Minto Apartment REIT Reports 2022 First Quarter Financial Results

— Solid growth in revenue, NOI and AFFO per unit driven by improving market conditions —

OTTAWA, ON, May 3, 2022 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the first quarter ended March 31, 2022 ("Q1 2022"). The Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q1 2022 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.1

"Canadian urban rental market conditions continued to strengthen during the first quarter, driving year-over-year growth in our key financial metrics. We continue to anticipate that market dynamics will return to pre-pandemic levels by the middle of this year," said Michael Waters, the REIT's Chief Executive Officer. "We achieved significant gains on the new leases that we signed in the quarter despite the surge in the Omicron variant of COVID-19 and local challenges in Ottawa with the truckers' occupation of the downtown core."

Q1 2022 Highlights

• The REIT executed 401 new leases, achieving an average rental rate that was 10.8% higher than the expiring rents; as rental markets have strengthened, the gain to lease potential on sitting rents increased to 10.7% from 6.8% in the fourth quarter of 2021 ("Q4 2021");
• Average occupancy of unfurnished suites was 94.2%, an increase from 91.1% in the first quarter ended March 31, 2021 ("Q1 2021");
• Total revenue was $32.5 million, an increase of 8.4% from Q1 2021;
• Net Operating Income ("NOI") was $18.8 million, an increase of 5.0% compared to Q1 2021;
• Funds from Operations ("FFO") increased by 10.0% to $12.0 million, compared to $10.9 million in Q1 2021; FFO per unit increased by 3.3% to $0.1906, compared to $0.1845 in Q1 2021;
• Adjusted Funds from Operations ("AFFO") increased by 11.0% to $10.3 million, compared to $9.3 million in Q1 2021; AFFO per unit increased by 4.3% to $0.1647, compared to $0.1579 in Q1 2021;
• Net income and comprehensive income was $34.6 million, compared to a net loss and comprehensive loss of $20.4 million in Q1 2021;
• Net asset value ("NAV") per unit was $24.33 as at March 31, 2022, an increase of 1.4% from $24.00 as at December 31, 2021;
• The REIT continued to productively deploy capital through its repositioning program, earning an annualized 8.4% return on the capital invested in the repositioning of 60 suites across its portfolio in Q1 2022;
• On January 24, 2022, the REIT announced the appointment of Jonathan Li as President and Chief Operating Officer, effective April 2022. Mr. Li has more than 20 years of related capital markets experience, most recently serving as a Managing Director in the North American Real Estate investment banking group at BMO Capital Markets;
• On March 24, 2022, the REIT announced an agreement to provide a convertible development loan of $51.7 million to Minto Properties Inc. ("MPI") to finance 80% of MPI's 45% interest in a joint venture to redevelop a portion of the University Heights shopping mall in the Greater Victoria Area into a mixed-use multi-residential and retail property comprising 593 rental suites atop 113,485 square feet of grocery-anchored retail;

Financial Summary

Q1 2022 Operating Results

Revenue in Q1 2022 totalled $32.5 million, an increase of 8.4% from $30.0 million in Q1 2021. The increased revenue in Q1 2022 reflected higher occupancy and average rents, and the acquisition of the Le Hill-Park property in Montreal.

Average monthly rent at the end of Q1 2022 was $1,655, an increase of 1.5% compared to $1,630 as the end of Q1 2021. Average monthly rent for the Same Property Portfolio was $1,677 at the end of Q1 2022, an increase of 2.9% compared to $1,630 at the end of Q1 2021.

Average occupancy was 94.2% in Q1 2022, compared to 91.1% in Q1 2021 and 95.0% in Q4 2021. The significant year-over-year increase in occupancy reflected improving urban rental market conditions. Occupancy declined slightly in Q1 2022 compared to Q4 2021 as move-outs marginally exceeded move-ins, which is consistent with the normal seasonality in the leasing cycle.

Property operating costs were 12.3% higher (8.4% for the Same Property Portfolio) in Q1 2022 compared to Q1 2021. This was due to higher insurance costs, higher labour costs resulting from the staffing of certain vacant positions, higher labour rates, higher repairs and maintenance and the addition of Le Hill-Park to the portfolio. Utilities were 26.8% higher (22.5% for the Same Property Portfolio) in Q1 2022 compared to Q1 2021. The unfavourable variance was largely related to higher heating costs. A cold winter (total heating degree days in Q1 2022 were 13% higher than Q1 2021) combined with higher natural gas prices (unit rates in Q1 2022 were 34% higher than Q1 2021) resulted in a large unfavourable year-over-year variance in natural gas costs.

