/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES./
TORONTO, March 7, 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 December 31, 2017
(the "Fourth Quarter") and for the year ended December 31, 2017 ("2017"). The Fund
commenced operations on October 18,
2016 after the exchange of limited partnership units
("units") of Starlight U.S. Multi-Family Core Fund, Starlight U.S.
Multi-Family (No. 2) Core Fund, Starlight U.S. Multi-Family (No. 3)
Core Fund, and Starlight U.S. Multi-Family (No. 4) Core Fund
(collectively the "Arrangement Funds") and common shares of Campar
Capital Corporation for units of the Fund following the closing of
its initial public offering (the "Offering").
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. The forecast
figures represent the financial forecast (the "Forecast") as set
out in Fund's final long form prospectus dated October 12, 2016.
Highlights for the Fourth Quarter and 2017
- Overall, the Fund continued its program to strategically
recycle capital into new properties intended to improve the vintage
of its portfolio and enhance its geographical diversification:
-
- Disposed of three properties in Houston, Texas (including two smaller assets
of 126 and 114 suites), totaling 540 suites with an average vintage
of 2010 and one smaller property (176 suites) in Charlotte, North Carolina, for a total of 716
suites.
- Reinvested the proceeds of sales on a tax-deferred basis to
acquire properties in Denver,
Colorado (2014 vintage, 228 suites), Phoenix, Arizona (2012 vintage, 274 suites),
Nashville, Tennessee (2015
Vintage, 288 suites) and Dallas,
Texas (2016 vintage, 261 suites), totaling 1,051
suites.
- Increased the Fund's portfolio by 335 suites, with the fund
making its first investments in the high growth markets of
Denver, Phoenix and Nashville.
- Entered into a variable rate collar contract to provide
protection from the impact of any potential weakening of the U.S.
dollar on the Fund's Canadian dollar distributions. The 12-month
contract that began in March of 2017 allows the Fund to exchange
U.S. funds each month within a range of C$1.33 to C$1.3850
to fund Canadian dollar distributions.
- Recognized a $100,670 fair value
increase on its properties during 2017. The increase was driven by
capitalization rate compression and net operating income ("NOI")
increases across the portfolio.
- Extended the term of its credit facility to October 19, 2018 and reduced the interest rate to
prime rate plus 2.15% or the banker's acceptance stamping fee plus
3.15%. The Fund completed several mortgage refinancing's 2017,
resulting in additional net proceeds of $34,310.
- Revenue from property operations during the Fourth Quarter was
$25,486 (three months ended
December 31, 2016 - $19,679) reflecting growth from acquisitions and
revenue growth across the portfolio and revenue from property
operations for 2017 was $99,872
(period from August 26, 2016 to
December 31, 2016 - $19,679).
- Same property AMR as at December 31,
2017 increased by 1.5% to $1,187 from $1,170
at December 31, 2016, reflecting
strong growth in Orlando /
Tampa (4.4%), Raleigh (2.8%) and Atlanta (2.1%). Same property economic
occupancy for 2017 decreased by 30 basis points to 93.0%, compared
to the same period in 2016.
- Same property NOI for 2017 at $39,448 was a 4.0% increase over the
corresponding period in 2016 and the NOI margin at 57.3% was a
100-basis point improvement.
- Net income (loss) and comprehensive income (loss) for the
Fourth Quarter was $45,307 (three
months ended December 31, 2016 –
($7,898)) primarily due to a deferred
tax recovery during the Fourth Quarter.
- Net income and comprehensive income for 2017 was $93,860, largely driven by fair value increases
during the year.
- Adjusted funds from operations ("AFFO") for the Fourth Quarter
was $6,634 (three months ended
December 31, 2016 – $5,649) and for the 2017 was $26,817 (period from August 26, 2016 to December 31, 2016 – $5,649). AFFO payout ratio was 92.7% for the
Fourth Quarter (three months ended December
31, 2016 – 90.4%) and 91.6% for 2017 (period from
August 26, 2016 to December 31, 2016 – 90.4%).
