Milestone Apartments REIT Reports 2015 Fourth Quarter and Year-End Results

- Rent increases, strong occupancy, continued portfolio expansion and operating efficiencies drive Q4 2015 AFFO growth of 27.0% and total and samestore NOI growth of 19.7% and 12.2%, respectively - 
- 2015 AFFO grew 30.0% with total and samestore annual NOI growth of 23.1% and 8.2%, respectively -

TORONTO and DALLAS, March 3, 2016 /CNW/ - Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the fourth quarter ("Q4 2015") and year ended December 31, 2015. All comparisons in the following summary are to the corresponding periods in the prior fiscal 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 2015 and 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.

"We are pleased with our continued strong performance in 2015 generating total annual returns in excess of 25% for MST unitholders. The fourth quarter of 2015 marked the REIT's eighth consecutive quarter of increases in samestore rents and net operating income. As a result of our continued and consistently strong operating performance we have increased MST's monthly cash distributions approximately 15%, effective January 2016," said Robert Landin, CEO of Milestone. "In addition, we continue to execute on our external growth strategy adding over 5,500 units to the REIT's portfolio since the beginning of 2015 and increasing Milestone's total units under management to more than 50,000 throughout the Sunbelt U.S." 

"Looking ahead, the U.S. multifamily sector is projected to maintain its positive trend in 2016 and beyond with industry experts expecting the improvement in the U.S. economy and job growth to continue driving high demand for apartment units over the next several years," concluded Mr. Landin.

Q4 2015 Financial Highlights

  • Total and samestore average monthly in-place rents were $879 and $829, respectively, up 9.6% and 6.3% from $802 and $780 in the fourth quarter ended December 31, 2014 ("Q4 2014");
  • Total and samestore occupancy remained strong ending Q4 2015 at 94.9% and 95.0%, respectively, compared to total and samestore occupancy ending Q4 2014 of 95.1% and 95.3%, respectively;
  • Total and samestore property revenue were $55.7 million and $43.9 million, respectively, up 13.0% and 6.6% from $49.3 million and $41.2 million in Q4 2014;
  • Total and samestore net operating income ("NOI") were $31.4 million and $24.3 million, respectively, up 19.7% and 12.2% from $26.3 million and $21.7 million in Q4 2014. Total and samestore NOI margins were 56.4% and 55.3%, respectively, up 310 and 270 basis points from 53.3% and 52.6% in Q4 2014;
  • Funds from operations ("FFO") was $18.7 million, up 21.9% from $15.3 million in Q4 2014. Adjusted funds from operations ("AFFO") was $16.5 million, up 27.0% from $13.0 million in Q4 2014. Basic FFO and AFFO per unit of $0.28 and $0.25, respectively, were up from $0.25 and $0.21 in Q4 2014;
  • FFO and AFFO payout ratios were 43% and 49%, respectively, an improvement from 57% and 68% in Q4 2014. The REIT's Q4 2015 payout ratios benefited from a rising U.S. dollar against the Canadian dollar during the period; and
  • Improved financial leverage ending Q4 2015 at 46.7%, with investment properties valued at $1.84 billion, compared to financial leverage of 51.1%, with investment properties valued at $1.62 billion at the end of Q4 2014.

Q4 2015 Business Highlights

  • Milestone announced the acquisition of a 15-property portfolio from Landmark Apartment Trust ("Landmark") for a purchase price of approximately $502 million, as part of a definitive merger agreement between Milestone and Starwood Capital Group ("Starwood") to acquire Landmark for $8.17 per Landmark share in cash (the "Acquisition"), representing a total enterprise value of approximately $1.9 billion. As part of the Acquisition, Starwood acquired Landmark's interest in 63 properties, 57 of which are currently property managed by Milestone for a fee equal to 3.0% of revenue;
  • The REIT's Board of Trustees approved, effective for the January 2016 distribution, an increase to the REIT's unitholder cash distributions of approximately 15% (based on the Bank of Canada's noon U.S. dollar exchange rate as at March 2, 2016) and a change to U.S. dollar denominated cash distributions, with unitholders having the option to elect to receive Canadian dollar denominated distributions;
  • Commenced development of 60 new apartment units at its Harbor Creek property located in Cherokee County, just north of Atlanta, Georgia. Cherokee County is a rapidly growing health care hub with five major health care facilities and a number of new development projects planned for the future. The REIT expects to complete this project during Q3 2016; and
  • Declared total cash distributions to REIT unitholders and Class B unitholders of $8.1 million.

