/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES./
TORONTO, Aug. 29, 2018 /CNW/ - Starlight U.S. Multi-Family
(No. 5) Core Fund (TSX.V: STUS.A, STUS.U) (the "Fund") announced
today its results of operations and financial condition for the
three months ended June 30, 2018 (the
"Second Quarter").
All amounts in this press release are in thousands of
United States ("U.S.") dollars
except for average market rent ("AMR") or unless otherwise stated.
All references to "C$" are to Canadian dollars.
Second Quarter Highlights
- Revenue from property operations for the Second Quarter was
$27,551, a 12.1% increase over the
same period in the prior year ($24,568) reflecting growth from net acquisition
activity and same property AMR growth of 2.3%.
- Economic occupancy improved 90 basis points to 92.6% compared
to the three months ended March 31,
2018.
- Net operating income ("NOI") for the three months ended
June 30, 2018 was $15,704, a 10.9% increase over the same period in
the prior year ($14,166) and was
primarily due to new properties acquired as part of the Fund's
strategic capital recycling program.
- Net income and comprehensive income for the Second Quarter was
$20,521, in comparison to
$3,278 for the same period in the
prior year. Net income and comprehensive income for the Second
Quarter was primarily driven by a $41,734 positive fair value adjustment on
investment properties compared to $8,301 for the same period in 2017.
- Adjusted funds from operations ("AFFO") for the Second Quarter
was $4,716 (three months ended
June 30, 2017 - $6,884). AFFO payout ratio was 133.3% for the
Second Quarter (three months ended June 30,
2017 – 88.3%). The decrease in AFFO and the increase in the
payout ratio was primarily related to higher interest on mortgages
payable due to increases in the U.S. 30-day London Interbank
Offered Rate ("LIBOR") being partly offset by NOI growth across the
portfolio.
- Subsequent to quarter end, the Fund entered into agreements to
lock the interest rate on a proposed new mortgage financing
anticipated to close during the fourth quarter of 2018, totaling
approximately $612,000 in two
tranches at a weighted average fixed rate of 3.93% and a weighted
average term to maturity of 6.4 years.
Property Highlights for the Second Quarter including a
comparison to the same period in the prior year:
- Portfolio AMR as at June 30, 2018
was $1,224, representing an increase
of 3.7% from $1,181 at June 30, 2017. AMR growth was particularly strong
in Orlando/Tampa (7.7%), Dallas (6.3%) and Houston (2.7%) reflecting the acquisition of
properties with higher average rents. Economic occupancy for the
Second Quarter at 92.6% was consistent with the same period in the
prior year.
- Same property AMR as at June 30,
2018 was $1,108, representing
a 2.3% increase from $1,083 at
June 30, 2017. Same property AMR
growth was particularly strong in Orlando/Tampa
(4.7%). Same property economic occupancy for the Second Quarter was
93.0%, representing an 80 basis point decrease in comparison to the
same period in the prior year.
- Same property NOI at $11,804 for
the Second Quarter decreased by $280
or 2.3% in comparison to the same period in the prior year, due to
impact of settlements of prior year property taxes. Excluding these
amounts, same property NOI increased by $283 or 2.4%.
Financial Condition and Operating Results
|
|
|
|
|
As at June 30,
2018
|
As at December
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational
Information
|
|
|
|
|
|
|
Number of
properties
|
|
|
|
|
23
|
23
|
Total
suites
|
|
|
|
|
7,289
|
7,127
|
Economic occupancy
(1)
|
|
|
|
|
91.7%
|
91.8%
|
AMR (in actual
dollars)
|
|
|
|
|
$
|
1,224
|
$
|
1,196
|
AMR per square foot
(in actual dollars)
|
|
|
|
$
|
1.26
|
$
|
1.25
|
|
|
|
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
|
|
Gross Book Value
(2)
|
|
|
|
|
$1,386,058
|
$1,267,840
|
Indebtedness
|
|
|
|
|
$892,257
|
$787,294
|
Indebtedness to Gross
Book Value (3)
|
|
|
|
64.37%
|
62.10%
|
Weighted average
mortgage interest rate
|
|
|
|
4.15%
|
3.60%
|
Weighted average
mortgage term to maturity
|
|
|
|
4.18 years
|
4.16 years
|
|
|
Second
Quarter
|
Three months
ended June 30,
2017
|
Six months
ended June 30,
2018 (4)
|
Six months
ended June 30,
2017
|
|
|
|
|
|
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
|
|
|
Revenue from property
operations
|
|
|
$27,551
|
$24,568
|
$54,084
|
$48,879
|
Property operating
costs
|
|
|
($7,299)
|
($6,483)
|
($14,222)
|
($12,715)
|
Property taxes
(5)
|
|
|
($4,548)
|
($3,919)
|
($9,022)
|
($8,172)
|
NOI
|
|
|
$15,704
|
$14,166
|
$30,840
|
$27,992
|
Net income and
comprehensive income
|
|
|
$20,521
|
$3,278
|
$11,460
|
$7,612
|
FFO
|
|
|
$4,662
|
$3,796
|
$5,875
|
$10,447
|
FFO per unit - basic
and diluted
|
|
|
$0.10
|
$0.08
|
$0.12
|
$0.13
|
AFFO
|
|
|
$4,716
|
$6,884
|
$9,978
|
$13,881
|
AFFO per unit - basic
and diluted
|
|
|
$0.10
|
$0.14
|
$0.20
|
$0.28
|
Interest Coverage
Ratio
|
|
|
1.57 x
|
2.16 x
|
1.58 x
|
2.45 x
|
Indebtness Coverage
Ratio
|
|
|
1.57 x
|
1.95 x
|
1.55 x
|
2.27 x
|
FFO payout
ratio
|
|
|
134.8%
|
160.2%
|
213.1%
|
117.4%
|
AFFO payout
ratio
|
|
|
133.3%
|
88.3%
|
125.5%
|
88.3%
|
Weighted average
units Outstanding (000s) - basic and diluted
|
|
|
49,019
|
49,085
|
49,021
|
49,179
|
Notes:
|
|
|
|
|
|
|
(1) Economic occupancy for the six months ended June 30,
2018 and year-ended December 31, 2017.
