Starlight U.S. Multi-Family Core Fund Reports Strong Net Operating Income, Occupancy and Capital Appreciation for Fourth Quarter and 2013 Period End

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO, March 25, 2014 /CNW/ - Starlight U.S. Multi-Family Core Fund (TSX.V: UMF.A, UMF.U) (the "Fund") today announced its results of operations and financial condition for the three months ended December 31, 2013 (the "Fourth Quarter") and period from February 12, 2013 (date of formation) to December 31, 2013. The results and financial condition reflect operations for the Fund's initial portfolio, comprised of three properties, that were acquired on April 23, 2013, as well as the acquisition of Greenhaven Apartments on July 29, 2013 and the acquisition of a 35% interest in the Falls at Eagle Creek on September 16, 2013.  

All dollar amounts set out in this news release are in United States currency unless otherwise noted. 

HIGHLIGHT FROM 2013

• Net Operating Income ("NOI") in relation to the initial portfolio was 5.4% higher for the Fourth Quarter compared to the three month period ended September 30, 2013 (the "Third Quarter").  Overall, the Fund's NOI margin for each of the Fourth Quarter and period from February 12, 2013 to December 31, 2013 was 58.0% and 58.6% respectively, excluding the Fund's non-controlling interest in the Falls at Eagle Creek. 
• The Fund's portfolio had strong occupancy of 94.9% for the year ended December 31, 2013.
• The Fund's portfolio recognized capital appreciation of $6.81 million or 5.8% for the period February 12, 2013 to December 31, 2013, excluding the Fund's non-controlling interest in the Falls at Eagle Creek. 
• Adjusted Funds from Operations ("AFFO") payout ratio for the Fourth Quarter was 98.6% and 85.0% for the period from February 12, 2013 to December 31, 2013. 
• The Fund had conservative leverage of 61.79% of gross book value as at December 31, 2013 and had an interest coverage ratio for the period February 12, 2013 to December 31, 2013 of 2.68 times and total indebtedness coverage of 2.31 times, in each case excluding the Fund's non-controlling interest in the Falls at Eagle Creek.
• Capital expenditures for the year were below budget and were modest given that the Fund acquired recently constructed assets.

Operating Results

For the Fourth Quarter, property revenues and NOI, excluding the Fund's non-controlling interest in the Falls at Eagle Creek, were $3.52 million and $2.04 million, respectively. At the conclusion of the Fourth Quarter, average monthly rent was $1,046 and the weighted average portfolio occupancy was 94.9% after removing the Fund's non-controlling interest.  Average monthly rent grew 7.0% when compared to the Third Quarter excluding the Fund's non-controlling interest, demonstrating the strong market demand for the Fund's portfolio and active management.

Financial Position

As of December 31, 2013, the Fund's gross book value was $155.53 million and indebtedness was $101.11 million or 65.01% of gross book value.  Excluding the Fund's non-controlling interest in the Falls at Eagle Creek, the Fund's gross book value was $128.41 million and indebtedness was $79.34 million or 61.79% of gross book value.  The interest coverage ratio for the Fourth Quarter was 2.58 times after removing the Fund's non-controlling interest in the Falls at Eagle Creek. The weighted average interest rate on the Fund's mortgage portfolio was 3.31%, and the weighted average term to maturity was 3.48 years after removing the Fund's non-controlling interest in the Falls at Eagle Creek.

Occupancy

The Fund's weighted average occupancy of its properties for the period from February 12, 2013 to December 31, 2013 was 94.9%. The strong occupancy is attributable to robust market dynamics and the seasonal leasing impact in Dallas and Houston. Given the strong occupancies at the properties, the Fund has aggressively increased rental rates on both new and renewal leases and curtailed concessions.

