Milestone Apartments REIT Reports Strong Quarterly and Year-end Results
- Fourth Quarter and YTD Revenue and AFFO Exceeded IPO Forecast -
- Quarterly In-Place Rents Increased Sequentially on Broad-based Strength across our Markets -
TORONTO, ON / DALLAS, TX, March 19, 2014 /CNW/ - Milestone Apartments REIT (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the fourth quarter and year-to-date ("YTD") periods ended December 31, 2013. The fourth quarter is the third full quarter of operations for the REIT, as it completed an initial public offering ("IPO") and commenced trading on the Toronto Stock Exchange on March 6, 2013. The YTD period covers March 6, 2013 (the closing date of the REIT's IPO) to December 31, 2013. Financial comparisons to the IPO forecast reference the forecast presented in the REIT's prospectus dated February 27, 2013, prorated for a partial year. References to "samestore" results do not take into account acquisitions completed following the IPO.
A more detailed analysis is included in Management's Discussion and Analysis and the 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. All dollar amounts are in U.S. currency unless otherwise noted.
Fourth Quarter Highlights
- Total and samestore revenue were 9.9% and 4.3% higher than the IPO forecast, respectively;
- Total and samestore monthly in-place rents were $732 and $723, up from $726 and $717 in the prior quarter, respectively;
- Total and samestore occupancy were 94.5% and remained within our targeted range of 94% to 96%;
- Total and samestore Net Operating Income ("NOI") were 15.6% and 7.9% higher than the IPO forecast, respectively;
- Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO") per unit were $0.25 and $0.21 for payout ratios of 61% and 75%, respectively, better than the IPO forecast of $0.23 and $0.18 for payout ratios of 70% and 88%, respectively; and
- Declared monthly distributions of C$0.05417 per unit resulting in total cash distributions declared for the quarter of $7.7 million.
- Total and samestore revenue were 6.5% and 3.3% higher than the IPO forecast, respectively;
- Total and samestore NOI were 11.2% and 6.8% higher than the IPO forecast, respectively;
- FFO and AFFO per unit were $0.81 and $0.66 for payout ratios of 64% and 78%, respectively, better than the IPO forecast of $0.74 and $0.58 for payout ratios of 72% and 92%, respectively;
- Completed two accretive acquisitions for a combined purchase price of $86.5 million and totaling 704 units, one of which provided MST entry in the Denver market; and
- Declared monthly distributions of C$0.05417 per unit resulting in total cash distributions declared for the YTD period of $25.7 million.
Commenting on the results, Robert Landin, CEO, stated: "We are pleased with our fourth quarter and year-to-date financial results, which exceeded our IPO forecasts on most key financial metrics. Our strong financial performance since our listing on the TSX was largely supported by robust organic growth attributable to higher than anticipated occupancy and effective rent growth across our portfolio, and the addition of new assets in attractive growth markets. This is a testament to Milestone's focused execution of its strategy to grow the business through intensive operational focus and strategic external growth."
Mr. Landin added, "As we look to the remainder of 2014 and beyond, we are excited about the opportunities that lie ahead. We believe that our strong financial performance, coupled with a positive macro-economic outlook in the U.S., and particularly the markets in which we operate, provides Milestone with the ability to keep growing organically and acquisitively. We remain committed to growing our platform and maximizing long-term unitholder value."
