Milestone Apartments REIT Reports 2015 Second Quarter Results

- Total and samestore NOI growth of 27.1% and 5.2% driven by total and samestore rent increases of 10.6% and 5.7%, strong occupancy, improved margins and consistent portfolio expansion - 

TORONTO / DALLAS, Aug. 10, 2015 /CNW/ - Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the second quarter­­ ended June 30, 2015 ("Q2 2015") and the six month period ended June 30, 2015 ("YTD 2015"). All comparisons in the following summary are to the corresponding period in the prior 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 Q2 2015 and the second quarter ended June 30, 2014 ("Q2 2014") and in YTD 2015 and the six month period ended June 30, 2014 ("YTD 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.

"Our strong financial results reflect Milestone's efficient operational execution, the continued advancement of our growth by acquisition strategy, and the high demand for our garden-style apartment units in our U.S. sunbelt markets. Building on the momentum of our acquisitions in the first quarter, we continued to expand and diversify the REIT's portfolio. The REIT has acquired over 1,000 apartment units year-to-date via acquisitions, on pace with the almost 2,000 units acquired in 2014. With our recent property acquisition in Charlotte, North Carolina, Milestone is now operating in 14 major U.S. metropolitan markets, each of which is exhibiting strong demographic and employment trends," said Robert Landin, CEO of Milestone.

Q2 2015 Financial Highlights

  • Total and samestore average monthly in-place rents were $837 and $794, respectively, up 10.6% and 5.7% from $757 and $751 in Q2 2014;
  • Total and samestore occupancy remained strong ending Q2 2015 at 95.2% and 95.1%, respectively, up 20 and 10 basis points from total and samestore occupancy both ending Q2 2014 at 95.0%;
  • Total and samestore property revenue were $53.0 million and $43.8 million, respectively, up 23.4% and 5.2% from $43.0 million and $41.6 million in Q2 2014;
  • Total and samestore net operating income ("NOI") were $29.2 million and $23.6 million, respectively, up 27.1% and 5.2% from $23.0 million and $22.4 million in Q2 2014. Total and samestore NOI margins were 55.1% and 53.9%, respectively, up 160 basis points and flat compared to 53.5% and 53.9% in Q2 2014;
  • FFO was $17.3 million, up 24.4% from $13.9 million in Q2 2014. AFFO was $14.9 million, up 34.3% from $11.1 million in Q2 2014. FFO and AFFO per unit of $0.27 and $0.24, respectively, were up from $0.25 and $0.20 in Q2 2014. FFO and AFFO growth were attributable to higher property revenue, NOI and improved NOI margins during the quarter;
  • FFO and AFFO payout ratios were 50% and 58%, respectively, compared to 61% and 76% in Q2 2014. The REIT's Q2 2015 payout ratios benefited from a rising U.S. dollar against the Canadian dollar during the period; and
  • Improved financial leverage ending Q2 2015 at 47.8%, with investment properties valued at $1.82 billion, compared to 53.5%, with investment properties valued at $1.39 billion at the end of Q2 2014.

Q2 2015 Business Highlights

  • Completed the acquisition of The Village at Almand Creek, a 236-unit multifamily apartment community located in the Conyers submarket of East Atlanta, Georgia, for a purchase price of $24.0 million;
  • Completed, together with MileSouth Apartment Portfolio LP, an affiliated entity of Invesco Ltd. ("MileSouth"), a bought deal equity offering for gross proceeds of C$125.0 million, with proceeds being used in part to reduce MileSouth's ownership interest in the REIT to approximately 17.9%, down from 26.9% prior to the offering, and down from 42.9% immediately following the REIT's IPO in March of 2013; and
  • Declared total cash distributions to REIT unitholders and Class B unitholders of $8.6 million.

Subsequent Events

  • Completed the acquisition of Flagstone at Indian Trail (previously announced as "Hawthorne at the Trail"), a 252-unit multifamily apartment community located in the Union County submarket of Southeastern Charlotte, North Carolina, for a purchase price of $32.2 million.

Q2 2015, Q2 2014, YTD 2015 & YTD 2014 Financial Results Summary

(US$000s, except per unit amounts)

Q2 2015

Q2 2014

Change

YTD 2015

YTD 2014

Change

Rents, Samestore

794

751

5.7%

794

751

5.7%

Rents, Total

837

757

10.6%

837

757

10.6%

Occupancy, Samestore

95.1%

95.0%

10 bp

95.1%

95.0%

10 bp

Occupancy, Total

95.2%

95.0%

20 bp

95.2%

95.0%

20 bp








Revenue, Samestore

43,803

41,624

5.2%

86,666

82,279

5.3%

Revenue, Non-samestore

9,239

1,374

572.4%

16,337

2,198

643.3%

Revenue, Management Company

1,777

1,629

9.1%

3,360

3,211

4.6%

Revenue, Total

54,819

44,627

22.8%

106,363

87,688

21.3%








Operating Expenses, Samestore

15,932

15,101

5.5%

49,875

46,622

7.0%

Operating Expenses, Non-samestore

2,015

714

182.2%

7,313

1,351

441.3%

Operating Expenses, Management Company

1,563

1,434

9.0%

2,956

2,826

4.6%

Operating Expenses, Total(1)

