/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES./
TORONTO, May 16, 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 March 31, 2018
(the "First 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.
First Quarter Highlights
- The Fund completed its program to strategically recycle capital
into new properties further enhancing the vintage of its portfolio
and its geographical diversification while disposing of smaller
assets.
-
- Disposed of two properties in Texas with an average vintage of 2011 and
reinvested the proceeds on a tax-deferred basis into Alexander Village, a 320-suite property in
Charlotte, North Carolina (2015
vintage).
- Proceeds from the refinancing of five properties were used to
acquire Altis at Sand Lake, a
315-suite property in Orlando,
Florida (2016 vintage).
- Revenue from property operations for the First Quarter was
$26,044, a 7.1% increase over the
same period in the prior year ($24,311) reflecting growth from net acquisition
activity and same property revenue growth across the
portfolio.
- Net operating income ("NOI") for the three months ended
March 31, 2018 was $15,136, a 9.5% increase over the same period in
the prior year ($13,825) and was
primarily due to the impact of net acquisition activity and same
property NOI growth.
- NOI margin for the First Quarter was 57.1%, a 20-basis point
improvement over the NOI margin for the same period in the prior
year.
- Net (loss) income and comprehensive (loss) income for the First
Quarter was ($9,061), in comparison
to $4,334 for the same period in the
prior year. Net income and comprehensive income for the three
months ended March 31, 2017 was
primarily driven by a $9,695 positive
fair value adjustment on investment properties.
- Adjusted funds from operations ("AFFO") for the First Quarter
was $5,611 (three months ended
March 31, 2017 - $6,978). AFFO payout ratio was 111.2% for the
First Quarter (three months ended March 31,
2017 – 88.5%). The decrease in AFFO and the increase in the
payout ratio is primarily related to higher interest on mortgages
payable due to an increase in the U.S. 30-day London Interbank
Offered Rate ("LIBOR") and a larger mortgages payable balance
resulting from net acquisition activity and refinancings.
- On March 29, 2018, the Fund
entered into an interest rate collar agreement to provide
protection on the rate of interest payable on its second pooled
mortgage facility. This agreement provides for a LIBOR floor rate
of 1.9% and a LIBOR ceiling rate of 2.5% and covers approximately
$305,000 face value of mortgages
payable across seven properties.
Subsequent Events
- On April 24, 2018, the Fund
entered into an interest rate collar agreement to provide
protection on the rate of interest payable on its first pooled
mortgage facility. This agreement provides for a LIBOR floor rate
of 1.9% and a LIBOR ceiling rate of 2.5% and covers approximately
$280,000 in face value of mortgages
payable across eight properties.
- The Fund successfully hedged the variable interest rate risk on
approximately $759,000 or 86% of the
face value of its mortgages payable as a result of the interest
rate cap and collar agreements that it has entered into to
date.
Reconciliation of cash provided by operating activities
determined in accordance with International Financial Reporting
Standards ("IFRS") to AFFO for the First Quarter along with the
comparative 2017 period was as follows:
|
Three months
ended
March 31, 2018
|
Three months
ended
March 31, 2017
|
Cash provided by
operating activities
|
$
|
14,675
|
$
|
10,447
|
|
Less: interest
paid
|
(7,861)
|
(5,076)
|
Cash provided by
operating activities - including interest paid
|
6,814
|
5,371
|
Add /
(Deduct):
|
|
|
|
Change in non-cash
operating working capital
|
(3,229)
|
(643)
|
|
Change in restricted
cash
|
(6,357)
|
(2,640)
|
|
One-time Plan of
Arrangement costs
|
-
|
152
|
|
Fair value adjustment
of investment properties relating to IFRIC 21
(1)(2)
|
8,135
|
5,118
|
|
Realized foreign
exchange (gain) loss
|
(208)
|
10
|
|
Fair value adjustment
on interest rate cap
|
-
|
6
|
|
Current taxes - U.S.
withholding taxes and tax on dispositions
|
732
|
12
|
|
Service fees related
to class A and class U units
|
149
|
163
|
|
Amortization of
financing costs (3)
|
2
|
-
|
|
Loss on early
extinguishment of debt (3)
|
165
|
-
|
|
Sustaining capital
expenditures and suite renovation reserve
|
(592)
|
(552)
|
AFFO
|
$
|
5,611
|
$
|
6,997
|
(1)
|
International
Financial Reporting Interpretations Committee 21 -
Levies("IFRIC 21").
|
|
|
(2)
|
Includes portion of
fair value adjustment relating to the Villages at Sunset Ridge,
which was classified as held for sale at December 31, 2017 and
disposed of during the First Quarter.
|
(3)
|
These amounts relate
to the Villages at Sunset Ridge which was classified as held for
sale at December 31, 2017 and disposed of during the First
Quarter.
|
Evan Kirsh, President of
Starlight U.S. Multi-Family commented, "The Fund completed the
strategic rebalancing of its portfolio resulting in enhanced
geographical diversification and a further improvement in the
overall vintage of its assets during the First Quarter. The Fund
also hedged a substantial portion of its variable interest rate
risk by entering into interest rate collar agreements, providing
protection against future increases in LIBOR for a substantial
portion of the Fund's mortgage portfolio."
