STARLIGHT U.S. RESIDENTIAL FUND ANNOUNCES Q4-2022 RESULTS INCLUDING AN 11.8% INCREASE IN YTD-2022 SAME PROPERTY AVERAGE MONTHLY RENT

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

TORONTO, March 1, 2023 /CNW/ - Starlight U.S. Residential Fund (TSXV: SURF.A) (TSX: SURF.U) (the "Fund") announced today its results of operations and financial condition for the three months ended December 31, 2022 ("Q4-2022") and year ended December 31, 2022 ("YTD-2022"). Certain comparative figures are included for the three months ended December 31, 2021 ("Q4-2021") and the period from September 23, 2021 (date of formation) to December 31, 2021 ("YTD-2021"). Given the operations of the Fund commenced on November 15, 2021, the operating activities for YTD-2021 and Q4-2021 are the same and are used interchangeably to describe the operating activities for the periods.

All amounts in this press release are in thousands of United States ("U.S.") dollars except for average monthly rent1 ("AMR") or unless otherwise stated. All references to "C$" are to Canadian dollars.

"The Fund owns a high-quality, well located portfolio of multi-family communities which has continued to demonstrate strong operating results including an 11.8% increase in 2022 year-to-date same property average monthly rent," commented Evan Kirsh, the Fund's President. "The Fund continues to focus on increasing net operating income at the properties through its active asset management strategy and to navigate the present period of capital markets uncertainty with the goal of maximizing the total return for investors upon the eventual sale of its properties."

Q4-2022 HIGHLIGHTS

• The Fund achieved a 3.7% annualized increase in AMR during Q4-2022 with rent growth in the primary markets in which the Fund operates reducing slightly during Q4-2022 primarily due to the return of more seasonal leasing patterns that were more customary prior to the onset of Coronavirus (SARS-COV2) and its variants ("COVID-19"). Leasing volumes are typically at their lowest levels from October to February and highest from March to September, when higher rental increases can typically be achieved.
• Q4-2022 total portfolio revenue and net operating income1 ("NOI") were $9,911 and $6,971 (Q4-2021 - $2,692 and $1,970), respectively, with the increases relative to Q4-2021 resulting from a full period of operations for the Fund's properties as well as the acquisition of Eight at East and a 90% partial interest in The Ventura ("Ventura"), adding interests in an additional 536 multi-family suites in Orlando, Florida and Phoenix, Arizona ("Primary Variance Drivers").
• As at February 28, 2023, the Fund had collected approximately 97.7% of rents during Q4-2022, with further amounts expected to be collected in future periods, demonstrating the Fund's high quality resident base and operating performance.
• The Fund reported a net loss and comprehensive loss for Q4-2022 of $15,424 (Q4-2021 - net loss and comprehensive loss of $985) primarily resulting from the fair value loss on investment properties reported during Q4-2022 driven by increases in capitalization rates partially offset by strong NOI growth.
• As a result of interest rate caps in place as at December 31, 20222, the Fund's weighted average interest rate was 5.68%. On January 25, 2023, the Fund also entered into an interest rate swap relating to the Fund's Indigo Apartments property loan payable at a swap rate of 3.75%, fixing the all-in interest rate associated with such loan at 5.70% until maturity. After the Indigo Apartments interest rate swap was entered into, the Fund has interest rate caps or swaps in place for 96% of the Fund's loans payable and as a result, a 100 basis point increase in U.S. 30-day London Interbank Offered Rate ("LIBOR") or SOFR, as defined below, would result in a 4 basis point increase in the Fund's weighted average interest rate.
• On November 25, 2022, the Fund announced it was pausing monthly distributions for all classes of units, effective with the November 2022 distribution, which would have been payable on December 15, 2022. The Fund continues to navigate this continued period of capital markets uncertainty with the reduction in distributions amounting to approximately $9,600 per annum which is expected to provide the Fund with additional flexibility during this period.

