Minto Apartment REIT Generates Solid Fourth Quarter 2019 Financial Results Driven by Continued Organic and External Growth

March 10, 2020 From Minto Apartment REIT

— Substantial growth in total revenue and same property NOI1

OTTAWA, March 10, 2020 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the fourth quarter and year ended December 31, 2019 ("Q4 2019" and "FY 2019", respectively). The financial results for Q4 2019 are being presented in comparison with the results for the three months ended December 31, 2018 ("Q4 2018"). The FY 2019 results are presented in this news release without a year-over-year comparison, as the REIT has only a partial year of comparable period results in 2018, having acquired its initial property portfolio on July 2, 2018. Audited Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for Q4 2019 and FY 2019 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.


Q4 2019 Highlights

  • Total revenue was $29.9 million, an increase of 39.7% from Q4 2018; same property revenue2 of $22.1 million increased 3.5% from Q4 2018;
  • Net Operating Income ("NOI")1 was $18.6 million, an increase of 42.9% from Q4 2018; same property NOI1,2 of $13.8 million increased 6.6% from Q4 2018;
  • NOI1 margin was 62.3%, an increase of 140 bps from Q4 2018; same property NOI1,2 margin was 62.7%, 180 bps higher than Q4 2018;
  • Net income and comprehensive income was $19.7 million, an increase of 21.5% from Q4 2018;
  • Funds from Operations ("FFO")1 increased by 42.9% year-over-year to $11.7 million; FFO1 per unit3 was $0.1997, compared to $0.2236 in Q4 2018;
  • Adjusted Funds from Operations ("AFFO")1 increased 58.3% year-over-year to $10.2 million; AFFO1 per unit3 was $0.1738, compared to $0.1757 in Q4 2018;
  • The REIT declared distributions during the quarter totaling $0.1100 per unit3 compared to $0.1025 per unit3 in Q4 2018, an increase of 7.3%;
  • The Q4 2019 AFFO1 payout ratio was 63.3%, compared to 58.3% a year earlier;
  • Occupancy of available unfurnished suites as at December 31, 2019 was 98.0%, compared to 98.8% as at December 31, 2018; same property occupancy2 as at December 31, 2019 was 97.9%, compared to 98.8% as at December 31, 2018;
  • Average monthly rent as at December 31, 2019, excluding furnished and/or unoccupied suites, was $1,579, an increase of 12.6% compared to $1,402 as at December 31, 2018; average monthly rent for the same property portfolio2, excluding furnished and/or unoccupied suites, was $1,486 as at December 31, 2019, an increase of 5.6% compared to $1,407 as at December 31, 2018;
  • Debt to Gross Book Value ("Debt-to-GBV")1 as at December 31, 2019 was 39.3%, down from 43.2% as at September 30, 2019;
  • On October 22, 2019, the REIT issued 9,850,000 trust Units from treasury on a bought deal basis (the "Offering") at a price of $22.85 per Unit for net proceeds of approximately $215.4 million;
  • On November 20, 2019, the REIT acquired Le 4300 and Haddon Hall, two multi-residential properties in Montreal, Quebec comprising 528 suites, for a combined purchase price of approximately $281.1 million;
  • On November 20, 2019, the REIT enhanced its liquidity by amending its revolving credit facility, increasing the limit from $150 million to $200 million;
  • On November 25, 2019, the REIT issued an additional 856,280 trust Units from treasury pursuant to the over-allotment option granted to the underwriters in the Offering, generating net proceeds of approximately $18.8 million; and
  • During the fourth quarter, the REIT advanced $19.7 million to an affiliate of Minto Properties Inc. for the redevelopment of Fifth and Bank in Ottawa into a mixed-use multi-residential rental and retail property. The loan bears interest at 6% per annum, matures in March 2022 and is subordinate to senior construction financing.













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

2 The same property portfolio represents the initial 22 properties, comprising 4,283 suites (including 4 additional suites converted from underutilized space), acquired at the time of the REIT's initial public offering. It does not include the Kaleidoscope property in Calgary that was purchased on December 18, 2018 as the 13 days of results from this property in 2018 are not material to the analysis.

3 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.

