– Samestore rent increase of 5.5%, strong occupancy, continued portfolio expansion and operating efficiencies drive total and samestore NOI growth of 25.2% and 7.7%, respectively –
– REIT completes closing of recently announced acquisition in Atlanta –
TORONTO and DALLAS, May 6, 2015 /CNW/ – Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) (“Milestone” or the “REIT”) today announced its financial results for the first quarter ended March 31, 2015 (“Q1 2015”). All comparisons in the following summary are to the corresponding period in the prior year. 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 Q1 2015 and the first quarter ended March 31, 2014 (“Q1 2014), thus removing the impact of acquisitions and dispositions.
A more detailed analysis is included in the REIT’s Management’s Discussion and Analysis and Consolidated Financial Statements, which have been filed on SEDAR and can be viewed at www.sedar.com or on the REIT’s website at www.milestonereit.com.
“Supported by continued employment and population growth in our target markets, we remain focused on the advancement of our organic and external growth strategies, as evidenced by our strong financial performance in the first quarter of 2015. Building on the momentum of our acquisitions in 2014, we continue to be active in expanding our portfolio, having acquired an additional 819 units to date in 2015, for an aggregate purchase price of $101.3 million,” said Robert Landin, CEO of Milestone Apartments REIT.
Q1 2015 Financial Highlights
- Total and samestore average monthly in-place rents were $820 and $781, respectively, up 11.1% and 5.5% from $738 and $740 in Q1 2014;
- Total and samestore occupancy remained strong ending Q1 2015 at 95.8% and 96.0%, respectively, up 60 and 80 basis points from total and samestore occupancy ending Q1 2014 at 95.2%;
- Total and samestore property revenue were $50.0 million and $42.9 million, respectively, up 20.4% and 5.4% from $41.5 million and $40.7 million in Q1 2014;
- Total and samestore net operating income (“NOI”) were $27.4 million and $23.2 million, respectively, up 25.2% and 7.7% from $21.9 million and $21.6 million in Q1 2014. Total and samestore NOI margins were 54.9% and 54.2%, respectively, up 210 and 120 basis points compared to 52.8% and 53.0% in Q1 2014;
- Funds From Operations (“FFO”) totaled $16.4 million, up 25.6% from $13.1 million in Q1 2014. Adjusted Funds From Operations (“AFFO”) totaled $14.3 million, up 30.1% from $11.0 million in Q1 2014. FFO and AFFO per unit of $0.27 and $0.23, respectively, were up from $0.26 and $0.22 in Q1 2014;
- FFO and AFFO payout ratios were 49% and 57%, respectively, compared to 57% and 67% in Q1 2014. The REIT’s Q1 2015 payout ratios benefited from a rising U.S. dollar against the Canadian dollar during the period; and
- Improved financial leverage ending Q1 2015 at 51.6%, with investment properties valued at $1.74 billion, compared to 55.0% as at Q1 2014, with investment properties valued at $1.29 billion.
Q1 2015 Business Highlights
- Completed the acquisition of two multifamily apartment communities totaling 583 units, for a combined purchase price of $77.3 million. Through these acquisitions, the REIT entered the Kansas City market and expanded its presence in Orlando, further diversifying its portfolio;
- Completed the sales of two properties in Atlanta for combined gross proceeds of $21.6 million, as part of the REIT’s overall business strategy to optimize cash flow performance and continue to build long-term unitholder value through strategic acquisitions and dispositions. Net proceeds from the dispositions were used to partially fund the Arborwalk acquisition; and
- Declared total cash distributions to REIT unitholders and Class B unitholders of $8.1 million.
Subsequent Events
- Completed the acquisition of Almand Creek, a 236-unit Class A multifamily apartment community located in the Conyers submarket of East Atlanta, Georgia, for a purchase price of $24.0 million.
