MCS Steel Non-Voting DR MSTUF

RBC

[retiredcf]

It looks like they agree with Sportsnut. GLTA

March 22, 2017

Milestone Apartments REIT

Privatization is near; rating moved to Sector Perform

Our view: Starwood Capital Group has amended its offer to US$16.25 per ("MST") unit, versus US$16.15/unit formerly. We believe this offer will prove successful. We have moved our rating on MST's units to Sector Perform. We see this as a best/final offer and we recommend unitholders vote in favour. Our revised $21.70 price target (-$0.30) is in line with the US$16.25/unit offer price based upon the current US$/$C exchange rate.

Key points:

A small victory – Milestone Apartments Real Estate Investment Trust ("MST") and an affiliate of Starwood Capital Group ("Starwood") have amended their previously announced agreement by which Starwood will acquire all of MST's subsidiaries and assets. Under the amended agreement, MST unitholders will now receive US$16.25/unit, a fractional 0.6% increase from the former offer of US$16.15/unit. We reviewed key elements of the new proposal in our First Glance note from this morning entitled "Small victories in revised Starwood offer".

Strong Q4 – Separately, MST disclosed strong Q4 results. Highlights:

• FFO/unit: $0.311, +22% from Q4/15’s $0.255 and +5% over our $0.295E • Q4/16 SP stats: Occupancy of 94.9%, -10bps YoY; AMR of $925, +6% (+$52) from Q4/15’s $873; NOI of US$28.7MM, +8.2% YoY, delivering a 58.5% margin (+140 bps YoY). NOI and margin were above forecast, aided by lower-than-expected property tax accruals.

• IFRS BVPU: $14.78, -5% YoY from Q4/15's $15.50 (primarily due to the 9% dilution stemming from the Q3/16 internalization) and -1% QoQ from Q3/16's $14.90 (primarily due to the dilution related to the issuance of 10.4MM units in Oct-16 at US$13.32/unit, net)

2017E-18E FFO/unit unchanged – Reflecting an anticipation of slowing same-property NOI growth and recently completed acquisitions, our 2017E-18E FFO/unit of $1.20 (+6%) and $1.25 (+4%) are unchanged.