 

"We ended 2019 on a high note, generating strong organic and external growth in the fourth quarter," said Michael Waters, the REIT's Chief Executive Officer. "We reported impressive 12.9% rental growth on new leases signed, the second highest quarterly level in the REIT's history, despite challenging rental market conditions in Alberta and typical weaker seasonal demand. That result highlights the sustained strength of the Toronto, Ottawa and Montreal rental markets. We also generated substantial value through asset repositioning in the fourth quarter, and further upgraded our portfolio with the additions of Le 4300 and Haddon Hall in Montreal. Overall, 2019 was a highly successful year for the REIT. Strong growth in net operating income helped to drive a 17.2% increase in the REIT's net asset value1 during the year. With our outstanding portfolio, experienced team and strong rental market conditions across most of our portfolio, we are well positioned to continue capitalizing on growth opportunities while generating excellent returns for our unitholders."

Q4 2019 Financial Summary

($000's except per unit amounts)

Three months ended

December 31, 2019

December 31, 2018

Variance

Revenue from investment properties

$

29,868

$

21,377

39.7%

Property operating costs

5,794

4,253

(36.2)%

Property taxes

3,105

2,249

(38.1)%

Utilities

2,356

1,853

(27.1)%

NOI1

$

18,613

$

13,022

42.9%

NOI1 margin (%)

62.3%

60.9%

140 bps

Same property revenue2

$

22,083

$

21,329

3.5%

Same property NOI1,2

13,846

12,984

6.6%

Same property NOI1,2 margin (%)

62.7%

60.9%

180 bps

Net income and comprehensive income

$

19,708

$

16,217

21.5%

FFO1

11,737

8,211

42.9%

FFO1 per unit3

$

0.1997

$

0.2236

(10.7)%

AFFO1

$

10,212

$

6,453

58.3%

AFFO1 per unit3

$

0.1738

$

0.1757

(1.1)%

Distributions declared per unit3

$

0.1100

$

0.1025

7.3%

AFFO1 payout ratio

63.3%

58.3%

500 bps


 

Q4 2019 Operating Results

Revenue in Q4 2019 totaled $29.9 million, an increase of 39.7% from $21.4 million in Q4 2018. The increase was primarily attributable to the contribution from properties acquired in Toronto, Montreal and Calgary during the year, and higher rental rates.

As at December 31, 2019, occupancy in the REIT's available unfurnished suite portfolio was 98.0% and average monthly rent was $1,579 per occupied unfurnished suite. This compares to occupancy of 98.8% and average monthly rent of $1,402 per occupied unfurnished suite as at December 31, 2018.

NOI1 for Q4 2019 totaled $18.6 million, representing 62.3% of revenue, an increase of 42.9% from $13.0 million, or 60.9% of revenue, in Q4 2018. The increase reflects higher NOI1 for the same property portfolio2 and the contribution from 2019 property acquisitions in Toronto, Montreal and Calgary comprising a total of 2,890 suites.

Same property revenue2 increased 3.5% to $22.1 million in Q4 2019, compared to $21.3 million in Q4 2018, reflecting higher rents achieved on new leases and higher revenue earned from repositioned suites. Same property NOI1,2 increased 6.6% in Q4 2019 to $13.8 million, or 62.7% of revenue, compared to $13.0 million, or 60.9% of revenue, in Q4 2018. The increase in same property portfolio NOI1,2 was attributable to higher rents achieved on suite turnover and repositioning and lower utility expenses compared to Q4 2018.

FFO1 in Q4 2019 was $11.7 million, or $0.1997 per unit3, compared to $8.2 million, or $0.2236 per unit3, in Q4 2018. The 42.9% increase in FFO1 in Q4 2019 primarily reflected the positive NOI1 variance. AFFO1 was $10.2 million in Q4 2019, or $0.1738 per unit3, compared to $6.5 million, or $0.1757 per unit3, in Q4 2018. The 58.3% positive variance in AFFO1 for Q4 2019 primarily reflected the higher FFO1, as well as an adjustment for the gain on retirement of debt in 2018, partially offset by an increase in maintenance capital expenditure reserve as a result of the REIT's increased suite count. The declines in FFO1 per unit3 and AFFO1 per unit3 in Q4 2019 reflected the impact of the issuance of approximately 10.7 million trust Units from treasury in October and November 2019 for the acquisitions of Le 4300 and Haddon Hall. The positive impact of overall NOI growth was offset by lower leverage during the quarter and the timing difference between the October 2019 equity offering and the subsequent deployment of the proceeds.

