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TORONTO, Sept. 3, 2013 /CNW/ - Starlight U.S. Multi-Family Core Fund (TSX.V: UMF.A, UMF.U) (the "Fund") announced today that it has entered into an agreement to acquire a 35% interest in Alexan Eagle Creek ("Eagle Creek"), a 412 unit, garden style, Class "A", apartment complex built in 2009 and located at 9702 N. Sam Houston Parkway East, Humble, Texas, a rapidly growing area of North Houston. The remaining 65% interest in the property will be indirectly acquired by Daniel Drimmer, a Director and the Chief Executive Officer of Starlight U.S. Multi-Family Core GP, Inc., the Fund's general partner, and the principal of the Fund's manager, Starlight Investments Ltd.
In connection with the acquisition of Eagle Creek, the Fund and Mr. Drimmer have each assumed responsibility for the liabilities of Eagle Creek on a pro-rata ownership basis. All decision making in respect of Eagle Creek, including day- to-day and material decisions, will be made exclusively by the Fund through its established governance practices.
In accordance with the Fund's amended and restated limited partnership agreement dated as of May 22, 2013, Mr. Drimmer has declared the nature and the extent of his interest and recused himself from voting in respect of the acquisition of Eagle Creek. Following the completion of the acquisition, the Fund will have fully deployed the proceeds of its initial public offering completed on April 18, 2013.
Currently managed by Greystar Real Estate Partners ("Greystar"), Eagle Creek consists of 19, three storey walk-up buildings on a 22.13 acre site and is comprised of one and two bedroom suites. Each of Eagle Creek's suites contains modern features including crown modeling and nine foot ceilings. Amenities at the property include a central clubhouse containing a media room with a flat screen television, a business centre with Wi-Fi access, a fitness centre (including free weights, resistance machines, circuit training and cardio equipment), a demonstration cooking area, an internet café, billiard and shuffle board entertainment areas and two outdoor swimming pools that feature a covered barbeque area, patio seating and a covered patio with a fireplace. As of August 26, 2013, Eagle Creek's occupancy was 93.2%.
Following completion of the acquisition, the Fund intends to change the name of the property to 'Falls at Eagle Creek' and expects that Greystar, the third largest third party, multi-family property manager in the United States and the largest multi-family property manager in the Houston area, will continue to manage Eagle Creek. Greystar is also currently managing the Falls at Copper Lake in Houston for the Fund.
Pursuant to a purchase and sale agreement made as of July 25, 2013, as amended from time to time, the Fund has agreed to indirectly acquire a 35% interest in the Eagle Creek for a purchase price of approximately US$14.35 million. The purchase agreement contains customary representations and warranties for a transaction of this nature. Subject to the satisfaction or waiver of conditions precedent, the purchase of the Property is scheduled to close on or about September 16, 2013.
Financing in respect of the purchase of Eagle Creek in the amount of approximately US$33.5 million has been secured for a three year term with two one year extensions available. Subject to certain conditions, financing will be interest only for and will be payable at a blended rate of 3.98%.
The Fund Portfolio
Following completion of the acquisition of Eagle Creek, the Fund expects to own and operate a portfolio comprising 1,368 recently constructed, Class "A" stabilized, income producing multi-family real estate suites located in Dallas-Fort Worth and Houston, Texas.
Update on Occupancy and Rental Rates
The Fund also announced that as at August 26, 2013, occupancy for the Fund's properties (exclusive of Eagle Creek) was 96.1%, which was 2.1% above the pro forma occupancy for the period ending September 30, 2013 as set out in the Fund's final prospectus dated March 31, 2013 (the "Forecast"). The increase in occupancy is believed to be attributable to the strength of market conditions in Houston and Dallas, the cities where the Fund's properties are located, and the seasonal nature of multi-family leasing, with summer being a historically strong leasing period. Management of the Fund is not aware of any events and circumstances that occurred between the closing of the Fund's initial public offering on April 18, 2013 and the date of this news release that are reasonably likely to cause actual operating results to differ materially from those contained in the Forecast for the current or future periods.
Given the strong occupancies at its properties, the Fund has aggressively increased rental rates on both new and renewal leases and curtailed concessions. Renewal rents for existing tenants are being increased between 3% and 6% depending a tenant's rent versus current asking rents, whereas asking rents for new tenants are being increased by 2% to 5% versus asking rents when the properties were acquired. Only moderate concessions are currently being offered on new leases at any of the properties.
Property management for the Falls at Copper Lake is being provided by Greystar. Property Management for the Bridgemoor at Denton, Villages of Towne Lake and Greenhaven is being provided by the Pinnacle Family of Companies, the fourth largest third party, multi-family property manager in the United States.
Further details regarding market conditions where the Fund's properties are located and the Fund's property performance are available in the Fund's August 2013 Newsletter which is available at http://www.starlightinvest.com/starlight-u-s-multi-family-core-fund.
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.
This news release contains statements that may constitute forward-looking statements within the meaning of Canadian securities laws and which reflect the Fund's current expectations regarding future events, including statements concerning: the acquisition of Eagle Creek; the financing of Eagle Creek; and performance relative to the Forecast. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Fund or the real estate industry are forward-looking statements. 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 Fund's materials 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 Fund's manager; the ability to complete the acquisition of Eagle Creek; the terms and availability of financing for Eagle Creek; the expected benefits of the ownership of Eagle Creek; the relationship and obligations of Fund and its partner in respect of Eagle Creek; performance relative to the Forecast; the experience of the Fund's officers and directors; substitutes for residential real estate rental suites; reliance on property management; competition for real property investments and tenants; and U.S. market factors.
Information contained in forward-looking statements is based upon certain material assumptions that were applied in developing such forward-looking statements, in drawing a conclusion or making a forecast or projection, 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 ability of the Fund to complete the acquisition of Eagle Creek and secure acceptable financing; the ability of the manager of the Fund to manage and operate the properties; the relationship and obligations between the Fund and its partner in respect of Eagle Creek; 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
For further information:
President, Starlight U.S. Multi-Family Core Fund