Minto Apartment REIT's Third Quarter 2018 Financial Results Exceed Forecast

November 12, 2018 From Minto Apartment REIT

OTTAWA, Nov. 12, 2018  /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the third quarter ended September 30, 2018 ("Q3 2018"). The REIT acquired its initial property portfolio on July 2, 2018 and completed its Initial Public Offering (the "IPO") and commenced trading on the Toronto Stock Exchange on July 3, 2018. Accordingly, the results for Q3 2018 comprise the 91-day period from July 2, 2018 to September 30, 2018, as opposed to the 92-day period from July 1, 2018 to September 30, 2018. However, the REIT indicated that the one-day difference in the duration of the period compared to the financial forecast (the "Forecast") presented in the REIT's prospectus dated June 22, 2018, did not constitute a material difference in its results.

The following summary of the REIT's financial results for Q3 2018 are presented in comparison to the Forecast. Full Financial Statements and Management's Discussion and Analysis (MD&A) for Q3 2018 are available on the REIT's website at www.mintoapartments.com and at www.SEDAR.com.

Q3 2018 Highlights

  • Total revenue in Q3 2018 was $21.1 million, 3.4% above the Forecast of $20.4 million.
  • Net Operating Income1 ("NOI") of $13.1 million was 6.5% higher than the Forecast of $12.3 million.
  • NOI1 margin was 62.0%, which exceeded the Forecast by 180 basis points.
  • Funds from Operations1 ("FFO") of $8.0 million, or $0.22 per Unit, was 11.7% above the Forecast of $7.2 million, or $0.19 per Unit.
  • Adjusted Funds from Operations1 ("AFFO") of $6.8 million, or $0.18 per Unit, exceeded the Forecast of $5.9 million, or $0.16 per Unit, by 14.2%.
  • The REIT established a monthly distribution of $0.03416 per Unit, representing $0.41 per Unit on an annualized basis.
  • The REIT declared distributions totaling $0.10028 per Unit for Q3 2018.
  • Occupancy as at September 30, 2018 was 99.0% versus the Forecast of 96.7%.
  • Average monthly rent as at September 30, 2018 was $1,388 per suite compared to Forecast of $1,382 per suite.
  • Debt to Gross Book Value1 ("Debt to GBV") as at September 30, 2018 was 45.8%.
  • On July 10, 2018, the IPO underwriters exercised their overallotment option, acquiring a further 2,069,100 Units of the REIT; resulting in additional gross proceeds of approximately $30 million. The proceeds were used to redeem 2,069,100 Class B LP Units held by Minto Properties Inc.

1

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

"We're pleased with the success of our first quarter as a publicly traded REIT where our financial performance exceeded all Forecasted metrics" said Michael Waters, the REIT's Chief Executive Officer. "We also advanced multiple initiatives to realize organic growth and assessed opportunities across an active acquisition pipeline. Looking out over the balance of the 12-month Forecast period ending June 30, 2019, management is confident the REIT will achieve its Forecast AFFO1 of $23.2 million."

The REIT generated significant organic growth during Q3 2018 through both gain-to-lease activities and asset repositioning. As new tenants take occupancy of suites, the REIT is able to move rental rates from in-place levels to current market rates, thereby realizing on the gain-to-lease opportunities in the portfolio. During the quarter, the REIT signed 363 new leases, improving average monthly rent by 7.3%, from $1,395 per suite to $1,497 per suite, resulting in an increase in annualized income of $0.4 million. Management currently estimates that its portfolio has further annualized embedded gain-to-lease opportunities representing approximately $5.7 million.

The REIT also advanced three repositioning opportunities in its portfolio, making improvements to suites and building common areas to take advantage of market demand for repositioned product. In Q3 2018, the REIT repositioned 49 suites at Minto one80five, five suites at Minto Yorkville and 20 suites in its Edmonton portfolio. The REIT has a further 78 suites remaining to be repositioned at Minto Yorkville and 140 suites in its Edmonton portfolio. In addition, management is developing repositioning plans for two additional properties in Ottawa, Castle Hill and Carlisle, where work is expected to commence in early 2019.

Q3 2018 Financial Summary

($000's except per unit amounts)





Actual

Forecast


Three months ended

September 30, 2018

September 30, 2018

Variance

Revenue from investment properties

$21,098

$20,409

+3.4%

Property operating costs

4,004

4,082

+1.9%

Property taxes

2,279

2,289

+0.4%

Utilities

1,727

1,748

+1.2%

NOI1

$13,088

$12,290

6.5%

NOI1 margin (%)

62.0%

60.2%

+180 bps

FFO1

$7,986

$7,152

+11.7%

FFO1 per Unit

$0.2171

$0.1944

+11.7%

AFFO1

$6,782

$5,941

+14.2%

AFFO1 per Unit

$0.1844

$0.1615

+14.2%

Distributions declared per Unit

$0.1003

$0.1003

-

AFFO1 Payout Ratio

54.3%

62.0%

 -770 bps

 

Revenues in Q3 2018 totalled $21.1 million, compared to the Forecast of $20.4 million. The 3.4% positive variance over the Forecast was attributable to higher rents achieved on turnover of suites, higher revenue earned from furnished suites and higher ancillary revenue. As at September 30, 2018, occupancy in the REIT's available unfurnished portfolio was 98.96% and average monthly rent was $1,388 per suite. This compares with an average monthly rent in the Forecast of $1,382 per suite.

NOI1 for Q3 2018 totalled $13.1 million, representing 62.0% of revenue, which was 6.5% above the Forecast of $12.3 million, or 60.2% of revenue. This outperformance of the Forecast reflected positive operating leverage, as total revenue increased 3.4% while property operating costs of $4.0 million were 1.9% below the Forecast and other expenses were in line. The lower-than-expected property operating costs primarily reflected reductions in advertising and employee costs.

FFO1 in the period was $8.0 million, or $0.22 per Unit, compared to the Forecast of $7.2 million, or $0.19 per Unit. The 11.7% outperformance reflected the positive NOI1 variance. AFFO1 was $6.8 million in Q3 2018, or $0.18 per Unit, compared with the Forecast of $5.9 million, or $0.16 per Unit. The 14.2% positive variance over the Forecast was attributable to the higher-than-expected FFO1.

The REIT declared cash distributions totaling $0.10028 per Unit for Q3 2018, in line with the IPO prospectus guidance, which represented an AFFO1 payout ratio of 54.3%, compared with the Forecast of 62.0%. If the REIT had been public for the full 92-day period, it would have paid cash distributions of $0.10248 per Unit, representing an AFFO1 payout ratio of 55.6%.

As of September 30, 2018, the REIT had total debt outstanding of $519.8 million with a weighted average actual interest rate of 3.18% and a weighted average term to maturity of 6.01 years. The Debt to GBV1 ratio at quarter-end was 45.8%.

The total number of REIT Units outstanding as at September 30, 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 Tuesday, November 13, 2018 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/1851745/05778E995268AA520869CB775536117F

A replay of the call will be available until Tuesday, November 20, 2018. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 723362 #). 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 22 high-quality income-producing multi-residential rental properties consisting of 4,279 suites, 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 IPO prospectus dated June 22, 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 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 and is indicative of the REIT's ability to pay distributions, 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 Q3 2018 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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