|Fourth Quarter and YTD(1) Financial Summary|
|($000, except per unit amounts)||
|Revenue, Total||$ 43,012||$ 39,129||+9.9%||$ 136,070||$ 127,737||+6.5%|
|Revenue, Samestore||$ 40,820||$ 39,129||+4.3%||$ 131,988||$ 127,737||+3.3%|
|Operating Expenses, Total||$ 21,009||$ 20,076||+4.6%||$ 67,682||$ 66,143||+2.3%|
|Operating Expenses, Samestore||$ 20,258||$ 20,076||+0.9%||$ 66,281||$ 66,143||+0.2%|
|Property Revenue, Total(2)||$ 41,307||$ 37,527||+10.1%||$ 130,550||$ 122,162||+6.9%|
|Property Revenue, Samestore(2)||$ 39,115||$ 37,527||+4.2%||$ 126,468||$ 122,162||+3.5%|
|Property Operating Expenses(2)||$ 19,508||$ 18,666||+4.5%||$ 62,824||$ 61,246||+2.6%|
|Property Operating Expenses, Samestore(2)||$ 18,757||$ 18,666||+0.5%||$ 61,423||$ 61,246||+0.3%|
|NOI||$ 21,799||$ 18,861||+15.6%||$ 67,726||$ 60,916||+11.2%|
|NOI, Samestore||$ 20,358||$ 18,861||+7.9%||$ 65,045||$ 60,916||+6.8%|
|FFO||$ 12,624||$ 11,494||+9.8%||$ 40,278||$ 36,618||+10.0%|
|FFO Per Unit||$ 0.25||$ 0.23||+8.7%||$ 0.81||$ 0.74||+9.5%|
|FFO Payout Ratio(3)||61%||70%||64%||72%|
|AFFO||$ 10,277||$ 9,133||+12.5%||$ 32,850||$ 28,858||+13.8%|
|AFFO Per Unit||$ 0.21||$ 0.18||+16.7%||$ 0.66||$ 0.58||+13.8%|
|AFFO Payout Ratio(3)||75%||88%||78%||92%|
|Total Cash Distributions(4)||$ 7,717||n/a||n/a||$ 25,653||n/a||n/a|
(1) YTD period is March 6, 2013 (the IPO of the REIT) to December 31, 2013.
(2) Excludes third party property management revenue and related expenses.
(3) The FFO and AFFO payout ratios are calculated by dividing total cash distributions declared to REIT unitholders and Class B unitholders by the FFO and AFFO for the period.
(4) Represents total cash distributions declared to REIT unitholders and Class B unitholders for the period.
Fourth Quarter Results
Property revenue totaled $41.3 million, 10.1% higher than the $37.5 million forecast. The favorable variance is attributable to rental rates for the entire portfolio being higher than forecasted due to better than anticipated market conditions, and the acquisitions of the Preston Pointe at Windermere and Canyon Chase properties, completed on June 21, 2013 and July 31, 2013, respectively. Samestore property revenue was $39.1 million, 4.2% higher than forecast.
Property operating expenses totaled $19.5 million, 4.5% higher than the $18.7 million forecast. The variance is primarily attributable to expenses relating to the acquisitions noted above and increased real estate taxes. Samestore property operating expenses were $18.8 million, relatively flat with the $18.7 million forecast.
NOI totaled $21.8 million, 15.6% higher than the $18.9 million forecast. The favorable variance is primarily attributable to higher revenue, slightly offset by higher operating expenses, in part related to the addition of the newly acquired assets and higher real estate taxes. Samestore NOI was $20.4 million, 7.9% higher than forecast.
FFO totaled $12.6 million, or $0.25 per unit, higher than the forecast of $11.5 million and $0.23 per unit, respectively. AFFO totaled $10.3 million, or $0.21 per unit, higher than the forecast of $9.1 million and $0.18 per unit, respectively. The favorable variances resulted from increased revenue and NOI during the quarter, as noted above.
Property revenue totaled $130.6 million, 6.9% higher than the $122.2 million forecast. The favorable variance is attributable to actual occupancy and rental rates for the entire portfolio being higher than forecasted due to better than anticipated market conditions, and the acquisitions of the Preston Pointe at Windermere and Canyon Chase properties. Samestore property revenue was $126.5 million, 3.5% higher than forecast.
Property operating expenses totaled $62.8 million, 2.6% higher than the $61.2 million forecast. The variance is primarily attributable to expenses relating to the acquisitions noted above and increased real estate tax expenses. Samestore property operating expenses were $61.4 million, relatively flat with the $61.2 million forecast.
NOI totaled $67.7 million, 11.2% higher than the forecast of $60.9 million. The favorable variance is primarily attributable to higher revenue, slightly offset by higher operating expenses, in part related to the addition of the newly acquired assets and higher real estate taxes. Samestore NOI was $65.0 million, 6.8% higher than forecast.
