/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES./
TORONTO, May 11, 2021 /CNW/ - Starlight U.S. Multi-Family
(No. 2) Core Plus Fund (TSXV: SCPT.A) (TSXV: SCPT.U) (the
"Fund") announced today its results of operations and financial
condition for the three months ended March
31, 2021 ("Q1-2021"), which includes one day of operating
activity for March 31, 2021 (the
"Initial Reporting Period"), the closing date of the Fund's initial
public offering (the "Offering").
All amounts in this press release are in thousands of
United States ("U.S.") dollars
except for average monthly rent ("AMR") or unless otherwise stated.
All references to "C$" are to Canadian dollars.
"Following the successful completion of the Offering, the Fund
was able to take advantage of strong leasing trends with the Fund's
average physical occupancy on May 10,
2021 at approximately 94.4%, increasing from 93.3% as at
March 31, putting the Fund in a
favourable position to capture rent growth increases as the
economic recovery continues across the Fund's primary markets"
commented Evan Kirsh, the Fund's
President. "Throughout the remainder of 2021, the Fund will be
focused on optimizing operating results through the implementation
of asset management plans which include light value-add and
operation initiatives for each property."
FIRST QUARTER HIGHLIGHTS
- The Fund completed the Offering on March
31, 2021 and raised gross subscription proceeds of
$85,408.
- Using the proceeds from the Offering, the Fund completed the
acquisition Broadstone Montane and Hudson at East on March 31, 2021 which included a total of 675
suites geographically diversified across the states of Florida and Colorado (the "Properties").
- The Fund's initial AMR was $1,528
as at March 31, 2021, slightly above
forecasted AMR, with the Fund achieving economic occupancy of 93.3%
for Q1-2021.
- As at May 10, 2021, the Fund
collected approximately 98.3% of rents for March 2021. The Fund also anticipates an increase
in collections for April 2021 with
the Fund collecting approximately 98.3% of rents up to May 10, 2021 and further amounts expected to be
collected in future periods.
- Revenue, property operating costs, property taxes and NOI were
in line with the forecast for Q1-2021.
- On April 15, 2021, the Fund
declared its first monthly distribution for April 2021, the first full month of operations of
the Fund, payable on May 17, 2021 to
unitholders of record at April 30,
2021.
COVID-19 IMPACT
On March 11, 2020, the World
Health Organization characterized the outbreak of COVID-19 as a
global pandemic ("COVID-19"). Although COVID-19 has resulted in a
volatile economy, the Fund is well positioned to navigate through
this challenging time and continues to undertake proactive measures
at the Properties to combat the spread, assist tenants where needed
and implement other measures to minimize business interruption.
The Fund intends to actively monitor any impact COVID-19 may
have on the Fund's operating results in future periods specifically
as they relate to rent collections, occupancy, rent growth,
ancillary fees and expenses incurred for preventative measures in
response to COVID-19 at the Fund's properties.
COVID-19 immunization programs have commenced across the U.S. to
varying degrees in different states and jurisdictions with the
immunization efforts widely considered to have been successful to
date relative to other countries globally. According to the U.S.
Department of Labor, unemployment rates for March 2021 declined to 6.0% (from a peak of
approximately 15% in April 2020) with
employment gains broadly diversified across many industries and
driven by the continued economic reopening linked to the successful
vaccination program across the U.S. The sustained rollout of the
vaccination program is expected to continue to improve economic
growth and employment throughout the U.S., although there can be no
certainty with respect to the timing of these improvements.
Certain market data published during March and April 2021 also highlights a positive outlook for
key multi-family fundamentals including strengthening occupancy,
rent growth and collection rates which have started to translate
into the operating results of various owners of multi-family
properties, including those in the markets the Fund operates in.
These trends, in conjunction with the markets the Fund operates in
exhibiting sustained job and population growth historically as a
result of lifestyle choices as well as positive net migration,
should continue to support further demand for multi-family
apartments in future periods. In addition, previous economic
downturns have typically been followed by periods of above market
rent growth for multi-family properties in the U.S.
