Minto Apartment REIT Reports 2021 Fourth Quarter and Year-End Financial Results

— Higher rental rates and occupancy drive stronger financial performance —

OTTAWA, ON, March 8, 2022 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the fourth quarter and year ended December 31, 2021 ("Q4 2021" and "FY 2021", respectively). The Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for Q4 2021 and FY 2021 are available on the REIT's website at www.mintoapartments.com and at www.sedar.com.¹

"Our financial performance improved significantly in the fourth quarter as our markets continued to recover from the impact of the pandemic," said Michael Waters, the REIT's Chief Executive Officer and President. "We achieved our highest average occupancy since the second quarter of 2020, even as we reduced the use of discounts and promotions. We expect the recovery in our core markets to continue to accelerate, with market dynamics returning to pre-pandemic levels by the middle of the year. The fundamentals underlying Canadian urban rental markets remain very strong."

Q4 2021 Highlights

• The REIT executed 444 new leases, a 9% increase compared to 406 new leases signed in the fourth quarter ended December 31, 2020 ("Q4 2020");
• The REIT achieved an average rental rate on the new leases that was 7.2% higher than the expiring rents;
• Average monthly rent, excluding furnished and unoccupied suites, at December 31, 2021 was $1,641, a decrease of 0.6% compared to $1,651 at September 30, 2021 and an increase of 1.1% compared to $1,623 as at December 31, 2020. The sequential decline in average monthly rent in Q4 2021 was due to the Montreal acquisition in Q4 2021 with an average monthly rent below the REIT's portfolio average. On a same-property basis, average monthly rent was $1,664 at December 31, 2021;
• Average occupancy of unfurnished suites was 95.0%, a significant increase from 92.3% in Q4 2020 and 92.9% in the third quarter of 2021 ("Q3 2021"). Q4 2021 was the third consecutive sequential quarter of improved occupancy for the REIT;
• Total revenue was $32.4 million, an increase of 4.8% from Q4 2020;
• Net Operating Income ("NOI") was $19.9 million, an increase of 5.2% compared to Q4 2020;
• Funds from Operations ("FFO") increased by 10.2% to $13.2 million, compared to $12.0 million in Q4 2020; FFO per unit increased by 5.5% to $0.2147, compared to $0.2036 in Q4 2020;
• Adjusted Funds from Operations ("AFFO") increased by 11.4% to $11.7 million, compared to $10.5 million in Q4 2020; AFFO per unit increased by 6.7% to $0.1890 compared to $0.1771 in Q4 2020;
• Net income and comprehensive income was $24.9 million, an increase of 8.4% from $23.0 million in Q4 2020;
• Net asset value ("NAV") per unit was $24.00 as at December 31, 2021, an increase of 7.8% from $22.26 as at December 31, 2020;
• The REIT continued to productively deploy capital through its repositioning program, earning an annualized 9.4% return on the capital invested in the repositioning of 113 suites across its portfolio in Q4 2021. The REIT repositioned a total of 367 suites in 2021 earning an annualized 9.1% return on invested capital;
• On October 29, 2021, the REIT completed a bought deal equity offering in which it issued 3,795,000 trust units of the REIT from treasury at a price of $22.85 per Unit, raising gross proceeds of approximately $87 million;
• On November 9, 2021, the REIT announced that its Board of Trustees approved a 4.4% increase to its cash distributions, raising the monthly unitholder distribution from an annualized rate of $0.455 per unit to $0.475 per unit. The distribution increase reflects the REIT's strong growth prospects and high level of confidence in its business model, long-term strategy, and overall business outlook;
• On November 16, 2021, the REIT released its inaugural Environmental, Social and Governance ("ESG") report. The report outlines 18 specific initiatives with milestones and/or measurable targets to be achieved in a five-year horizon;
• On December 1, 2021, the REIT announced an agreement to provide a convertible loan of up to $19.6 million to Minto Properties Inc. ("MPI") to finance MPI's 85% interest in a joint venture for the development of a six-storey, mixed-use multi-residential property at 810 Kingsway in Vancouver, British Columbia. The property will comprise 108 suites and approximately 11,500 square feet of at-grade retail and the REIT has an option to purchase MPI's interest in the property on stabilization at 95% of its then-appraised fair value;
• On December 7, 2021, the REIT acquired Le Hill-Park, a 20-storey multi-residential rental property in downtown Montreal comprising 261 suites.[2] The purchase price was approximately $80.1 million. The property has a gain-to-lease potential of approximately 20%, and provides a significant repositioning opportunity as only 81 of the suites have undergone a modernization program;
• The REIT received a commitment from CMHC to provide construction financing for the Richgrove development project in Toronto. The funding commitment was secured through CMHC's Rental Construction Financing Initiative. Construction at Richgrove commenced in Q4 2021, with stabilization anticipated in the first quarter of 2026;
• The REIT maintained a strong balance sheet, with Debt to Gross Book Value ("Debt-to-GBV") as at December 31, 2021 of 36.5%, compared with 38.6% as at December 31, 2020; and
• Total available liquidity was $150.7 million as at December 31, 2021, enabling the REIT to maintain financial flexibility and continue to capitalize on growth opportunities to drive long term NAV growth.

