/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED
STATES./
TORONTO, May 7, 2019 /CNW/ - Starlight U.S.
Multi-Family (No. 5) Core Fund (TSXV: STUS.A) (TSXV: STUS.U) (the
"Fund") announced today its results of operations and financial
condition for the three months ended March
31, 2019 (the "First Quarter").
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.
First Quarter Highlights
- Total portfolio revenue from property operations for the First
Quarter was $28,458, representing an
increase of 7.3% over the same period in the prior year due to net
acquisition activity and same property revenue growth of 5.8%
driven primarily by a 250 basis point increase in same property
economic occupancy, which was 93.1% in the First Quarter, as well
as AMR growth and strong ancillary income growth.
- The Fund continued to realize increases in economic occupancy
as a result of continued success in increasing the renewal rates on
existing leases, attracting new tenants to its properties and
enhancing its lease expiration profile. The Fund's economic
occupancy improved by 240 basis points to 93.1% in the First
Quarter compared to the same period in 2018.
- Total portfolio net operating income ("NOI") for the First
Quarter was $16,717, a 10.4% increase
over the same period in the prior year, primarily due to net
acquisition activity and a 7.5% increase in same property NOI,
reflecting improvements in occupancy, AMR growth and strong
ancillary income growth partially offset by increases in property
taxes and property operating costs.
- Net income (loss) and comprehensive income (loss) for the First
Quarter was $27,769, in comparison to
a loss of $9,061 for the same period
in the prior year. The increase in net income (loss) and
comprehensive income (loss) was primarily related to increases in
NOI and the fair value gain on investment properties of
$52,440 recognized during the First
Quarter, offset by increases in the provision for carried interest
and deferred income taxes.
- Adjusted Funds from Operations ("AFFO") for the First Quarter
was $5,150 (three months ended
March 31, 2018 - $5,611) resulting in an AFFO payout ratio of
119.4% (three months ended March 31,
2018 – 111.2%). The decrease in AFFO and the increase in the
payout ratio was primarily related to higher interest on mortgages
payable reflecting the refinancing of the majority of the Fund's
indebtedness into fixed rate loans during the three months ended
December 31, 2018 being partially
offset by NOI growth.
- Portfolio AMR as at March 31,
2019 was $1,232, representing
an increase of 1.5% from $1,214 at
March 31, 2018. AMR growth was
particularly strong in Phoenix
(5.4%), Las Vegas (4.0%) and
Denver (2.5%). Same property AMR
as at March 31, 2019 was $1,222, representing a 1.6% increase from
$1,203 at March 31, 2018. Same property AMR growth was
particularly strong in Phoenix
(5.4%), Las Vegas (4.0%),
Orlando/Tampa (2.6%) and Denver (2.5%).
Subsequent Events
On April 2, 2019, the Fund and
Tricon Capital Group Inc. ("Tricon") entered into an arrangement
agreement (the "Arrangement Agreement") whereby Tricon will acquire
all of the issued and outstanding units of the Fund in an all-share
transaction (the "Transaction"). As part of the Transaction,
Starlight Investments US AM Group LP, the manager of the Fund (the
"Manager") has entered into a transitional services agreement
whereby the Manager will provide asset management services to
Tricon for the Fund's properties for a period of three years after
closing. The Transaction is expected to close in June 2019 and in no event later than an outside
date of July 31, 2019, subject to an
extension by up to 60 days in certain circumstances and subject to
the satisfaction or waiver of certain closing conditions including:
Fund unitholder approval of the Transaction; Tricon shareholder
approval of the associated issuance of Tricon common shares
("Tricon Shares"); Fund lender and landlord consents; court
approval of the proposed plan of arrangement; the approval of the
Toronto Stock Exchange; and certain other customary closing
conditions.
The Transaction includes Tricon issuing 50,779,314 Tricon Shares
in exchange for all the outstanding units of the Fund. As a result
of the Transaction, Tricon will also indirectly assume all of the
Fund's existing debt as well as other outstanding liabilities of
the Fund and acquire all of the Fund's properties. Unitholders will
receive Tricon Shares in exchange for their units of the Fund based
on exchange ratio's as set out in the proposed plan of
arrangement.
Assuming the Transaction closes in June
2019, the last distribution to Unitholders prior to the
exchange of units of the Fund for Tricon Shares would be paid to
Unitholders using a record date of May 31,
2019.
For further information relating to the Transaction including
required approvals please see the Fund's news release dated
April 2, 2019 in addition to other
Transaction documents which are available on www.sedar.com under
the Fund's profile as well as on the Fund's website at
www.starlightus.com.
