True North Apartment REIT Announces Results for the Three Months Ended March 31, 2015

/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S. NEWSWIRES/

TORONTO, May 6, 2015 /CNW/ – True North Apartment Real Estate Investment Trust (TSX: TN.UN; TN.DB) (the “REIT”) today announced its results of operations and financial condition for the three months ended March 31, 2015 (the “first quarter”).

First Quarter Highlights

• Net Operating Income (“NOI”) of $10.2 million, a 59.2% increase from the first quarter of 2014, primarily reflecting the impact of acquisitions.
• Same Property NOI growth of 7.6% in Ontario, the REIT’s largest market.
• Average Monthly Rent (“AMR”) increased to $815, a 7.0% increase from $762 at March 31, 2014 and 0.9% above the December 31, 2014 level of $808.
• Same Property AMR growth of 2.4%, including 5.5% in the key Greater Toronto Area market.
• Portfolio occupancy at 96.7%, a 0.8% increase from occupancy of 95.9% as at March 31, 2014.
• Basic and diluted funds from operations (“FFO”) of $0.14 per trust unit (“Unit”), an increase of $0.01 or 7.7% over the previous year.
• Basic and diluted adjusted funds from operations (“AFFO”) of $0.12 per Unit, equivalent to the same period in 2014.
• FFO and AFFO payout ratios of 129% and 148% respectively, and 114% and 131% respectively, on a cash basis, reflecting both the impact of unfavourable winter conditions and the normal seasonality experienced in the first quarter.
• Subsequent to March 31, 2015, enhanced liquidity by $11.4 million with the up-financing of maturing mortgages.

“The REIT has continued to build on the momentum achieved during 2014.  AMR at quarter end improved on a year over year and sequential basis, benefiting from both an increase in Same Property AMR and higher AMR on properties acquired since the end of the first quarter a year ago.” said Leslie Veiner, the REIT’s President and Chief Executive Officer.  “Our value creation initiatives, such as the high-end suite renovations being completed at select Greater Toronto Area properties, continue to yield an attractive return on investment and allow for above-market rent increases that are expected to drive future NOI growth.”

“As we look to the remainder of 2015, we expect sustained growth in AMR across the REIT’s portfolio. Our asset base will continue to strengthen from the identification of new opportunities to increase revenue partnered with the effective management of operating costs.  As spring advances, the REIT will benefit from seasonal improvements in occupancy and AMR as turnover increases during these peak leasing months. In particular, we anticipate improved operating performance in the second half of 2015 at our Montréal complex following the recent change to a local property manager.”  

Operating Results

Property revenues for the first quarter were $21.6 million, representing an increase of $8.0 million, or 59.0%, compared to the three month period ended March 31, 2014.  The increase was primarily due to the impact of acquisitions subsequent to March 31, 2014 coupled with AMR growth across the portfolio.

NOI for the first quarter was $10.2 million, an increase of $3.8 million, or 59.2%, when compared to the three month period ended March 31, 2014. This increase was also due to the impact of acquisitions completed subsequent to March 31, 2014. The REIT’s NOI margin for the first quarter was 47.4%, compared to 47.3% for the three months ended March 31, 2014. The slight increase in NOI margin was due to the impact of acquisitions completed subsequent to March 31, 2014.

As at March 31, 2015, the REIT’s AMR was $815, an improvement of $53, or 7.0%, when compared to $762 as at March 31, 2014. Sequentially, AMR increased 0.9% from $808 at December 31, 2014. The year-over-year improvement was partly driven by a 2.4% increase in Same Property AMR, from $762 to $780. Same Property AMR growth exceeded 3.0% in Ontario, Nova Scotia and Alberta. In addition, AMR increased as a result of properties acquired subsequent to March 31, 2014, which had higher average monthly rents.

