/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. 1) Value-Add Fund (TSX.V: SUVA.A, SUVA.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.
The comparative figures below represent a 15 day operating period
from June 16, 2017, the date of the
initial acquisitions to June 30, 2017
(the "Initial Operating Period").
Second Quarter Highlights
- On June 12, 2018, the Fund
acquired an additional 41.5% (approximately) interest in Landmark
at Coventry Pointe ("Coventry Pointe"), a 250 suite value-add
property located in Atlanta,
Georgia for $15,596. The Fund
financed the acquisition through proceeds from the refinancing of
the Landing at Round Rock ("The Landing"). The Fund now owns
approximately 91.5% of Coventry Pointe.
- The Fund continued to implement its value-add capital
improvement program during the Second Quarter. Since inception the
Fund has upgraded and re-leased a total of 130 suites achieving
average rent increases of $156 per
month per suite and an estimated average return on investment of
23.9%.
- The Fund's value-add initiatives resulted in significant
improvements to common areas and amenities including the
transformation of the main clubhouse at The
Landing.
- AMR grew from $1,188 as at
March 31, 2018 to $1,206 as at June 30,
2018 representing an annualized increase of 6.1% reflecting
the impact of the Fund's value-add capital improvements
program.
- Revenue from property operations, including the Fund's interest
in Coventry Pointe was $3,942 for the
Second Quarter, $197 or 5.3% higher
than the three months ended March 31,
2018, primarily due to increases in AMR and economic
occupancy during the Second Quarter.
- Net operating income ("NOI"), was $2,140 for the Second Quarter in comparison to
$2,091 during the three months ended
March 31, 2018. The increase of
$49 was primarily due to the
increases in revenue as well as the increased ownership interest in
Coventry Pointe.
- Net loss and comprehensive loss of $1,029 for the Second Quarter was primarily due
to deferred income taxes of $1,162.
- Economic occupancy for the three months ended June 30, 2018 at 89.7% was higher than the three
months ended March 31, 2018 by 140
basis points.
- The Fund's adjusted funds from operations ("AFFO") for the
Second Quarter was $620 and the AFFO
payout ratio was 164.7%. The increase in NOI was offset by
increased mortgage interest expense due to increases in the U.S.
30-day London Interbank Offering Rate ("LIBOR").
- Indebtedness to Gross Book Value remained consistent at 65.1%
as at June 30, 2018, in comparison to
65.1% as at December 31, 2017.
- As at June 30, 2018, the weighted
average interest rate on mortgages payable was 4.09% and the
weighted average term to maturity was 2.17 years.
Financial Condition and Operating Results
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IFRS - As at
June 30, 2018
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Adjusted - As
at
June 30, 2018(3)
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As at December
31, 2017
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Operational
Information
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Number of
properties
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3
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3
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2
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Total
suites
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1,193
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1,172
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943
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Economic occupancy
(1)
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89.3%
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89.3%
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90.9%
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AMR (in actual
dollars)(2)
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$
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1,206
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$
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1,206
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$
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1,212
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AMR per square foot
(in actual dollars)(2)
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$
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1.06
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$
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1.06
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$
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1.13
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Summary of
Financial Information
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Gross Book
Value
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$212,870
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$209,580
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$161,142
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Indebtedness
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$138,601
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$136,494
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$104,950
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Indebtedness to Gross
Book Value (4)
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65.11%
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65.13%
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65.13%
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Weighted average
mortgage interest rate
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4.09%
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4.09%
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3.41%
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Weighted average
mortgage term to maturity
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2.17 years
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2.17 years
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2.50 years
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IFRS - Second
Quarter (6)
|
Adjusted -
Second Quarter
(5)
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Period from
April
24, 2017 to June
30, 2017
|
IFRS - Six
months ended
June 30, 2018 (6)
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Adjusted - Six
months ended
June 30, 2018 (5)
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Period from
April
24, 2017 to June
30, 2017
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Summary of
Financial Information
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Revenue from property
operations
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$3,597
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$3,942
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$586
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$6,932
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$7,688
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$586
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Property operating
costs
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($1,007)
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($1,123)
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($135)
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($1,840)
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($2,079)
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($135)
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Property taxes
(7)
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$0
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($679)
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($102)
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($2,645)
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($1,379)
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($102)
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Income from rental
operations / NOI
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$2,590
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$2,140
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$349
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$2,447
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$4,230
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$349
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Net (loss) income and
comprehensive (loss) income
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($1,029)
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($1,029)
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$63
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$4,497
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$4,497
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$63
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FFO
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$233
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$132
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$926
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$132
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FFO per unit - basic
and diluted
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$0.03
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$0.02
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$0.11
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$0.02
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AFFO
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$620
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$132
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$1,422
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$132
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AFFO per unit - basic
and diluted
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$0.08
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$0.02
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$0.17
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$0.02
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Interest coverage
ratio
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1.66 x
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1.52 x
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1.64 x
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1.52 x
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Indebtedness coverage
ratio
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1.66 x
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1.52 x
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1.64 x
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1.52 x
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FFO payout
ratio
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438.2%
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n/a
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218.9%
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n/a
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AFFO payout
ratio
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164.7%
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n/a
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142.5%
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n/a
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Weighted average
units Outstanding (000s) - basic
and diluted
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8,181
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8,180
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8,181
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8,180
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(1)
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Economic occupancy
for the six months ended June 30, 2018 and December 31,
2017.
