Minto Apartment REIT Reports First Quarter 2020 Financial Results Highlighted by Strong Growth in Revenue and Net Operating Income

May 6, 2020 From Minto Apartment REIT

— Maintains strong balance sheet during period of economic uncertainty —

OTTAWA, May 6, 2020 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the first quarter ended March 31, 2020 ("Q1 2020"). The Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q1 2020 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.


Q1 2020 Highlights

  • Total revenue was $31.5 million, an increase of 42.4% from the three months ended March 31, 2019 ("Q1 2019"); same property revenue2 of $22.8 million increased 3.1% from Q1 2019;
  • Net Operating Income ("NOI")1 was $19.5 million, an increase of 46.4% from Q1 2019; same property NOI1,2 of $13.9 million increased 4.7% from Q1 2019;
  • NOI1 margin was 61.8%, an increase of 170 basis points ("bps") from Q1 2019; same property NOI1,2 margin was 61.1%, 100 bps higher than Q1 2019;
  • Net income and comprehensive income was $87.9 million, compared to a net loss and comprehensive loss of $18.7 million in Q1 2019;
  • Funds from Operations ("FFO")1 increased by 65.6% to $12.1 million, compared to $7.3 million in Q1 2019; FFO1 per unit3 increased by 3.0% to $0.2052 per unit3, compared to $0.1993 in Q1 2019;
  • Adjusted Funds from Operations ("AFFO")1 increased by 73.1% to $10.6 million, compared to $6.1 million in Q1 2019; AFFO1 per unit3 increased by 7.6% to $0.1788, compared to $0.1661 in Q1 2019;
  • The REIT declared distributions during the quarter totaling $0.1100 per unit3 compared to $0.1025 per unit3 in Q1 2019, an increase of 7.3%;
  • The Q1 2020 AFFO1 payout ratio was 61.5%, compared to 61.7% a year earlier;

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1 

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

2 

The same property portfolio consists of 24 multi-residential rental properties comprising an aggregate of 4,552 suites that are wholly owned by the REIT for
equivalent periods in 2020 and 2019. A total of 240 of these suites operate as furnished suites.

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.

  • Occupancy of available unfurnished suites as at March 31, 2020 was 97.3%, compared to 98.7% as at March 31, 2019; same property occupancy2 as at March 31, 2020 was 97.2%, compared to 98.7% as at March 31, 2019;
  • Average monthly rent as at March 31, 2020, excluding furnished and/or unoccupied suites, was $1,599, an increase of 12.8% compared to $1,417 as at March 31, 2019; average monthly rent for the same property portfolio2, excluding furnished and/or unoccupied suites, was $1,501 as at March 31, 2020, an increase of 5.9% compared to $1,417 as at March 31, 2019;
  • On March 31, 2020, the REIT completed a $100 million mortgage financing secured by one of its Ottawa properties, adding significantly to the REIT's liquidity;
  • Debt to Gross Book Value ("Debt-to-GBV")1 as at March 31, 2020 was 42.6%, compared to 39.3% at 2019 year end. Subsequent to Q1 2020, on April 3, 2020, the REIT used the proceeds from the $100 million mortgage financing completed on March 31, 2020 to repay amounts outstanding on the REIT's revolving credit facility and its Debt-to-GBV decreased to 39.8%;
  • Subsequent to Q1 2020, on April 16, 2020, the REIT provided an operational update related to the impact of COVID-19. The REIT announced that its rent collections for the month of April 2020 were consistent with its normal collection cycle, and that it is not implementing at this time any rent increases that were scheduled to come into effect in April, May, or June. The REIT also announced that it has created deferred rental payment plans for tenants that are unable to pay as a result of the pandemic.
  • Subsequent to Q1 2020, occupancy of available unfurnished suites as at April 30, 2020 was 96.8% compared to 98.8% as at April 30, 2019. May 2020 occupancy continues to be strong and as at May 5, 2020 the REIT has received collections of more than 90% of its May rents and are in line with normal collection patterns.

During Q1 2020, the REIT continued to generate significant organic growth through gain to lease activities. The REIT signed 353 new leases of unfurnished suites during the quarter that increased average monthly rent on the leased suites by 13.6%, resulting in an increase in annualized revenue by approximately $0.8 million. Management estimates that the REIT's portfolio holds an embedded gain-to-lease potential in its unfurnished suite portfolio of 13.5%, representing future annualized embedded potential revenue of approximately $14.7 million.

The REIT also continued to productively deploy capital through its repositioning program in Q1 2020, repositioning a total of 71 suites across its portfolio. The REIT has 2,039 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 is in the process of developing repositioning plans for the recently acquired Haddon Hall and Le 4300 properties in Montreal.

"We capitalized on strong rental market conditions in Toronto, Ottawa and Montreal during the first quarter of 2020, generating solid growth in all of our key financial metrics," said Michael Waters, the REIT's Chief Executive Officer and President. "Obviously, the economic outlook shifted very significantly in March due to the impact of COVID-19. Fortunately, the REIT has a strong financial position, with current liquidity, as at May 5, 2020, of $198.5 million through a combination of cash on hand and availability on our credit facility. While the financial impact from the virus has not been material to the REIT to date, we are continuing to monitor the situation closely and are committed to working with our tenants during this difficult period."

