/NOT FOR DISTRIBUTION TO
All amounts in this press release are in thousands of
"The Fund continued to achieve strong operating results for the fourth quarter, including annualized rent growth of 7.2% and net operating income ahead of forecast by 4.5%," commented
Q4-2021 HIGHLIGHTS
- During Q4-2021, the Fund recorded a fair value gain on
Hudson at East ("Hudson") and Montane (together, the "Properties") of$11,554 , contributing to the cumulative$49,444 or 25.9% increase over the aggregate purchase price since the Properties were acquired by the Fund onMarch 31, 2021 . The fair value gain during Q4-2021 was primarily driven by net operating income ("NOI") growth and capitalization rate compression from increasing demand in the investment market for multi-family properties across the markets in which the Fund operates. - Significant increases in rent growth continued during Q4-2021 with the Fund achieving 7.2% annualized rent growth with in-place rents at the end of 2021 approximately 3.5% higher than forecasted. These increases were driven by growth in demand for multi-family suites due to the economic strength following the downturn created by coronavirus (SARS – CoV2) and its variants ("COVID-19") in the
U.S. and the markets in which the Fund operates. - The Fund had collected 99.1% of rents for Q4-2021 as at
March 7, 2022 , demonstrating the Fund's strong tenant profile. - Net income for Q4-2021 was
$4,028 , ahead of the financial forecast included in the Fund's final long form prospectus datedMarch 19, 2021 ("Forecast") by$4,280 . - Adjusted funds from operations ("AFFO") for Q4-2021 was
$1,017 or 1.7% ahead of Forecast, with the Fund's AFFO payout ratio at 83.6%, lower than the forecasted AFFO payout ratio of 85.4%, driven primarily by higher than forecasted NOI at the Properties. - On
October 25, 2021 , the Fund refinanced the loan payable on Montane by entering into a new$92,000 first mortgage at an attractive all-in rate. Given the significant increase in the fair value ofHudson , the Fund is evaluating the potential refinancing of the associated loan payable whereby the net proceeds of any such refinancing along with the Fund's cash on hand as atDecember 31, 2021 of$6,445 may provide sufficient liquidity for the Fund to acquire a third property. - On
December 16, 2021 , the Fund entered into a variable rate collar contract to establish a guaranteed monthly exchange rate betweenC$1.2575 andC$1.3200 for the conversion ofU.S. dollar funds to Canadian dollar funds amounting toC$312 per month fromFebruary 10, 2022 toJuly 12, 2022 andC$156 per month fromAugust 10, 2022 toNovember 14, 2022 . The contract was entered into to protect against the potential impact of any weakening of theU.S. dollar on the amounts required to pay the Fund's monthly Canadian dollar distributions and ensure a more favorable exchange rate for conversion of these funds when compared to the rate used to convert the proceeds from the Offering intoU.S. dollars ofC$1.252 .
INITIAL REPORTING PERIOD HIGHLIGHTS
- The Fund completed the Offering on
March 31, 2021 and raised gross subscription proceeds of$85,408 , which were used to acquire the Properties onMarch 31, 2021 , which included a total of 675 suites inDenver, Colorado andOrlando, Florida . - NOI for YTD-2021 was
$6,538 (Forecast -$6,386 ), representing an increase of$152 or 2.4% compared to the Forecast, primarily due to higher than forecasted revenue at the Properties. - Net income for YTD-2021 was
$23,770 (Forecast - loss of$696 ), an increase of$24,466 compared to Forecast. - AFFO for YTD-2021 was
$3,105 (Forecast -$3,072 ) with the Fund's AFFO payout ratio at 82.8%, lower than Forecast by approximately 90 basis points driven primarily by higher than forecasted NOI.
