Canada NewsWire
OTTAWA, ON, May 7, 2024
— Normalized FFO and AFFO per unit growth of 27.3% and 32.8%, respectively —
OTTAWA, ON, May 7, 2024 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the first quarter ended March 31, 2024 ("Q1 2024"). The Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q1 2024 are available on the REIT's website at www.mintoapartmentreit.com and at www.sedarplus.ca.1
"It was a great start to 2024. In the first quarter, we generated outstanding year-over-year growth in net operating income and cash flow per unit. Normalized Same Property Portfolio NOI increased by 12.3% and Normalized FFO and AFFO per unit increased by 27.3% and 32.8%, respectively," said Jonathan Li, President and Chief Executive Officer of the REIT. "Our strategy of growing cash flow per unit has been successful. We have increased our FFO per unit growth for five consecutive quarters reflecting continued strong rental market conditions, outstanding operating performance from our high-quality urban portfolio, execution of accretive asset sales and disciplined capital allocation decisions. Collectively, these strategies have materially reduced leverage, increased our cash flow per unit and strengthened our balance sheet. In Q1 2024, our interest costs were 11% lower than the prior year, our variable-rate debt as a percentage of Total Debt decreased to 6% by quarter end and our Debt-to-Adjusted EBITDA and Debt-to-Gross Book Value ratios improved significantly."
__________________________ |
1 This news release contains certain non-IFRS and other financial measures. Refer to "Non-IFRS and Other Financial Measures" in this news release for a complete list of these measures and their meaning. |
Q1 2024 Highlights
Three months ended March 31, | |||
($000's except per unit and per suite amounts) | 2024 | 2023 | Variance |
Revenue from investment properties | $ 38,943 | $ 38,403 | 1.4 % |
Property operating costs | 6,987 | 7,443 | 6.1 % |
Property taxes | 4,008 | 4,008 | — % |
Utilities | 3,504 | 4,216 | 16.9 % |
NOI | $ 24,444 | $ 22,736 | 7.5 % |
NOI margin (%) | 62.8 % | 59.2 % | 360 bps |
Normalized NOI | $ 24,444 | $ 22,822 | 7.1 % |
Normalized NOI margin (%) | 62.8 % | 59.4 % | 340 bps |
Revenue - SPP | $ 38,174 | $ 35,964 | 6.1 % |
NOI - SPP | 24,040 | 21,312 | 12.8 % |
NOI margin (%) - SPP | 63.0 % | 59.3 % | 370 bps |
Normalized NOI - SPP | $ 24,040 | $ 21,398 | 12.3 % |
Normalized NOI margin (%) - SPP | 63.0 % | 59.5 % | 350 bps |
Interest costs | $ 9,495 | $ 10,668 | 11.0 % |
Net loss and comprehensive loss | (18,794) | (24,227) | 22.4 % |
Funds from Operations ("FFO") | $ 15,039 | $ 11,629 | 29.3 % |
FFO per unit | 0.2290 | 0.1772 | 29.2 % |
Adjusted Funds from Operations ("AFFO") | 13,427 | 9,933 | 35.2 % |
AFFO per unit | 0.2045 | 0.1513 | 35.2 % |
Distribution per unit | $ 0.1262 | $ 0.1225 | 3.0 % |
AFFO payout ratio | 61.7 % | 81.0 % | 1,930 bps |
Normalized FFO | $ 14,917 | $ 11,715 | 27.3 % |
Normalized FFO per unit | 0.2272 | 0.1785 | 27.3 % |
Normalized AFFO | 13,305 | 10,019 | 32.8 % |
Normalized AFFO per unit | 0.2026 | 0.1526 | 32.8 % |
Normalized AFFO payout ratio | 62.3 % | 80.3 % | 1,800 bps |
Average monthly rent | $ 1,911 | $ 1,769 | 8.0 % |
Average monthly rent - SPP | 1,911 | 1,793 | 6.6 % |
Closing occupancy | 97.1 % | 97.6 % | (50) bps |
Closing occupancy - SPP | 97.1 % | 97.5 % | (40) bps |
Average occupancy | 96.9 % | 97.2 % | (30) bps |
Average occupancy - SPP | 96.9 % | 97.1 % | (20) bps |
As at | March 31, 2024 | December 31, 2023 | Variance |
Debt-to-Gross Book Value ratio | 41.4 % | 42.8 % | (140) bps |
Debt-to-Adjusted EBITDA ratio | 10.94x | 11.79x | (0.85)x |
Achieved Normalized Same Property NOI Growth of 12.3% in Q1 2024
The REIT achieved SPP Normalized NOI growth of 12.3% in Q1 2024 compared to Q1 2023. This was primarily driven by an increase in SPP average monthly rent of 6.6% and lower operating expenses. The reduction in Normalized operating expenses was driven by a significant drop in natural gas rates from Q1 2023, lower repairs and maintenance and the continued benefits of a milder winter that reduced snow removal costs and decreased natural gas usage, partially offset by higher property taxes. SPP Normalized NOI margin increased by 350 bps to 63.0%, reflecting higher revenue and lower Normalized operating expenses.