Subsequent Events

  • Completed the acquisition of the 15-property Landmark portfolio for a purchase price of approximately $502 million (subject to final purchase price adjustments), on January 27, 2016;
  • Completed an offering of 9,591,000 subscription receipts (including subscription receipts issued pursuant to the exercise in full of the over-allotment option) in connection with the Acquisition on a bought deal basis at a price of C$15.00 per subscription receipt for total gross proceeds of C$143.9 million; and
  • Completed the sales of four properties for combined gross proceeds of over $100.0 million, as part of the REIT's overall strategy to optimize cash flow performance through strategic acquisitions and dispositions. Net proceeds from the dispositions were used to fund the acquisition of the 15-property Landmark portfolio.

 


Q4 2015, Q4 2014, 2015 & 2014 Financial Results Summary

(US$000s, except per unit amounts)

Q4 2015

Q4 2014

Change

2015

2014

Change

Rents, Samestore

829

780

6.3%

829

780

6.3%

Rents, Total

879

802

9.6%

879

802

9.6%

Occupancy, Samestore

95.0%

95.3%

-30 bp

95.0%

95.3%

-30 bp

Occupancy, Total

94.9%

95.1%

-20 bp

94.9%

95.1%

-20 bp








Revenue, Samestore

43,930

41,209

6.6%

171,418

161,618

6.1%

Revenue, Non-samestore

11,725

8,043

45.8%

42,025

18,163

131.4%

Revenue, Management Company

1,368

1,892

-27.7%

6,101

6,958

-12.3%

Revenue, Total

57,023

51,144

11.5%

219,544

186,739

17.6%








Operating Expenses, Samestore

14,574

15,374

-5.2%

78,246

75,527

3.6%

Operating Expenses, Non-samestore

3,545

2,796

26.8%

16,407

7,834

109.4%

Operating Expenses, Management Company

1,205

1,664

-27.6%

5,369

6,123

-12.3%

Operating Expenses, Total(1)

19,324

19,834

-2.6%

100,022

89,484

11.8%








Property Revenue, Samestore

43,930

41,209

6.6%

171,418

161,618

6.1%

Property Revenue, Non-samestore

11,725

8,043

45.8%

42,025

18,163

131.4%

Property Revenue, Total(2)

55,655

49,252

13.0%

213,443

179,781

18.7%








Property Operating Expenses, Samestore

19,625

19,549

0.4%

78,246

75,527

3.6%

Property Operating Expenses, Non-samestore

4,615

3,453

33.7%

17,621

8,746

101.5%

Property Operating Expenses, Total(2,3)

24,240

23,002

5.4%

95,867

84,273

13.8%








NOI, Samestore

24,305

21,660

12.2%

93,172

86,091

8.2%

NOI, Non-samestore

7,110

4,590

54.9%

24,404

9,417

159.1%

NOI, Total(2,3)

31,415

26,250

19.7%

117,576

95,508

23.1%








NOI Margin, Samestore

55.3%

52.6%

270 bp

54.4%

53.3%

110 bp

NOI Margin, Non-samestore

60.6%

57.1%

350 bp

58.1%

51.8%

630 bp

NOI Margin, Total(2,3)

56.4%

53.3%

310 bp

55.1%

53.1%

200 bp








FFO

18,690

15,328

21.9%

69,715

56,155

24.1%

FFO Per Unit, Basic(4)

0.28

0.25

0.03

1.08

1.01

0.07

FFO Payout Ratio(5)

43%

57%

-14%

47%

59%

-12%








AFFO

16,451

12,954

27.0%

60,827

46,808

30.0%

AFFO Per Unit, Basic(4)

0.25

0.21

0.04

0.95

0.84

0.11

AFFO Payout Ratio(5)

49%

68%

-19%

54%

70%

-16%








Total Distributions Declared(6)

8,080

8,778

-8.0%

32,937

32,914

0.1%








Debt to gross book value

46.7%

51.1%

-440 bp

46.7%

51.1%

-440 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)

Basic FFO and AFFO per unit are calculated by dividing total FFO and AFFO for the respective periods by the amount of the total weighted average number of outstanding REIT and Class B units for Q4 2015 (66,227,487), Q4 2014 (60,729,837), 2015 (64,278,250) and 2014 (55,641,289), which excludes subscription receipts issued during Q4 2015, as well as unit options.

(5)

FFO and AFFO Payout ratios are calculated by dividing the amount of REIT and Class B unitholder distributions declared, by FFO and AFFO for the respective period. Distributions on REIT and Class B units are translated based on an average CAD to USD exchange rate for the respective period, consistent with IFRS.

