’s Blake. Looking at what – for 2021? We're expecting a 2% rent growth. That's what we're expecting entirely, and hopefully in our markets as we continue, we discussed this in past calls, but we spend so much time on revenue management and looking at our markets, and looking at our competitors, and as we continue to get further along as the original pandemic outbreak, we are hopeful that 2021 will create that 2% growth and really looking forward to 2022.

And with that taught process, where would you currently expect your margins to trend for the year?

Hey, Brad, it’s Susie. I would say about 54% as well. We're predicting for our market straight forward.

Okay. And maybe just one last one for me, in terms of the outlook for acquisitions, can you give a little bit more of a context or commentary in terms of your expectations for capital deployment and when you think the REIT could reach more stabilized levels in terms of debt metrics?

Sure. And, you know, Brad, let's start out with cap rates, because that's a fun conversation to have. If I'm looking back to Q3 of multi-family U.S. multifamily cap rates compress 20 basis points, and that's just through Q3. So we're looking at the average of 5.09 is the average U.S. cap rate. Now there's two items to note here. First let's take Dallas. DFW was by no means average last year. DFW was by no means average. Last year was the top U.S. metro from all their family investment in the United States. And some, now I haven’t seen accurate numbers for Q4 cap rates yet, but since October and through yesterday, I'll tell you right now, cap rates in our markets have compressed substantially. I haven't seen a cap rate above 375 in Austin since last October. And I'm seeing comps to our recent DFW and Houston acquisitions trading at 20% and 25% premium since the date we acquired those. I'll tell you right now, Houston's probably a solid 4 to 4.5 GAAP market at this time. Now those are the headwinds that, that means that that the way I see it, what we bought were to a lot more than we paid for, but it does make it somewhat competitive on look forward. I don't think our investors would be happy with a span of 3.5% capital Austin. And we won't do that, right, but I want to remind the group that we got about 400 million of acquisitions that we're looking to close on between now and the end of July, June or July. We're pretty competent in that number. Obviously we hadn't disclosed any acquisitions yet? That's just the nature of the public disclosure of acquisitions. We're pretty confident that we filled half that number to date. We're excited to roll out our pipeline as we close. I don't think that that we are really going to participate in the low cap rate environment that we saw coming through in December and January. The majority of our acquisitions that we source are off market and from repeat sellers. The reasonability to close in a short in a short period of time and quickly underwrite and do exactly what we tell people were going to do, that helps our credibility in these markets. I think the second thing that helps our credibility right now is the cash on hand that we have to deploy into acquisition. What that enables the REIT to do is trade a little cap rate for some volume in these markets. I think the second thing that helps right now is the cash on hand that we have deploying the acquisition. What that enables the REIT to do, is trade a little cap rate for some volume. What I mean by that is that it opens up the door for portfolio dispositions from a developer standpoint or from a sellers standpoint allows a little bit more elasticity and cap rates, so that we can go ahead and acquire that cap rate should – so that we can go head and acquire the cap rate should we think are a little bit higher than what we are seeing the market trade right now. And then turn around and hedge in our debt behind that, so we can preserve the economics for our investors. Now, one other component that what we're seeing in the current cap rate environment is the majority of the buy and the sell side and the lending side for that matter, they're underwriting to some pretty substantial 2022 organic growth numbers. Some of the numbers that I'm seeing that are commonly dropped on the street are a 9% and 10% organic growth number for Austin, 6% for Dallas 5%, 4% for Houston. And they're embedding some of that organic growth into the current cap rates that they're trading properties at in the market. So when you look at how that investment looks over a three-year period, you're seeing cap rates look back expansion, that's sometimes double what we're historically used to. And I think that's a for that, and a little bit of the leverage and the lower rates we saw in December through February is enabling a buyer to probably lever up a little bit, fixed their rates and sacrifice a little bit lower cap for the – for kind of the year two and year three growth expectations, simply out of just organic rent growth on the margin of 56 on the AFFO margin of 50, you can turn into your-over-year cash flow growth pretty quick. And with that I’ll drop the product.