Financial Condition and Operating Results
|
|
|
|
As at March 31,
2019
|
As at December 31,
2018
|
|
|
|
Operational
Information
|
|
|
Number of
properties
|
23
|
23
|
Total
suites
|
7,289
|
7,289
|
Economic occupancy
(1)
|
93.1%
|
92.8%
|
AMR (in actual
dollars)
|
$
|
1,232
|
$
|
1,232
|
AMR per square foot
(in actual dollars)
|
$
|
1.28
|
$
|
1.28
|
|
|
|
Summary of
Financial Information
|
|
|
Gross book
value
|
$
|
1,450,625
|
$
|
1,389,255
|
Indebtedness
|
$
|
919,710
|
$
|
920,265
|
Indebtedness to gross
book value
|
63.40%
|
66.24%
|
Weighted average
mortgage interest rate
|
3.87%
|
3.88%
|
Weighted average
mortgage term to maturity
|
5.75 years
|
6.00 years
|
|
|
|
|
First
Quarter
|
Three months
ended
March 31, 2018
|
|
|
|
Summary of
Financial Information
|
|
|
Revenue from property
operations
|
$28,458
|
$26,533
|
Property operating
costs
|
($7,101)
|
($6,923)
|
Property taxes
(2)
|
($4,640)
|
($4,474)
|
NOI
|
$16,717
|
$15,136
|
Net income (loss) and
comprehensive income (loss)
|
$27,769
|
($9,061)
|
FFO
|
$5,102
|
$1,564
|
FFO per unit - basic
and diluted
|
$0.10
|
$0.03
|
AFFO
|
$5,150
|
$5,611
|
AFFO per unit - basic
and diluted
|
$0.11
|
$0.11
|
Interest Coverage
Ratio
|
1.58x
|
1.58x
|
Indebtness Coverage
Ratio
|
1.49x
|
1.53x
|
FFO payout
ratio
|
120.5%
|
398.8%
|
AFFO payout
ratio
|
119.4%
|
111.2%
|
Weighted average
units Outstanding (000s)
|
|
|
- basic and
diluted
|
48,968
|
49,024
|
Notes:
|
|
(1)
|
Economic occupancy
for the three months ended March 31, 2019 and three months ended
December 31, 2018
|
|
|
(2)
|
Property taxes were
adjusted to exclude the International Financial Reporting
Interpretations Committee 21 - Levies ("IFRIC 21")
adjustment and treat property taxes as an expense that is amortized
during the fiscal year for the purposes of calculating
NOI
|
Cash Provided by Operating Activities to AFFO
AFFO for the First Quarter was $5,150 (2018 - $5,611). AFFO payout ratio was 119.4% for the
First Quarter (three months ended March 31,
2018 – 111.2%). The decrease in AFFO and the increase in the
payout ratio was primarily related to higher interest on mortgages
payable reflecting the refinancing of the majority of the Fund's
indebtedness into fixed rate loans during the three months ended
December 31, 2018 being partially
offset by NOI growth.
The Fund was formed as a closed-end, limited partnership with an
initial term of three years and a target distribution yield of
6.5%. Although the payout ratio was in excess of 100%,
distributions have been maintained at 6.5% while interest rates
have increased as a result of increases in LIBOR since the Fund's
inception. The Fund refinanced all of its outstanding indebtedness
and continues to focus on its active management strategy which the
Manager of the Fund expects will yield improvements in AFFO in
future periods. The Fund believes that maintaining the targeted
distributions has been in the best interests of investors based on
the Fund's terminal nature as compared to a perpetual real-estate
investment trust and the Fund's investment objectives and
strategy.
As noted above, on April 2, 2019,
the Fund entered into the Transaction which is expected to close in
June 2019 resulting in the last
distribution to unitholders expected to be paid to Unitholders of
record date on May 31, 2019.
Reconciliation of cash provided by operating activities
determined in accordance with International Financial Reporting
Standards ("IFRS") to AFFO for the First Quarter with the
comparative 2018 period was as follows:
DISTRIBUTIONS AND
ADJUSTED FUNDS FROM OPERATIONS ("AFFO")
|
|
|
|
|
|
|
First
Quarter
|
Three months
ended
March 31, 2018
|
Cash provided by
operating activities
|
$
|
13,982
|
$
|
14,480
|
Less: interest
paid
|
(9,558)
|
(8,120)
|
Cash provided by
operating activities - including interest paid
|
4,424
|
6,360
|
Add /
(Deduct):
|
|
|
Change in non-cash
operating working capital
|
1,072
|
(2,715)
|
Change in restricted
cash
|
(6,567)
|
(6,357)
|
Fair value adjustment
of investment properties (including IFRIC 21)
|
6,601
|
7,659
|
Realized foreign
exchange (gain) loss
|
12
|
208
|
Current taxes - U.S.
withholding taxes and income taxes
|
-
|
732
|
Service fees related
to class A and class U units
|
155
|
149
|
Amortization of
financing costs
|
-
|
2
|
Loss on early
extinguishment of debt
|
-
|
165
|
Sustaining capital
expenditures and suite renovation reserve
|
(547)
|
(592)
|
AFFO
|
$
|
5,150
|
$
|
5,611
|
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 2019 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 which may be used in this
press release including AFFO, AFFO payout ratio, AMR, economic
occupancy, Funds from Operations ("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 Management Discussion & Analysis 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 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 completion of the Transaction; 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 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.
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