Minto Apartment REIT First Quarter 2019 Financial Results Exceed Forecast

May 7, 2019 From Minto Apartment REIT

REIT continues to generate strong growth from acquisitions, gain-to-lease activities and
repositioning of suites

OTTAWA, May 7, 2019 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the first quarter ended March 31, 2019 ("Q1 2019"). The REIT acquired its initial property portfolio on July 2, 2018 and completed its Initial Public Offering (the "IPO") the following day. Accordingly, the results for Q1 2019 are presented in comparison with the financial forecast for the three months ended March 31, 2019 (the "Forecast") included in the REIT's IPO prospectus dated June 22, 2018. Condensed Interim Financial Statements and Management's Discussion and Analysis (MD&A) for Q1 2019 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.

Q1 2019 Highlights

  • Total revenue in Q1 2019 was $22.1 million, 8.5% above the Forecast of $20.4 million; same property revenue was $21.0 million, 2.7% above Forecast;
  • Net Operating Income ("NOI")1 of $13.3 million was 14.3% higher than the Forecast of $11.6 million; same property NOI1 was $12.4 million, 6.4% higher than the Forecast;
  • NOI1 margin was 60.1%, which exceeded the 57.1% Forecast by 300 basis points; same property NOI1 margin was 59.2%, 210 basis points above Forecast;
  • Funds from Operations ("FFO")1 of $7.3 million, or $0.1993 per unit2, was 13.1% above the Forecast of $6.5 million, or $0.1762 per unit2.
  • Adjusted Funds from Operations ("AFFO")1 of $6.1 million, or $0.1661 per unit2, exceeded the Forecast of $5.3 million, or $0.1433 per unit2, by 15.9%;
  • The REIT declared distributions totaling $0.10248 per unit2 for Q1 2019;
  • The AFFO1 payout ratio for Q1 2019 was 61.7% compared with the Forecast of 71.5%;
  • Occupancy of available unfurnished suites as at March 31, 2019 was 98.7% versus the Forecast of 96.4%; same property occupancy was 98.8%;
  • Average monthly rent as at March 31, 2019, excluding furnished and/or unoccupied suites, was $1,417 per suite compared to the Forecast of $1,399 per suite;
  • Debt to Gross Book Value ("Debt-to-GBV")1 as at March 31, 2019 was 47.4%;
  • Subsequent to quarter-end, on April 4, 2019, the REIT announced agreements to acquire 50% interests in two high quality multi-residential rental properties: Rockhill, a six building property comprising 1,004 suites in Montreal, and Leslie/York Mills, a three building property comprising 409 suites in Toronto, for a cumulative total of approximately $209 million; the Rockhill acquisition closed May 7, 2019 and the Leslie/York Mills acquisition closed May 1, 2019; and
  • On April 4, 2019, the REIT also announced an agreement to issue 7,660,000 trust Units from treasury at a price of $19.60 per Unit to a syndicate of underwriters, and granted the underwriters an over-allotment option to purchase up to an additional 1,149,000 trust Units at the offering price; on April 15, 2019, the REIT closed the sale of 8,809,000 trust Units for gross proceeds of approximately $173 million, which included the full exercise of the over-allotment option.

1

NOI, FFO, AFFO and Debt-to-GBV are non-IFRS financial measures. See, "Non-IFRS Financial Measures" in this news release.

2

Includes REIT Units and Class B LP units of Minto Apartment Limited Partnership, which are exchangeable for REIT Units on a one-for-one basis.

 

"In the first quarter of 2019, the REIT produced strong financial results, while successfully pursuing acquisitions that both position us with immediate scale in the attractive Montreal rental market and increase our exposure in the strong Toronto market," said Michael Waters, the REIT's Chief Executive Officer. "Our same property revenue and NOI exceeded the Forecast for the period while the acquisitions increased our suite count by 31%. The acquisition of Leslie/York Mills also underlines the benefit of the REIT's relationship with the Minto Group and its robust pipeline."

Q1 2019 Financial Summary

($000's except per Unit amounts)



Actual


 Forecast



Three months ended


March 31, 2019


March 31, 2019


Variance

Revenue from investment properties


$22,135


$20,402


8.5%

Property operating costs


4,230


4,158


(1.7%)

Property taxes


2,398


2,320


(3.4%)

Utilities


2,197


2,275


3.4%

NOI1


$13,310


$11,649


14.3%

NOI1 margin (%)


60.1%


57.1%


300 bps

Same property revenue


$20,953


$20,402


2.7%

Same property NOI1


$12,398


$11,649


6.4%

Same property NOI1 margin (%)


59.2%


57.1%


210 bps

Net income (loss)


($18,669)


$4,121


NM

FFO1


$7,318


$6,471


13.1%

FFO1 per unit2


$0.1993


$0.1762


13.1%

AFFO1


$6,100


$5,264


15.9%

AFFO1 per unit2


$0.1661


$0.1433


15.9%

Distributions declared per unit2


$0.10248


$0.10248


-

AFFO1 payout ratio


61.70%


71.50%


981 bps

 

Q1 2019 Operating Results
Revenues in Q1 2019 totalled $22.1 million, compared to the Forecast of $20.4 million. The 8.5% positive variance was primarily attributable to the contribution from properties acquired in Calgary in the fourth quarter of 2018 and the first quarter of 2019, higher rents achieved on suite turnovers and other new leases, as well as higher occupancy. As at March 31, 2019, occupancy in the REIT's available unfurnished portfolio was 98.7% and average monthly rent was $1,417 per occupied unfurnished suite. This compares with an average monthly rent in the Forecast of $1,399 per occupied unfurnished suite and occupancy of 96.4%.