(6)

Represents total cash distributions declared to REIT and Class B unitholders for the period.



Q4 2015 Financial Results

Total and samestore property revenue were $55.7 million and $43.9 million, respectively, up 13.0% and 6.6% from $49.3 million and $41.2 million in Q4 2014. The increase in total and samestore property revenue is attributable to continued strong occupancy, organic rent growth and growth from acquisitions completed subsequent to Q3 2014.

Total and samestore property operating expenses were $24.2 million and $19.6 million, respectively, up 5.4% and 0.4% from $23.0 million and $19.5 million in Q4 2014. 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 properties acquired subsequent to Q3 2014.

Total and samestore NOI were $31.4 million and $24.3 million, respectively, up 19.7% and 12.2% from $26.3 million and $21.7 million in Q4 2014. Total and samestore NOI margins were 56.4% and 55.3%, respectively, up 310 and 270 basis points from 53.3% and 52.6% in Q4 2014. The increase in total and samestore NOI and NOI margins is primarily attributable to higher property revenue, partially offset by higher operating expenses, as noted above.

FFO and AFFO of $18.7 million and $16.5 million, respectively, were up 21.9% and 27.0% from $15.3 million and $13.0 million in Q4 2014. Basic FFO and AFFO per unit of $0.28 and $0.25, respectively, were up from $0.25 and $0.21 in Q4 2014. FFO and AFFO growth were attributable to higher property revenue and NOI during the quarter, as noted above. Basic FFO and AFFO per unit calculations exclude subscription receipts issued during Q4 2015, as well as unit options.

Fair Value on Investment Properties
As at December 31, 2015, the REIT's properties were valued using an overall weighted capitalization rate of 6.38% (December 31, 2014 – 6.38%). There were $34.5 million of fair value gains recognized in Q4 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.

Cash Distributions
Cash distributions declared to REIT unitholders and Class B unitholders of the REIT's operating partnership were $8.1 million in Q4 2015, representing FFO and AFFO payout ratios of 43% and 49%, respectively, compared to declared distributions of $8.8 million in Q4 2014, representing FFO and AFFO payout ratios of 57% and 68%. The REIT's Q4 2015 payout ratios benefited from a rising U.S. dollar against the Canadian dollar during the period. Management expects that 100% of the REIT's distributions for 2015 will be a return of capital. The REIT began withholding from a portion of the distributions payable to Canadian (and other non-U.S.) unitholders starting with the February of 2016 monthly distribution, payable on March 15, 2016, to unitholders of record as at February 29, 2016. For more information on the tax treatment of the REIT's distributions please reference the news release issued on February 16, 2016.

Liquidity and Capital Structure
As at December 31, 2015, the REIT had cash and cash equivalents of $47.4 million and a $100.0 million revolving line of credit (with an option to increase the line to $125.0 million). As at March 3, 2016, the REIT had drawn $10.0 million on its line of credit related to the acquisition of the Landmark portfolio and ongoing working capital needs. The REIT ended the period with mortgage notes obligations of $943.4 million with approximately 91.5% issued at fixed rates, a weighted average interest rate of 3.68% and a weighted average maturity of approximately 6.2 years. The REIT's debt to gross book value ended Q4 2015 at 46.7%. As at March 3, 2016, the REIT had mortgage notes obligations of $1.21 billion with approximately 85.9% issued at fixed rates with a weighted average interest rate of 3.62% and a weighted average maturity of approximately 6.5 years. The REIT's debt to gross book value is currently 50.2%.

Units Outstanding
As at March 3, 2016, there were 70,039,063 REIT units and 5,779,424 Class B units outstanding.

Conference Call
Robert Landin, CEO, Steve Lamberti, COO, and Ryan Newberry, CFO, will host a conference call for the investment community tomorrow, Friday, March 4, 2016 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 Friday, March 11, 2016. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 441055). The webcast will be archived on Milestone's website.

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 72 multifamily garden-style residential properties, comprising 22,546 units that are located in 14 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 1,500 employees and manages more than 50,000 apartment units 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$10 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 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, 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, the future performance of the U.S. multifamily sector, the development at the REIT's Harbour Creek property, the Acquisition and management's expected characterization of the REIT's distributions. 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 and the REIT's prospectus supplement dated October 26, 2015, each 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

Image with caption: "Milestone Apartments Real Estate Investment Trust (CNW Group/Milestone Apartments REIT)". Image available at: http://photos.newswire.ca/images/download/20160303_C8248_PHOTO_EN_635148.jpg

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

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