NOI for Q1 2022 totalled $18.8 million, representing 57.8% of revenue, an increase of 5.0% compared to $17.9 million, or 59.6% of revenue, in Q1 2021. Same Property Portfolio NOI for Q1 2022 was $18.4 million, representing 58.0% of revenue, an increase of 2.6% compared to $17.9 million, or 59.6% of revenue, in Q1 2021.

The REIT has approximately 43,000 square feet of under-performing commercial space at its Carlisle property in Ottawa and is investigating the potential to convert this area into residential suites. The REIT has allowed approximately 8,000 square feet to become vacant and has negotiated new month-to-month lease terms with a tenant that occupies the remaining 35,000 square feet, pending completion of a detailed feasibility study. Adjusting for this vacancy and amended lease terms, NOI for the Same Property Portfolio would have increased by 3.4% in Q1 2022 compared to Q1 2021.

FFO in Q1 2022 increased 10.0% to $12.0 million, or $0.1906 per unit, compared to $10.9 million, or $0.1845 per unit, in Q1 2021. The higher FFO in Q1 2022 primarily reflected the positive NOI variance. AFFO in Q1 2022 was $10.3 million, or $0.1647 per unit, an increase of 11.0% compared to $9.3 million, or $0.1579 per unit, in Q1 2021. The increase in AFFO for Q1 2022 was primarily due to the higher FFO, partially offset by an increase in the maintenance capital expenditure reserve from the addition of Le Hill-Park.

The REIT reported net income and comprehensive income of $34.6 million in Q1 2022, compared to a net loss and comprehensive loss of $20.4 million in Q1 2021. The positive variance was primarily attributable to higher NOI and fair value gains on investment properties, Class B LP Units, interest rate swap and unit-based compensation.

The REIT paid cash distributions of $0.1187 per unit for Q1 2022, an increase of 4.3% compared to Q1 2021 and representing an AFFO payout ratio of 72.1%. Cash distributions of $0.1138 per unit were paid in Q1 2021, representing an AFFO payout ratio of 72.0%.

Organic Growth Initiatives: Gain-to-Lease and Repositioning

The REIT signed 401 new leases in Q1 2022, realizing an average gain-to-lease of 10.8%. That was the highest gain-to-lease achieved by the REIT in two years and compares to realized gains of 7.6% in Q1 2021 and 7.2% in Q4 2021. Gains were realized in all markets in Q1 2022, including a gain of 13.4% in the Toronto market. As the Canadian economy sustained its recovery from the negative impact of the COVID-19 pandemic, the REIT continued to reduce the use of special pricing discounts to drive occupancy, supporting higher gain-to-lease.

Management estimates that the REIT holds embedded gain-to-lease potential in its unfurnished suite portfolio of 10.7% as at March 31, 2022, representing future annualized embedded potential revenue of approximately $12.5 million. That compares to embedded gain-to-lease potential of 8.2% and estimated annualized revenue growth opportunity of $8.7 million as at March 31, 2021, and 6.8% or $7.9 million as at December 31, 2021. The embedded gain-to-lease potential is increasing as Canadian urban rental markets strengthen and management reduces the use of discounts and promotions to drive occupancy. These will continue to be decreased as occupancy levels stabilize.

The REIT repositioned a total of 60 suites across its portfolio in Q1 2022. The annualized revenue gains realized on the repositioned suites generated an average annual unlevered return on investment of 8.4%. The REIT has a total of 2,255 suites remaining to be repositioned under its current program.

Property Development and Intensification

The REIT has entered into agreements to provide convertible development loans for the development of five properties: Fifth + Bank and Beechwood in Ottawa, Lonsdale Square in North Vancouver, 810 Kingsway in Vancouver, and University Heights in the Greater Victoria Area. The REIT has the option to purchase each of these properties, or MPI's interest in the case of 810 Kingsway and University Heights, upon stabilization at 95% of their then-appraised fair values. In addition, the REIT is pursuing development of additional rental suites on available excess land at three Toronto properties: Richgrove, Leslie York Mills, and High Park Village. Combined, these eight opportunities have the potential to increase the REIT's suite count by 2,271 suites, a 27% increase from the REIT's current suite count, inclusive of the recently announced acquisitions of Niagara West and The International (refer to "Subsequent Events" below for more details). Updated information on these opportunities, including development timelines, is available in the REIT's Q1 2022 MD&A.

Balance Sheet

As of March 31, 2022, the REIT had total debt outstanding of $910.7 million, with a weighted average interest rate on fixed rate debt of 2.81% and a weighted average term to maturity on fixed rate debt of 4.77 years. The Debt-to-GBV ratio was 36.8%. The REIT's NAV per unit as at March 31, 2022 was $24.33, an increase of 1.4% from $24.00 as at December 31, 2021.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $144.4 million as at March 31, 2022, with a liquidity ratio (total liquidity/total debt) of 15.9%.