That’s quite helpful. So just to maybe clarify, it seems like the – maybe the off-market opportunities are more with the developers at the stage where you can take advantage of liquidity and maybe a little bit of to get a little bit better stabilized yield?

That's fair to say. It does help us out with economics and having solid trading partners. You know, what I think, we came into the IPO in 11 of our 13 broader acquisitions were off market from repeat sellers. That number, those statistics really haven't changed since IPO. A lot about acquiring and selling in our markets is knowing everybody at the table who builds and buys and rehabs and brokers and lens and keeping up good relationships with them. And that turns into really the ability to competently project a $400 million in acquisitions by the end of the second quarter.

Okay, great. Thank you.

Thank you. The next question comes from Kyle Stanley with Desjardins. Kyle, please go ahead.

Thanks. Good morning, everyone. So it sounds like the…

Hi, Kyle.

…the acquisition pipeline is fairly deep and you just gave a pretty good rundown of what you're seeing out there. Are you seeing any portfolios available for per sale? Maybe you get that capital deployed even quicker?

Yes. I'm seeing – this is Dan, I'm seeing portfolios, I'm seeing one-offs, it's a great time to shop for properties in our market. When I look at last year's volume, you got $10.5 billion of multifamily trading in Dallas. You got 3.5 in Austin and 3.5 in Houston. That I see no signs of that slowing down; as a matter of fact, I see that's probably going to accelerate into 2021. So we're seeing everything from a fractured condo deal to property portfolios.

Okay, great. That makes sense. And then maybe just giving your commentary about not participating in the low cap rate environment; I mean, you mentioned maybe targeting some developer owned property with some lease up risk, but would that also indicate maybe you're looking at some assets with a bit more value add than maybe what you've done in your most recent deals?

Probably not. Our view of value-add right now is it's a good time to be a seller of value-add properties. It's very – I think it's very easy to – I think it's relatively easy to underwrite to increased economics for value add and it's much tougher to execute upon those increased economics. So if I'm looking at hedge debt of call it 2.5% and walking into the back of a three to five year increase in interest rates, that's going to drive potentially drive cap rates. I really want to run the quality all day long, which so with that said, if you look at the last call it six or seven acquisitions, we've done, they've all been new assets and they've all been strategically located. I don't think there is any signs that BSR is going to stop doing

Okay, makes sense. And the just looking at one of the more recent acquisitions on Vale, just how's the leasing program going there?

Blake?

Hey, Kyle, this is Blake. Going really well. We're least at 75% as of today. Our budget called for 55%. We are reaching the pro forma of lease ranks, where actually a little ahead of that right now. Our traffic's great and really, really doing well.

Okay. Great to hear. And then just the last one for me, maybe a little higher level, just curious on your thoughts on the 10/31 exchange program under the new administration, any chance that we see any changes there or just your general,

Hi Kyle. Before Dan answered that question, I would want to add too also that Satori, which was one of our first properties that we took on a lease-up, 97% of it is reaching the rents that we had projected.

Okay, Kyle. So this is Jon. And I'll take the 1031 question. And just we noted that there was discussion about that during the presidential election period. And this president, Biden has put all kinds of different priorities out in front of him, including just raising overall taxes much less than getting into the weeds on how they would raise taxes or do a wave of certain components of the real estate side. I will say this. The 1031 has been around since 1921 in some form or fashion. And since 1987, it's been the way that we're looking at it today. And it provided a great lift to the whole economic component of the U.S. economy. So to me I think that it's pretty far down that we'd say that this is going to go away or it's going to have a meaningful change, but we don't control that. And as far as we're concerned, we're going to continue conducting our business and utilizing 1031 as long as it's available, but we don't believe that it's going to be a something that's going to morph or go away due to one administration's discussion about it last presidential election. It was a good wording around good fodder for top speak, if you will, it’s good to be elected.

Okay, great. Thanks for all the color. I'll turn it back.

Thank you. Your next question comes from Joanne Chen with BMO. Joanne, please go ahead.

