/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE
SERVICES FOR DISSEMINATION IN THE UNITED
STATES./
TORONTO, Nov. 9, 2017 /CNW/ - Starlight U.S. Multi-Family
(No. 1) Value-Add Fund (TSX.V: SUVA.A, SUVU.U) (the "Fund") today
announced its results of operations and financial condition for the
three months ended September 30, 2017
("Third Quarter") and for the period from April 24, 2017 to September 30, 2017 ("Period to Date"), a 107-day
operating period that commenced following the closing of the Fund's
initial public offering (the "Offering") and the acquisitions of
The Landing at Round Rock and Spectra South, (collectively the
"Initial Properties") on June 16,
2017.
All amounts in this press release are in thousands of
United States dollars unless
otherwise stated. All references to "C$" are to Canadian
dollars. The forecast figures below represent the financial
forecast (the "Forecast") as set out in the Fund's final long form
prospectus dated June 12,
2017.
Key Highlights
- Average market rent ("AMR") at September
30, 2017 at $1,223 was 1.3%
higher than the Forecast.
- Revenue from property operations for the Third Quarter was
$3,505, $89 or 2.5% lower than the Forecast due to lower
economic occupancy being partly offset by higher AMR.
- Property operating costs including property taxes were
$1,509, $20 or 1.3% below the Forecast during the Third
Quarter.
- Net operating income ("NOI") was $1,996, $69 or 3.3%
lower than Forecast for the Third Quarter. Period to Date NOI
was $2,345, $54 or 2.3% lower than in the
Forecast.
- NOI margin for the Third Quarter was 57.0% compared to the
forecasted 57.5%. Period to Date NOI margin was 57.3%
compared to Forecast at 57.4%.
- The Fund recognized a fair value increase on its Initial
Properties of $5,678 during the Third
Quarter driven by capitalization rate compression.
- The Fund's adjusted funds from operations ("AFFO") for the
Third Quarter was $865, $69 or 7.4% below Forecast due to the decrease in
NOI.
- The Fund's AFFO payout ratio Period to Date was 102.3%, however
after adjusting for the fact that the Fund had not yet fully
deployed the equity raised in the Offering, the revised AFFO payout
ratio was 84.8% compared to Forecast of
81.8%.
- Net income and comprehensive income was $2,924 for the Third Quarter (Forecast – net loss
of $355) driven by the fair value
increase on the Initial Properties.
- Indebtedness to gross book value was 65.3% as at September 30, 2017, within the Fund's targeted
range.
- Interest coverage ratio and indebtedness coverage ratio was
2.06 times for the Third Quarter.
- As at September 30, 2017, the
weighted average interest rate on mortgages payable was 3.23% and
the weighted average term to maturity was 2.75 years.
- As at September 30, 2017, the
Fund had cash on hand of $10,021. Subsequent to September 30, 2017, the Fund announced that it
will be acquiring a 50% interest in Landmark at Coventry Pointe, a
250 suite value-add property completed in 2002 and located in
Atlanta, Georgia. The Fund
will be fully deployed following the closing of the
acquisition. See Subsequent Events.
Evan Kirsh, President of
Starlight U.S. Multifamily commented, "We continue to be encouraged
by the strong response from both existing and new residents to our
properties and apartment suite upgrades. This is reflected in the
Fund's strong performance on rental rate growth as compared to the
Fund's Forecast.
Financial Condition and Operating Results
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|
|
|
|
|
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As at September
30, 2017
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|
|
|
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Operational
Information
|
|
|
|
Number of
properties
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|
|
2
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Total
suites
|
|
|
943
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Weighted average
portfolio occupancy %
|
|
93.3%
|
AMR (in actual
dollars)
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|
|
$
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1,223
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Average monthly rent
per square foot (in actual dollars)
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$
|
1.12
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|
|
|
Summary of
Financial Information
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Gross book
value
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|
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$160,833
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Indebtedness
|
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$104,950
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Indebtedness to gross
book value (1)
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65.25%
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Weighted average
mortgage interest rate
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3.23%
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Weighted average
mortgage term to maturity
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2.75 years
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|
|
For the three
months
ended September 30,
2017
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Period from April
24, 2017 to
September 30, 2017 (1)
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|
|
|
|
Summary of
Financial Information
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|
|
|
Revenue from property
operations
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$3,505
|
$4,091
|
Property operating
costs
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|
$895
|
$1,030
|
Property taxes
(2)
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|
$614
|
$716
|
NOI
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|
$1,996
|
$2,345
|
Net income and
comprehensive income
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$2,924
|
$2,987
|
FFO
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|
$863
|
$995
|
FFO per unit - basic
and diluted
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|
$0.10
|
$0.12
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AFFO
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|
$865
|
$997
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AFFO per unit - basic
and diluted
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|
$0.10
|
$0.12
|
Interest coverage
ratio
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|
2.06 x
|
2.07 x
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Indebtedness coverage
ratio
|
|
2.06 x
|
2.07 x
|
FFO payout
ratio
|
118.2%
|
102.5%
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AFFO payout
ratio
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|
117.9%
|
102.3%
|
Weighted average
units Outstanding (000s) - basic and diluted
|
8,180
|
8,180
|
(1)
The Fund commenced operations following
the acquisition of the Initial Properties on June 16,
2017.