Subsequent Events

On April 11, 2022, the REIT announced two agreements to acquire a 28.35% managing interest in 39 Niagara Street ("Niagara West") in downtown Toronto, and a 100% interest in 220 4th Avenue SW ("The International") in downtown Calgary, for a total purchase price of $201 million. The two premium residential properties comprise a total of 753 suites. The acquisition of Niagara West closed on April 22, 2022 and the acquisition of the International is expected to close on May 6, 2022.

On May 2, 2022, the REIT obtained a commitment from its lenders to increase the total commitment on the REIT's revolving credit facility from $200 million to $300 million, enabling the REIT to maintain financial flexibility and continue to capitalize on opportunities to drive long term NAV growth.

Conference Call

Michael Waters, Chief Executive Officer and President, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, May 4, 2022 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:

Minto Apartment REIT Q1 2022 Earnings Webcast

A replay of the call will be available until Wednesday, May 11, 2022. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 568248 #). 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, develop, and operate 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 "expects". 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 Annual Information Form dated March 8, 2022, 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 and Other Financial Measures

This news release contains certain non-GAAP and other financial measures which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure for the purpose of this news release. These measures and ratios are defined below:

• "FFO" is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of investment properties, effects of puttable instruments classified as financial liabilities and changes in fair value of financial instruments and derivatives. FFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating FFO may differ from other issuers' methods and, accordingly, may not be comparable to FFO reported by other issuers.
• "FFO per unit" is calculated as FFO divided by the weighted average number of Units of the REIT and Class B LP Units of Minto Apartment Limited Partnership (the "Partnership") outstanding over the period. The REIT regards FFO per unit as a key measure of operating performance.
• "AFFO" is defined as FFO adjusted for items such as maintenance capital expenditures and straight-line rental revenue differences. AFFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating AFFO may differ from other issuers' methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT also uses AFFO in assessing its capacity to make distributions.
• "AFFO per unit" is calculated as AFFO divided by the weighted average number of Units of the REIT and Class B LP Units of the Partnership outstanding over the period. The REIT regards AFFO per unit as a key measure of operating performance.
• "AFFO payout ratio" is the proportion of the total distributions on Units of the REIT and Class B LP Units of the Partnership to AFFO. The REIT uses AFFO payout ratio in assessing its capacity to make distributions.
• "Weighted average term to maturity on fixed rate debt" is calculated as the weighted average of the term to maturity on the outstanding fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units of the Partnership.
• "Weighted average interest rate on fixed rate debt" is calculated as the weighted average of the stated interest rates on the outstanding balances of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units of the Partnership.
• "NOI" is defined as revenue from investment properties less property operating costs, property taxes and utilities (collectively referred to as "property operating expenses") prepared in accordance with IFRS. NOI should not be construed as an alternative to net income determined in accordance with IFRS. The REIT's method of calculating NOI may differ from other issuers' methods and, accordingly, may not be comparable to NOI reported by other issuers. It is a key input in determining the value of the REIT's properties.
• "NOI margin" is defined as NOI divided by revenue.
• "Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date.
• "Debt-to-GBV" is calculated by dividing total interest-bearing debt consisting of mortgages, credit facility and Class C LP Units of the Partnership by Gross Book Value and is used as the REIT's primary measure of its leverage.
• "NAV" is calculated as the sum of the value of REIT Unitholders' equity and Class B LP Units of the Partnership as at the balance sheet date.
• "NAV per unit" is calculated by dividing NAV by the number of Units of the REIT and Class B LP Units of the Partnership outstanding as at the balance sheet date.
• "total debt" is calculated as the sum of value of interest-bearing debt consisting of mortgages, credit facility and Class C LP Units of the Partnership.
• "Total liquidity" is calculated as the sum of the undrawn balance under the revolving credit facility and cash.
• "gain-to-lease" refers to the gap between rents achieved on new leases of unfurnished suites as compared to the expiring leases.
• "gain-to-lease potential" refers to the gap between Management's estimate of monthly market rent and average monthly in-place rent per occupied unfurnished suite.
• "average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average annual rental increase per suite after repositioning by the average repositioning cost per suite, excluding the impact of financing costs.
• "average monthly rent" represents the average monthly rent for occupied unfurnished suites at the end of the period.
• "average occupancy" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio for the period.

Reconciliations of Non-IFRS Financial Measures and Ratios

FFO and AFFO

NAV and NAV per unit

SOURCE MINTO Real Estate Investment Trust

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