|
(2)
The December 31, 2017 Gross Book Value
includes Sunset Ridge which was classified as held for
sale.
|
(3)
Defined as Indebtedness divided by Gross
Book Value.
|
(4)
Revenue from property operations,
property operating costs and property taxes include amounts
relating to Sunset Ridge which was classified as held for sale at
December 31, 2017 and subsequently sold during the six months ended
June 30, 2018.
|
(5)
Property taxes were adjusted to exclude
the IFRIC 21 adjustment and treat property taxes as an expense that
is amortized during the fiscal year for the purposes of calculating
NOI.
|
Financial Position
As at June 30, 2018, the Fund's
indebtedness to gross book value was 64.37%, representing an
increase from 63.81% at December 31,
2017. The increase in indebtedness to gross book value was
primarily related to the refinancing of five of the Fund's
properties during the three months ended March 31, 2018. The Fund's interest coverage
ratio for the Second Quarter was 1.57x in comparison to 2.16x for
the three months ended June 30, 2018.
The decrease in the interest coverage ratio, in comparison to the
same period in the prior year was primarily related to the increase
in interest expense as a result of increases in LIBOR and a higher
mortgages payable balance relating to net acquisitions and
refinancing activity being partially offset by NOI growth. As at
June 30, 2018, the Fund's weighted
average interest rate on mortgages payable and weighted average
term to maturity were 4.15% and 4.18 years, respectively.
Reconciliation of cash provided by operating activities
determined in accordance with International Financial Reporting
Standards ("IFRS") to AFFO for the Second Quarter along with the
comparative 2017 period was as follows:
|
|
Second
Quarter
|
Three months
ended June 30, 2017
|
Six months
ended
June 30, 2018
|
Six months
ended
June 30, 2017
|
Cash provided by
operating activities
|
$
|
14,008
|
$
|
14,235
|
$
|
28,942
|
$
|
24,682
|
|
Less: interest
paid
|
(9,003)
|
(5,482)
|
(16,864)
|
(10,537)
|
Cash provided by
operating activities - including interest paid
|
5,005
|
8,753
|
12,078
|
14,145
|
Add /
(Deduct):
|
|
|
|
|
|
Change in non-cash
operating working capital (1)
|
(173)
|
(1,372)
|
(3,910)
|
(2,009)
|
|
Change in restricted
cash
|
4,553
|
3,604
|
(1,804)
|
964
|
|
One-time Plan of
Arrangement costs
|
-
|
-
|
-
|
152
|
|
Fair value adjustment
of investment properties (including IFRIC 21)
(1)
|
(4,231)
|
(4,096)
|
3,555
|
916
|
|
Realized foreign
exchange loss
|
-
|
325
|
208
|
421
|
|
Current taxes - U.S.
withholding taxes and tax on dispositions
|
2
|
12
|
734
|
24
|
|
Service fees related
to class A and class U units
|
152
|
156
|
301
|
319
|
|
Purchase of Interest
rate cap agreement
|
-
|
54
|
-
|
54
|
|
Sustaining capital
expenditures and suite renovation reserve
|
(592)
|
(552)
|
(1,184)
|
(1,104)
|
AFFO
|
$
|
4,716
|
$
|
6,884
|
$
|
9,978
|
$
|
13,881
|
(1) Includes portion
of fair value adjustment relating to Sunset Ridge, which was
classified as held for sale at December 31, 2017 and subsequently
disposed of during the six month period ended June 30,
2018.
|
Subsequent Events
- On July 13, 2018, the Fund
entered into index lock agreements to fix the interest rate on a
proposed new mortgage financing totaling $612,000. The new fixed rate financing which the
Fund expects to close during the three months ended December 31, 2018 comprises a six year tranche at
a fixed rate of 3.92% with five years of interest only payments and
a seven year tranche at a fixed rate of 3.95% with five years of
interest only payments.
