Milestone Apartments REIT Reports 2015 Third Quarter Results

- 12.2% and 6.3% total and samestore rent increases and continued strong occupancy drive total and samestore NOI growth of 21.1% and 8.0% -

TORONTO, DALLAS, Nov. 4, 2015 /CNW/ - Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) ("Milestone" or the "REIT") today announced its financial results for the third quarter ended September 30, 2015 ("Q3 2015") and the nine month period ended September 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 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 operating performance in the third quarter, highlighted by seven consecutive quarterly increases in samestore rents and NOI since our IPO. The multifamily sector in the United States remains strong and is projected to maintain its positive trend well into 2016", said Robert Landin, CEO of Milestone. "Additionally, we are excited about our recently announced acquisition of the Landmark Apartment Trust portfolio and the expansion of the Milestone enterprise to more than 50,000 units under management throughout the Sunbelt of the U.S."

Q3 2015 Financial Highlights

  • Total and samestore average monthly in-place rents were $871 and $821, respectively, up 12.2% and 6.3% from $776 and $772 in the third quarter ended September 30, 2014 ("Q3 2014");
  • Total and samestore occupancy remained strong both ending Q3 2015 at 95.3%, compared to total and samestore occupancy both ending Q3 2014 at 95.5%;
  • Total and samestore property revenue were $54.8 million and $43.4 million, respectively, up 19.0% and 6.8% from $46.1 million and $40.6 million in Q3 2014;
  • Total and samestore net operating income ("NOI") were $29.5 million and $23.1 million, respectively, up 21.1% and 8.0% from $24.3 million and $21.4 million in Q3 2014. Total and samestore NOI margins were 53.8% and 53.2%, respectively, up from 52.8% and 52.6% in Q3 2014;
  • FFO was $17.4 million, up 25.0% from $13.9 million in Q3 2014. AFFO was $15.2 million, up 29.0% from $11.8 million in Q3 2014. FFO and AFFO per unit of $0.26 and $0.23, respectively, were up from $0.25 and $0.21 in Q3 2014. FFO and AFFO per unit in Q3 2015 do not reflect the full impact of the acquisitions that closed following the bought deal equity offering completed on May 26, 2015;
  • FFO and AFFO payout ratios were 47% and 54%, respectively, compared to 61% and 71% in Q3 2014. The REIT's Q3 2015 payout ratios benefited from a rising U.S. dollar against the Canadian dollar during the period; and
  • Improved financial leverage ending Q3 2015 at 47.8%, with investment properties valued at $1.91 billion, compared to 52.6%, with investment properties valued at $1.49 billion at the end of Q3 2014.

Q3 2015 Business Highlights

  • Completed the acquisition of Estates at Vista Ridge, a 372-unit multifamily apartment community located in the Lewisville submarket of Dallas, Texas, for a purchase price of $45.0 million;
  • Completed the acquisition of Flagstone at Indian Trail, a 252-unit multifamily apartment community located in the Union County submarket of Charlotte, North Carolina, for a purchase price of $32.2 million;
  • Completed the disposition of Villas at Cave Creek, a 696-unit multifamily apartment community located in Phoenix, Arizona, for gross proceeds of $43.2 million; and
  • Declared total cash distributions to REIT unitholders and Class B unitholders of $8.2 million.

Subsequent Events

  • Milestone and Starwood Capital Group ("Starwood"), through a strategic relationship, entered into a definitive merger agreement to acquire Landmark Apartment Trust, Inc. ("Landmark") for $8.17 per Landmark share in cash (the "Acquisition"), representing a total enterprise value of approximately $1.9 billion. The Acquisition, which is subject to customary closing conditions, including approval by Landmark's shareholders, is expected to close in the first quarter of 2016. As part of the Acquisition, Milestone will acquire a 100% interest in 15 properties currently owned by Landmark, while Starwood will acquire Landmark's interest in 63 properties, all of which will be property managed by the REIT for a fee equal to 3.0% of revenue;
  • In connection with the Acquisition, the REIT completed an offering of 9,591,000 subscription receipts (including subscription receipts issued pursuant to the over-allotment option, which was exercised in full) at a price of C$15.00 per subscription receipt for gross proceeds of C$143.9 million; and
  • The REIT's Board of Trustees approved, effective for the January 2016 distribution, payable on February 15, 2016, an approximate 11% increase to its unitholder cash distributions (based on the Bank of Canada's noon U.S. dollar exchange rate as at October 21, 2015) and a change to U.S. dollar denominated cash distributions, with unitholders having the option to elect to receive Canadian dollar denominated distributions.

Q3 2015, Q3 2014, YTD 2015 & YTD 2014 Financial Results Summary

(US$000s, except per unit amounts)

Q3 2015

Q3 2014

Change

YTD 2015

YTD 2014

Change

Rents, Samestore

821

772

6.3%

821

772

6.3%

Rents, Total

871

776

12.2%

871

776

12.2%

Occupancy, Samestore

95.3%

95.5%

-20 bp

95.3%

95.5%

-20 bp

Occupancy, Total

95.3%

95.5%

-20 bp

95.3%

95.5%

-20 bp








Revenue, Samestore

43,373

40,624

6.8%

127,488

120,409

5.9%

Revenue, Non-samestore

11,412

5,428

110.2%

30,300

10,120

199.4%

Revenue, Management Company

1,373

1,855

-26.0%

4,733

5,066

-6.6%

Revenue, Total

56,158

47,907

17.2%

162,521

135,595

19.9%








Operating Expenses, Samestore

15,721

15,504

1.4%

63,002

59,918

5.7%

Operating Expenses, Non-samestore

3,625

1,806

100.7%

13,531

5,365

152.2%

Operating Expenses, Management Company

1,208

1,541

-21.6%

4,165

4,367

-4.6%

Operating Expenses, Total(1)

