- Continued operating efficiencies through increased scale and portfolio expansion drive year-over-year
Q3 2016 samestore NOI growth of 9.1% and AFFO growth of 26.2% -
TORONTO and DALLAS, Nov. 10, 2016 /CNW/ - Milestone
Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the
third quarter ended September 30, 2016 ("Q3 2016") and the nine-month period ended September 30, 2016 ("YTD 2016"). All dollar amounts are in U.S. currency unless otherwise noted. References to
"samestore" correspond to properties the REIT has owned for equivalent periods in 2016 and 2015, thus removing the impact of
acquisitions and dispositions.
"Our third quarter results demonstrate our continued positive momentum of optimizing the REIT's performance as we continue to
strategically grow the portfolio. The recent decision to increase our monthly cash distributions by 10 percent underscores the
Trustees' confidence in the REIT's business and future cash flows," said Robert Landin, CEO of
Milestone. "During the quarter, we also completed the internalization of the REIT's asset management function, an important
landmark in Milestone's evolution. This initiative results in the REIT continuing to benefit from the asset manager's expertise,
platform and industry relationships, while operating under a more efficient cost structure."
Q3 2016 Financial Highlights
- Total and samestore average monthly in-place rents were $950 and $917, respectively, up 9.1% and 6.0% from the third quarter ended September 30,
2015 ("Q3 2015");
- Total and samestore occupancy remained strong ending Q3 2016 at 95.0% and 94.9%, respectively;
- Total and samestore property revenue were $68.3 million and $49.2
million, respectively, up 24.7% and 5.5% from Q3 2015;
- Total and samestore net operating income ("NOI") were $38.0 million and $27.4 million, respectively, up 29.0% and 9.1% from Q3 2015. Total and samestore NOI margins were 55.7% and
55.8%, respectively, both up 190 basis points from Q3 2015. The REIT's NOI margins are generally lower for the third quarter of
any year due to higher unit turnover and utility expenses during summer months;
- Funds from operations ("FFO") totaled $21.5 million, up 23.8% from Q3 2015. Adjusted funds from
operations ("AFFO") increased 26.2% to $19.2 million. Diluted FFO and AFFO per unit were
$0.28 and $0.25, respectively, up from $0.26 and $0.23 in Q3 2015. FFO and AFFO for Q3 2016 were adversely affected by a
$0.3 million increase in deferred units expense compared to Q3 2015 primarily due to an increase in
the REIT's unit price in U.S. dollars during the period;
- FFO and AFFO payout ratios were 50% and 56%, respectively, compared to 47% and 54% in Q3 2015;
- Financial leverage ended Q3 2016 at 47.9% compared to financial leverage of 47.8% at the end of Q3 2015; and
- Investment properties increased 29.3% to $2.5 billion at the end of Q3 2016, compared to
investment properties of $1.9 billion at the end of Q3 2015.
Q3 2016 Business Highlights
- Milestone completed the internalization of the REIT's asset management function (the "Internalization") on September 30, 2016. At a special meeting of unitholders of the REIT ("Unitholders") held on September 13, 2016, Unitholders overwhelmingly voted in favour of the Internalization with the Internalization
approved by over 99% of votes cast. As a result of the Internalization, the annual asset management fee and incentive fee have
been eliminated, resulting in a net reduction in the REIT's annual general and administrative expenses by approximately
$9.5 million, and in an expected increase in the REIT's annual AFFO per unit of approximately 4%.
Also as a result of the Internalization, the Milestone senior management team now owns approximately 10.9 million Class B units,
or 11.8% of the outstanding REIT units, up from 5.5 million Class B units, or 7.3% of the outstanding REIT units prior to the
Internalization, creating even greater alignment of interest between the REIT and its senior management team;
- The REIT filed and obtained a receipt for the renewal of its base shelf prospectus (the "Shelf Prospectus"), thereby enabling
the REIT to continue to more quickly access capital when market opportunities permit. The Shelf Prospectus is valid for a 25
month period, during which time the REIT may offer and issue, from time to time, trust units, debt securities, warrants and
subscription receipts, or any combination thereof, having an aggregate offering price of up to C$750
million; and
- The REIT declared total cash distributions to REIT Unitholders and Class B Unitholders of $10.7
million.