Hi, good morning everyone. Maybe just a quick follow-up on the acquisition side with respect to the $400 million acquisition in terms of given how competitive the pricing environment is, would you say that the kind of cap rate that you'd be looking at on those acquisitions probably in the low 4% range?

Yes, Joanne, this is Dan. I think it's fair at this time to give a range. Let me give you a 100 basis point range between 4% and 5%, the way that we look at cap rates, which might be different than the way that the rest of the market views.

Okay, that's helpful. But maybe just switching gears a little bit, I guess, on the maintenance CapEx side of things. How should we think about that the trend, I guess, in 2021, 2022 just given the significant shifts in the portfolio this year?

I'm sorry. You faded out for a second, Joanne. Did you asked about maintenance CapEx?

Yes. How should we think about that – that's a trend in 2021 and 2022 given the significant shifts in the portfolio this year?

Right, yes, we project around $430 a door-ish. That's going down a little bit maybe closer to, I would say, $375, based on the age of this new portfolio.

Okay. Okay. And I guess just this quarter, there was the weighted average cap rate on the portfolio comprised quite a bit just 4.9%. Can you talk maybe some of the drivers of that 30 bips move quarter-over-quarter? Was that mostly from acquisitions of some of the newer properties?

Yes, right. So for everybody's notice, the weighted average cap rate of our portfolio has been trending down and there's two reasons, right. We are buying properties with lower cap rates, yes. But we're also selling a lot of properties that have higher cap rates. So, it's a combination of those.

Right. Okay, thanks for that clarification and I'll pass it back. Thanks everyone.

Yes, thanks, Joanne.

Thank you, Joanne.

Thank you. We have a following question from Matt Logan with RBC. Matt, please go ahead.

Thank you and good morning.

Good morning, Matt.

Just wanted to touch on your disposition of Towne Park. When we think about the remaining assets in Northwest Arkansas, would those be something that you would consider selling? Any color there would be appreciated.

Matt, this is Jon. And Northwest Arkansas is certainly one of our target markets to grow in, but I will say this. The market has – they made an outrageous price from – our perspective for Towne Park. In that it was also Simada market debt that was with it. And when you look at the – look at cap rates that we received on the property, it was compelling to the point that we wanted to rotate that capital and put it back into where we do have scale and where this – where our platform could take advantage of the opportunities as Dan had discussed before. And we see the same thing for the remaining property, Mountain Ranch. I mean, if we look at the pricing being in that particular market, so just – I wouldn't be surprised if you ever saw it move out. Our strategy is a clustering strategy. And if we are growing, most likely we're going to take advantage of an opportunity to move our capital and put it where we can grow with scale.

Yes. This is Dan. I'm going to echo some of Jon's comments. And generally say, let's take that Towne Park up – that Towne Park acquisition or that disposition, I think it was 31.7, give or take. Now, I want to note there and I think we hit on it in some of the disclosure materials. The buyer in that transaction assumed a 10 year fixed rate 4.5% interest rate loan that carried with it at closing about a $5 million, I think its $5 million or $6 million pre-pay. So if you're looking at what that acquisition cap rate would look like all cash. You're looking at a four cap flat for Towne Park, right. And you have a buyer that assumed a lower levered loan at a high – at a way at a market interest rate. And that's what drove down some of that – some of that – that sales price on Towne Park. Now, even with Towne Park sales price at $31.7 million, let's call that a mid-5s exit cap. And when you're stacking the pre-pay on top of that $31.7 million, you're looking at a four. And when we decided to get in and anchor Northwest Arkansas as a core market for us, we saw the basic demographic trends, the net population growth, the AMR growth, the supply and demand mismatch. But if we're going to see assets trade at four cap in Northwest Arkansas, then I think it's just basic capital discipline that we would revisit our hold strategy there.

Makes total sense to me. Any thoughts on Oklahoma City at the moment?