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^1	This news release contains certain Non-IFRS and other financial measures. Refer to "Non-IFRS and Other Financial Measures" in this news release for a complete list of these measures and their meaning.
2	A discussion on the Same Property Portfolio has not been provided here as the impact of the 261 additional suites, which were acquired on December 7, 2021 is not considered material for Q4 2021. Management intends to resume providing information relating to the Same Property Portfolio in Q1 2022.

Subsequent Event

• On January 24, 2022, the REIT announced the appointment of Jonathan Li as President and Chief Operating Officer, effective April 2022. Mr. Li has more than 20 years of related capital markets experience, most recently serving as a Managing Director in the North American Real Estate investment banking group at BMO Capital Markets.

Organic Growth Initiatives

The REIT signed 444 new leases in Q4 2021, realizing an average gain-to-lease of 7.2%. That represented a significant increase compared to the gain-to-lease of 4.4% in Q3 2021 and 2.1% in Q4 2020. Gains were realized in all markets, with the majority of the contributions coming from the Ottawa and Toronto markets. The REIT reduced its use of promotions and discounts during the quarter as rental markets continued to recover from the negative impact of the pandemic, which positively impacted gain-to-lease.

Management estimates that the REIT holds an embedded gain-to-lease potential in its unfurnished suite portfolio of 6.8% as at December 31, 2021, representing future annualized embedded potential revenue of approximately $7.9 million. That compares to an embedded gain-to-lease potential of 6.6% and an estimated annualized revenue growth opportunity of $7.3 million as at September 30, 2021, and 7.6% or $8.0 million as at December 31, 2020. While the use of discounts and promotions has declined over the second half of FY 2021, Management continues to selectively offer discounts to maintain and improve occupancy. These will be gradually tapered as occupancy stabilizes.

The REIT continued to make progress with its repositioning program in Q4 2021, repositioning a total of 113 suites across its portfolio. The annualized revenue gains realized on the suites that were repositioned in Q4 2021 generated an average annual unlevered return of 9.4% return on investment. The REIT has a total of 2,315 suites remaining to be repositioned at the 12 properties with active repositioning programs and is exploring repositioning opportunities at two other wholly-owned properties in its portfolio.

The REIT has entered into agreements to provide convertible development loans for the development of four properties: Fifth + Bank and Beechwood in Ottawa, Lonsdale Square in North Vancouver, and 810 Kingsway in Vancouver. The REIT has the option to purchase each of these properties, or in the case of 810 Kingsway, MPI's interest in the property, upon stabilization at 95% of its then appraised fair value. In addition, the REIT is pursuing development of additional rental suites on available excess land at three Toronto properties: Richgrove, Leslie York Mills, and High Park Village. Combined, these seven opportunities have the potential to increase the REIT's suite count by 1,678 suites (a 22% increase from the REIT's current suite count). Updated information on these opportunities, including development timelines, is available in the REIT's FY 2021 MD&A.

Financial Summary                                                      

($000's except per unit amounts)	Three months ended December 31,						Year ended December 31,
	2021		2020		Variance		2021		2020		Variance
Revenue from investment properties	$	32,429	$	30,930	4.8 %		$	123,547	$	124,929	(1.1) %
Property operating costs	6,161		6,142		(0.3) %		23,952		23,221		(3.1) %
Property taxes	3,508		3,162		(10.9) %		13,322		13,346		0.2 %
Utilities	2,820		2,680		(5.2) %		10,026		9,742		(2.9) %
NOI	$	19,940	$	18,946	5.2 %		$	76,247	$	78,620	(3.0) %
NOI margin (%)	61.5 %		61.3 %		20 bps		61.7 %		62.9 %		(120) bps
Net income and comprehensive income	$	24,933	$	23,010	8.4 %		$	94,161	$	179,638	(47.6)  %
FFO	$	13,245	$	12,022	10.2 %		$	48,530	$	49,981	(2.9) %
FFO per unit	$	0.2147	$	0.2036	5.5 %		$	0.8128	$	0.8465	(4.0) %
AFFO	$	11,656	$	10,459	11.4 %		$	42,234	$	43,733	(3.4) %
AFFO per unit	$	0.1890	$	0.1771	6.7 %		$	0.7073	$	0.7407	(4.5) %
Distribution per unit	$	0.1171	$	0.1138	2.9 %		$	0.4584	$	0.4463	2.7 %
AFFO payout ratio	63.1 %		64.2 %		110 bps		65.1 %		60.3 %		(480) bps

Q4 2021 Operating Results

Revenue in Q4 2021 totalled $32.4 million, an increase of 4.8% from $30.9 million in Q4 2020. Revenue from unfurnished suites increased 3.9% year-over-year and revenue from furnished suites increased 6.7% year-over-year, reflecting higher occupancy and average rents.

