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.
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