Minto Apartment REIT Reports Strong Fourth Quarter 2018 Financial Results

March 19, 2019 From Minto Apartment REIT

Revenue, NOI and AFFO all exceed forecast

OTTAWA, March 19, 2019 /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, 2018 ("Q4 2018" and "FY 2018", respectively). 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 FY 2018 comprise the period from July 2, 2018 to December 31, 2018. The financial results for both Q4 2018 and FY 2018 are presented in comparison with the financial forecast (the "Forecast") included in the REIT's IPO prospectus dated June 22, 2018. Full Financial Statements for FY 2018 and Management's Discussion and Analysis (MD&A) for Q4 2018 and FY 2018 are available on the REIT's website at www.mintoapartments.com and at www.SEDAR.com.

Minto Apartment REIT (CNW Group/Minto Apartment Real Estate Investment Trust)

Q4 2018 Highlights

  • Total revenue in Q4 2018 was $21.4 million, 5.0% above the Forecast of $20.4 million.
  • Net Income for Q4 2018 was $16.2 million, an increase of 253.1% above the Forecast of $4.6 million.
  • Net Operating Income ("NOI")1 of $13.0 million was 7.5% higher than the Forecast of $12.1 million.
  • NOI1 margin was 60.9%, which exceeded the Forecast by 140 basis points.
  • Funds from Operations ("FFO")1 of $8.2 million, or $0.2236 per Unit, was 18.3% above the Forecast of $6.9 million, or $0.1891 per Unit.
  • Adjusted Funds from Operations ("AFFO")1 of $6.5 million, or $0.1757 per Unit, exceeded the Forecast of $5.7 million, or $0.1561 per Unit, by 12.6%.
  • The REIT declared distributions totaling $0.10248 per Unit for Q4 2018.
  • The AFFO1 payout ratio for Q4 2018 was 58.30% compared with the Forecast of 65.63%.
  • Occupancy of available unfurnished suites as at December 31, 2018 was 98.8% versus the Forecast of 96.3%.
  • Average monthly rent as at December 31, 2018, excluding furnished and/or unoccupied suites, was $1,402 per suite compared to the Forecast of $1,388 per suite.
  • Debt to Gross Book Value ("Debt-to-GBV")1 as at December 31, 2018 was 45.0%.
  • On November 22, 2018, the REIT announced an agreement to acquire The Quarters, two high quality, recently constructed, and strategically located buildings in Calgary's Quarry Park comprising 199 suites for $63.8 million; the transaction was completed subsequent to year-end on January 7, 2019.
  • On the same date, the REIT also announced an agreement to advance up to $30.0 million at 6% interest in financing for the redevelopment of a commercial property strategically located at Fifth Avenue and Bank Street in Ottawa into a mixed-used multi-residential rental and retail property, with an option to acquire the property upon stabilization at a discount to fair market value.
  • On December 18, 2018, the REIT acquired Kaleidoscope, a 70-suite property, of which 49 are affordable units, constructed in 2013. The property is located in Calgary in a strong urban market adjacent to the University of Calgary, the Banff Trail LRT and the Alberta Children's Hospital; the $20.3 million acquisition was sourced off-market and represents a cap rate of 4.4% (based on forecasted year one net operating income).
  • On December 21, 2018, the REIT announced that it filed a base shelf short form prospectus for an aggregate offering amount of up to $750 million in securities, which provides the financial flexibility to capitalize on market opportunities as they arise.

1 

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

"The fourth quarter of 2018 was characterized by strong financial performance and the advancement of our growth agenda," said Michael Waters, the REIT's Chief Executive Officer. "Our results significantly exceeded the financial forecast for this period provided in our IPO prospectus, while we committed over $100 million to investments aligned with our growth strategy and continued to diversify our portfolio by enhancing our scale with well-located and recently constructed properties."

Q4 2018 Financial Summary

($000's except per Unit and variance amounts)







Actual


Forecast



Three months ended

December 31, 2018


December 31, 2018


Variance

Revenue from investment properties

$21,377


$20,358


5.0%

Property operating costs

4,253


4,024


(5.7%)

Property taxes

2,249


2,289


1.7%

Utilities

1,853


1,931


4.0%

NOI1

$13,022


$12,114


7.5%

NOI1 margin (%)

60.9%


59.5%


140 bps

Net income

$16,217


$4,593


253.1%

FFO1

$8,211


$6,943


18.3%

FFO1 per Unit

$0.2236


$0.1891


18.3%

AFFO1 

$6,453


$5,732


12.6%

AFFO1 per Unit

$0.1757


$0.1561


12.6%

Distributions declared per Unit

$0.10248


$0.10248


-

AFFO1 Payout Ratio

58.30%


65.63%


733 bps

 

Revenues in Q4 2018 totalled $21.4 million, compared to the Forecast of $20.4 million. The 5.0% positive variance was attributable to higher-than-Forecast occupancy and average monthly rent, the latter primarily attributable to higher rents achieved on suite turnover. As at December 31, 2018, occupancy in the REIT's available unfurnished portfolio was 98.8% and average monthly rent was $1,402 per occupied unfurnished suite. This compares with an average monthly rent in the Forecast of $1,388 per occupied unfurnished suite.