Significant Growth in Normalized FFO and AFFO per Unit Driven by NOI Growth and Reduction to Interest Costs
In Q1 2024, Normalized FFO per unit and Normalized AFFO per unit increased by 27.3% and 32.8%, respectively, compared to Q1 2023. The increases reflect Normalized NOI growth and the effect of accretive debt reduction initiatives that also reduced variable-rate debt. Debt-to-Gross Book Value decreased by 140 basis points to 41.4%, Debt-to-Adjusted EBITDA decreased by 0.85x to 10.94x and variable-rate debt was reduced to 6% of Total Debt at quarter end. As a result, interest costs in Q1 2024 declined by 11.0% compared to Q1 2023.
IFRS Net Loss and Comprehensive Loss
The REIT's net asset value ("NAV") per unit as at March 31, 2024 was $22.26 per unit, a decline from $22.76 as at December 31, 2023, primarily resulting from a non-cash fair value loss on investment properties of $38.6 million in Q1 2024. This was driven by higher capitalization rates within certain geographies of the residential portfolio, primarily due to the high interest rate environment, and an increase to the capital expenditure reserve, partially offset by growth in forecast NOI for the overall portfolio.
The REIT recorded a non-cash fair value gain on Class B LP Units of $8.5 million in Q1 2024, reflecting a decrease in the Unit price during the quarter.
The REIT reported a net loss and comprehensive loss of $18.8 million in Q1 2024, compared to $24.2 million in Q1 2023. The positive variance was primarily attributable to higher NOI and the non-cash fair value gain on Class B LP Units during the quarter, partially offset by a larger non-cash fair value loss on investment properties in Q1 2024 compared to Q1 2023.
The REIT generated organic growth through 369 new leases signed in Q1 2024, achieving an average gain-on-lease of 12.5%. The REIT realized double-digit gain-on-lease in every market except Toronto, where approximately 70% of new leases signed were at Niagara West, a non-rent controlled property where there was a lower gap to market rents. Excluding Niagara West, realized gain-on-lease in Toronto was 19.0% and 13.8% across the portfolio.
The REIT estimates a gain-to-lease potential of 15.9% as at March 31, 2024, representing future annualized potential revenue of $21.4 million. The REIT's ability to realize these embedded leasing gains is dependent on natural turnover. SPP annualized turnover was 15.9% in Q1 2024, which was in line with seasonal norms. The REIT expects turnover will slow in 2024 relative to seasonal norms due to the gap between sitting rents and market rents. The REIT expects that it will be able to realize a significant portion of the gain-to-lease potential over a period of four to six years.
The REIT repositioned a total of seven suites across its portfolio in Q1 2024, generating an average annual unlevered return on investment of 9.4%. The REIT strategically assesses each repositioning and currently expects to reposition a total of 50 to 90 suites in 2024, compared to 116 suites in 2023.
The REIT experienced positive momentum for its Toronto retail spaces, with Dollarama opening its doors in Q1 2024 at Niagara West, and strong interest in the ground floor retail unit at Minto Yorkville. Management anticipates a lease will be executed in 2024, with lease payments commencing in 2025 to account for the fixturing period for a new tenant.
During Q1 2024, Management remained focused on disciplined capital allocation in order to strengthen the REIT's balance sheet and provide flexibility with respect to its refinancing, operating and investment strategies. These measures included:
As of March 31, 2024, the REIT had Total Debt outstanding of $1.07 billion, with a weighted average effective interest rate on Term Debt of 3.43% and a weighted average term to maturity on Term Debt of 5.81 years. Debt-to-Gross Book Value was 41.4%, Debt-to-Adjusted EBITDA was 10.94x and variable-rate debt was 6% of Total Debt.
The REIT continues to maintain a strong financial position. Total liquidity was approximately $188.1 million as at March 31, 2024, with a liquidity ratio (Total liquidity/Total Debt) of 17.6%.
On May 7, 2024, the REIT and MPI amended the terms of The Hyland CDL. The REIT's purchase option was extended to February 28, 2025 and the maturity of the CDL was extended to April 30, 2025. In addition, the 6% annual interest rate on the CDL was adjusted, and commencing June 1, 2024, it will be equal to the all-in interest rate the REIT pays on its revolving credit facility (7.07% at March 31, 2024), subject to a maximum interest rate of 7.25% per annum and a minimum interest rate of 5.25% per annum.