Reconciliation of cash provided by operating activities
determined in accordance with International Financial Reporting
Standards ("IFRS") to AFFO for the Fourth Quarter and 2017 along
with comparative 2016 periods was as follows:
|
Fourth
Quarter
|
Three months
ended
December 31, 2016
|
2017
|
Period from August
26
to December 31, 2016
|
Cash provided by
operating activities
|
$
|
11,222
|
$
|
8,306
|
$
|
49,880
|
$
|
8,306
|
|
Less: interest
paid
|
|
(6,725)
|
|
(4,099)
|
|
(23,651)
|
|
(4,099)
|
Cash provided by
operating activities - including interest paid
|
|
4,497
|
|
4,207
|
|
26,229
|
|
4,207
|
Add /
(Deduct):
|
|
|
|
|
|
|
|
|
|
Change in non-cash
operating working capital
|
|
(1,084)
|
|
(5,918)
|
|
(1,719)
|
|
(5,918)
|
|
Change in restricted
cash
|
|
1,122
|
|
(3,148)
|
|
4,367
|
|
(3,148)
|
|
One-time Plan of
Arrangement costs
|
|
-
|
|
6,633
|
|
152
|
|
6,633
|
|
Fair value adjustment
of investment properties including IFRIC 21
|
|
2,627
|
|
4,629
|
|
(634)
|
|
4,629
|
|
Realized foreign
exchange gain
|
|
(114)
|
|
(444)
|
|
(18)
|
|
(444)
|
|
Current taxes - U.S.
withholding taxes
|
|
12
|
|
10
|
|
48
|
|
10
|
|
Amortization of
financing costs (1)
|
|
6
|
|
-
|
|
6
|
|
-
|
|
Service fees related
to class A and class U units
|
|
154
|
|
134
|
|
628
|
|
134
|
|
Sustaining capital
expenditures and suite renovation reserve
|
|
(586)
|
|
(454)
|
|
(2,242)
|
|
(454)
|
AFFO
|
$
|
6,634
|
$
|
5,649
|
$
|
26,817
|
$
|
5,649
|
(1)
For portion relating to held for sale
properties, The Reserve at Jones Road and Villages at Sunset Ridge
only.
|
Property Highlights for the Fourth Quarter and 2017 include
the comparative period in which the properties were owned by the
Arrangement Funds:
- Portfolio AMR as at December 31,
2017 increased by 2.5% to $1,196 from $1,167
at December 31, 2016, driven by the
strong increases in Dallas (6.3%),
Charlotte / Raleigh (5.5%) and Orlando / Tampa (4.4%). Economic occupancy for 2017
decreased by 80 basis points to 92.3%, compared to the same period
in the 2016.
- Same property NOI at $11,075 for
the Fourth Quarter was a 1.2% increase over the corresponding
period in 2016 and the same property NOI margin at 57.6% was a
30-basis point decrease from the period in 2016.
- NOI at $15,030 for the Fourth
Quarter was a 10.8% increase over the corresponding period in 2016
and the same property NOI margin at 59.0% represented a 110-basis
point increase from the same period in 2016.
- NOI for 2017 at $57,213 was a
21.8% increase over the corresponding period in 2016 and the NOI
margin at 57.3% was a 120-basis point improvement.
Evan Kirsh, President of
Starlight U.S. Multi-Family commented, "The Fund achieved its
strategic goal of enhancing geographical diversification and
improving the overall vintage of its assets in 2017. We
successfully entered three new markets, Phoenix, Denver and Nashville while ensuring that all properties
in the portfolio are economically sized to maximize operating
efficiencies.
Financial Condition and Operating Results
|
|
As
at
|
As
at
|
|
|
December 31,
2017
|
December 31,
2016
|
|
|
|
|
|
|
Operational
Information
|
|
|
|
|
|
Number of
properties
|
|
|
23
|
|
23
|
Total
suites
|
|
|
7,127
|
|
6,792
|
Weighted average
portfolio occupancy %
|
|
|
91.8%
|
|
93.1%
|
AMR (in actual
dollars)
|
|
$
|
1,196
|
$
|
1,167
|
AMR per square foot
(in actual dollars)
|
|
$
|
1.25
|
$
|
1.21
|
|
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
|
|
Gross book value
(1)
|
|
|
$1,267,840
|
|
$1,056,414
|
Indebtedness
|
|
|
$808,989
|
|
$691,090
|
Indebtedness to gross
book value (2)
|
|
|
63.81%
|
|
65.42%
|
Weighted average
mortgage interest rate
|
|
|
3.60%
|
|
2.90%
|
Weighted average
mortgage term to maturity
|
|
|
4.16 years
|
|
4.23 years
|
|
|
|
|
|
Period from August
26
|
|
Fourth
Quarter(3)
|
|
2017
(3)
|
|
to December 31,
2016 (4)
|
|
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
|
|
Revenue from property
operations
|
$25,486
|
|
$99,872
|
|
$19,679
|
Property operating
costs
|
$6,997
|
|
$26,760
|
|
$5,241
|
Property
taxes(5)
|
$3,459
|
|
$15,899
|
|
$3,027
|
NOI
|
$15,030
|
|
$57,213
|
|
$11,411
|
Net income (loss) and