Subsequent Events
- On October 12, 2016, the REIT completed the previously announced acquisition of Park 9
Apartments, a 275-unit multifamily apartment community located in Woodstock, a suburb northwest
of Atlanta, Georgia, for a purchase price of $47.0 million,
representing an estimated year one capitalization rate of 5.7%;
- On October 19, 2016, Milestone announced a definitive agreement to acquire a six-property
portfolio, comprising 1,460 apartment units in attractive U.S. Sunbelt markets, for a gross purchase price of approximately
$242 million (the "Portfolio Acquisition"). As part of the Portfolio Acquisition, the REIT will
further diversify its U.S. Sunbelt property portfolio by increasing scale in four existing markets and entering two new markets,
establishing greater critical mass to drive operating efficiencies and growth. The six-property portfolio has a weighted average
year built of 2005, which will effectively lower the average age of Milestone's overall portfolio. Two of the properties, Costa
Bella in San Antonio, TX and Fairways at Birkdale in Charlotte,
NC, closed on November 4, 2016, using proceeds from the previously announced bought deal
equity offering (the "Offering"). The remainder of the Portfolio Acquisition will be funded from mortgage assumptions, proceeds
from the refinancing of the REIT's existing mortgage debt facility, a proposed property disposition, the REIT's revolving line of
credit and proceeds from the Offering, as previously disclosed;
- Also on October 19, 2016, the REIT announced a 10% increase to its monthly cash distributions
to $0.05041 per unit (representing $0.60492 per unit on an annualized
basis), up from the current monthly distribution of $0.04583 per unit (representing $0.55000 per unit on annualized basis). The increase is expected to be effective starting with the January 2017 distribution, payable on February 15, 2017, to Unitholders of record
on January 31, 2017; and
- On October 28, 2016, the REIT successfully closed the Offering and exercised in full the
over-allotment option for gross proceeds of approximately C$192.6 million. Proceeds from the
Offering will be used to partially fund the Portfolio Acquisition.
|
Q3 2016, Q3 2015, YTD 2016 and YTD 2015 Financial Results
Summary
|
|
(US$000s, except per unit amounts)
|
Q3 2016
|
Q3 2015
|
Change
|
YTD 2016
|
YTD 2015
|
Change
|
|
Rents, Samestore
|
917
|
865
|
6.0%
|
917
|
865
|
6.0%
|
|
Rents, Total
|
950
|
871
|
9.1%
|
950
|
871
|
9.1%
|
|
Occupancy, Samestore
|
94.9%
|
95.4%
|
-50 bp
|
94.9%
|
95.4%
|
-50 bp
|
|
Occupancy, Total
|
95.0%
|
95.3%
|
-30 bp
|
95.0%
|
95.3%
|
-30 bp
|
|
|
|
|
|
|
|
|
Revenue, Samestore
|
49,170
|
46,611
|
5.5%
|
144,748
|
137,004
|
5.7%
|
|
Revenue, Non-samestore
|
19,148
|
8,174
|
134.3%
|
53,870
|
20,784
|
159.2%
|
|
Revenue, Management Company
|
2,781
|
1,373
|
102.5%
|
7,850
|
4,733
|
65.9%
|
|
Revenue, Total
|
71,099
|
56,158
|
26.6%
|
206,468
|
162,521
|
27.0%
|
|
|
|
|
|
|
|
|
Operating Expenses, Samestore
|
16,360
|
16,327
|
0.2%
|
67,619
|
68,517
|
-1.3%
|
|
Operating Expenses, Non-samestore
|