Management will host a conference call for analysts and investors on Wednesday, May 8, 2024 at 10:00 am ET. To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/4cIZVKM to receive an instant automated call back. Alternatively, they can dial 416-764-8688 or 1-888-390-0546 to reach a live operator who will join them into the call.
In addition, the call will be webcast live at:
Minto Apartment REIT Q1 2024 Earnings Webcast
A replay of the call will be available until Wednesday, May 15, 2024. To access the replay, dial 416-764-8677 or 888-390-0541 (Passcode: 127031 #). A transcript of the call will be archived on the REIT's website.
Minto Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario to own, develop, and operate income-producing multi-residential properties located in urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa and Calgary. For more information on Minto Apartment REIT, please visit the REIT's website at: www.mintoapartmentreit.com.
This news release may contain forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will", "expects", "potential" and "anticipated". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in the REIT's Annual Information Form dated March 6, 2024, which is available on SEDAR+ (www.sedarplus.ca). The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.
This news release contains certain non-IFRS and other financial measures which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS Accounting Standards ("IFRS") and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure for the purpose of this news release. These non-IFRS and other financial measures are defined below:
Reconciliations of Non-IFRS Financial Measures and Ratios
FFO and AFFO
Three months ended March 31, | ||
($000's except unit and per unit amounts) | 2024 | 2023 |
Net loss and comprehensive loss | $ (18,794) | $ (24,227) |
Distributions on Class B LP Units | 3,251 | 3,155 |
Disposition costs on investment property | 615 | 348 |
Fair value loss (gain) on: | ||
Investment properties | 38,605 | 13,503 |
Class B LP Units | (8,499) | 18,286 |
Interest rate swap | (58) | 410 |
Unit-based compensation | (81) | 154 |
Funds from operations (FFO) | 15,039 | 11,629 |
Maintenance capital expenditure reserve | (1,539) | (1,520) |
Amortization of mark-to-market adjustments | (73) | (176) |
Adjusted funds from operations (AFFO) | 13,427 | 9,933 |
Distributions on Class B LP Units | 3,251 | 3,155 |
Distributions on Units | 5,038 | 4,886 |
$ 8,289 | $ 8,041 | |
AFFO payout ratio | 61.7 % | 81.0 % |
Weighted average number of Units and Class B LP Units issued and | 65,659,537 | 65,642,641 |
FFO per unit | $ 0.2290 | $ 0.1772 |
AFFO per unit | $ 0.2045 | $ 0.1513 |
Normalized FFO and AFFO
Three months ended March 31, | ||
($000's except unit and per unit amounts) | 2024 | 2023 |
FFO | $ 15,039 | $ 11,629 |
AFFO | 13,427 | 9,933 |
Normalizing items for NOI | — | 86 |
Insurance recoveries | (122) | — |
(122) | 86 | |
Normalized FFO | 14,917 | 11,715 |
Normalized FFO per unit | 0.2272 | 0.1785 |
Normalized AFFO | 13,305 | 10,019 |
Normalized AFFO per unit | $ 0.2026 | $ 0.1526 |
Normalized AFFO payout ratio | 62.3 % | 80.3 % |
NOI and NOI Margin
($000's) | Same Property Portfolio | Total Portfolio | |||
Three months ended March 31, | 2024 | 2023 | 2024 | 2023 | |
Revenue from investment properties | $ 38,174 | $ 35,964 | $ 38,943 | $ 38,403 | |
Operating expenses | 14,134 | 14,652 | 14,499 | 15,667 | |
NOI | $ 24,040 | $ 21,312 | $ 24,444 | $ 22,736 | |
NOI margin | 63.0 % | 59.3 % | 62.8 % | 59.2 % | |
Normalizing items for NOI | |||||
Severance costs | $ — | $ 86 | $ — | $ 86 | |
Normalized NOI | $ 24,040 | $ 21,398 | $ 24,444 | $ 22,822 | |
Normalized NOI margin | 63.0 % | 59.5 % | 62.8 % | 59.4 % |
NAV and NAV per unit
($000's except unit and per unit amounts) | As at | |
March 31, 2024 | December 31, 2023 | |
Net assets (Unitholders' equity) | $ 1,053,656 | $ 1,077,381 |
Add: Class B LP Units | 408,217 | 416,716 |
NAV | $ 1,461,873 | $ 1,494,097 |
Number of Units and Class B LP Units | 65,660,891 | 65,653,641 |
NAV per unit | $ 22.26 | $ 22.76 |
SOURCE Minto Apartment Real Estate Income Trust
View original content: http://www.newswire.ca/en/releases/archive/May2024/07/c4796.html
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