COVID-19 IMPACT
On
COVID-19 vaccination programs continue across the
FINANCIAL CONDITION AND OPERATING RESULTS
Highlights of the financial and operating performance of the Fund as at
As at | ||||||||
Operational Information (1) | ||||||||
Number of properties | 2 | |||||||
Total suites | 675 | |||||||
Economic occupancy (2) | 93.6% | |||||||
AMR (in actual dollars) | $ | 1,617 | ||||||
AMR per square foot (in actual dollars) | $ | 1.67 | ||||||
Summary of Financial Information | ||||||||
Gross book value | $ | 255,200 | ||||||
Indebtedness | $ | 131,063 | ||||||
Indebtedness to gross book value | 51.4% | |||||||
Weighted average interest rate - as at period end (3) | 2.49% | |||||||
Weighted average loan term to maturity | 4.86 years | |||||||
Q4-2021 (4) | Forecast | YTD-2021 (4) | Forecast | |||||
Summarized Income Statement | ||||||||
Revenue from property operations | $ | 3,391 | $ | 3,255 | $ | 10,104 | $ | 9,869 |
Property operating costs | $ | (855) | $ | (779) | $ | (2,464) | $ | (2,348) |
Property taxes (5) | $ | (342) | $ | (377) | $ | (1,102) | $ | (1,135) |
Adjusted income from operations / NOI | $ | 2,194 | $ | 2,099 | $ | 6,538 | $ | 6,386 |
Finance costs (including non-cash items) (6) | $ | (1,567) | $ | (896) | $ | (3,533) | $ | (2,705) |
Distributions to unitholders of the Fund ("Unitholders") | $ | (850) | $ | (854) | $ | (2,570) | $ | (2,571) |
Distributions to preferred shareholders | $ | (4) | $ | (4) | $ | (8) | $ | (8) |
Fund and trust expenses | $ | (305) | $ | (259) | $ | (859) | $ | (780) |
Unrealized foreign exchange (loss) gain | $ | (5) | $ | - | $ | 12 | $ | - |
Realized foreign exchange gain (loss) | $ | 4 | $ | - | $ | 3 | $ | - |
Fair value adjustment on investment properties | $ | 11,554 | $ | - | $ | 49,444 | $ | - |
Provision for carried interest | $ | (3,301) | $ | - | $ | (11,211) | $ | - |
Deferred income taxes | $ | (3,692) | $ | (338) | $ | (14,046) | $ | (1,018) |
Net income (loss) and comprehensive income (loss) | $ | 4,028 | $ | (252) | $ | 23,770 | $ | (696) |
Other Selected Financial Information | ||||||||
Funds from operations ("FFO") (7) | $ | 348 | $ | 944 | $ | 2,290 | $ | 2,901 |
FFO per unit of the Fund ("Unit") - basic and diluted (7) | $ | 0.03 | $ | 0.09 | $ | 0.21 | $ | 0.27 |
AFFO | $ | 1,017 | $ | 1,000 | $ | 3,105 | $ | 3,072 |
AFFO per Unit - basic and diluted | $ | 0.09 | $ | 0.09 | $ | 0.28 | $ | 0.28 |
Weighted average interest rate - average during period (8) | 2.48% | 2.49% | 2.46% | 2.49% | ||||
Interest coverage ratio | 2.29 x | 2.33 x | 2.34 x | 2.35 x | ||||
Indebtedness coverage ratio | 2.29 x | 2.33 x | 2.34 x | 2.35 x | ||||
Distributions to Unitholders | $ | 850 | $ | 854 | $ | 2,570 | $ | 2,571 |
FFO payout ratio (7) | 244.3% | 90.5% | 112.2% | 88.6% | ||||
AFFO payout ratio | 83.6% | 85.4% | 82.8% | 83.7% | ||||
Weighted Average Units Outstanding (000s) - basic/diluted | 10,902 | 10,902 | 10,902 | 10,902 |
(1) | The Fund commenced operations following the acquisition of the Fund's properties on | |||||
(2) | Economic occupancy for Q4-2021. | |||||
(3) | The weighted average interest rate on loans payable is presented as at | |||||
(4) | Figures represent the actual results of Q4-2021 and YTD-2021 with Forecast Q4-2021 and Forecast YTD-2021 representing the Forecast adjusted for Q4-2021 and the Initial Reporting Period. | |||||
(5) | Property taxes were adjusted to exclude the International Financial Reporting Interpretations Committee Interpretation 21, Levies ("IFRIC 21") fair value adjustment and treat property taxes as an expense that is amortized during the fiscal year for the purpose of calculating NOI. These amounts have been reported under Fair value adjustment IFRIC 21 under the Fund's consolidated financial statements for the period from | |||||
(6) | Finance costs include interest expense on loans payable as well as non-cash amortization of deferred financing costs, fair value changes in derivative financial instruments as well as any loss on the early extinguishment of loans payable. | |||||
(7) | Basic and diluted FFO and FFO per Unit for Q4-2021 and YTD-2021 were lower than Forecast primarily due to the loss on early extinguishment of debt related to expensing the unamortized deferred financing costs associated with the refinancing of the Montane loan payable in | |||||
(8) | The weighted average interest rate on loans payable presented reflects the average prevailing index rate, LIBOR or SOFR as applicable to each of the loans payable, throughout each period presented. |
NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS
The Fund's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("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. Gross book value is defined as the fair market value of the investment properties as determined in accordance with IFRS. Indebtedness is defined as the principal amount of loans payable outstanding as at a specific reporting date. AFFO payout ratio is calculated by taking distributions declared and dividing by AFFO in a given reporting period. FFO payout ratio is calculated by taking distributions declared and dividing by FFO in a given reporting period. 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. Further details on Non-IFRS Measures are set out in the Fund's MD&A in the "Non-IFRS Financial Measures" section for YTD-2021 and are available on the Fund's profile on SEDAR at www.sedar.com.