|
Q1 2015 and Q1 2014 Financial Results Summary |
|||
|
(US$000s, except per unit amounts) |
Q1 2015 |
Q1 2014 |
Change |
|
Rents, Samestore |
781 |
740 |
5.5% |
|
Rents, Total |
820 |
738 |
11.1% |
|
Occupancy, Samestore |
96.0% |
95.2% |
80 bp |
|
Occupancy, Total |
95.8% |
95.2% |
60 bp |
|
Revenue, Samestore |
42,863 |
40,655 |
5.4% |
|
Revenue, Non-samestore |
7,098 |
824 |
761.4% |
|
Revenue, Management Company |
1,583 |
1,582 |
0.1% |
|
Revenue, Total |
51,544 |
43,061 |
19.7% |
|
Operating Expenses, Samestore |
33,943 |
31,521 |
7.7% |
|
Operating Expenses, Non-samestore |
5,298 |
637 |
731.7% |
|
Operating Expenses, Management Company |
1,393 |
1,392 |
0.1% |
|
Operating Expenses, Total(1) |
40,634 |
33,550 |
21.1% |
|
Property Revenue, Samestore |
42,863 |
40,655 |
5.4% |
|
Property Revenue, Non-samestore |
7,098 |
824 |
761.4% |
|
Property Revenue, Total(2) |
49,961 |
41,479 |
20.4% |
|
Property Operating Expenses, Samestore |
19,637 |
19,094 |
2.8% |
|
Property Operating Expenses, Non-samestore |
2,883 |
464 |
521.3% |
|
Property Operating Expenses, Total(2,3) |
22,520 |
19,558 |
15.1% |
|
NOI, Samestore |
23,226 |
21,561 |
7.7% |
|
NOI, Non-samestore |
4,215 |
360 |
1,070.8% |
|
NOI, Total (2,3) |
27,441 |
21,921 |
25.2% |
|
NOI Margin, Samestore |
54.2% |
53.0% |
120 bp |
|
NOI Margin, Non-samestore |
59.4% |
43.7% |
1,570 bp |
|
NOI Margin, Total (2,3) |
54.9% |
52.8% |
210 bp |
|
FFO |
16,388 |
13,051 |
25.6% |
|
FFO Per Unit(4) |
0.27 |
0.26 |
0.01 |
|
FFO Payout Ratio(5) |
49% |
57% |
-8% |
|
AFFO |
14,254 |
10,957 |
30.1% |
|
AFFO Per Unit(4) |
0.23 |
0.22 |
0.01 |
|
AFFO Payout Ratio(5) |
57% |
67% |
-10% |
|
Total Distributions Declared(6) |
8,088 |
7,345 |
10.1% |
|
Debt to gross book value |
51.6% |
55.0% |
-340 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) |
FFO and AFFO per unit are calculated by dividing total FFO and AFFO for the |
|
|
(5) |
Payout ratios are calculated by dividing the amount of REIT and Class B unitholder |
|
|
(6) |
Represents total cash distributions declared to REIT and Class B unitholders for the period. |
|
Q1 2015 Financial Results
Total and samestore property revenue were $50.0 million and $42.9 million, respectively, up 20.4% and 5.4% from $41.5 million and $40.7 million in Q1 2014. The increase in total and samestore property revenue is attributable to consistent organic rent growth, higher occupancy and growth from acquisitions completed subsequent to Q1 2014.
Total and samestore property operating expenses were $22.5 million and $19.6 million, respectively, up 15.1% and 2.8% from $19.6 million and $19.1 million in Q1 2014. The increase in total and samestore property operating expenses is primarily attributable to higher real estate tax accruals and expenses related to the operations of the acquisitions completed subsequent to Q1 2014.
Total and samestore NOI were $27.4 million and $23.2 million, respectively, up 25.2% and 7.7% from $21.9 million and $21.6 million in Q1 2014. Total and samestore NOI margins were 54.9% and 54.2%, respectively, up 210 and 120 basis points compared to 52.8% and 53.0% in Q1 2014. The increase in total and samestore NOI is attributable to higher property revenue and continued operating efficiencies, partially offset by higher operating expenses, as noted above.
FFO totaled $16.4 million, up 25.6% from $13.1 million in Q1 2014. AFFO totaled $14.3 million, up 30.1% from $11.0 million in Q1 2014. FFO and AFFO growth were attributable to higher property revenue and NOI during the quarter, as noted above. FFO and AFFO per unit of $0.27 and $0.23, respectively, were up from $0.26 and $0.22 in Q1 2014. The per unit figures in Q1 2015 were adversely affected by increased asset management fees driven by a rise in the valuation of the REIT’s assets, along with increased non-cash deferred unit expenses driven by an increase in the REIT’s unit price during the period.
