Minto Apartment REIT Third Quarter 2019 Financial Results Demonstrate Continued Strong Operating Performance

November 12, 2019 From Minto Apartment REIT

— Solid growth in revenue, same property NOI and AFFO per Unit —

OTTAWA, Nov. 12, 2019 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the third quarter and nine months ended September 30, 2019 ("Q3 2019" and "YTD 2019", respectively). The financial results for Q3 2019 are being presented in comparison with the results for the three months ended September 30, 2018 ("Q3 2018"). Given that the REIT acquired its initial property portfolio on July 2, 2018 and completed its Initial Public Offering (the "IPO") on July 3, 2018, the results for Q3 2018 omit the first day of the quarter. However, this did not materially impact the Q3 2018 financial performance. The YTD 2019 results are presented in this news release without a year-over-year comparison, because the operating results for the nine months ended September 30, 2018 are only for the same 91 day period as Q3 2018 and, therefore, are not comparable to the operating results for the full nine month period ended September 30, 2019. Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q3 2019 and YTD 2019 are available on the REIT's website at http://www.mintoapartments.com and at www.sedar.com.

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

Q3 2019 Highlights

  • Total revenue was $27.6 million, an increase of 31.0% from Q3 2018; same property revenue of $22.2 million increased 5.1% from Q3 2018;
  • Net Operating Income ("NOI")1 was $17.6 million, an increase of 34.4% from Q3 2018; same property NOI1 of $14.0 million increased 6.9% from Q3 2018;
  • NOI1 margin was 63.6%, compared to 62.0% in Q3 2018; same property NOI1 margin was 63.1%, 110 bps higher than Q3 2018;
  • Net loss was $29.9 million compared to net income of $33.2 million in Q3 2018, reflecting the non-cash impact of the change in fair value of Class B LP Units of Minto Apartment Limited Partnership;
  • Funds from Operations ("FFO")1 increased by $2.8 million, or 35.3% from Q3 2018, FFO per unit increased by 4.8% from $0.2175 per unit2 to $0.2280 per unit2;
  • Adjusted Funds from Operations ("AFFO")1 increased by $2.6 million, or 38.4% from Q3 2018, AFFO per unit increased by 7.2% from $0.1847 per unit2 to $0.1980 per unit2;
  • The REIT declared distributions totaling $0.10750 per unit2;
  • The AFFO1 payout ratio was 54.4%, compared to 54.3% in Q3 2018;
  • Occupancy of available unfurnished suites as at September 30, 2019 was 98.6%, compared to 99.0% as at September 30, 2018; same property occupancy as at September 30, 2019 was 98.7%, compared to 99.0% as at September 30, 2018;
  • Average monthly rent as at September 30, 2019, excluding furnished and/or unoccupied suites, was $1,478, an increase of 6.5% compared to $1,388 as at September 30, 2018; average monthly rent for the same property portfolio, excluding furnished and/or unoccupied suites, was $1,462 as at September 30, 2019, compared to $1,388 as at September 30, 2018;
  • Debt to Gross Book Value ("Debt-to-GBV")1 as at September 30, 2019 was 43.24%;
  • On August 1, 2019, the REIT acquired 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;
  • Subsequent to quarter-end, on October 10, 2019, the REIT announced an agreement to acquire Le 4300 and Haddon Hall, two multi-residential properties in Montreal, Quebec comprising 528 large suites, for approximately $281.1 million;
  • 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 gross proceeds of approximately $225 million. The net proceeds of the Offering will be used to directly and/or indirectly finance a portion of the purchase price for Le 4300 and Haddon Hall; and
  • On October 29, 2019, the REIT advanced $17.1 million in connection with its commitment to advance financing to support Minto Properties Inc.'s redevelopment of a commercial property located in Ottawa, Ontario into a mixed-use multi-residential rental and retail property. The financing has an interest rate of 6% per annum and matures in March 2022 and is subordinate to senior construction financing.

____________________

1

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

2

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.

 

"Our business continues to demonstrate strong momentum," said Michael Waters, the REIT's Chief Executive Officer. "We reported solid growth in all of our key financial metrics in the third quarter. The markets in which the REIT operates are generally robust, our gain-to-lease and suite repositioning efforts are generating excellent returns, and we are rapidly expanding our portfolio with high-quality acquisitions. The pending acquisition of Le 4300 and Haddon Hall will increase the size of our Montreal portfolio to more than 20% of the REIT's total suites. Moreover, this acquisition provides us with two more desirable properties with material potential upside from repositioning. We have a proven ability to create unitholder value through acquisitions, and we are continuing to evaluate exciting external growth opportunities."

Q3 2019 Financial Summary

($000's except per unit amounts)






Three months ended

Sept. 30, 2019

Sept. 30, 2018

Variance

Revenue from investment properties

$27,639

$21,098

31.0%

Property operating costs

5,227

4,004

(30.5%)

Property taxes

2,864

2,279

(25.7%)

Utilities

1,960

1,727

(13.5%)

NOI1

$17,588

$13,088

34.4%

NOI1 margin (%)

63.6%

62.0%

160 bps

Same property revenue

$22,171

$21,098

5.1%

Same property NOI1

$13,997

$13,088

6.9%

Same property NOI1 margin (%)

63.1%

62.0%

110 bps

Net (loss) income

($29,889)

$33,173

(190.1%)

FFO1

$10,808

$7,986

35.3%

FFO1 per unit2

$0.2280

$0.2175

4.8%

AFFO1

$9,385

$6,782

38.4%

AFFO 1 per unit2

$0.1980

$0.1847

7.2%

Distributions declared per unit2

$0.10750

$0.10028

7.2%

AFFO1 payout ratio

54.4%

54.3%

10 bps

 

Q3 2019 Operating Results
Revenue in Q3 2019 totaled $27.6 million, an increase of 31.0% from $21.1 million in Q3 2018. The increase was primarily attributable to the contribution from properties acquired in Calgary, Toronto and Montreal subsequent to the IPO, and higher rental rates.