COVID-19 has also significantly disrupted active and new
construction of comparable product in the markets the Fund operates
in which may create a temporary imbalance in supply of comparable,
multi-suite residential properties. This imbalance, alongside the
continued economic recovery and improving fundamental statistics,
could be supportive of favourable supply and demand conditions for
the Properties and could result in future increases in occupancy
and rent growth. The Fund believes it is well positioned to take
advantage of these conditions should they transpire given the
quality of its properties and the benefit of having a tenant pool
employed across a diverse job base. Since the COVID-19 outbreak
commenced, based on available investment sales information,
capitalization rates in the markets the Fund operates in have
compressed on average by approximately 50-75 basis points.
Further disclosure surrounding the impact of COVID-19 are
included in the Fund Management's Discussion and Analysis
("MD&A") for Q1-2021 under the Fund's profile, which is
available on www.sedar.com.
FINANCIAL CONDITION AND OPERATING RESULTS
Highlights of the financial and operating performance of the
Fund as at March 31, 2021 and for the
Initial Reporting Period is provided below:
|
|
|
|
|
As at March
31,
2021
|
|
|
|
Operational
Information (1)
|
|
|
Number of
properties
|
|
2
|
Total
suites
|
|
675
|
Economic occupancy
(2)
|
|
93.3%
|
AMR (in actual
dollars)
|
$
|
1,528
|
AMR per square foot
(in actual dollars)
|
$
|
1.57
|
Summary of
Financial Information
|
|
|
Gross Book
Value
|
$
|
204,952
|
Indebtedness
|
$
|
127,434
|
Indebtedness to Gross
Book Value
|
|
62.2%
|
Weighted average
interest rate - as at period end (3)
|
|
2.44%
|
Weighted average loan
term to maturity
|
|
2.8
years
|
|
|
Q1-2021(7)
|
Summary of
Financial Information
|
|
|
Revenue from property
operations
|
$
|
35
|
Property operating
costs
|
$
|
(9)
|
Property taxes
(4)
|
$
|
(4)
|
Adjusted Income from
operations / NOI
|
$
|
22
|
Fund and trust
expenses
|
$
|
(3)
|
Finance
costs
|
$
|
(11)
|
Unrealized foreign
exchange gain
|
$
|
5
|
Deferred income
taxes
|
$
|
(4)
|
Net income and
comprehensive income
|
$
|
9
|
Funds from operations
("FFO")
|
$
|
8
|
FFO per Unit - basic
and diluted
|
$
|
-
|
Adjusted funds from
operations ("AFFO")
|
$
|
10
|
AFFO per Unit - basic
and diluted
|
$
|
-
|
Weighted average
interest rate - average during period (5)
|
|
2.44%
|
Interest coverage
ratio
|
|
2.08
x
|
Indebtedness coverage
ratio
|
|
2.08
x
|
FFO payout ratio
(6)
|
|
- %
|
AFFO payout ratio
(6)
|
|
- %
|
Weighted Average
Units Outstanding (000s) - basic/diluted
|
|
10,902
|
|
|
(1)
|
The Fund commenced
operations following the acquisition of the Properties on March 31,
2021.
|
(2)
|
Economic occupancy
for the Initial Reporting Period.
|
(3)
|
The weighted average
loan interest rate is presented as at March 31, 2021 reflecting the
prevailing index rate, U.S. 30-day London Interbank Offered Rate or
U.S. 30-day Secured Overnight Financing Rate, as applicable to each
loan, as at that date.
|
(4)
|
Property taxes were
adjusted to exclude the International Financial Reporting
Interpretations Committee interpretation 21, Levies fair value
adjustment and treat property taxes as an expense that is amortized
during the fiscal year for the purpose of calculating
NOI.