The REIT declared cash distributions totaling $0.1100 per unit3 for Q4 2019, representing an AFFO1 payout ratio of 63.3%. Cash distributions of $0.1025 per unit3 were declared in Q4 2018, representing an AFFO1 payout ratio of 58.3%.

The REIT reported net income and comprehensive income for Q4 2019 of $19.7 million, an increase of 21.5% compared to $16.2 million for Q4 2018. The increase in net income for Q4 2019 was primarily attributable to the positive NOI1 variance and smaller non-cash loss from the change in fair value of Class B LP Units of Minto Apartment Limited Partnership compared to Q4 2018. This was partially offset by a smaller non-cash gain from the change in fair value of investment properties compared to Q4 2018, and higher finance costs.

In the fourth quarter of 2019, the REIT continued to generate significant organic growth through gain-to-lease activities. During this period, the REIT signed 300 new leases of unfurnished suites that increased average monthly rent on the leased suites by 12.9%, resulting in an increase in annualized revenue of approximately $0.6 million. Management estimates that the REIT's portfolio holds an embedded gain-to-lease potential in its unfurnished suite portfolio of 15.0%, representing future annualized embedded potential revenue of approximately $16.2 million.

The REIT also continued to productively deploy capital through its repositioning program in Q4 2019, repositioning a total of 67 suites across its portfolio. The REIT has a cumulative 2,110 suites remaining to be repositioned at the following properties: Minto Yorkville, Leslie York Mills, High Park Village, Carlisle, Castle Hill, Rockhill and the Edmonton portfolio. In addition, the REIT plans to reposition the majority of suites at Le 4300 and Haddon Hall.

FY 2019 Operating Results

FY 2019 revenues totaled $104.4 million. NOI1 was $65.3 million, representing 62.5% of revenue.

Same property revenue2 was $86.8 million for FY 2019. Same property NOI1,2 totaled $53.9 million, representing 62.1% of revenue.

FFO1 for FY 2019 was $39.6 million, or $0.8414 per unit3. AFFO1 was $34.1 million, or $0.7248 per unit.3

The REIT increased its monthly cash distribution by 7.3% commencing with its distribution for the month of August 2019. The REIT declared cash distributions totaling $0.4225 per unit3 for FY 2019, which represented an AFFO1 payout ratio of 58.6%.

Net income and comprehensive income for FY 2019 was $20.0 million. The net income was primarily attributable to NOI1 and a fair value gain on investment properties of $93.2 million, partially offset by a fair value loss on Class B LP Units of Minto Apartment Limited Partnership of $104.2 million and finance costs of $30.1 million.

During FY 2019, the REIT signed 1,424 new leases of unfurnished suites that increased average monthly rent on the leased suites by 12.9%, resulting in an increase in annualized revenue of approximately $2.9 million. The REIT also repositioned a total of 219 suites across its portfolio.

Balance Sheet

As of December 31, 2019, the REIT had total debt outstanding of $805.9 million, with a weighted average interest rate of 3.15% and a weighted average term to maturity of 5.97 years for its fixed-rate term debt. The Debt-to-GBV1 ratio at year end was 39.30%, significantly below the 43.2% level three months earlier.

Conference Call

Michael Waters, Chief Executive Officer, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, March 11, 2020 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/r2186124/0C77A44A8FDF1BAC21824FDC2489AF7A

A replay of the call will be available until Wednesday, March 18, 2020. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 215201 #). A transcript of the call will be archived on the REIT's website.

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 "expects". 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 March 10, 2020 (the "FY 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. 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. Net asset value is an important measure of value creation. 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 IFRS measurement most directly comparable to NOI, FFO and AFFO is net income. The IFRS measurement most directly comparable to net asset value is unitholders' equity. See the REIT's FY 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

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