Average occupancy of unfurnished suites was 95.0% in Q4 2021, compared to 92.9% in Q3 2021 and 92.3% in Q4 2020. The increased occupancy reflects improving market conditions and the use of promotions and discounts. There were 514 move-ins during Q4 2021, compared to 420 move-outs. It was the third consecutive quarter with positive net move-ins and increased occupancy.

NOI for Q4 2021 totalled $19.9 million, representing 61.5% of revenue, an increase of 5.2% compared to $18.9 million, or 61.3% of revenue, in Q4 2020. The higher NOI in Q4 2021 primarily reflects higher revenue due to improved occupancy, partially offset by higher property taxes and utilities expense. The stabilization of 32 rebuilt suites at the Skyline property in Ottawa and the acquisition of the Le-Hill Park property in Montreal also contributed to the increase in NOI.

FFO in Q4 2021 increased 10.2% to $13.2 million, or $0.2147 per unit, compared to $12.0 million, or $0.2036 per unit, in Q4 2020. The higher FFO in Q4 2021 primarily reflected the positive NOI variance. AFFO in Q4 2021 was $11.7 million, or $0.1890 per unit, an increase of 11.4% compared to $10.5 million, or $0.1771 per unit, in Q4 2020. The increase in AFFO for Q4 2021 primarily reflected the higher FFO, partially offset by an increase in the maintenance capital expenditure reserve.

The REIT reported net income and comprehensive income of $24.9 million in Q4 2021, an increase of 8.4% compared to $23.0 million in Q4 2020. The positive variance was primarily attributable to higher NOI and fair value gains on investment properties, Class B LP Units, interest rate swaps, and unit-based compensation.

The REIT paid cash distributions of $0.1171 per unit for Q4 2021, an increase of 2.9% compared to Q4 2020 and representing an AFFO payout ratio of 63.1%. Cash distributions of $0.1138 per unit were paid in Q4 2020, representing an AFFO payout ratio of 64.2%.

Balance Sheet

As of December 31, 2021, the REIT had total debt outstanding of $891.9 million, with a weighted average interest rate on fixed rate date of 2.82% and a weighted average term to maturity on fixed rate debt of 4.69 years for its fixed-rate term debt. The Debt-to-GBV was 36.5%. The REIT's NAV per unit as at December 31, 2021 was $24.00, an increase of 14.8% from $22.26 as at December 31, 2020.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $150.7 million as at December 31, 2021, with a liquidity ratio (total liquidity/total debt) of 16.9%.

Conference Call

Michael Waters, Chief Executive Officer and President, and Julie Morin, Chief Financial Officer, will host a conference call for analysts and investors on Wednesday, March 9, 2022 at 10:00 am ET. The dial-in numbers for participants are 416-764-8688 or 888-390-0546. In addition, the call will be webcast live at:

Minto Apartment REIT Q4 2021 Earnings Webcast

A replay of the call will be available until Wednesday, March 16, 2022. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 393302 #). A transcript of the call will be archived on the REIT's website

About Minto Apartment Real Estate Investment Trust

Minto Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario to own, develop, and operate income-producing multi-residential properties located in urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa, Calgary and Edmonton. For more information on Minto Apartment REIT, please visit the REIT's website at:  www.mintoapartments.com.

Forward-Looking Information

This news release may contain forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will" and "expects". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in the REIT's Annual Information Form dated March 8, 2022, which is available on SEDAR (www.sedar.com). The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.