Fair Value on Investment Properties
As at March 31, 2015, the properties were valued using an overall weighted capitalization rate of 6.36% (December 31, 2014 – 6.38%). There were $34.4 million of fair value gains recognized in Q1 2015 primarily 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.
Distributions
Distributions declared to REIT unitholders and Class B unitholders of the REIT’s operating partnership were $8.1 million in Q1 2015, representing an AFFO payout ratio of 57%, compared to declared distributions of $7.4 million in Q1 2014, representing an AFFO payout ratio of 67%. The REIT’s Q1 2015 payout ratio benefited from a rising U.S. dollar against the Canadian dollar during the period. Management expects that 100% of the REIT’s distributions for Q1 2015 will be a return of capital.
Liquidity and Capital Structure
As at March 31, 2015, the REIT had cash and cash equivalents of $17.3 million and an $85.0 million revolving line of credit (with an option to increase the line to $125 million). As at May 6, 2015, $51.0 million was drawn on the line related to the acquisitions of The Manor Homes of Arborwalk, Heritage on Millenia and Almand Creek. The REIT ended the period with mortgage notes obligations of $887.3 million with a weighted average interest rate of 3.73% and a weighted average maturity of 7.3 years. Debt to gross book value ended Q1 2015 at 51.6%.
Units Outstanding
As at March 31, 2015, there were 53,505,082 REIT units and 8,076,656 Class B units outstanding.
Almand Creek Closing and Funding
On May 1, 2015, the REIT closed the acquisition of Almand Creek, a 236-unit Class A multifamily apartment community located in the Conyers submarket of East Atlanta, Georgia, for a purchase price of $24.0 million. This acquisition was previously announced by the REIT on March 16, 2015. Almand Creek was built in 2002 and is currently approximately 95.0% occupied, with average monthly rents of approximately $985 per unit. The property’s average in-place rents are higher than the REIT’s portfolio average in part due to a higher proportion of two and three-bedroom apartment suites. The property’s average in-place rent per square foot is consistent with the REIT’s portfolio and middle market strategy. Consistent with the REIT’s established portfolio, Almand Creek features extensive amenities, including a resort style pool, tennis court, an outdoor children’s playground and a nature trail. Almand Creek has convenient access to major transportation corridors and is located within close proximity to several large employers, including Rockdale County Public Schools District Administration, Rockdale Medical Center and AT&T.
The acquisition of Almand Creek was funded using the REIT’s available cash and revolving line of credit.
Conference Call
Robert Landin, CEO, Steve Lamberti, COO, and Ryan Newberry, CFO, will host a conference call for the investment community tomorrow, Thursday, May 7, 2015 at 11:00 a.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 www.milestonereit.com/investor-relations/events-presentations.
A replay of the call will be available until Thursday, May 14, 2015. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 678074). The webcast will be archived on Milestone’s website.
Annual General Meeting
Milestone will host its Annual General Meeting on Thursday, May 7, 2015, at 2:00 p.m. (ET) at the offices of Goodmans LLP, which are located at 333 Bay Street, Suite 3400, in Toronto.
About Milestone
Milestone is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT’s portfolio consists of 60 multifamily garden-style residential properties, comprising 19,980 units that are located in 13 major metropolitan markets throughout the Southeast and Southwest United States. Milestone is the largest real estate investment trust listed on the TSX focused solely on the United States multifamily sector. The REIT operates its portfolio through its internal property management company, Milestone Management, LLC, which has more than 900 employees across the United States. Based in Dallas, TX, TMG Partners, L.P., an affiliate of The Milestone Group, LLC, is the external asset manager of the REIT. For more information, please visit www.milestonereit.com.
About The Milestone Group, LLC
The Milestone Group is a privately-held real estate investment management company with expertise and presence in major metropolitan markets throughout the United States. The firm has corporate offices in Dallas, Texas and New York, New York with regional acquisition and management offices across the United States. Founded in 2004, The Milestone Group has a strong track record of investing in the U.S. multifamily sector, including completion of more than US$4.5 billion in multifamily transactions. For more information, please visit www.milestonegp.com.
Non-IFRS Financial Measures
This press release contains certain non-IFRS financial measures including FFO, AFFO, NOI, average in-place rents, average occupancy, samestore measures, acquisitions, FFO payout ratio, AFFO payout ratio and any related per unit amount 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 first quarter ended March 31, 2015 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 and the ability to create long-term unitholder value. 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. 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