Subsequent Events

On February 24, 2014 the Fund, together with Starlight U.S. Multi-Family (No. 2) Core Fund ("Fund No. 2") announced that they had entered into an agreement to acquire Soho Parkway Apartments ("Soho Parkway"), a 379 unit garden style Class "A" apartment complex located in North Dallas.  The Fund is expected to acquire 25% at a purchase price of $10.325 million and Fund No. 2 is expected to acquire 75% at a purchase price of $30.975 million.  The purchase is subject to the satisfaction or waiver of conditions precedent and is scheduled to close on April 1, 2014. 

A first mortgage loan in respect of the property for $28.3 million has been secured for a three year term with two one year extensions available.  The loan will be interest only for the entire term and will be payable at an annual rate of LIBOR plus 2.00%.  The Fund has secured a supplementary loan on the Falls of Copper Lake for up to $4.5 million that will mature on April 1, 2017.  The loan is expected to be an interest only loan for the entire term and will be payable at a rate equal to the interpolated three-year U.S. treasury yield plus 3.17%. 

Following completion of the acquisition of Soho Parkway, the Fund expects to own and operate a portfolio comprising interests in 1,747 recently constructed, Class "A" stabilized, income producing multi-family real estate suites located in Dallas-Fort Worth and Houston, Texas.

About Starlight U.S. Multi-Family Core Fund

The Fund is a limited partnership formed under the Limited Partnerships Act (Ontario) for the primary purpose of indirectly acquiring, owning and operating a portfolio of diversified income producing rental properties in the U.S. multi-family real estate market.

For complete consolidated financial statements and management's discussion and analysis for the period, and any other information relating to the Fund, please visit www.sedar.com.

Non-IFRS Financial Measures

Certain terms used in this news release including NOI, AFFO, gross book value, indebtedness and interest coverage ratio are not measures defined under International Financial Reporting Standards ("IFRS") as prescribed by the International Accounting Standard Board. Details on non-IFRS financial measures are set out in the Fund's management's discussion and analysis for the period available on the Fund's profile at www.sedar.com.

Forward-looking Statements

This news release contains statements that may constitute forward-looking statements within the meaning of Canadian securities laws and which reflect the current expectations of the Fund  regarding future events, including statements concerning the acquisitions of Soho Parkway, the financing of Soho Parkway and the refinancing of the Falls at Copper Lake by the Fund.  Particularly statements regarding future results, performance, achievements, prospects or opportunities for the Fund or the real estate industry. In some cases, forward-looking statements can be identified by terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

The forward-looking statements in this news release involve risks and uncertainties, including those set forth in the materials of the Fund and Fund No. 2 filed with the Canadian securities regulatory authorities from time to time at www.sedar.com. Actual results could differ materially from those projected herein. Those risks and uncertainties include, among other things, risks related to: reliance on the manager of the Fund and Fund No. 2; the ability to complete the acquisition of Soho Parkway; the terms and availability of financing for Soho Parkway; the terms and availability of supplementary financing for the Falls at Copper Lake by the Fund; the expected benefits of the ownership of Soho Parkway; the relationship and obligations of the Fund and Fund No. 2 in respect of Soho Parkway; the experience of the officers and directors of the Fund; substitutes for residential real estate rental suites; reliance on property management; competition for real property investments and tenants; anticipated future growth of the Fund; United States market factors; and exchange rates.

Information contained in forward-looking statements is based upon certain material assumptions that were applied in developing such forward-looking statements including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the extent of competition between properties; the ability of the manager of the Fund to manage and operate the properties; the inventory of multi-family real estate properties; the population of multi-family real estate market participants; assumptions about the markets in which the Fund operates; the global and North American economic environment; foreign currency exchange rates; and governmental regulations or tax laws. Readers are cautioned against placing undue reliance on forward-looking statements. Except as required by applicable Canadian securities laws, neither the Fund nor its manager undertakes any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: Starlight U.S. Multi-Family Core Fund

Evan Kirsh, President, Starlight U.S. Multi-Family Core Fund, 647-725-0417, [email protected]