Milestone Apartments REIT Reports 2014 Second Quarter Results
- Fifth Consecutive Quarterly Increase in Rents and NOI since IPO -
TORONTO AND DALLAS, Aug. 7, 2014 /CNW/ - Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the second quarter ("Q2 2014") and six month period ("YTD 2014") ended June 30, 2014. All comparisons in the following summary are to the corresponding periods in the prior fiscal year. The period ended June 30, 2013 ("YTD 2013") represents the 26-day period ended March 31, 2013 combined with the second quarter ended June 30, 2013 ("Q2 2013"), as such, comparisons between the YTD 2014 and YTD 2013 periods should be considered in the appropriate context. The REIT completed its initial public offering ("IPO") on March 6, 2013 and had no operations prior to that date. All dollar amounts are in U.S. currency unless otherwise noted. References to "samestore" results do not take into account acquisitions completed following the REIT's IPO.
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.
Q2 2014 Financial Highlights
- Total and samestore average monthly in-place rents were $757 and $740, respectively, up 6.3% and 4.8% from $712 and $706 in Q2 2013;
- Total and samestore occupancy remained strong ending the quarter at 95.0%, up from total and samestore occupancy of 94.1% and 94.2% in Q2 2013, respectively;
- Total and samestore revenue were $44.6 million and $41.8 million, respectively, up 12.4% and 5.7% from $39.7 million and $39.6 million in Q2 2013;
- Total and samestore net operating income ("NOI") were $23.0 million and $21.2 million, respectively, up 16.5% and 7.8% from $19.8 million and $19.6 million in Q2 2013;
- FFO was $13.8 million, or $0.25 per unit, up from $12.2 million, or $0.25 per unit in Q2 2013. AFFO was $11.1 million, or $0.20 per unit, up from $9.9 million, or $0.20 per unit in Q2 2013. The REIT's FFO and AFFO per unit results for Q2 2014 do not reflect the full impact of the acquisitions that closed following the bought deal equity financing that was completed on April 11, 2014; and
- FFO and AFFO payout ratios were 61% and 76%, respectively, compared to 65% and 80% in Q2 2013.
Q2 2014 Business Highlights
- Closed bought deal equity financing for gross proceeds of C$69.1 million (including exercise in full of over-allotment option), with a portion of the proceeds used to repay in full the outstanding balance on the REIT's unsecured revolving line of credit;
- Refinanced $228.6 million mortgage debt facility, extending the facility's weighted average debt maturity from 2015 to 2022 and the REIT's total debt maturity to 2021, as well as providing approximately $50.0 million of additional proceeds used for acquisitions and general business purposes;
- Completed acquisition of Harbor Creek, a 316-unit multifamily apartment community located in Atlanta, Georgia, for a purchase price of $28.0 million;
- Entered the Orlando market by completing the acquisition of Osprey Links at Hunter's Creek, a 424-unit multifamily apartment community located in south Orlando, Florida, for a purchase price of $50.7 million; and
- Declared monthly distributions of C$0.05417 per unit resulting in total distributions declared for the quarter of $8.4 million.
- Completed acquisition of Legacy Heights, a 384-unit multifamily apartment community located in Denver, Colorado, for a purchase price of $50.3 million; and
- Renegotiated the REITs unsecured revolving line of credit, extending the term to three years and increasing the base principal amount from $50.0 million to $85.0 million, with the potential to increase to $125.0 million under certain circumstances, while lowering the interest rate spread from 525 basis points to 285 basis points over the 30 day LIBOR, based on the REIT's current financial leverage.
"We continue to make strong progress in advancing our growth strategy, both organically and acquisitively. We are pleased with our business accomplishments and the continued strength of the REIT's financial performance in Q2 2014. We have successfully increased our average in-place rents and NOI each quarter since our IPO, while maintaining strong occupancy levels. Our organic growth is in large part attributable to the implementation of our value-add program and the continued strength of the rental market for garden style apartments in the U.S., particularly Milestone's markets where strong demand for apartment units continues to outpace new supply," said Robert Landin, CEO of Milestone Apartments REIT. "We also made significant progress in strengthening our financial position in the quarter and subsequent to quarter-end by closing a bought deal equity financing, refinancing and extending the maturities on our senior mortgage debt facility, and renegotiating the terms of our unsecured revolving line of credit, all of which have enhanced our financial flexibility and our ability to continue pursuing value creation opportunities for our unitholders."
"Turning to our external growth, during the quarter we completed two property acquisitions totaling 740 units, followed by the closing of another 384 unit property subsequent to quarter-end. Since our IPO, we have increased our assets under management by approximately 20%, completing more than $200 million in acquisitions and adding 1,828 apartment units to the REIT's portfolio. Some of these acquisitions originated from our proprietary pipeline of opportunities that are held in finite-life partnerships." continued Mr. Landin. "Other notable benefits of our acquisitions since the IPO include our strategic entry into the Denver, Colorado, and Orlando, Florida markets, and an increased market presence in Atlanta, Georgia, thereby further diversifying the REIT's property portfolio within our target markets."