20,554

18,851

9.0%

80,698

69,650

16.4%








Property Revenue, Samestore

43,373

40,624

6.8%

127,488

120,409

5.9%

Property Revenue, Non-samestore

11,412

5,428

110.2%

30,300

10,120

199.4%

Property Revenue, Total(2)

54,785

46,052

19.0%

157,788

130,529

20.9%








Property Operating Expenses, Samestore

20,302

19,260

5.4%

59,236

56,405

5.6%

Property Operating Expenses, Non-samestore

5,002

2,457

103.6%

12,390

4,866

154.6%

Property Operating Expenses, Total(2,3)

25,304

21,717

16.5%

71,626

61,271

17.5%








NOI, Samestore

23,071

21,364

8.0%

68,252

64,004

6.1%

NOI, Non-samestore

6,410

2,971

115.8%

17,910

5,254

240.9%

NOI, Total (2,3)

29,481

24,335

21.1%

86,162

69,258

23.9%








NOI Margin, Samestore

53.2%

52.6%

60 bp

53.5%

53.2%

30 bp

NOI Margin, Non-samestore

56.2%

54.7%

150 bp

59.1%

51.9%

720 bp

NOI Margin, Total (2,3)

53.8%

52.8%

100 bp

54.6%

53.1%

150 bp








FFO

17,356

13,882

25.0%

51,026

40,828

25.0%

FFO Per Unit(4)

0.26

0.25

0.01

0.80

0.76

0.04

FFO Payout Ratio(5)

47%

61%

-14%

49%

59%

-10%








AFFO

15,238

11,816

29.0%

44,377

33,854

31.1%

AFFO Per Unit(4)

0.23

0.21

0.02

0.70

0.63

0.06

AFFO Payout Ratio(5)

54%

71%

-17%

56%

71%

-15%








Total Distributions Declared(6)

8,199

8,397

-2.4%

24,858

24,136

3.0%








Debt to gross book value

47.8%

52.6%

-480 bp

47.8%

52.6%

-480 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 Q3 2015 (65,979,455), Q3 2014 (56,361,265), YTD 2015 (63,628,504) and YTD 2014 (53,455,739).

(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.

Q3 2015 Financial Results
Total and samestore property revenue were $54.8 million and $43.4 million, respectively, up 19.0% and 6.8% from $46.1 million and $40.6 million in Q3 2014. The increase in total and samestore property revenue is attributable to strong occupancy, organic rent growth and growth from acquisitions completed subsequent to Q2 2014.

Total and samestore property operating expenses were $25.3 million and $20.3 million, respectively, up 16.5% and 5.4% from $21.7 million and $19.3 million in Q3 2014. The increase in total and samestore property operating expenses is primarily attributable to expenses related to the operations of the acquisitions completed subsequent to Q2 2014.

Total and samestore NOI were $29.5 million and $23.1 million, respectively, up 21.1% and 8.0% from $24.3 million and $21.4 million in Q3 2014. Total and samestore NOI margins were 53.8% and 53.2%, respectively, up from 52.8% and 52.6% in Q3 2014. The increase in total and samestore NOI and NOI margins is attributable to higher property revenue, partially offset by higher operating expenses, as noted above. The REIT's NOI margins are generally lower for the third quarter of any year due to higher unit turnover and utility expenses during summer months.

FFO was $17.4 million, up 25.0% from $13.9 million in Q3 2014. AFFO was $15.2 million, up 29.0% from $11.8 million in Q3 2014. FFO and AFFO per unit of $0.26 and $0.23, respectively, were up from $0.25 and $0.21 in Q3 2014. FFO and AFFO growth were attributable to higher property revenue and NOI during the quarter, as noted above. FFO and AFFO per unit in Q3 2015 do not reflect the full impact of the acquisitions that closed following the bought deal equity offering completed on May 26, 2015.

Fair Value on Investment Properties
As at September 30, 2015, the REIT's properties were valued using an overall weighted capitalization rate of 6.36% (September 30, 2014 - 6.43%). There were $49.9 million of fair value gains recognized in Q3 2015 primarily resulting from increased NOI forecasts and a lower capitalization rate. 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 $8.2 million in Q3 2015, representing FFO and AFFO payout ratios of 47% and 54%, compared to declared distributions of $8.4 million in Q3 2014, representing FFO and AFFO payout ratios of 61% and 71%. The REIT's Q3 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 Q3 2015 will be a return of capital.

Liquidity and Capital Structure
As at September 30, 2015, the REIT had cash and cash equivalents of $48.2 million and an $85.0 million revolving line of credit (with an option to increase the line to $125.0 million). As at November 4, 2015, the line of credit was undrawn. The REIT ended the period with mortgage notes obligations of $947.1 million with approximately 91.4% issued at fixed rates, a weighted average interest rate of 3.68% and a weighted average maturity of approximately 7 years. The REIT's debt to gross book value ended Q3 2015 at 47.8%.

Units Outstanding
As at November 4, 2015, there were 60,448,063 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, Thursday, November 5, 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 Thursday, November 12, 2015. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 087360). 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 19,908 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 third quarter ended September 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, the Acquisition, the proposed changes to the REIT's distribution policy  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

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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