Property Highlights for the First Quarter including a
comparison to the same period in the prior year:
- Portfolio AMR as at March 31,
2018 was $1,214, representing
an increase of 3.8% from $1,170 at
March 31, 2017. AMR growth was
particularly strong in Orlando/Tampa
(7.1%), Dallas (6.9%) and
Charlotte/Raleigh (3.8%) reflecting the acquisition of
properties with higher average rents. Economic occupancy for the
three months ended March 31, 2018
decreased by 130 basis points to 90.7%, compared to the same period
in the prior year.
- Same property AMR as at March 31,
2018 was $1,196, representing
a 1.5% increase from $1,179 at
March 31, 2017. Same property AMR
growth was particularly strong in Orlando/Tampa
(3.9%) and Charlotte/Raleigh (3.2%). Same property economic
occupancy for the three months ended March
31, 2018 was 91.2%, representing an 80 basis point decrease
in comparison to the same period in the prior year.
- Same property NOI at $11,765 for
the three months ended March 31, 2018
increased by $130 or 1.1% in
comparison to the same period in the prior year. The increase was
primarily driven by AMR growth being partly offset by a decrease in
economic occupancy.
Financial Condition and Operating Results
|
|
|
|
As
at
|
As
at
|
|
March 31,
2018
|
December 31,
2017
|
|
|
|
Operational
Information
|
|
|
Number of
properties
|
23
|
23
|
Total
suites
|
7,289
|
7,127
|
Economic occupancy
(1)
|
90.7%
|
91.8%
|
AMR (in actual
dollars)
|
$
|
1,214
|
$
|
1,196
|
AMR per square foot
(in actual dollars)
|
$
|
1.26
|
$
|
1.25
|
|
|
|
Summary of
Financial Information
|
|
|
Gross book value
(2)
|
$1,344,944
|
$1,267,840
|
Indebtedness
|
$892,505
|
$808,988
|
Indebtedness to gross
book value (3)
|
66.4%
|
63.8%
|
Weighted average
mortgage interest rate
|
3.76%
|
3.60%
|
Weighted average
mortgage term to maturity
|
4.37 years
|
4.16 years
|
|
Three months
ended
March 31, 2018 (4)
|
Three months
ended
March 31, 2017
|
|
|
|
|
Summary of
Financial Information
|
|
|
Revenue from property
operations
|
$26,533
|
$24,311
|
Property operating
costs
|
($6,923)
|
($6,232)
|
Property taxes
(5)
|
($4,474)
|
($4,254)
|
NOI
|
$15,136
|
$13,825
|
Net (loss) income and
comprehensive (loss) income
|
($9,061)
|
$4,334
|
Funds from operations
("FFO")
|
$1,564
|
$6,632
|
FFO per unit - basic
and diluted
|
$0.03
|
$0.13
|
AFFO
|
$5,611
|
$6,978
|
AFFO per unit - basic
and diluted
|
$0.11
|
$0.14
|
Interest coverage
ratio
|
1.55 x
|
2.45 x
|
Indebtness coverage
ratio
|
1.50 x
|
2.27 x
|
FFO payout
ratio
|
398.8%
|
93.2%
|
AFFO payout
ratio
|
111.2%
|
88.5%
|
Weighted average
units Outstanding (000s) - basic and diluted
|
49,024
|
49,273
|
Notes:
|
(1) Economic
occupancy for the First Quarter and three months ended December 31,
2017.
|
(2)
The December 31, 2017 gross book value
includes Villages at 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 Villages at Sunset Ridge which was classified as held
for sale at December 31, 2017 and subsequently sold during the
First Quarter.
|
(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 March 31, 2018, the Fund's
indebtedness to gross book value was 66.4%, representing an
increase from 63.8% 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 First Quarter. The Fund's interest coverage
ratio for the First Quarter was 1.55x in comparison to 2.45x for
the three months ended March 31,
2017. 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, partially offset by
NOI growth. As at March 31, 2018, the
Fund's weighted average interest rate on mortgages payable and
weighted average term to maturity were 3.76% and 4.37 years,
respectively.
May 2018 Distributions
The Fund also announced its May
2018 cash distribution amounts on its outstanding Class A
Units, Class C Units, Class D Units, Class E Units, Class F Units,
Class H Units and Class U Units (collectively, the "Units"),
payable on June 15, 2018 to holders
of Units of record at May 31, 2018.
The distribution amounts will be as follows:
- C$0.05417 per Class A Unit,
representing approximately C$0.65 per
Unit on an annualized basis;
- C$0.05417 per Class C Unit,
representing approximately C$0.65 per
Unit on an annualized basis;
- C$0.05417 per Class D Unit,
representing approximately C$0.65 per
Unit on an annualized basis;
- US$0.05417 per Class E Unit,
representing approximately US$0.65
per Unit on an annualized basis;
- C$0.05417 per Class F Unit,
representing approximately C$0.65 per
Unit on an annualized basis;
- C$0.02917 per Class H Unit,
representing approximately C$0.65 per
Unit on an annualized basis less a portion of the cost of the
derivative instrument purchased by the Fund to provide the holders
of Class H Units with some protection against any weakening of the
U.S. dollar as compared to the Canadian dollar on termination and
liquidation of the Fund (the "Class H Unit Liquidation Hedge");
and
- US$0.05417 per Class U Unit,
representing approximately US$0.65
per Unit on an annualized basis.
A wholly-owned subsidiary of Starlight Group Property Holdings
Inc., the manager of the Fund, may at its sole discretion,
discontinue the Class H Unit Liquidation Hedge in the event that
derivative instruments are not available on an economical basis or
the manager determines that the continuation of the Class H Unit
Liquidation is no longer in the best interests of holders of Class
H Units.
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
May 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