As at March 31, 2015, portfolio occupancy was 96.7%, a 0.8% increase from occupancy of 95.9% as at March 31, 2014 and a 0.4% increase from the level as at December 31, 2014. Occupancies were 97.8% in Southwestern Ontario, 98.9% in the Greater Toronto Area, 97.4% in Eastern Ontario, 93.2% in Québec, 97.6% in Alberta, 97.8% in Nova Scotia and 97.1% in New Brunswick.  The REIT continues to make property management improvements at the Montréal complex that are resulting in enhanced tenant retention and quality.  Occupancy at the complex is expected to stabilize during the key spring leasing season.

 

FFO and AFFO in the quarter reflected the impact of higher than average energy costs normally associated with the first quarter. For the three months ended March 31, 2015, basic and diluted FFO were $0.14 per Unit, an increase of 7.7% over the $0.13 per Unit generated in the first quarter of 2014. The FFO payout ratio for quarter was 129%, a reduction from 135% in the prior year period. On a cash basis, which excludes non-cash distributions made under the REIT’s DRIP, the FFO payout ratio was 114%. Basic and diluted AFFO were $0.12 per Unit for the first quarter. The AFFO payout ratio for the first quarter was 148%, 131% on a cash basis, which excludes non-cash distributions made under the REIT’s distribution reinvestment plan (“DRIP”).

Financial Position

At the conclusion of the first quarter, the REIT’s debt to gross book value was 62.67% and its interest coverage ratio was 2.12 times. Both metrics fall within the REIT’s stated targets. The weighted average interest rate on the REIT’s portfolio was 3.15% and the weighted average term to maturity was 3.32 years. CMHC-insured debt accounted for approximately 44% of the REIT’s overall mortgage portfolio at March 31, 2015.

Subsequent to March 31, 2015, the REIT enhanced its liquidity by $11.4 million through the up-financing of maturing mortgages.

About the REIT

The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT focuses on a long-term strategy to generate stable cash distributions on a tax-efficient basis for unitholders. The REIT intends to actively look for opportunities to expand its asset base and increase its distributable cash flow through acquisitions of additional multi-suite residential rental properties across Canada, the United States, and other jurisdictions where opportunities may arise.

For complete financial statements and management’s discussion and analysis for the period, and any other information relating to the REIT, please visit either www.sedar.com or the REIT’s website, www.truenorthreit.com.

Non-IFRS measures

The REIT’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, FFO, AFFO, Same Property NOI, indebtedness, gross book value, indebtedness to gross book value ratio, indebtedness coverage ratio and interest coverage ratio 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 REIT uses these measures to better assess the REIT’s underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the REIT’s Management’s Discussion and Analysis for the period ended March 31, 2015 and available on the REIT’s profile on SEDAR at www.sedar.com. 

Forward-looking Statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information is provided for the purposes of assisting the reader in understanding the REIT’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, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry and may include statements regarding: the REIT’s financial position; business strategy; budgets; litigation; projected costs; capital expenditures; financial results; occupancy levels; AMR; taxes; the REIT’s intention with respect to, and ability to execute, its internal and external growth strategies; the REIT’s distribution policy and the distributions to be paid to holders of Units; the distributions to be paid to holders class B limited partnership units of subsidiary partnerships of the REIT; the REIT’s debt strategy; derivative instruments; plans and policies regarding capital expenditures; the REIT’s distributions and payout ratio; the REIT’s use of its normal course issuer bid and the short form base shelf prospectus filed with the securities commission of the provinces and territories of Canada; and the ability of the REIT to qualify as a “real estate investment trust and a mutual fund trust”, as defined in the Income Tax Act (Canada). Particularly, statements regarding future geographic diversification, determinations of investment property fair values, per suite repair and maintenance expenditures, the REIT’s ability to meet its obligations and the REIT’s use of Canada Mortgage and Housing Corporation insured debt 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 information necessarily involves 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 will not be achieved. A variety of factors, many of which are beyond the REIT’s control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in the REIT’s materials filed with Canadian securities regulatory authorities from time to time. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information as there can be no assurance that actual results will be consistent with such forward-looking information.

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 Canadian economy will remain stable over the next twelve months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; and that the risks referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

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

SOURCE True North Apartment Real Estate Investment Trust