NOI1 for Q1 2019 totalled $13.3 million, representing 60.1% of revenue, which was 14.3% above the Forecast of $11.6 million, or 57.1% of revenue. The increase over Forecast was primarily related to the stronger revenue referenced above, particularly the property acquisitions, in addition to lower than expected utility expenses.

On a same property basis, revenue increased 2.7% to $21.0 million, reflecting higher than expected occupancy and higher rents achieved on new leases, as well as revenue earned from the furnished suites. Same property NOI1 increased 6.4% to $12.4 million as a result of higher revenues and lower than expected utility expenses.

FFO1 in Q1 2019 was $7.3 million, or $0.1993 per unit2, compared to the Forecast of $6.5 million, or $0.1762 per unit2. The 13.1% outperformance primarily reflected the positive NOI1 variance. AFFO1 was $6.1 million in Q1 2019, or $0.1661 per unit2, compared with the Forecast of $5.3 million, or $0.1433 per unit2. The 15.9% positive variance over the Forecast primarily reflected the higher-than-Forecast FFO1.

The REIT declared cash distributions totaling $0.10248 per unit2 for Q1 2019, in line with the Forecast, which represented an AFFO1 payout ratio of 61.7%, compared with the Forecast of 71.5%.

The REIT reported a net loss for the period of $18.7 million, compared to the Forecast profit of $4.1 million. The variance was primarily a result of a $37.3 million non-cash charge related to the change in the fair value of outstanding Class B LP units.

In the first quarter of 2019, the REIT continued to generate organic growth through gain-to-lease activities. During this period, the REIT signed 247 new leases that increased average monthly rent on the leased suites by 8.4%, resulting in an increase in annualized revenue of $0.4 million. Management currently estimates that its portfolio has a further 4,234 suites with an average 9.7% gain-to-lease potential, representing future annualized embedded gain-to-lease revenue of approximately $7.0 million.

The REIT also continued to advance its repositioning program in Q1 2019, repositioning 8 suites at Minto Yorkville in Toronto and 13 suites in its Edmonton portfolio. The REIT has a further 67 suites remaining to be repositioned at Minto Yorkville and 124 suites in its Edmonton portfolio. In addition, the repositioning plans were completed for two Ottawa properties, including 191 suites at Carlisle and 176 suites at Castle Hill.

Balance Sheet
As of March 31, 2019, the REIT had total debt outstanding of $611.2 million, with a weighted average interest rate of 3.17% and a weighted average term to maturity of 6.01 years for its fixed-rate term debt. The Debt-to-GBV1 ratio at quarter-end was 47.4%. The REIT noted that following the closings of the acquisitions of Rockhill and Leslie/York Mills and of the Unit offering, all of which occurred subsequent to quarter-end, its Debt-to-GBV1 ratio is approximately 45%.

The total number of REIT Units outstanding as at March 31, 2019 was 15,863,100, which increased subsequent to quarter-end to 24,672,100 following closing of the offering on April 15, 2019. In addition, there were 20,859,410 Class B LP Units outstanding, which are exchangeable into REIT Units on a one-for-one basis.

Conference Call
Michael Waters, Chief Executive Officer, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, May 8th, 2019 at 10:00 am ET. The dial-in numbers for participants are 416-764-8688 or 888-390-0546. In addition, the call will be webcast live at:
https://event.on24.com/wcc/r/1977976/DE3BE13E1B9D4ED8063B77A304FFDFB0 

A replay of the call will be available until Wednesday, May 15, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 044575 #). A transcript of the call will be archived on the REIT's website.

Annual General Meeting of Unitholders
The REIT's Annual General Meeting of Unitholders will take place on Thursday, May 23, 2019 at 11:00 am ET. The meeting will be held at KPMG LLP, 150 Elgin Street, Suite 1800, Ottawa, Ontario.

About Minto Apartment Real Estate Investment Trust
Minto Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario to own income-producing multi-residential properties located in urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa, Calgary and Edmonton. For more information on Minto Apartment REIT, please visit the REIT's website at: www.mintoapartments.com/.

Forward-Looking Information
This news release may contain forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will" and "expected". 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. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risks and Uncertainties" in the REIT's Management Discussion & Analysis dated May 7, 2019 (the "Q1 2019 MD&A"), which is available on SEDAR (www.sedar.com). 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.

Non-IFRS Financial Measures
This news release contains certain financial measures which are not defined under International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. NOI, FFO and AFFO are key measures of performance used by the REIT's management and real estate businesses, while Debt-to-GBV is a measure of financial position. These measures, as well as any associated "per unit" amounts, are not defined by IFRS and do not have standardized meanings prescribed by IFRS, and therefore should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS. The REIT believes that AFFO is an important measure of earnings performance, while NOI and FFO are important measures of operating performance of real estate businesses and properties and Debt-to-GBV is an important measure of financial leverage. The IFRS measurement most directly comparable to NOI, FFO and AFFO is net income. See the REIT's Q1 2019 MD&A for further discussion of these non-IFRS financial measures and for a reconciliation of NOI, FFO and AFFO to net income.

SOURCE Minto Apartment Real Estate Investment Trust

more recent news