|Q2 and YTD 2014 Financial Summary|
|(US$000s, except per unit amounts)||
|Operating Expenses, Total(2)||17,654||16,248||8.7||51,204||20,516|
|Operating Expenses, Samestore(2)||16,315||16,244||0.4||48,744||20,512|
|Property Revenue, Total(3)||42,998||38,034||13.1||84,477||48,882|
|Property Revenue, Samestore(3)||40,214||37,921||6.0||79,505||48,769|
|Property Operating Expenses(3,4)||19,996||18,284||9.4||39,554||23,189|
|Property Operating Expenses, Samestore(3,4)||19,049||18,280||4.2||37,909||23,185|
|FFO Per Unit||0.25||0.25||−||0.51||0.32|
|FFO Payout Ratio(5)||61%||65%||−||59%||64%|
|AFFO Per Unit||0.20||0.20||−||0.42||0.26|
|AFFO Payout Ratio(5)||76%||80%||−||71%||78%|
|Total Distributions Declared(6)||8,394||7,936||−||15,739||10,135|
The YTD period ended June 30, 2013 represents the 26-day period ended
March 31, 2013 combined with the three month period ended June 30,
The REIT completed its IPO on March 6, 2013 and had no operations prior to that date. The YTD period ended June 30, 2014 represents a full six-month period.
|(2)||Includes real estate tax adjustments related to IFRIC 21.|
|(3)||Excludes third party property management revenue and related expenses.|
|(4)||Excludes real estate tax adjustments related to IFRIC 21.|
Payout ratios are calculated by dividing the amount of REIT and Class B
unitholder distributions by actual FFO and AFFO for the respective
Distributions on Class A and Class B units are translated based on an average CAD to USD exchange rate for the respective period, consistent with IFRS guidance.
|(6)||Represents total cash distributions declared to REIT and Class B unitholders for the period.|
Q2 2014 Financial Results
Total and samestore property revenue were $43.0 million and $40.2 million, respectively, up 13.1% and 6.0% from $38.0 million and $37.9 million in Q2 2013. The increase in total and samestore property revenue reflects continued organic rent growth, strong occupancy and growth from acquisitions.
Total and samestore property operating expenses were $20.0 million and $19.0 million, respectively, up 9.4% and 4.2% from $18.3 million and $18.3 million in Q2 2013. The increase in total and samestore property operating expenses is primarily attributable to higher real estate tax estimates and expenses related to the operations of the acquisitions completed subsequent to Q2 2013.
Total and samestore NOI were $23.0 million and $21.2 million, respectively, up 16.5% and 7.8% from $19.8 million and $19.6 million in Q2 2013. The increase in NOI and samestore NOI is attributable to higher property revenue, partially offset by higher operating expenses, as identified above.
FFO was $13.8 million, or $0.25 per unit, up from $12.2 million, or $0.25 per unit in Q2 2013. AFFO was $11.1 million, or $0.20 per unit, up from $9.9 million, or $0.20 per unit in Q2 2013. Increased FFO and AFFO reflect higher revenue and NOI for the quarter, as explained above. The REIT's FFO and AFFO per unit results for Q2 2014 do not reflect the full impact of the acquisitions that closed following the bought deal equity financing that was completed on April 11, 2014.
Fair Value on Investment Properties
As at June 30, 2014 the properties were valued using an overall weighted capitalization rate of 6.5%. There were $12.4 million of fair value gains recognized in Q2 2014 resulting from higher anticipated NOI. Fair value adjustments are determined based on the movement of various parameters, including changes in stabilized NOI and capitalization rates.
Distributions declared to REIT and Class B unitholders of the REIT's operating partnership were $8.4 million in Q2 2014, representing an AFFO payout ratio of 76%, compared to declared distributions of $7.9 million in Q2 2013, representing an AFFO payout ratio of 80%. Distributions declared to REIT and Class B unitholders of the REIT's operating partnership were $15.7 million in the YTD 2014 period, representing an AFFO payout ratio of 71%, compared to declared distributions of $10.1 million in the YTD 2013 period, representing an AFFO payout ratio of 78%. Management expects that 100% of the REIT's distributions for the first six months of 2014 will be return of capital.
Liquidity and Capital Structure
As at June 30, 2014, the REIT had cash and cash equivalents of $30.0 million and an undrawn unsecured revolving line of credit. On August 5, 2014, the REIT agreed to new terms on its unsecured revolving line of credit, extending the term to three years and increasing the base principal amount available from $50.0 million to $85 million, with an option to increase the line to $125 million. The line of credit is currently undrawn.
The REIT ended the period with mortgage notes obligations of $764.5 million with a weighted average interest rate of 3.77% and a weighted average maturity of 2021. Debt to gross book value was 53.5%.
As at June 30, 2014, the total number of REIT units outstanding was 43,497,000. In addition, there are currently 12,864,265 Class B units of the REIT's operating partnership outstanding.
Robert Landin, CEO, Steve Lamberti, COO, and Ryan Newberry, CFO, will host a conference call for the investment community on Friday, August 8, 2014 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 accessible via Milestone's website at: www.milestonereit.com/investor-relations/events-presentations.
A replay of the call will be available until Friday, August 15, 2014. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 444982). The webcast will be archived on Milestone's website.
Milestone is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT's portfolio consists of 57 multifamily garden-style residential properties, comprising 18,772 units that are located in 12 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, TX and New York, NY 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 second quarter ended June 30, 2014 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, access to capital, financial flexibility, the ability to pursue value creation opportunities, 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 REITFor further information:
Robert Debs, Investor Relations
Milestone Apartments REIT
Bruce Wigle, Investor Relations
Bryan Mills Iradesso (BMIR)
Tel: 416.447.4740, x 232