YTD-2022 HIGHLIGHTS

• The Fund achieved an 11.8% increase in same property AMR, with strong rent growth driven by the growth in the demand for multi-family suites in the primary markets in which the Fund operates.
• The Fund acquired Eight at East and a 90% partial interest in Ventura, adding interests in an additional 536 multi-family suites in Orlando, Florida and Phoenix, Arizona. The acquisitions were financed through cash on hand, first mortgage financing at each of Eight at East, Ventura and Emerson at Buda as well as net proceeds from the refinancing of Sunlake Apartments.
• The Fund acquired 49 single-family rental homes in Atlanta, Georgia for a total of $11,042 and as at November 24, 2022, had completed capital upgrades since the date of acquisition on all of the Fund's 98 single-family rental homes.
• The Fund successfully deployed the proceeds from the Fund's initial public offering on November 15, 2021(the "Offering"), having assembled a portfolio of 1,973 multi-family suites across six markets and 98 single-family rental homes.
• Total portfolio revenue and NOI for YTD-2022 were $34,530 and $22,224 (YTD-2021 - $2,692 and $1,970), respectively, with the increases relative to YTD-2021, being primarily due to the Primary Variance Drivers.
• Net loss and comprehensive loss for YTD-2022 was $21,709 (YTD-2021 - net loss and comprehensive loss of $985) primarily resulting from the fair value loss on investment properties reported during Q4-2022 driven by expansion in capitalization rates partially offset by the strong NOI growth reported by the Fund.

FINANCIAL CONDITION AND OPERATING RESULTS

Highlights of the financial and operating performance of the Fund as at December 31, 2022, for Q4-2022 and YTD-2022, including a comparison to December 31, 2021, Q4-2021 and YTD-2021, as applicable, are provided below:

NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS

The Fund's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Certain terms that may be used in this press release including adjusted funds from operations ("AFFO"), AMR, economic occupancy, estimated gap to market versus in-place rents, funds from operations ("FFO"), gross book value, indebtedness, indebtedness coverage ratio, indebtedness to gross book value, interest coverage ratio, same property NOI and NOI (collectively, the "Non-IFRS Measures") as well as other measures discussed elsewhere in this press release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. The Fund uses these measures to better assess the Fund's underlying performance and financial position and provides these additional measures so that investors may do the same. Further details on Non-IFRS Measures are set out in the Fund's MD&A in the "Non-IFRS Financial Measures" section for Q4-2022 and are available on the Fund's profile on SEDAR at www.sedar.com.

A reconciliation of the Fund's interest coverage ratio and indebtedness coverage ratio are provided below:

The Fund's interest coverage ratio and indebtedness coverage ratio were each 0.92x during Q4-2022 and 1.18x for YTD-2022. The decline in both ratios during Q4-2022 and YTD-2022, relative to Q4-2021 and YTD-2021 was primarily due to increases in SOFR, partially offset by strong NOI growth. Although the interest coverage and indebtedness coverage ratio's have been negatively impacted by the increases in SOFR and LIBOR, NOI growth and operating results for the Fund's properties have remained strong.

During Q4-2022, the Fund covered any operating shortfall, including any distributions paid, through cash on hand. The Fund reported strong operating results offset by increases in the Fund's interest costs as a result of the Fund utilizing a variable rate debt strategy which allows the Fund to maintain maximum flexibility for the potential sale of the Fund's properties at the end of, or during, the Fund's three-year term. The Fund also utilizes interest rate caps and swaps to limit the potential impact on the Fund's financial performance from any increases in interest rates. As a result of such interest rate caps in place as at December 31, 2022, the Fund's weighted average interest rate was 5.68%. The Fund also entered into an interest rate swap relating to the Indigo Apartment's property loan payable at a strike rate of 3.75%, fixing the all-in interest rate associated with such loan at 5.70%. After the Indigo Apartment's interest rate swap was entered into, the Fund has interest rate caps or swaps in place for 96% of the Fund's Indebtedness and as a result, a 100 basis point increase in LIBOR or SOFR would result in a four basis point increase in the Fund's weighted average interest rate.