|
(5)
|
The weighted average
loan interest rate presented for Q1-2021 reflects the average
prevailing index rate, LIBOR or SOFR as applicable to each of the
loans payable, throughout each period presented.
|
(6)
|
Since the Offering
was completed on March 31, 2021 and only one operating day is
included in Q1-2021, there were no distributions paid to
Unitholders in the quarter. The first distribution for the Fund's
first full month of operations in April 2021 will be paid on May
17, 2021.
|
(7)
|
Figures represent the
actual results of the Initial Reporting Period.
|
CASH USED IN OPERATING ACTIVITIES RECONCILIATION TO
AFFO
FFO and FFO per unit for Q1-2021 were $8 and $nil, respectively (Forecast -
$8 and $nil) both in line with the
forecast. FFO per Unit for Q1-2021 was $nil due to the Fund only
generating one day of operating results in Q1-2021. Given the
Fund's operations commenced on March 31,
2021, there were no distributions paid in the quarter
resulting in no payout metrics to report. In addition, basic and
diluted AFFO were in line with the forecast.
The Fund was formed as a "closed-end" limited partnership with
an initial term of three years, a targeted yield of 4.0% and a
targeted minimum 11% pre-tax investor internal rate of return
across all classes of Units of the Fund.
A reconciliation of cash used in operating activities determined
in accordance with International Financial Reporting Standards
("IFRS") to AFFO for Q1-2021 is provided below:
|
|
|
|
|
Q1-2021
|
Cash used in
operating activities
|
$
|
(325)
|
Less: interest paid
|
|
(9)
|
Cash used in
operating activities - including interest paid
|
$
|
(334)
|
Add /
(Deduct):
|
|
|
Change in non-cash
operating working capital
|
|
11
|
Change in restricted
cash
|
|
333
|
Sustaining capital
expenditures and suite renovation reserves
|
|
-
|
AFFO
|
$
|
10
|
NON-IFRS FINANCIAL MEASURES
The Fund's consolidated
financial statements are prepared in accordance with IFRS. Certain
terms that may be 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 Q1-2021
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 and
which reflect the Fund's current expectations regarding future
events, including the overall financial performance of the Fund and
its properties, including the impact of COVID-19 on the business
and operations of the Fund.
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, the impact of COVID-19 on the Fund's
portfolio as well as the impact of COVID-19 on the markets in which
the Fund operates, including the Manager's belief of the increased
desire to live in less densely populated areas, and the potential
for favourable market conditions for multi-family real estate
following economic downturns and the trading price of the Fund's
listed units, 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 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. Those risks and
uncertainties include: the impact of COVID-19 on the Fund's
portfolio as well as the impact of COVID-19 on the markets in which
the Fund operates and the trading price of the Fund's listed Units;
changes in government legislation or tax laws which would impact
any potential income taxes or other taxes rendered or payable with
respect to the Fund's properties or the Fund's legal entities; and
the applicability of any government regulation concerning the
Fund's tenants or rents as a result of COVID-19 or otherwise. 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 impact of COVID-19 on the Fund's portfolio as
well as the impact of COVID-19 on the markets in which the Fund
operates and the trading price of the Fund's listed units; the
applicability of any government regulation concerning the Fund's
tenants or rents as a result of COVID-19 or otherwise; 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 loan financing and
current interest rates; the ability to complete value-add
initiatives; 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 the Manager to manage and operate the properties; the
global and North American economic environment; foreign currency
exchange rates; and governmental regulations or tax laws.
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.
About Starlight U.S. Multi-Family (No. 2) Core Plus
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 two
properties, consisting of 675 suites with an average year of
construction in 2019.
For the Fund's complete unaudited financial statement for the
three months ended March 31, 2021 and
MD&A for the three months ended March
31, 2021 and any other information related 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 2021 Newsletter which is
available on the Fund's profile at www.starlightus.com.
Please visit us at www.starlightus.com and connect with us on
LinkedIn at www.linkedin.com/company/starlight-investments-ltd-
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. 2) Core Plus Fund