19,510

17,249

13.1%

60,144

50,799

18.4%








Property Revenue, Samestore

43,803

41,624

5.2%

86,666

82,279

5.3%

Property Revenue, Non-samestore

9,239

1,374

572.4%

16,337

2,198

643.3%

Property Revenue, Total(2)

53,042

42,998

23.4%

103,003

84,477

21.9%








Property Operating Expenses, Samestore

20,177

19,175

5.2%

39,813

38,269

4.0%

Property Operating Expenses, Non-samestore

3,624

821

341.4%

6,508

1,285

406.5%

Property Operating Expenses, Total(2,3)

23,801

19,996

19.0%

46,322

39,554

17.1%








NOI, Samestore

23,626

22,449

5.2%

46,853

44,010

6.5%

NOI, Non-samestore

5,615

553

915.4%

9,828

913

976.5%

NOI, Total (2,3)

29,241

23,002

27.1%

56,681

44,923

26.2%








NOI Margin, Samestore

53.9%

53.9%

0 bp

54.1%

53.5%

60 bp

NOI Margin, Non-samestore

60.8%

40.2%

2,060 bp

60.2%

41.5%

1,870 bp

NOI Margin, Total (2,3)

55.1%

53.5%

160 bp

55.0%

53.2%

180 bp








FFO

17,283

13,895

24.4%

33,671

26,946

25.0%

FFO Per Unit(4)

0.27

0.25

0.02

0.54

0.51

0.03

FFO Payout Ratio(5)

50%

61%

-11%

49%

58%

-9%








AFFO

14,886

11,081

34.3%

29,140

22,038

32.2%

AFFO Per Unit(4)

0.24

0.20

0.04

0.47

0.42

0.05

AFFO Payout Ratio(5)

58%

76%

-18%

57%

71%

-14%








Total Distributions Declared(6)

8,570

8,394

2.1%

16,657

15,739

5.8%








Debt to gross book value

47.8%

53.5%

-570 bp

47.8%

53.5%

-570 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)

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 Q2 2015 (63,324,319), Q2 2014 (55,630,825), YTD 2015 (62,453,028) and YTD 2014 (52,668,487).

(5)

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.

 

Q2 2015 Financial Results
Total and samestore property revenue were $53.0 million and $43.8 million, respectively, up 23.4% and 5.2% from $43.0 million and $41.6 million in Q2 2014. The increase in total and samestore property revenue is attributable to organic rent growth, higher occupancy and growth from acquisitions completed subsequent to Q1 2014.

Total and samestore property operating expenses were $23.8 million and $20.2 million, respectively, up 19.0% and 5.2% from $20.0 million and $19.2 million in Q2 2014. The increase in total and samestore property operating expenses is primarily attributable to higher real estate tax accruals in the quarter and expenses related to the operations of the acquisitions completed subsequent to Q1 2014.

Total and samestore NOI were $29.2 million and $23.6 million, respectively, up 27.1% and 5.2% from $23.0 million and $22.4 million in Q2 2014. Total and samestore NOI margins were 55.1% and 53.9%, respectively, up 160 basis points and flat compared to 53.5% and 53.9% in Q2 2014. The increase in total and samestore NOI is attributable to higher property revenue, partially offset by higher operating expenses, as noted above.

FFO was $17.3 million, up 24.4% from $13.9 million in Q2 2014.  AFFO was $14.9 million, up 34.3% from $11.1 million in Q2 2014. FFO and AFFO per unit of $0.27 and $0.24, respectively, were up from $0.25 and $0.20 in Q2 2014. FFO and AFFO growth were attributable to higher property revenue, NOI and improved margins during the quarter, as noted above.

Fair Value on Investment Properties
As at June 30, 2015, the properties were valued using an overall weighted capitalization rate of 6.36% (June 30, 2014 - 6.48%). There were $48.3 million of fair value gains recognized in Q2 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 $8.6 million in Q2 2015, representing FFO and AFFO payout ratios of 50% and 58%, compared to declared distributions of $8.4 million in Q2 2014, representing FFO and AFFO payout ratios of 61% and 76%. The REIT's Q2 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 Q2 2015 will be a return of capital.

Liquidity and Capital Structure
As at June 30, 2015, the REIT had cash and cash equivalents of $10.5 million and an $85.0 million revolving line of credit (with an option to increase the line to $125.0 million). As at August 10, 2015, approximately $15.0 million was drawn on the line primarily related to the acquisition of Flagstone at Indian Trail. The REIT ended the period with mortgage notes obligations of $884.7 million with a weighted average interest rate of 3.74% and a weighted average maturity of 7.1 years. Debt to gross book value ended Q2 2015 at 47.8%.

Units Outstanding
As at June 30, 2015, there were 60,448,063 REIT units and 5,513,675 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, Tuesday, August 11, 2015 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 Tuesday, August 18, 2015. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 883361). 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 61 multifamily garden-style residential properties, comprising 20,232 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 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, 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$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, 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 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 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

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

RELATED LINKS
www.milestonereit.com

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