Non-IFRS and Other Financial Measures

This news release contains certain non-GAAP and other financial measures which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure for the purpose of this news release. These measures and ratios are defined below:

• "FFO" is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of investment properties, effects of puttable instruments classified as financial liabilities and changes in fair value of financial instruments and derivatives. FFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating FFO may differ from other issuers' methods and, accordingly, may not be comparable to FFO reported by other issuers.
• "FFO per unit" is calculated as FFO divided by the weighted average number of Units of the REIT and Class B LP Units of the Partnership outstanding over the period. The REIT regards FFO per unit as a key measure of operating performance.
• "AFFO" is defined as FFO adjusted for items such as maintenance capital expenditures and straight-line rental revenue differences. AFFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating AFFO may differ from other issuers' methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT also uses AFFO in assessing its capacity to make distributions.
• "AFFO per unit" is calculated as AFFO divided by the weighted average number of Units of the REIT and Class B LP Units of the Partnership outstanding over the period. The REIT regards AFFO per unit as a key measure of operating performance.
• "AFFO payout ratio" is the proportion of the total distributions on Units of the REIT and Class B LP Units of the Partnership to AFFO. The REIT uses AFFO payout ratio in assessing its capacity to make distributions.
• "Weighted average term to maturity on fixed rate debt" is calculated as the weighted average of the term to maturity on the outstanding fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units.
• "Weighted average interest rate on fixed rate debt" is calculated as the weighted average of the stated interest rates on the outstanding balances of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C LP Units.
• "NOI" is defined as revenue from investment properties less property operating costs, property taxes and utilities (collectively referred to as "property operating expenses") prepared in accordance with IFRS. NOI should not be construed as an alternative to net income determined in accordance with IFRS. The REIT's method of calculating NOI may differ from other issuers' methods and, accordingly, may not be comparable to NOI reported by other issuers. It is a key input in determining the value of the REIT's properties.
• "NOI margin" is defined as NOI divided by revenue.
• "Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date.
• "Debt-to-GBV" is calculated by dividing total interest-bearing debt consisting of mortgages, credit facility and Class C LP Units of the Partnership by Gross Book Value and is used as the REIT's primary measure of its leverage.
• "NAV" is calculated as the sum of the value of REIT Unitholders' equity and Class B LP Units of the Partnership as at the balance sheet date.
• "NAV per unit" is calculated by dividing NAV by the number of Units of the REIT and Class B LP Units of the Partnership outstanding as at the balance sheet date.
• "total debt" is calculated as the sum of value of interest-bearing debt consisting of mortgages, credit facility and Class C LP Units of the Partnership.
• "gain-to-lease" refers to the gap between rents achieved on new leases of unfurnished suites as compared to the expiring leases.
• "gain-to-lease potential" refers to the gap between Management's estimate of monthly market rent and average monthly in-place rent per occupied unfurnished suite.
• "average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average annual rental increase per suite by the average cost per suite, excluding the impact of financing costs.
• "average monthly rent, excluding furnished and unoccupied suites" represents the average monthly rent for occupied unfurnished suites at the end of the period.
• "average occupancy of unfurnished suites" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio for the period.

Reconciliations of Non-IFRS Financial Measures and Ratios

FFO and AFFO

($000's except per unit amounts)	Three months ended December 31,					Year ended December 31,
	2021		2020			2021		2020
Net income and comprehensive income	$	24,933	$	23,010		$	94,161	$	179,638
Distributions on Class B LP Units	2,665		2,591			10,436		10,162
Fair value loss (gain) on:
Investment properties	(3,133)		(61,231)			(89,188)		(78,701)
Class B LP Units	(10,701)		47,587			34,609		(63,298)
Interest rate swap	(421)		(174)			(1,625)		2,429
Unit-based compensation	(98)		239			137		(249)
Funds from operations (FFO)	13,245		12,022			48,530		49,981
Maintenance capital expenditure reserve	(1,397)		(1,369)			(5,527)		(5,478)
Amortization of mark-to-market adjustments	(192)		(194)			(769)		(770)
Adjusted funds from operations (AFFO)	11,656		10,459			42,234		43,733
Distributions on Class B LP Units	2,665		2,591			10,436		10,162
Distributions on Units	4,691		4,127			17,071		16,189
	$	7,356	$	6,718		$	27,507	$	26,351
AFFO payout ratio	63.11%		64.23%			65.13%		60.25%
Weighted average number of Units and Class B LP Units issued and outstanding	61,683,912		59,043,912			59,709,337		59,043,912
FFO per unit	$	0.2147	$	0.2036		$	0.8128	$	0.8465
AFFO per unit	$	0.1890	$	0.1771		$	0.7073	$	0.7407

NAV and NAV per unit

($000's except per unit amounts)	As at December 31,
	2021		2020
Net assets (Unitholders' equity)	$	1,010,001	$	850,224
Add: Class B LP Units	498,415		463,806
NAV	$	1,508,416	$	1,314,030
Number of Units and Class B LP Units	62,838,912		59,043,912
NAV per unit	$	24.00	$	22.26

SOURCE MINTO Real Estate Investment Trust

For further information: Julie Morin, Chief Financial Officer, Minto Apartment Real Estate Investment Trust, Tel: [phone]