- On July 27, 2018, the Fund
entered into a second amending agreement to its Credit facility
providing for a $8,500 tranche C
facility bearing interest at an interest rate spread of 3.15% over
LIBOR. The tranche C facility matures on the same date as the
tranche A and B facilities on October 19,
2018.
About Starlight U.S. Multi-Family (No. 5) 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. The Fund currently owns 23
properties, consisting of 7,289 suites with an average year of
completion of 2012.
For the Fund's complete consolidated financial statements and
management's discussion and analysis ("MD&A") for the First
Quarter and any other information relating to the Fund, please
visit www.sedar.com. Further details regarding the Fund's unit
performance and distributions, market conditions where the Fund's
properties are located, performance by the Fund's properties and a
capital investment update are also available in the Fund's
August 2018 Newsletter which is
available on the Fund's profile at www.starlightus.com.
Non-IFRS Financial Measures
The Fund's consolidated financial statements are prepared in
accordance with IFRS. Certain terms used in this press
release including AFFO, AFFO payout ratio, AMR, economic occupancy,
FFO, FFO payout ratio, Gross Book Value, Indebtedness, Indebtedness
coverage ratio, Indebtedness to gross book value, Interest coverage
ratio, NOI, same property AMR, same property economic occupancy,
same property NOI and same property NOI margin (collectively, the
"non-IFRS measures") as well as other measures discussed elsewhere
in this press release, do not have a standardized definition
prescribed by IFRS and are, therefore, unlikely to be comparable to
similar measures presented by other reporting issuers. The
Fund uses these measures to better assess the Fund's underlying
performance and financial position and provides these additional
measures so that investors may do the same. Details on
non-IFRS measures are set out in the Fund's MD&A for the First
Quarter and are available on the Fund's profile on SEDAR at
www.sedar.com.
Forward-looking Statements
Certain statements contained in this press release constitute
forward-looking information within the meaning of Canadian
securities laws. Forward-looking information is provided for the
purposes of assisting the reader in understanding the Fund's
financial performance, financial position and cash flows as at and
for the periods ended on certain dates and to present information
about management's current expectations and plans relating to the
future and readers are cautioned that such statements may not be
appropriate for other purposes. Forward-looking information may
relate to future results, acquisitions, performance, achievements,
events, prospects or opportunities for the Fund or the real estate
industry and may include statements regarding the financial
position, business strategy, acquisitions, budgets, litigation,
projected costs, capital expenditures, financial results, occupancy
levels, AMR, taxes, the Fund's use of its normal course issuer bid,
and plans and objectives of or involving the Fund. In some
cases, forward-looking information can be identified by terms such
as "may", "might", "will", "could", "should", "would", "occur",
"expect", "plan", "anticipate", "believe", "intend", "seek", "aim",
"estimate", "target", "goal", "project", "predict", "forecast",
"potential", "continue", "likely", "schedule", or the negative
thereof or other similar expressions concerning matters that are
not historical facts.
Forward-looking information necessarily involves known and
unknown risks and uncertainties, which may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, assumptions may not be correct and objectives,
strategic goals and priorities may not be achieved. A variety of
factors, many of which are beyond the Fund's control, affect the
operations, performance and results of the Fund and its business,
and could cause actual results to differ materially from current
expectations of estimated or anticipated events or
results.
Information contained in forward-looking information is based
upon certain material assumptions that were applied 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 inventory of multi-family real estate
properties; the availability of properties for acquisition and the
price at which such properties may be acquired; the availability of
mortgage financing and current interest rates; the extent of
competition for properties; the population of multi-family real
estate market participants; assumptions about the markets in which
the Fund operates; the ability of Starlight Investments US AM Group
LP., the manager of the Fund, to manage and operate the properties;
the global and North American economic environment; foreign
currency exchange rates; and governmental regulations or tax
laws.
Although the Fund believes the expectations reflected in such
forward-looking information are reasonable and represent the Fund's
projections, expectations and beliefs at this time, such
information involves known and unknown risks and uncertainties
which may cause the Fund's actual performance and results in future
periods to differ materially from any estimates or projections of
future performance or results expressed or implied by such
forward-looking information.
Important factors that could cause actual results to differ
materially from the Fund's expectations include, among other
things, the availability of suitable properties for purchase by the
Fund, the availability of mortgage financing for such properties,
and general economic and market factors, including interest rates,
business competition and changes in government regulations or in
tax laws. The reader is cautioned to consider these and other
factors, uncertainties and potential events carefully and not to
put undue reliance on forward-looking information as there can be
no assurance that actual results will be consistent with such
forward-looking information.
The forward-looking information included in this press release
relate only to events or information as of the date on which the
statements are made in this press release. Except as specifically
required by applicable Canadian law, the Fund undertakes no
obligation to update or revise publicly any forward-looking
information, 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 (No. 5) Core Fund