CASH PROVIDED BY OPERATING ACTIVITIES RECONCILIATION TO FFO and AFFO

The Fund was formed as a "closed-end" limited partnership with an initial term of three years, a targeted yield of 4.0% and a pre-tax targeted total annual return of 11% across all classes of units of the Fund. For Q4-2022, basic and diluted AFFO and AFFO per Unit were $(671) and $(0.02), respectively (Q4-2021 - $1,009 and $0.03), representing a decrease of $1,679 primarily as a result of increases in the Fund's interest costs driven by increases in SOFR and LIBOR, partially offset by NOI growth from the Primary Variance Divers. The Fund covered any shortfall between cash used by operating activities, including interest costs and distributions through either cash from operating activities, during such applicable periods, or cash on hand.

A reconciliation of the Fund's cash provided by operating activities determined in accordance with IFRS to FFO and AFFO for Q4-2022 and YTD-2022 is provided below:

FUTURE OUTLOOK

Since early 2022, concerns over elevated levels of inflation have resulted in a significant increase in interest rates with the U.S. Federal Reserve raising the Federal Funds Rate by approximately 450 basis points. Interest rate increases typically lead to increases in borrowing costs for the Fund, reducing cash flow, given the Fund employs a variable rate debt strategy due to the Fund's three-year term in order to provide maximum flexibility upon the eventual sale of the Fund's properties during or at the end of the Fund's term. Historically, investments in multi-family properties have provided an effective hedge against inflation given the short-term nature of each lease term which was reflected in the rent growth achieved at the Fund's properties during Q4-2022. Furthermore, the Fund does have certain interest rate caps in place which protect the Fund from increases in interest rates beyond stipulated levels and for stipulated terms as described in detail in the Fund's consolidated financial statements for the year ended December 31, 2022 and for the period from September 23, 2021 (date of formation) to December 31, 2021 which is available at www.sedar.com. The Fund also continues to closely monitor the U.S. employment and inflation data as well as the U.S. Federal Reserve's monetary policy decisions in relation to future interest rates and resulting impact these may have on the Fund's financial performance in future periods.

The impact of rising interest rates and higher levels of inflation have also significantly disrupted active and new construction of comparable product in the primary markets in which the Fund operates which may create a temporary imbalance in supply of comparable, multi-suite residential properties and single-family rental homes in future periods. This imbalance, alongside the continued economic strength and solid fundamentals may be supportive of favourable supply and demand conditions for the Fund's properties in future periods and could result in future increases in occupancy and rent growth. The Fund believes it is well positioned to take advantage of these conditions should they transpire given the quality of the Fund's properties and the benefit of having a resident pool employed across a diverse job base.

The Fund continues to closely monitor the financial impact of elevated interest rates and higher levels of inflation on the Fund's liquidity and financial performance.

Further disclosure surrounding the Future Outlook is included in the Fund's management's discussion and analysis in the "COVID-19" and "Future Outlook" sections for Q4-2022 under the Fund's profile, which is available on www.sedar.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws and which reflect the Fund's current expectations regarding future events, including the overall financial performance of the Fund and its properties, including the impact of inflation; interest rates; any resurgence in COVID-19; and the impact of any changes in migration or other population growth patterns that may be caused by the lagging effects of COVID-19 including return to work policies at various employers may have on the business and operations of the Fund.

Forward-looking information is provided for the purposes of assisting the reader in understanding the Fund's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes.

Forward-looking information may relate to future results, the impact of inflation levels and interest rates, the ability of the Fund to make and the resumption of future distributions, the impact of COVID-19 on the Fund's properties as well as the impact of any resurgence in COVID-19 on the markets in which the Fund operates, the trading price of the Fund's TSX Venture Exchange listed units which includes class A and U units of the Fund ("Listed Units") and the value of the Fund's unlisted units, which include all Units other than the Listed units, acquisitions, financing, performance, achievements, events, prospects or opportunities for the Fund or the real estate industry and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, occupancy levels, AMR, taxes, and plans and objectives of or involving the Fund. Particularly, matters described in "COVID-19" and "Future Outlook" are forward-looking information. In some cases, forward-looking information can be identified by terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "goal", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

