Minto Apartment REIT Reports Strong Second Quarter 2019 Financial Results and Announces Distribution Increase
Board of Trustees approves 7.4% increase to monthly distribution, reflecting continued growth in AFFO
OTTAWA, Aug. 12, 2019 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the second quarter and six months ended June 30, 2019 ("Q2 2019" and "YTD 2019", 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 Q2 2019 are presented in comparison with the financial forecast for the three months ended June 30, 2019 (the "Forecast") included in the REIT's IPO prospectus dated June 22, 2018. Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis (MD&A) for Q2 2019 and YTD 2019 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.
Q2 2019 Highlights
- Total revenue in Q2 2019 was $24.8 million, 17.8% above the Forecast of $21.0 million; same property revenue of $21.6 million was 2.6% above Forecast;
- Net Income for Q2 2019 was $48.8 million, an increase of 860.8% above the Forecast of $5.1 million.
- Net Operating Income ("NOI")1 of $15.8 million was 25.2% higher than the Forecast of $12.6 million; same property NOI1 of $13.6 million was 8.2% higher than the Forecast;
- NOI1 margin was 63.7%, which exceeded the 59.9% Forecast by 380 basis points; same property NOI1 margin of 63.2% was 330 basis points above Forecast;
- Funds from Operations ("FFO")1 of $9.8 million, or $0.2146 per unit2, was 31.5% above the Forecast of $7.4 million, or $0.2024 per unit2;
- Adjusted Funds from Operations ("AFFO")1 of $8.5 million, or $0.1855 per unit2, exceeded the Forecast of $6.2 million, or $0.1695 per unit2, by 35.7%;
- The REIT declared distributions totaling $0.10248 per unit2 for Q2 2019;
- The AFFO1 payout ratio for Q2 2019 was 55.2% compared with the Forecast of 60.5%;
- Occupancy of available unfurnished suites as at June 30, 2019 was 98.7% versus the Forecast of 96.8%; same property occupancy was 99.2%;
- Average monthly rent as at June 30, 2019, excluding furnished and/or unoccupied suites, was $1,439 per suite compared to the Forecast of $1,416 per suite;
- Debt to Gross Book Value ("Debt-to-GBV")1 as at June 30, 2019 was 43.3%;
- 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;
- On April 4, 2019, the REIT also announced an agreement to issue 7,660,000 REIT trust Units ("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 Units at the offering price. On April 15, 2019, the REIT closed the sale of 8,809,000 Units for gross proceeds of approximately $173 million, which included the full exercise of the over-allotment option; and
- Subsequent to quarter-end, on July 15, 2019, the REIT announced an agreement to acquire a 40% interest in the High Park Village apartment complex, a three building multi-residential property comprising 750 suites in Toronto, for approximately $131.2 million. The High Park Village acquisition closed on August 1, 2019.
NOI, FFO, AFFO and Debt-to-GBV are non-IFRS financial measures. See, "Non-IFRS Financial Measures" in this news release
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
The REIT is pleased to announce that its Board of Trustees has approved a 7.4% increase to its cash distributions, raising the monthly unitholder distribution from an annualized rate of $0.4100 per unit2 to $0.4404 per unit2. The REIT's AFFO1 per unit was 12.9% higher than the Forecast for the 12-month period ended June 30, 2019. The higher distribution reflects the continued growth and strong financial performance of the REIT. The increase will be effective for the REIT's August 2019 cash distribution, which will be paid on September 16, 2019 to unitholders of record as at August 31, 2019.
"The REIT's first year of operations was extremely successful," said Michael Waters, the REIT's Chief Executive Officer. "With the 12-month IPO Forecast period now over, we can look back with pride and say that we outperformed our expectations. In addition to the contribution from acquisitions, we generated same property NOI1 of $52.2 million during the period, compared to the Forecast of $48.7 million. We are delivering on every aspect of our strategy, achieving strong organic and external growth through a combination of gain-to-lease activities, suite repositioning, and attractive acquisitions in target urban markets across Canada. The increase to our monthly cash distributions reflects this successful execution of our strategy, and our confidence that we will continue to generate strong growth for our unitholders."
Q2 2019 Financial Summary
($000's except per unit amounts)
Three months ended
June 30, 2019
June 30, 2019
Revenue from investment properties
Property operating costs
NOI1 margin (%)
Same property revenue
Same property NOI1
Same property NOI1 margin (%)
FFO1 per unit2
AFFO1 per unit2
Distributions declared per unit2
AFFO1 payout ratio
Q2 2019 Operating Results
Revenues in Q2 2019 totalled $24.8 million, compared to the Forecast of $21.0 million. The 17.8% positive variance was primarily attributable to the contribution from properties acquired in Calgary, Toronto and Montreal subsequent to the IPO, higher rents achieved on suite turnovers and higher occupancy. As at June 30, 2019, occupancy in the REIT's available unfurnished portfolio was 98.7% and average monthly rent was $1,439 per occupied unfurnished suite. This compares with an average monthly rent in the Forecast of $1,416 per occupied unfurnished suite and occupancy of 96.8%.