Q1 2020 Financial Summary

($000's except per unit amounts)

Three months ended

March 31, 2020

March 31, 2019

Variance

Revenue from investment properties

$

31,525

$

22,135

42.4%

Property operating costs

5,783

4,230

(36.7)%

Property taxes

3,420

2,398

(42.6)%

Utilities

2,833

2,197

(28.9)%

NOI1

$

19,489

$

13,310

46.4%

NOI1 margin (%)

61.8%

60.1%

170 bps

Same property revenue2

$

22,821

$

22,135

3.1%

Same property NOI1,2

13,937

13,310

4.7%

Same property NOI1,2 margin (%)

61.1%

60.1%

100 bps

Net income (loss) and comprehensive income (loss)

$

87,944

$

(18,669)

571.1%

FFO1

$

12,117

$

7,318

65.6%

FFO1 per unit3

$

0.2052

$

0.1993

3.0%

AFFO1

$

10,558

$

6,100

73.1%

AFFO1 per unit3

$

0.1788

$

0.1661

7.6%

Distributions declared per unit3

$

0.1100

$

0.1025

7.3%

AFFO1 payout ratio

61.5%

61.7%

(20) bps


Q1 2020 Operating Results

Revenue in Q1 2020 totaled $31.5 million, an increase of 42.4% from $22.1 million in Q1 2019. The increase was primarily attributable to the contribution from the five property acquisitions the REIT completed subsequent to Q1 2019, in addition to higher rental rates.

As at March 31, 2020, occupancy in the REIT's available unfurnished suite portfolio was 97.3% and average monthly rent was $1,599 per occupied unfurnished suite. That compares to occupancy of 98.7% and average monthly rent of $1,417 per occupied unfurnished suite as at March 31, 2019.

NOI1 for Q1 2020 totaled $19.5 million, representing 61.8% of revenue, an increase of 46.4% from $13.3 million, or 60.1% of revenue, in Q1 2019. The increase reflects higher NOI1 for the same property portfolio2 and the contribution from the property acquisitions completed subsequent to Q1 2019, comprising a total of 2,691 suites (1,531 suites at the REIT's proportionate share).

Same property revenue2 increased 3.1% to $22.8 million in Q1 2020, compared to $22.1 million in Q1 2019, reflecting higher rents achieved on new leases, higher revenue earned from repositioned suites, and increased parking revenue due to new initiatives such as paid visitor parking. Same property NOI1,2 increased 4.7% in Q1 2020 to $13.9 million, or 61.1% of revenue, compared to $13.3 million, or 60.1% of revenue, in Q1 2019. The increase in same property portfolio NOI1,2 was attributable to higher rents achieved on suite turnover and repositioning compared to Q1 2019, as well as lower utility expenses. These positive factors were partially offset by higher property taxes and lower incremental income from furnished suites.

FFO1 in Q1 2020 was $12.1 million, or $0.2052 per unit3, compared to $7.3 million, or $0.1993 per unit3, in Q1 2019. The 65.6% increase in FFO1 in Q1 2020 primarily reflected the positive NOI1 variance. AFFO1 was $10.6 million in Q1 2020, or $0.1788 per unit3, compared to $6.1 million, or $0.1661 per unit3, in Q1 2019. The 73.1% positive variance in AFFO1 for Q1 2020 primarily reflected the higher FFO1, partially offset by an increase in the maintenance capital expenditure reserve due to the REIT's increased suite count.

The REIT declared cash distributions totaling $0.1100 per unit3 for Q1 2020, representing an AFFO1 payout ratio of 61.5%. Cash distributions of $0.1025 per unit3 were declared in Q1 2019, representing an AFFO1 payout ratio of 61.7%.

The REIT reported net income and comprehensive income for Q1 2020 of $87.9 million, compared to a net loss and comprehensive loss of $18.7 million in Q1 2019. The positive variance in Q1 2020 was primarily attributable to higher NOI1 and a fair value gain on Class B LP Units of Minto Apartment Limited Partnership of $83.1 million, partially offset by a fair value loss on an interest rate swap of $2.3 million, and higher finance costs.

Balance Sheet

As of March 31, 2020, the REIT had total debt outstanding of $923.4 million, with a weighted average interest rate of 3.15% and a weighted average term to maturity of 5.72 years for its fixed-rate term debt. The Debt-to-GBV1 ratio was 42.6%. Subsequent to quarter end, on April 3, 2020, the REIT used available cash-on-hand to pay down amounts outstanding on its revolving credit facility, which reduced its Debt-to-GBV1 ratio to 39.8%.

Conference Call

Michael Waters, Chief Executive Officer and President, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Thursday, May 7, 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://produceredition.webcasts.com/starthere.jsp?ei=1299623&tp_key=a96506a7ce

A replay of the call will be available until Thursday, May 14, 2020. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 457755 #). A transcript of the call will be archived on the REIT's website.

Annual and Special Meeting

An Annual and Special Meeting of the unitholders of the REIT will be held virtually via live audio webcast on Wednesday, May 27, 2020 at 11:00 a.m. (Eastern Daylight Time). This year, out of an abundance of caution, to proactively deal with the unprecedented public health impact of the novel coronavirus ("COVID-19") pandemic and to mitigate risks to the health and safety of the REIT's communities, unitholders, employees and other stakeholders, the meeting will be in a virtual-only format, which will be conducted via live audio webcast over the Internet. Unitholders will have an equal opportunity to participate at the meeting online regardless of their geographic location. Unitholders who choose to attend the meeting will do so by accessing a live audio webcast of the meeting via the Internet by visiting www.virtualshareholdermeeting.com/MI2020. For more details go to www.sedar.com.

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 May 6, 2020 (the "Q1 2020 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 Q1 2020 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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