Forward-looking statements involve known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities may not be achieved. Those risks and uncertainties include: the extent and sustainability of potential higher levels of inflation and the potential impact on the Fund's operating costs; the pace at which and degree of any changes in interest rates that impact the Fund's weighted average interest rate may occur; the ability of the Fund to make and the resumption of future distributions; the impact of COVID-19 on the Fund's properties as well as the impact of COVID-19 on the markets in which the Fund operates; the trading price of the Listed Units; changes in government legislation or tax laws which would impact any potential income taxes or other taxes rendered or payable with respect to the Fund's properties or the Fund's legal entities; the impact of rising interest costs, high inflation and supply chain issues have on new supply of multi-family apartments; the extent to which favorable operating conditions achieved during historical periods may continue in future periods; the applicability of any government regulation concerning the Fund's residents or rents as a result of COVID-19 or otherwise; and the availability of debt financing as loans payable become due during the Fund's term. A variety of factors, many of which are beyond the Fund's control, affect the operations, performance and results of the Fund and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results.

Information contained in forward-looking information is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the impact of inflation and interest rates on the Fund's operating costs; the impact of interest rate increases and market expectations for future interest rates on the Fund's financial performance; the availability of debt financing and as loans payable become due during the Fund's term; the impact of any resurgence in COVID-19 on the Fund's properties as well as the impact this may have on the markets in which the Fund operates; the trading price of the Listed Units; the applicability of any government regulation concerning the Fund's residents or rents as a result of COVID-19 or otherwise; the realization of property value appreciation and timing thereof; the inventory of residential real estate properties (including single-family rental homes); the availability of residential properties for potential future acquisition, if any, and the price at which such properties may be acquired; the ability of the Fund to benefit from any value add program the Fund conducts at certain properties; the price at which the Fund's properties may be disposed and the timing thereof; closing and other transaction costs in connection with the acquisition and disposition of the Fund's properties; the extent of competition for residential properties; the impact of interest costs, high inflation and supply chain issues have on new supply of multi-family apartments; the extent to which favorable operating conditions achieved during historical periods may continue in future periods; the growth in NOI generated and from its value-add initiatives; the population of residential real estate market participants; assumptions about the markets in which the Fund operates; expenditures and fees in connection with the maintenance, operation and administration of the Properties; the ability of the ability of Starlight Investments US AM Group LP or its affiliates (the "Manager") to manage and operate the Fund's properties or achieve similar returns to previous investment funds managed by the Manager; the global and North American economic environment; foreign currency exchange rates; the ability of the Fund to realize the estimated gap in market versus in-place rents through future rental rate increases; and governmental regulations or tax laws. Given this period of uncertainty, there can be no assurance regarding: (a) the impact of any resurgence in COVID-19 on the Fund's business, operations and performance or the volatility of the Units; (b) the Fund's ability to mitigate such impacts; (c) credit, market, operational, and liquidity risks generally; (d) that the Manager or any of its affiliates, will continue its involvement as asset manager of the Fund in accordance with its current asset management agreement; and (e) other risks inherent to the Fund's business and/or factors beyond its control which could have a material adverse effect on the Fund.

The forward-looking information included in this press release relate only to events or information as of the date on which the statements are made in this press release. Except as specifically required by applicable Canadian securities law, the Fund undertakes no obligation to update or revise publicly any forward-looking information, whether because of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

ABOUT STARLIGHT U.S. RESIDENTIAL FUND

The Fund is a "closed-end" fund formed under and governed by the laws of the Province of Ontario, pursuant to a declaration of trust dated September 23, 2021, as amended and restated The Fund was established for the primary purpose of directly or indirectly acquiring, owning and operating a portfolio primarily composed of income producing residential properties in the U.S. residential real estate market that can achieve significant increases in rental rates as a result of undertaking high return, value-add capital expenditures and active asset management. As at December 31, 2022, the Fund owned interests in six multi-family properties consisting of 1,973 suites as well as 98 single-family rental homes.

For the Fund's complete consolidated financial statements and MD&A for the year ended December 31, 2022 and any other information related to the Fund, please visit www.sedar.com. Further details regarding the Fund's unit performance and distributions, market conditions where the Fund's properties are located, performance by the Fund's properties and a capital investment update are also available in the Fund's March 2023 Newsletter which is available on the Fund's profile at www.starlightinvest.com.

Please visit us at www.starlightinvest.comand connect with us on LinkedIn at www.linkedin.com/company/starlight-investments-ltd-

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Starlight U.S. Residential Fund

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