None at this – this is Dan. No real – I mean, we've got tons of thoughts on them, but no real thoughts that are going to turn into tactics or strategies. We think the Oklahoma City NOI is what I would call pure. Our assets are pretty well capitalized there. We've acquired some of them post-IPO. And then I think if you really look at Oklahoma City performance during COVID, a big pillar of that economy has been hospitality since 2005. And the Oklahoma market performed well in the last year and a half though hospitality was one of the hardest hit factors of our economy in 2020. So we like the way the market – the way the city market, I guess, performed against some of those negative global macroeconomic trends. On a look forward, we hadn't seen much of any development in 2019 and 2020 in Oklahoma City. And I think some of our organic expectations this year and next make it kind of a quite pleasing market for us to have it to hold onto. With that said, we'll continue to be opportunistic.

Since, I guess, focus of the acquisitions is really Texas given positive dynamics. Oklahoma is moving along well. In terms of the NOI outlook, I guess, we've got 1%-ish rent growth, stable occupancy, and 54% margin. And correct me if I'm wrong, but with a 52% margin in 2020 and 53% in 2019, that should translate into some pretty healthy NOI growth here in the next year.

Yes, we think so. I mean, we – this is Dan. We spent the last year beating up on our competitors every quarter. We think we'll continue to do that in the next quarter we hope. And I think the motto of BSR's is we want to be able to control what we can control and we were real estate managers and real estate investors. So we're going to keep our heads down and we're going to continue to be excellent landlords and provide a great service and great properties in great locations for our residents and our employees. And I see no additional ingredients to apply. And I kind of see the person who is putting a look back. And I would expect this to continue to perform and outperform when I look forward.

And Matt, this is Jon. Just I'll add on to that this speaks volume to our strategy and why we've been growing primarily in just Austin, Houston, and Dallas. The trend for population and economic growth is forecast by REIT, CoStar, all the different outlets that are forecasting this type of growth going forward is way, way outpacing the other markets where we had existed. And we're going to continue to take advantage of any type of opportunity to have rotated. And we're extremely pleased that we have rotated within lower cap rate spread compression between our secondary and our primary markets.

Absolutely. And maybe just one quick question for me before I turn it back, can you give us a sense for what you're seeing for indicative interest rates these days?

Yes, sure. This is Dan again. So this is a topic majority of the run-up and rates that we've seen carries between years three and 10 on the curve. So the premium to finance what generally sit in those areas, the premium to per hedging against the curve right now is virtually non-existent between years one and three, which generally follows current that thinking on short term rates. I think for BSR, we'll likely look to hedge our future debt obligations to the usage of caps. And we'll just say a 25 basis point cap purchase in lieu of swaps. This will enable the REIT to enjoy current short low term LIBOR rates while protecting our investors from the potential of rising rates beyond 2023. Right now, if I'm going to look at spot money, five-year, five-year money probably looks like 2.5 to 2.75 leverage dependent, and 10-year money probably sits around just a hair south, 3.5.

Great commentary. Appreciate it. I will turn the call back. Next.

Thank you, Matt.

Thank you. Your next question comes from Yash with Laurentian Bank. Yash, please go ahead.

Good morning.

Hi, good morning.

Hi, Yash.

Are you guys modeling any specific number for your selling property NOI growth and FFO per unit growth given what you know what is happening in your markets?

I believe you were asking what are we modeling for same property NOI growth.

What's your model is spitting out based on your margin assumptions and rent growth, you said about 2%?

Yes, we're looking currently at 1% to 2% – we always – which is quite a bit more than our competitors and a lot of theirs is down in the Sunbelt. But we are always looking to beat that more, but at the current time that's what we're modeling.

Right, okay. And on your FFO per unit growth, how do you guys think about the FFO per unit growth this new portfolio that you have put together and given the rent growth you're seeing. What kind of FFO per unit growth do you think you can achieve over the next say five years?