5,414
|
3,019
|
79.3%
|
17,698
|
8,016
|
120.8%
|
|
Operating Expenses, Management Company
|
2,447
|
1,208
|
102.6%
|
6,594
|
4,165
|
58.3%
|
|
Operating Expenses, Total(1)
|
24,221
|
20,554
|
17.8%
|
91,911
|
80,698
|
13.9%
|
|
|
|
|
|
|
|
|
Property Revenue, Samestore
|
49,170
|
46,626
|
5.5%
|
144,748
|
137,004
|
5.7%
|
|
Property Revenue, Non-samestore
|
19,148
|
8,159
|
134.7%
|
53,870
|
20,784
|
159.2%
|
|
Property Revenue, Total(2)
|
68,318
|
54,785
|
24.7%
|
198,618
|
157,788
|
25.9%
|
|
|
|
|
|
|
|
|
Property Operating Expenses, Samestore
|
21,732
|
21,477
|
1.2%
|
62,247
|
61,527
|
1.2%
|
|
Property Operating Expenses, Non-samestore
|
8,552
|
3,827
|
123.5%
|
23,825
|
10,099
|
135.9%
|
|
Property Operating Expenses, Total(2,3)
|
30,284
|
25,304
|
19.7%
|
86,072
|
71,626
|
20.2%
|
|
|
|
|
|
|
|
|
NOI, Samestore
|
27,438
|
25,149
|
9.1%
|
82,501
|
75,477
|
9.3%
|
|
NOI, Non-samestore
|
10,596
|
4,332
|
144.6%
|
30,045
|
10,685
|
181.2%
|
|
NOI, Total(2,3)
|
38,034
|
29,481
|
29.0%
|
112,546
|
86,162
|
30.6%
|
|
|
|
|
|
|
|
|
NOI Margin, Samestore
|
55.8%
|
53.9%
|
190 bp
|
57.0%
|
55.1%
|
190 bp
|
|
NOI Margin, Non-samestore
|
55.3%
|
53.1%
|
220 bp
|
55.8%
|
51.4%
|
440 bp
|
|
NOI Margin, Total(2,3)
|
55.7%
|
53.8%
|
190 bp
|
56.7%
|
54.6%
|
210 bp
|
|
|
|
|
|
|
|
|
FFO
|
21,489
|
17,356
|
23.8%
|
62,123
|
51,026
|
21.7%
|
|
FFO Per Unit, Basic(4)
|
0.28
|
0.26
|
0.02
|
0.83
|
0.80
|
0.03
|
|
FFO Per Unit, Diluted(5)
|
0.28
|
0.26
|
0.02
|
0.81
|
0.80
|
0.01
|
|
FFO Payout Ratio(6)
|
50%
|
47%
|
3%
|
53%
|
49%
|
4%
|
|
|
|
|
|
|
|
|
AFFO
|
19,224
|
15,238
|
26.2%
|
56,473
|
44,377
|
27.3%
|
|
AFFO Per Unit, Basic(4)
|
0.25
|
0.23
|
0.02
|
0.75
|
0.70
|
0.05
|
|
AFFO Per Unit, Diluted(5)
|
0.25
|
0.23
|
0.02
|
0.74
|
0.69
|
0.05
|
|
AFFO Payout Ratio(6)
|
56%
|
54%
|
2%
|
58%
|
56%
|
2%
|
|
|
|
|
|
|
|
|
Total Distributions Declared(7)
|
10,669
|
8,199
|
30.1%
|
32,640
|
24,858
|
31.3%
|
|
|
|
|
|
|
|
|
Weighted Average Units Outstanding – Basic
|
75,877,790
|
65,979,455
|
|
74,944,470
|
63,628,504
|
|
|
Weighted Average Units Outstanding – Diluted
|
76,533,635
|
66,321,631
|
|
76,431,507
|
63,932,650
|
|
|
|
|
|
|
|
|
|
Debt to gross book value
|
47.9%
|
47.8%
|
10 bp
|
47.9%
|
47.8%
|
10 bp
|
|
(1) Includes real estate tax adjustments related to IFRIC
21.
|
|
(2) Excludes third-party property management revenue and related
expenses.
|
|
(3) Excludes real estate tax adjustments related to IFRIC
21.
|
|
(4) Basic FFO and AFFO per unit are calculated by
dividing total FFO and AFFO by the amount of the total weighted average number of outstanding REIT and Class B units for
the respective periods.
|
|
(5) Diluted FFO and AFFO per unit are calculated by dividing total
FFO and AFFO by the amount of the total weighted average number of outstanding REIT units, Class B units, subscription
receipts and options using the treasury method for the respective periods.
|
|
(6) FFO and AFFO Payout ratios are calculated by dividing the
amount of REIT unitholders and Class B unitholders distributions declared, by FFO and AFFO for the respective periods.