comprehensive income (loss)
|
$45,307
|
|
$93,860
|
|
($7,898)
|
Funds from operations
("FFO")
|
$6,592
|
|
$23,209
|
|
($1,854)
|
FFO per unit - basic
and diluted
|
$0.13
|
|
$0.47
|
|
($0.04)
|
AFFO
|
$6,634
|
|
$26,817
|
|
$5,649
|
AFFO per unit - basic
and diluted
|
$0.14
|
|
$0.55
|
|
$0.11
|
Interest coverage
ratio
|
2.06 x
|
|
2.19 x
|
|
2.99 x
|
Indebtedness coverage
ratio
|
1.89 x
|
|
2.00 x
|
|
2.84 x
|
FFO payout
ratio
|
93.3%
|
|
105.8%
|
|
n/a
|
AFFO payout
ratio
|
92.7%
|
|
91.6%
|
|
90.4%
|
Weighted average
units Outstanding (000s) - basic and diluted
|
49,024
|
|
49,101
|
|
49,469
|
Notes:
|
|
|
|
|
|
(1) Includes Villages
at Sunset Ridge held for sale as of December 31, 2017.
|
(2) Defined as
indebtedness divided by gross book value.
|
(3) Revenue from
property operations, property operating costs and property taxes
include amounts relating to The Reserve at Jones Road and Villages
at Sunset Ridge which were held for sale
during 2017.
|
(4) Includes the
properties included in the Arrangement Funds from October 18, 2016
and properties acquired from the date of acquisitions (South Blvd
Apartments - October 18, 2016, The Views at Coolray Field - October
20, 2016 and City North at Sunrise Ranch - October 31,
2016).
|
(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 purposes calculating NOI.
|
Financial Position
As at December 31, 2017, the
Fund's indebtedness to gross book value was 63.8%, a reduction from
65.4% as at December 31, 2016.
The Fund maintained a strong interest coverage ratio and
indebtedness coverage ratio of 2.19 times and 2.00 times
respectively for 2017 representing a reduction from 2.99 times and
2.84 times for the period from August 26,
2016 to December 31, 2016 due
mainly to increases in U.S. 30-day London Interbank Offering Rate
("LIBOR") throughout 2017. The weighted average interest rate
on the Fund's mortgages payable was 3.60% and the weighted average
term to maturity was 4.16 years as at December 31,
2017.
Subsequent Events
On January 31, 2018, the Fund
refinanced five properties for gross proceeds of $36,477 through a revolving credit facility
secured by the properties with a term of five years with a one-year
extension option at the Fund's discretion and at an interest rate
of U.S. one-month LIBOR plus 2.00%. The revolving credit
facility allows for up to $350,000 of
proceeds of which the Fund has utilized $258,614.
The Fund utilized the proceeds to repay the mezzanine loan on
The Callie Apartments of $6,418 and
acquire Altis at Sand Lake for
$69,300, a 315-suite property
completed in 2016 and located in Orlando, Florida. The acquisition of
Altis at Sand Lake was from an
affiliate of Starlight Group Property Holdings Inc., a related
party and the manager of the Fund. The acquisition of Altis at
Sand Lake was financed with
proceeds from the new revolving credit facility.
On February 13, 2018, the Fund
sold The Villages at Sunset Ridge
for $29,500 less transaction costs of
$342. The proceeds from the sale were
used to repay the outstanding mortgage balance of $21,695 with the remainder expected to be
utilized on a tax-deferred basis for a future acquisition.
Subsequent to the acquisition of Altis at Sand Lake and the disposition of Sunset Ridge,
the Fund's portfolio had an average year of completion of 2012.
On March 2, 2018 the Fund entered
into a new variable rate collar contract to provide protection from
the impact of any potential weakening of the U.S. dollar on the
Fund's Canadian dollar distributions. The 9-month contract which
will begin in April 2018 allows the
Fund to exchange U.S. funds each month within a range of
C$1.2700 to C$1.3220.
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 7,185 suites with an average year of
completion in 2012.
For the Fund's complete consolidated financial statements and
management's discussion and analysis ("MD&A") for the Fourth
Quarter and 2017, 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
March 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 2017 and
are available on the Fund's profile on SEDAR at www.sedar.com.
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