A reconciliation of the Fund's interest coverage ratio and indebtedness coverage ratio are provided below:
Interest and indebtedness coverage ratios | Q4-2021 (1) | Forecast | YTD-2021 (1) | Forecast | |||||
Net loss and comprehensive loss | $ | 4,028 | $ | (252) | $ | 23,770 | $ | (696) | |
Add: non-cash or one-time items and distributions (2) | $ | (2,964) | $ | 1,299 | $ | (20,519) | $ | 3,913 | |
Adjusted net income and comprehensive income | $ | 1,064 | $ | 1,047 | $ | 3,251 | $ | 3,217 | |
Interest coverage ratio (3) | 2.29x | 2.33x | 2.34x | 2.35x | |||||
Indebtedness coverage ratio (4) | 2.29x | 2.33x | 2.34x | 2.35x |
(1) | Figures represent the actual results of Q4-2021 and YTD-2021 with Forecast Q4-2021 and Forecast YTD-2021 representing the Forecast adjusted for Q4-2021 and the Initial Reporting Period. | ||||
(2) | Non-cash or one-time items consist of deferred taxes, amortization of financing costs and loan premiums, fair value adjustments on derivative instruments, and unrealized foreign exchange gains and losses. | ||||
(3) | Interest coverage ratio is calculated as adjusted net income and comprehensive income plus interest expense divided by interest expense. | ||||
(4) | Indebtedness coverage ratio is calculated as adjusted net income and comprehensive income plus interest expense divided by interest expense and mandatory principal payments on the Fund's loans payable. |
CASH PROVIDED BY OPERATING ACTIVITIES RECONCILIATION TO FFO and AFFO
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.
AFFO and AFFO per Unit for Q4-2021 were
AFFO and AFFO per Unit for YTD-2021 were
A reconciliation of the Fund's cash provided by operating activities determined in accordance with IFRS to FFO and AFFO for YTD-2021 is provided below:
Q4-2021 | YTD-2021 | |||
Cash provided by operating activities | $ | 2,531 | $ | 6,276 |
Less: interest costs | (825) | (2,424) | ||
Cash provided by operating activities - including interest costs | $ | 1,706 | $ | 3,852 |
Add / (Deduct): | ||||
Change in non-cash operating working capital | 37 | (978) | ||
Change in restricted cash | (675) | 384 | ||
Amortization of financing costs | (103) | (351) | ||
Loss on early extinguishment of debt | (617) | (617) | ||
FFO | $ | 348 | $ | 2,290 |
Add / (Deduct): | ||||
Amortization of financing costs | 103 | 351 | ||
Loss on early extinguishment of debt | 617 | 617 | ||
Sustaining capital expenditures and suite renovation reserves | (51) | (153) | ||
AFFO | $ | 1,017 | $ | 3,105 |
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 the COVID-19 global pandemic 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 Properties as well as the impact of COVID-19 on the markets in which the Fund operates and the trading price of the Fund's
Forward-looking statements involve 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, that assumptions may not be correct and that objectives, strategic goals and priorities may not be achieved. Those risks and uncertainties include: the impact of COVID-19 on the Properties as well as the impact of COVID-19 on the markets in which the Fund operates and the trading price of the Units and unlisted 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 Properties or the Fund's legal entities; the applicability of any government regulation concerning the Fund's tenants or rents as a result of COVID-19 or otherwise; the availability of debt financing for any future financing requirements of the Fund; and the availability and price at which any potential future acquisitions may be acquired including a third property. 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 Units; the applicability of any government regulation concerning the Fund's tenants or rents as a result of COVID-19 or otherwise; the realization of property value appreciation and timing thereof; the inventory of multi-family real estate properties; the availability of properties for potential future acquisition, if any, and the price at which such properties may be acquired; the price at which Properties may be disposed and the timing thereof; closing and other transaction costs in connection with the acquisition and disposition of Properties; the availability of mortgage financing and current interest rates; the extent of competition for properties; the growth in NOI and the ability of the Fund to benefit from its light value-add initiatives; the population of multi-family real estate market participants; assumptions about the markets in which the Fund operates; expenditures and fees in connection with the maintenance, operation and administration of the Properties; the ability of
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 securities law, the Fund undertakes no obligation to update or revise publicly any forward-looking information, whether because 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
The Fund is a limited partnership formed under the Limited Partnerships Act (
For the Fund's complete audited consolidated financial statements for the period from
Please visit us at www.starlightus.com and connect with us on LinkedIn at www.linkedin.com/company/starlight-investments-ltd-
Neither the
SOURCE
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