TORONTO and DALLAS, March 22, 2017 /CNW/ - Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced that the REIT has filed its Management's Discussion and Analysis and Audited Consolidated Financial Statements for the year ended December 31, 2016 on SEDAR. These documents are available on the REIT's website at www.milestonereit.com.
In the fourth quarter of 2016 ("Q4 2016") and full-year of 2016 the REIT experienced solid operating and financial performance as well as strong unit price appreciation. However, the near-term outlook for the U.S. multifamily market is showing signs of a slowdown, particularly when compared to the past few years of outsized performance. Changing factors include moderating rental rate growth owing in part to the impact of new supply and the potential for expanding capitalization rates amid rising interest rates.
"We are extremely pleased with the substantial value the Milestone team has created for the REIT's unitholders this past year and since Milestone's IPO," said Robert Landin, CEO of Milestone. "While Milestone has been a very strong investment, the current market environment is beginning to moderate compared to the past few years."
Mr. Landin continued, "As a result of this evolving industry landscape, we expect our ability to drive similar organic and external growth to be impacted going forward, which could potentially adversely affect our ability to grow NOI and AFFO as well as unitholder value creation."
Q4 2016 Financial Highlights
- Financial leverage was 47.5% compared to 46.7% at the end of the fourth quarter of 2015 ("Q4 2015"), primarily attributable to a US$9.8 million fair value loss recognized in the fourth quarter of 2016;
- Total and Samestore average monthly in-place rents were US$974 and US$925, respectively, up 10.8% and 6.0% from Q4 2015;
- Total and Samestore occupancy ended the quarter at 94.6% and 94.9%, respectively;
- Total and Samestore property revenue were US$72.2 million and US$49.0 million, respectively, up 29.7% and 5.7% from Q4 2015;
- Total and Samestore net operating income were US$42.8 million and US$28.7 million, respectively, up 36.3% and 8.2% from Q4 2015. Total and Samestore NOI margins were 59.3% and 58.5%, respectively up 290 basis points and 140 basis points from Q4 2015;
- NOI, NOI margins, FFO and AFFO benefited from final annual property tax costs being lower than previous estimates by approximately US$1.3 million;
- Funds from operations ("FFO") and Adjusted Funds from operations ("AFFO") totaled US$27.7 million and US$25.4 million, respectively, compared to US$18.7 million and US$16.5 million in Q4 2015. Diluted FFO and AFFO per unit were US$0.31 and US$0.28, respectively, compared to US$0.26 and US$0.22 in Q4 2015; and
- FFO and AFFO payout ratios were 45% and 50%, respectively, compared to 43% and 49% in Q4 2015.
The industry outlook section of the REIT's Management's Discussion and Analysis of Results of Operations and Financial Condition includes a discussion of the outlook for the U.S. multifamily market. Highlights include:
- Moderating rental rate growth and potential for expanding capitalization rates amid rising interest rates;
- U.S. multifamily rental rate growth started to decelerate in 2016 primarily as a result of moderating new lease rate growth;1 and
- Capitalization rates within the U.S. multifamily sector have started to expand and certain industry experts expect them to expand further in the foreseeable future, potentially putting downward pressure on the market values of real estate assets and REITs.2
In light of the REIT's pending transaction (the "Transaction") with an affiliate of Starwood Capital Group, Milestone will not be hosting an earnings call or webcast to discuss its fourth quarter and year ended December 31, 2016 results.
The REIT is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT's portfolio consists of 78 multifamily garden-style residential properties, comprising 24,061 apartment units that are located in 16 major metropolitan markets throughout the Southeast and Southwest United States. The REIT is the largest real estate investment trust listed on the TSX focused solely on the United States multifamily sector. Milestone's vertically integrated platform employs more than 1,200 employees and manages more than 50,000 apartment units across the United States. For more information, please visit www.milestonereit.com.
Non-IFRS Financial Measures
This press release contains certain non-IFRS financial measures including FFO, AFFO and NOI, and related amounts 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 year ended December 31, 2016 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 and the future performance of the U.S. multifamily sector. 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: Green Street Advisors. Refer to MD&A for accompanying chart and supporting data.
Source: Situs RERC. Refer to MD&A for accompanying chart and supporting data.
SOURCE Milestone Apartments REIT
For further information: Robert Debs, Investor Relations, Milestone Apartments REIT, Tel: 214.561.1215; Bruce Wigle, Investor Relations, Bay Street Communications, Tel: 647.496.7856