Distributions on REIT units and Class B units are translated based on an average CAD to USD exchange rate for the
respective periods, consistent with IFRS, as applicable. Note that monthly distributions starting with the January 2016
distribution were paid in USD and thus not translated from USD to CAD.
|
|
(7) Represents total cash distributions declared to REIT
unitholders and Class B unitholders for the respective periods.
|
Q3 2016 Financial Results
Total and samestore property revenue were $68.3 million and $49.2
million, respectively, up 24.7% and 5.5% from Q3 2015. The increase in total and samestore property revenue is attributable
to continued strong occupancy, organic rent growth and growth from acquisitions completed during and subsequent to Q3 2015.
Total and samestore property operating expenses were $30.3 million and $21.7 million,
respectively, up 19.7% and 1.2%, from Q3 2015. The increase in total and samestore property operating expenses is primarily
attributable to expenses related to the operations of properties acquired during and subsequent to Q3 2015 and higher real estate
tax estimates.
Total and samestore NOI were $38.0 million and $27.4 million, respectively, up 29.0% and 9.1% from Q3 2015. Total
and samestore NOI margins were 55.7% and 55.8%, respectively, both up 190 basis points from Q3 2015. The increase in total and
samestore NOI and NOI margins is primarily attributable to growth in property revenue and improved operating efficiencies as the
REIT continues to increase scale. The REIT's NOI margins are generally lower for the third quarter of any given year due to higher
unit turnover and utility expenses during summer months.
FFO and AFFO of $21.5 million and $19.2 million, respectively, were
up 23.8% and 26.2% from Q3 2015. Diluted FFO and AFFO per unit were $0.28 and $0.25, respectively, up from $0.26 and $0.23 in Q3
2015. FFO and AFFO growth were attributable to higher property revenue and NOI during the quarter, as noted above. FFO and AFFO for
Q3 2016 were adversely affected by a $0.3 million increase in deferred units expense compared to Q3
2015 primarily due to an increase in the REIT's unit price in U.S. dollars during the period.
Fair Value on Investment Properties
As at September 30, 2016, the REIT's properties were valued using an overall weighted capitalization rate of
6.30% (June 30, 2016 – 6.23%; December 31, 2015 – 6.38%). There
were $37.9 million of fair value gains recognized in Q3 2016 resulting from increased NOI forecasts. Fair value
adjustments are determined based on the movement of various parameters, including changes in stabilized NOI and capitalization
rates.
Cash Distributions
Cash distributions declared to REIT Unitholders and Class B Unitholders of the REIT's operating partnership
were $10.7 million in Q3 2016, representing FFO and AFFO payout ratios of 50% and 56%, respectively, compared to declared
distributions of $8.2 million in Q3 2015, representing FFO and AFFO payout ratios of 47% and
54%.
Liquidity and Capital Structure
As at September 30, 2016, the REIT had cash and cash equivalents of $10.8 million and a $100.0
million revolving line of credit (with an option to increase the line to $125.0 million). As at
November 10, 2016, the REIT had no balance on its line of credit. The REIT expects to utilize its
line of credit in the coming weeks to fund a portion of the purchase price for the Portfolio Acquisition, as previously disclosed.
The REIT ended the period with mortgage notes obligations carrying value of $1.20 billion with 87.0% issued at fixed rates, a
weighted average interest rate of 3.65% and a weighted average maturity of approximately 6.1 years. The REIT's debt to gross book
value ended Q3 2016 was 47.9%. Following the Portfolio Acquisition, the REIT's pro-forma mortgage notes obligations carrying value
is projected to be approximately $1.34 billion with 88.9% issued at fixed rates, a weighted average
interest rate of 3.65% and a weighted average maturity of approximately 6.1 years. Following the Portfolio Acquisition, the REIT's
debt to gross book value is expected to be approximately 49.0%.