Net income for Q4 2018 totalled $16.2 million, compared to the Forecast of $4.6 million. The 253.1% positive variance was primarily a result of increases in the fair value of investment properties. The $40.0 million fair value increase was comprised of a $59.3 million increase due to NOI, a $10.9 million increase from changes in capitalization rates and partially offset by a $30.2 million increase in the deduction for capital expenditures.

NOI1 for Q4 2018 totalled $13.0 million, representing 60.9% of revenue, which was 7.5% above the Forecast of $12.1 million, or 59.5% of revenue. In addition to the contribution to stronger revenue, this outperformance of the Forecast reflected actual property taxes and utilities expenses that were below the Forecast levels, partly offset by higher repairs and maintenance expenses at certain properties.

FFO1 in the period was $8.2 million, or $0.2236 per Unit, compared to the Forecast of $6.9 million, or $0.1891 per Unit. The 18.3% outperformance reflected the positive NOI1 variance. AFFO1 was $6.5 million in Q4 2018, or $0.1757 per Unit, compared with the Forecast of $5.7 million, or $0.1561 per Unit. The 12.6% positive variance over the Forecast was attributable to the higher-than-Forecast FFO1, partially offset by a non-cash $0.6 million gain on the retirement of debt.

The REIT declared cash distributions totaling $0.10248 per Unit for Q4 2018, in line with the IPO prospectus Forecast, which represented an AFFO1 payout ratio of 58.3%, compared with the Forecast of 65.6%.

FY 2018 Financial Summary

($000's except per Unit and variance amounts)







Actual


Forecast



Six months ended

December 31, 2018 


December 31, 2018


Variance

Revenue from investment properties

$42,475


$40,767


4.2%

Property operating costs

8,257


8,106


(1.9%)

Property taxes

4,528


4,578


1.1%

Utilities

3,580


3,679


2.7%

NOI1

$26,110


$24,404


7.0%

NOI1 margin (%)

61.5%


59.9%


160 bps

Net income

$49,390


$9,395


425.7%

FFO1

$16,197


$14,095


14.9%

FFO1 per Unit

$0.4411


$0.3838


14.9%

AFFO1

$13,235


$11,673


13.4%

AFFO1 per Unit

$0.3604


$0.3179


13.4%

Distributions declared per Unit

$0.20276


$0.20276


-

AFFO1 Payout Ratio

56.25%


63.78%


753 bps

 

In the six months since completion of its IPO, the REIT generated significant organic growth through gain-to-lease activities. During this period, the REIT signed 613 new leases that increased average monthly rent on the leased suites by 7.6%, resulting in an increase in annualized income of $0.8 million. Management currently estimates that its portfolio has further annualized embedded gain-to-lease opportunities representing approximately $5.7 million.

The REIT continued to make progress on its repositioning program. In FY 2018, the REIT repositioned 53 suites at Minto one80five in Ottawa, 24 suites at Minto Yorkville in Toronto and 34 suites in its Edmonton portfolio. The REIT has a further 75 suites remaining to be repositioned at Minto Yorkville and 137 suites in its Edmonton portfolio. In addition, since the IPO, management completed repositioning plans for two additional properties, Castle Hill and Carlisle, with the first renovated suites expected to be available for lease in April 2019.

Balance Sheet

As of December 31, 2018, the REIT had total debt outstanding of $542.6 million, with a weighted average actual interest rate of 3.18% and a weighted average term to maturity of 5.86 years for its fixed-rate term debt. The Debt-to-GBV1 ratio at year-end was 45.0%.

The total number of REIT Units outstanding as at December 31, 2018 was 15,863,100. 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, March 20th, 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/1930183/1EFA2A1F45752F77B423482ECA975FB9 

A replay of the call will be available until Wednesday, March 27, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 132223 #). 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, Ottawa, Calgary and Edmonton. For more information on Minto Apartment REIT, please visit the REIT's website at: https://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 "Risk Factors" in the REIT's base shelf short form prospectus dated December 21, 2018, 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. The IFRS measurement most directly comparable to NOI, FFO and AFFO is net income. See the REIT's MD&A for Q4 2018 and FY 2018 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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