Net income for Q2 2019 totalled $48.8 million, compared to the Forecast of $5.1 million. The 860.8% positive variance was primarily a result of increases in the fair value of investment properties and the fair value adjustment on the Class B LP units.
NOI1 for Q2 2019 totalled $15.8 million, representing 63.7% of revenue, which was 25.2% above the Forecast of $12.6 million, or 59.9% of revenue.
On a same property basis, revenue was $21.6 million, exceeding the Forecast by 2.6%, reflecting higher than forecasted occupancy and higher rents achieved on new leases, revenue earned from furnished suites, higher revenue earned from repositioned suites and ancillary revenue. Same property portfolio NOI1 was 13.6 million, 8.2% above the Forecast, as a result of higher revenues and lower-than-expected operating expenses.
FFO1 in Q2 2019 was $9.8 million, or $0.2146 per unit2, compared to the Forecast of $7.4 million, or $0.2024 per unit2. The 31.5% outperformance primarily reflected the positive NOI1 variance. AFFO1 was $8.5 million in Q2 2019, or $0.1855 per unit2, compared with the Forecast of $6.2 million, or $0.1695 per unit2. The 35.7% positive variance over the Forecast primarily reflected the higher-than-Forecast FFO1, adjusted for the amortization of mark-to-market adjustments and maintenance capital expenditure reserve.
The REIT declared cash distributions totaling $0.10248 per unit2 for Q2 2019, in line with the Forecast, which represented an AFFO1 payout ratio of 55.2%, compared with the Forecast of 60.5%.
The REIT reported net income and comprehensive income for the period of $48.8 million, compared to the Forecast net income of $5.1 million. The positive variance was primarily a result of a $30.9 million adjustment in the fair value of outstanding Class B LP units of Minto Apartment Limited Partnership, and a $10.3 million adjustment in the fair value of investment properties.
In the second quarter of 2019, the REIT generated significant organic growth through gain-to-lease activities. During this period, the REIT signed 435 new leases that increased average monthly rent on the leased suites by 11.5%, resulting in an increase in annualized revenue of approximately $0.8 million. Management currently estimates that its portfolio has a further 5,609 suites with an average 13.6% gain-to-lease potential, representing future annualized embedded potential gain-to-lease revenue of approximately $11.5 million.
The REIT also continued to advance its repositioning program in Q2 2019, repositioning a total of 57 suites across its portfolio. The REIT has in aggregate 1,310 suites remaining to be repositioned at the following properties: Minto Yorkville, Leslie York Mills, Carlisle, Castle Hill, the Edmonton portfolio and High Park Village. The REIT has also developed a repositioning plan for its newly acquired Rockhill property.
YTD 2019 Operating Results
YTD 2019 revenues totalled $46.9 million, compared to the Forecast of $41.5 million. The 13.2% outperformance was primarily attributable to the contribution from acquisitions, higher rental rates and higher occupancy.
NOI1 for YTD 2019 totalled $29.1 million, representing 62.0% of revenue, which was 19.9% above the Forecast of $24.3 million, or 58.5% of revenue on higher revenues and effective cost control.
Same property portfolio revenue was $42.6 million, exceeding the Forecast by 2.7% due to higher than expected occupancy and higher rents achieved on new leases, revenue earned from furnished suites, higher revenue earned from repositioned suites and ancillary revenue. Same property portfolio NOI1 was $26.0 million, 7.4% above the Forecast, as a result of higher revenues and lower-than-expected operating expenses.
FFO1 for YTD 2019 was $17.1 million, or $0.4155 per unit2, compared to the Forecast of $13.9 million, or $0.3786 per unit2. The 22.9% outperformance primarily reflected the positive NOI1 variance. AFFO1 was $14.6 million for YTD 2019, or $0.3537 per unit2, compared with the Forecast of $11.5 million, or $0.3128 per unit2. The 26.6% positive variance over the Forecast primarily reflected the higher-than-Forecast FFO1, adjusted for the amortization of mark-to-market adjustments and maintenance capital expenditure reserve.
The REIT declared cash distributions totaling $0.2049 per unit2 for YTD 2019, in line with the Forecast, which represented an AFFO1 payout ratio of 58.0%, compared with the Forecast of 65.5%.
Net income and comprehensive income for the period was $30.1 million, compared to the Forecast net income of $9.2 million. The positive variance was primarily a result of a $23.8 million adjustment in the fair value of investment properties.
As of June 30, 2019, the REIT had total debt outstanding of $660.2 million, with a weighted average interest rate of 3.19% and a weighted average term to maturity of 6.09 years for its fixed-rate term debt. The Debt-to-GBV1 ratio at quarter-end was 43.26%.
The total number of Units outstanding as at June 30, 2019 was 24,672,100. In addition, there were 20,859,410 Class B LP units of Minto Apartment Limited Partnership outstanding, which are exchangeable into Units on a one-for-one basis.
Michael Waters, Chief Executive Officer, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Tuesday, August 13, 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:
A replay of the call will be available until Tuesday, August 20, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 380137 #). 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.
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 August 12, 2019 (the "Q2 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. 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. See the REIT's Q2 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