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(2)
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 purposes of calculating NOI.
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As at September 30, 2017 the
Fund's occupancy was 93.3%. As of September 30, 2017, the Fund's AMR was
$1,223, an increase of $16 or 1.3% over Forecast. The Fund's
occupancy Period to Date was 92.8% compared to the Forecast of
94.7%. Indebtedness to gross book value was 65.3% as at
September 30, 2017.
The Fund's revenue from property operations for the Third
Quarter was $3,505 (Forecast -
$3,594). Property operating costs
were $895 for the Third Quarter
(Forecast - $893). Property
taxes for the Third Quarter were $614
(Forecast - $636). NOI for the
Third Quarter was $1,996 (Forecast -
$2,065). The Fund's net income and
comprehensive income for the Third Quarter was $2,924 (Forecast – net loss and comprehensive
loss of $355), significantly above
the Forecast due to the fair value adjustment on the Initial
Properties in the Third Quarter of $5,678.
AFFO and AFFO per unit for the Third Quarter was $865 and $0.10
(Forecast - $934 and $0.13) and Period to Date was $997 and $0.12
(Forecast - $1,033 and $0.13). The weighted average interest rate
on the Fund's mortgages payable was 3.23% as at September 30, 2017 and the weighted average term
to maturity was 2.75 years. For the Third Quarter interest
coverage ratio and indebtedness coverage ratio were 2.06 times and
2.06 times, respectively.
Reconciliation of cash provided by operating activities
determined in accordance with IFRS to AFFO for the three months
ended September 30, 2017 and for the
period from April 24, 2017 to
September 30, 2017 is provided
below:
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For the three
months ended
September 30, 2017
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Period from April
24, 2017
to September 30, 2017
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Cash provided by
operating activities
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|
$
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2,458
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$
|
1,912
|
|
Less: interest
paid
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(857)
|
(992)
|
Cash provided by
operating activities - including interest paid
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|
$
|
1,601
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$
|
920
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Add /
(Deduct):
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|
|
|
|
Change in non-cash
operating working capital
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|
(812)
|
(1,240)
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|
Change in restricted
cash
|
|
752
|
752
|
|
Fair value adjustment
of investment properties relating to IFRIC 21
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(623)
|
631
|
|
Unrealized foreign
exchange loss
|
|
6
|
3
|
|
Sustaining capital
expenditures and suite renovation reserves
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|
(59)
|
(69)
|
AFFO
|
|
$
|
865
|
$
|
997
|
Subsequent Events
On October 27, 2017, the Fund
announced that it will be acquiring a 50% interest in Landmark at
Coventry Pointe, a 250 suite value-add property completed in 2002
and located in Atlanta, Georgia
for $17,650. The Fund's
interest will be partly financed by a first mortgage of
$12,070 with the balance provided by
cash proceeds from the Offering. As part of the Fund's
business plan, the newly acquired property will be repositioned to
a modern standard with upgraded suite finishes and attractive
common areas and amenity spaces.
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 two properties,
consisting of interests in 943 suites with an average year of
construction in 2003.
For the Fund's complete condensed consolidated interim financial
statements and management's discussion and analysis ("MD&A")
for the Third Quarter and Period to Date, 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 November 2017
Newsletter which is available on the Fund's profile at
www.starlightus.com.
Non-IFRS Financial Measures
The Fund's condensed consolidated interim financial statements
are prepared in accordance with International Financial Reporting
Standards ("IFRS"). Certain terms used in this press release
including AMR, NOI, AFFO, AFFO payout ratio, indebtedness to gross
book value, interest coverage ratio, indebtedness coverage ratio
and economic occupancy (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 Three months ended September 30, 2017 and for the period from
April 24, 2017 (date of formation) to
September 30, 2017 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, performance, achievements, events,
prospects or opportunities for the Fund or the real estate industry
and may include statements regarding the financial position,
business strategy, budgets, litigation, projected costs, capital
expenditures, financial results, economic 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 inventory of multi-family real estate
properties; deploying the remaining cash on hand for an additional
value-add multi-family real estate property, 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 Group Property Holdings Inc., 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.
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 it
Regulations Securities Provider (as that term is defined in the
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