FFO was $40.3 million, or $0.81 per unit, higher than the forecast of $36.6 million and $0.74 per unit, respectively. AFFO was $32.9 million, or $0.66 per unit, higher than the forecast of $28.9 million and $0.58 per unit, respectively. The favorable variances resulted from increased revenue and NOI during the YTD period, as noted above.
Fair Value on Investment Properties
As of December 31, 2013, the properties were valued using an overall weighted capitalization rate of 6.6%. There were $17.2 million and $66.2 million fair value gains recognized for the fourth quarter and YTD periods, respectively, which resulted primarily from higher NOI. Fair value adjustments are determined based on the movement of various parameters, including changes in stabilized NOI and capitalization rates.
Cash distributions declared to REIT unitholders and Class B unitholders totaled $7.7 million for the quarter and $25.7 million for the YTD period, representing an AFFO payout ratio of 75% and 78%, respectively, compared to the IPO forecast of 88% and 92%, respectively. 100% of the REIT's cash distributions for the fourth quarter and YTD periods were return of capital.
Liquidity and Capital Structure
As of December 31, 2013, the REIT had cash and cash equivalents of $5.5 million and a $50.0 million revolving credit facility. A total of $42.5 million has been drawn from this facility to partially finance the REIT's acquisitions of Preston Pointe at Windermere ($21.0 million) and Canyon Chase ($19.0 million), and a draw in the amount of $2.5 million was made during the fourth quarter for ongoing operations. The REIT ended the period with a mortgage notes payable balance of $688.2 million with a weighted average interest rate of 3.7%. Debt to gross book value was 56.0%, with debt consisting of mortgage notes payable and the outstanding balance on the REIT's revolving credit facility.
As of December 31, 2013, the total number of REIT units outstanding was 36,850,000. In addition, there are currently 12,864,265 Class B units of the partnership and 1,413,975 REIT unit options outstanding.
Quarterly Results Conference Call
Robert Landin, CEO, Steve Lamberti, COO, and Ryan Newberry, CFO, will host a conference call for the investment community on Thursday, March 20, 2014 at 11:00 a.m. (ET). The call-in numbers for participants are 416-764-8688 or 888-390-0546. A webcast of the call will be accessible via Milestone's website at www.milestonereit.com/investor-relations/events-presentations.
A replay of the call will be available until Thursday, March 27, 2014. To access the replay, dial 416-764-8677 or 888-390-0541 (PIN: 179631). The webcast will be archived on Milestone's website.
About Milestone Apartments REIT
The REIT is an unincorporated, open-ended real estate investment trust that is governed under the laws of Ontario. The REIT's portfolio is made up of 54 multifamily garden-style residential properties, comprising 17,648 units that are located in 11 major metropolitan markets throughout the Southeast and Southwest United States. Milestone Apartments REIT is the largest REIT listed on the TSX focused solely on the U.S. multifamily sector. The Milestone Group, based in Dallas, Texas, is the external asset manager of the REIT. For more information, please visit www.milestonereit.com
About The Milestone Group
The Milestone Group is a privately-held real estate investment management company with expertise and presence in major metropolitan markets throughout 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 $4.5 billion in multifamily transactions.
Non-IFRS Financial Measures
This press release also 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 fourth quarter and YTD periods ended December 31, 2013 for a reconciliation of NOI, FFO and AFFO to standardized IFRS measures.
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 macroeconomic outlook in the U.S. and the REIT's ability to grow (organically and acquisitively) and create long-term unitholder value. These statements are based on the REIT's expectations and assumptions, including, but not limited to, the REIT's future growth potential, results of operations, future prospects and opportunities, the demographic and industry trends remaining unchanged, no change in legislative or regulatory matters, future indebtedness, the tax laws as currently in effect remaining unchanged, the continual availability of capital and the current economic conditions remaining unchanged. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. 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. 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 REITFor further information:
Robert P. Landin, CEO
Milestone Apartments REIT
Tel: 416.447.4740, x 232