As at September 30, 2019, occupancy in the REIT's available unfurnished portfolio was 98.6% and average monthly rent was $1,478 per occupied unfurnished suite. This compares to occupancy of 99.0% and average monthly rent of $1,388 per occupied unfurnished suite as at September 30, 2018.

NOI1 for Q3 2019 totaled $17.6 million, representing 63.6% of revenue, an increase of 34.4% from $13.1 million, or 62.0% of revenue, in Q3 2018. The increase reflects higher NOI1 for the same property portfolio and property acquisitions in Calgary, Toronto and Montreal comprising a total of 2,432 suites.

Same property revenue increased 5.1% to $22.2 million in Q3 2019, compared to $21.1 million in Q3 2018, reflecting higher rents achieved on new leases and higher revenue earned from repositioned suites. Same property portfolio NOI1 increased 6.9% in Q3 2019 to $14.0 million, or 63.1% of revenue, compared to $13.1 million, or 62.0% of revenue, in Q3 2018. The increase in same property portfolio NOI1 was attributable to higher rents on turnover and suite repositioning.

FFO1 in Q3 2019 was $10.8 million, or $0.2280 per unit2, compared to $8.0 million, or $0.2175 per unit2, in Q3 2018. The 35.3% increase in FFO1 in Q3 2019 primarily reflected the positive NOI1 variance. AFFO1 was $9.4 million in Q3 2019, or $0.1980 per unit2, compared to $6.8 million, or $0.1847 per unit2, in Q3 2018. The 38.4% positive variance in AFFO1 for Q3 2019 primarily reflected the higher FFO1, adjusted for the amortization of mark-to-market adjustments and maintenance capital expenditure reserve.

The REIT declared cash distributions totaling $0.10750 per unit2 for Q3 2019, representing an AFFO1 payout ratio of 54.4%. Cash distributions of $0.10028 per unit2 were declared in Q3 2018, representing an AFFO1 payout ratio of 54.3%.

The REIT reported a net loss and comprehensive loss for Q3 2019 of $29.9 million, compared to net income and comprehensive income of $33.2 million in Q3 2018. The negative variance was primarily attributable to a larger fair value loss on Class B LP Units of Minto Apartment Limited Partnership in Q3 2019 compared to Q3 2018, and a one-time bargain purchase gain totaling $79.2 million in Q3 2018 related to the REIT's acquisition of its initial portfolio of properties from Minto Properties Inc.

In the third quarter of 2019, the REIT generated significant organic growth through gain-to-lease activities. During this period, the REIT signed 442 new leases that increased average monthly rent on the leased suites by 16.9%, resulting in an increase in annualized revenue of approximately $1.1 million. Management estimates that the REIT's remaining portfolio of 6,326 suites has an embedded gain-to-lease potential of 16.5%, representing future annualized embedded potential revenue of approximately $15.3 million.

The REIT also continued to advance its repositioning program in Q3 2019, repositioning a total of 74 suites across its portfolio. The REIT has a cumulative 2,177 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 following the acquisition of those properties.

YTD 2019 Operating Results
YTD 2019 revenues totaled $74.6 million. NOI1 for the nine-month period was $46.7 million, representing 62.6% of revenue.

Same property portfolio revenue was $64.7 million for YTD 2019. Same property portfolio NOI1 totaled $40.0 million for the nine-month period, representing 61.9% of revenue.

FFO1 for YTD 2019 was $27.9 million, or $0.6454 per unit2. AFFO1 for the nine-month period was $23.9 million, or $0.5537 per unit2.

The REIT declared cash distributions totaling $0.3124 per unit2 for YTD 2019, which represented an AFFO1 payout ratio of 56.5%.

Net income and comprehensive income for YTD 2019 was $0.3 million. The net income was primarily attributable to NOI1 and a fair value gain on investment properties of $71.3 million, partially offset by a fair value loss on Class B LP Units of Minto Apartment Limited Partnership of $92.2 million.

Balance Sheet
As of September 30, 2019, the REIT had total debt outstanding of $741.2 million, with a weighted average interest rate of 3.14% and a weighted average term to maturity of 5.89 years for its fixed- rate term debt. The Debt-to-GBV1 ratio at quarter-end was 43.24%.

The total number of Units outstanding as at September 30, 2019 was 25,568,559. In addition, there were 22,769,073 Class B LP Units of Minto Apartment Limited Partnership outstanding, which are exchangeable into Units on a one-for-one basis. Subsequent to Q3 2019, on October 22, 2019, the REIT completed the Offering, in which it sold an additional 9,850,000 Units from treasury on a bought deal 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, November 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: https://event.on24.com/wcc/r/2090419/99E1D2979C2CA08029C00AEDACC5421A

A replay of the call will be available until Wednesday, November 20, 2019. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 550597 #). 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 "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 November 12, 2019 (the "Q3 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 Q3 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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