Units Outstanding
As at November 10, 2016, there were 80,478,063 REIT units and 11,116,687 Class B units outstanding.
Conference Call
Robert Landin, CEO, Steve Lamberti, COO, and Ryan Newberry, CFO, will host a
conference call for the investment community tomorrow, Friday, November 11, 2016 at 12:00 p.m. (ET). The call-in numbers for participants are 416-764-8688 or 888-390-0546. A live webcast of the
call will be archived on Milestone's website at http://www.milestonereit.com/investor-relations/events-presentations.
A replay of the call will be available until Friday, November 18, 2016. To access the replay, dial
416-764-8677 or 888-390-0541 (Passcode: 319051). The webcast will be archived on Milestone's website.
Interim Filings
The REIT's Management's Discussion and Analysis and Consolidated Financial Statements have been filed on SEDAR and can
be viewed at www.sedar.com, or on the REIT's website at www.milestonereit.com.
About Milestone
The REIT is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT's portfolio consists of 75 multifamily garden-style residential properties, comprising
23,345 apartment units that are located in 14 major metropolitan markets throughout the Southeast and Southwest United States. The REIT is the largest real estate investment trust listed on the TSX focused solely
on the United States multifamily sector. Milestone's vertically integrated platform employs more
than 1,200 employees and manages more than 50,000 apartment units across the United States. For
more information, please visit www.milestonereit.com.
Non-IFRS Financial Measures
This press release contains certain non-IFRS financial measures including FFO, AFFO and NOI, and related amounts to
measure, compare and explain the operating results and financial performance of the REIT. These measures are commonly used by
entities in the real estate industry as useful metrics for measuring performance. However, they do not have any standardized
meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities.
These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in
accordance with IFRS. Please refer to the REIT's Management's Discussion and Analysis for the third quarter ended September
30, 2016 for a reconciliation of NOI, FFO and AFFO to standardized IFRS measures.
Forward-looking Information
This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating
to the business of the REIT and the environment in which it operates. Forward-looking statements are identified by words such as
"believe", "anticipate", "expect", "intend", "plan", "will", "may" and other similar expressions. Some of the specific
forward-looking statements in this news release include, but are not limited to, statements with respect to the REIT's financial
performance, the future performance of the U.S. multifamily sector and the U.S. economy, the financing and completion of the
Portfolio Acquisition, the effects of the Portfolio Acquisition and the acquisition of Park 9 on the REIT (including estimated year
one capitalization rates and pro forma debt profile), proposed changes to the REIT's distribution policy and the effects of the
Internalization on the REIT (including the anticipated reduction in general and administrative expenses and increase in AFFO per
Unit). They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict.
A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements,
including, but not limited to, the factors discussed under the heading "Risk Factors" in the REIT's annual information form
available at www.sedar.com. The
forward-looking statements in this news release are based on certain assumptions that, while considered reasonable by management as
of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These
assumptions include, include, but are not limited to, those relating to the REIT's future growth potential, results of operations,
future prospects and opportunities, demographic and industry trends, legislative or regulatory matters, future levels of
indebtedness, the tax laws as currently in effect, the continual availability of capital, current economic conditions, all
conditions to completion of the Portfolio Acquisition will be satisfied or waived, the REIT will complete the Portfolio Acquisition
on the terms anticipated, revenue and NOI associated with the acquisition properties will remain consistent, significant additional
costs will not have to be incurred by the REIT to manage the acquisition properties, the REIT's assets will generate sufficient
cash to allow the REIT to pay the increased distribution and exchange rates don't change. There can be no assurance that
forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in
these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements.
Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by
applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.
SOURCE Milestone Apartments REIT
Image with caption: "Milestone Apartments Real Estate Investment Trust (CNW Group/Milestone Apartments REIT) (CNW
Group/Milestone Apartments REIT)". Image available at: http://photos.newswire.ca/images/download/20161110_C8522_PHOTO_EN_815696.jpg