Well, five years – this is Dan. Five years is a long time. And if I was ever accurate on a five-year look back then I should get more than a trophy. But I mean if we're really looking, I would say, now more than ever capital discipline and discipline and underwriting is so important, right. So if I look at last year the team looked at 107 acquisitions and any one of those 107 acquisitions would have been a great asset to the REIT. That's about 35,000 suites. It's a collective asset value of $6.5 billion and the average asking price of what we looked at was about $59 million, average age of construction was about 2011. And you saw, we bought five, or we bought six. That penetration rate of about 5% to 6% is what we like to see every single year. We can only coach to that. We look at that number and it's a good bellwether number for us to know whether we're reaching on acquisitions or not. Now, if we look back again and dig through our discipline a little bit more, we like to see 75 basis point cap rate expansion on a three year look back. I don't see any reason why we can't continue that trend of call it a three-year look back turning into NOI and FFO growth of 75 basis point expansion. Now with that said, there could be a couple of curve balls in our market. We've said last year of some flat to declining – flat to declining rent AMR numbers, right. Now, our markets continue to lead the nation and population growth, job growth, right, and in some cases rent growth. So when I'm looking at and modeling some Austin acquisitions, I'm looking at potentially a 9% to an 11% organic growth from new constructions and AMR in the year 2022. Now that's not going to chase buy cap down, but it may afford the REIT the opportunity to meet and exceed that 75 basis point look back cap rate number that we generally model to. As we go out five years as – and as I said earlier, I think there is a lot of premium built into years three and five on that – on the borrowing spreads. So there – it creates a little bit more uncertainty. So I think if we continue to focus on what we can control and buy these assets in the right sub-markets and the right markets, the other aspects of real estate investment will take care of themselves.

Dan, you know, something that I feel like I talk about every call, but I think it's really, really important to think about is that when you just pull up the information on cities and you're looking at the overall rental growth, right, so the occupancy rates, it's really important to look at the sub markets. I mean, Houston, I mean, we've owned properties that are 60 miles apart from the main city. And these sub markets and Dan does a fabulous job at this. And something that Dan and me look at when we're putting together our projections every year as we go through and we literally look at the projections by three different forecasters what the rates are going to look like for the coming year. And you can't just stress is, again. You can't just look at the overall city; you've got to look at the sub markets. And I think that's been one of our biggest strengths is buying in the right areas at the right time.

Blake brings up a good point. This is Dan. I mean, let's take Austin as a snapshot as of December 2020. On a look back, for the entire MSA, I'm seeing a negative 3.2% average rent performance for 2020, right. And I'm seeing occupancy reduced year-over-year by 4.2% in that market. A lot of that's driven by the 17,000 to 18,000 units in lease-up and the 21,000 units under construction. So there's some supply chain issues there. Now with that said, let's take a snapshot of where BSR owns in Austin. All right. In South Austin at Cielo and that's our – we have two assets in South Austin in Hays County. Now Hays County was the highest performing sub market in 2020 in Austin. It demonstrated rent growth of 3%. Now I want to point out here that only five of the 23 sub markets in Austin last year had positive rent growth, Hayes County was one of them, BSR has two properties there, and we told you exactly what was going to happen when we bought them. Now, the second, and third, and fourth assets we own in Austin are North Austin. That's up in Williamson County. Now, Williamson County was the only sub market out of all 23 of those sub markets that witnessed not only positive rent, but also occupancy growth in the fourth quarter. And it's 2% and 4% respectively. But for the year as well, where we saw a rent growth to 2% and 6% occupancy grow. So I think you can drive two things. Number one, we like to be in the right sub markets; but number two, that's kind of indicative of that suburban growth in urban slack that we saw last year, we saw some of the migration out to more of affordable apartments with better amenities in the – we'll call it the donuts around an urban MSA.

And going back to what I said, probably in my first question, I think, to tackle on Dan, what we're seeing on these not same-store assets is the performance is in each instance, either right on top of what we were thinking, and you just heard me reference Vale. We were performing 55% at this time where it's 75% now. So, we feel really, really good and over the next year about where these assets are going to take the portfolio.

Okay, that's great color. Thank you.

Thank you. There are no further questions at this time. Please proceed.

All right. Well, that concludes our call this morning. And thank you for your interest in BSR REIT. And we look forward to speaking with you again, as we report our first quarter 2021 results. God bless everyone.

Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you. Please disconnect your lines.