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(2)
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The decrease in AMR
and AMR per square foot relates to the impact of the acqusition of
Coventry Pointe which had an AMR and AMR per square foot of $1,094
and $0.83, respectively on the Fund's weighted average AMR
metrics.
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(3)
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Total suites, Gross
Book Value and Indebtedness include the proportionate amounts of
the Fund's approximate 91.5% interest in Coventry
Pointe.
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(4)
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Defined as
Indebtedness divided by Gross Book Value.
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(5)
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Revenue from property
operations, property operating costs, property taxes and NOI
include the proportionate amounts for the Fund's 50% interest in
Coventry Pointe prior to June 12, 2018 and approximate 91.5%
interest in Coventry Pointe from June 12 - June 30,
2018.
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(6)
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Revenue from property
operations, property operating costs and property taxes reflect the
amounts in the condensed consolidated interim financial
statements.
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(7)
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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 purpose of calculating NOI.
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For the three months ended June 30,
2018, economic occupancy at the Landing was 87.9% (Initial
Operating Period – 93.6%), Spectra South economic occupancy was
90.9% (Initial Operating Period – 90.3%) and Coventry Pointe
economic occupancy was 93.5%. Portfolio economic occupancy of 89.7%
for the Second Quarter was lower than the Initial Operating Period
of 92.6% primarily due to lower occupancy in three and four-bedroom
suites at The Landing. In addition, occupancy at The Landing
was impacted by the extensive clubhouse renovations that took place
during the three months ended June 30,
2018. The occupancy as at June 30, 2018 was 90.7% and as of August 19, 2018 was 94.4%. The Fund expects these
increases to significantly improve performance in the third
quarter.
As at June 30, 2018, The Landing
and Spectra South AMR was $1,367 and
$1,023, respectively, compared to the
Initial Operating Period of $1,345
and $995, respectively, representing
increases of 1.6% and 2.8%. As at June 30,
2018, Coventry Pointe AMR was $1,094. The Fund's aggregate AMR as at
June 30, 2018 was $1,206.
The Fund's indebtedness to gross book value as of June 30, 2018 was 65.1%, consistent with
December 31, 2017. The Fund's
weighted average mortgage interest rate as of June 30, 2018 was 4.09% and the weighted average
term to maturity was 2.17 years.
AFFO per unit and AFFO payout ratio for the Second Quarter and
six months ended June 30, 2018 was
$0.08, $0.17, 164.7% and 142.5%, respectively.
A reconciliation of cash provided by operating activities
determined in accordance with International Financial Reporting
Standards ("IFRS") to AFFO for the Second Quarter and for the six
months ended June 30, 2018 is
provided below:
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Second
Quarter
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Period from April
24,
2017 to June 30, 2017
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Six months
ended
June 30, 2018
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Cash provided by
(used in) operating activities
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$
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1,716
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$
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(547)
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$
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4,795
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Less: interest
paid
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(1,118)
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(135)
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(2,057)
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Cash provided by
(used in) operating activities - including interest paid
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$
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598
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$
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(682)
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$
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2,738
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Add /
(Deduct):
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Change in non-cash
operating working capital
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(306)
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(427)
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(1,453)
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Change in restricted
cash
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737
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-
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(952)
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Fair value adjustment
of investment properties relating to IFRIC 21
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(489)
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1,254
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803
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Fair value adjustment
relating to IFRIC 21 on investment in joint ventures
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99
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-
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255
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Amortization of
financing costs related to joint venture
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8
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-
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19
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Vacancy costs
associated with the suite upgrade program
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43
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-
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141
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Unrealized foreign
exhange (gain) loss
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-
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(3)
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-
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Sustaining capital
expenditures and suite renovation reserves
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(70)
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(10)
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(129)
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AFFO
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$
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620
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$
|
132
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$
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1,422
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About Starlight U.S. Multi-Family (No. 1) Value-Add
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 value-add, income producing rental properties in
the United States multi-family
real estate market. The Fund currently owns interests in three
properties, consisting of interests in 1,193 suites with an average
year of construction in 2003.
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 and NOI (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 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. 1) Value-Add Fund