— Robust growth in key financial metrics, reflecting strengthening rental demand —

OTTAWA, ON, Nov. 8, 2022 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the third quarter and nine months ended September 30, 2022 ("Q3 2022" and "YTD 2022", respectively). The Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q3 2022 and YTD 2022 are available on the REIT's website at www.mintoapartments.com and at www.sedarplus.ca.[1]

"Our business continued to demonstrate very strong momentum in the third quarter supported by the attractiveness of renting compared to home ownership, a return to downtown living and immigration," said Michael Waters, the REIT's Chief Executive Officer. "We generated the second highest quarterly gain-to-lease in the REIT's history during Q3, and our average rent per suite surpassed $1,700 for the first time.

Going forward, we believe our high quality, urban portfolio is well-positioned to capitalize on current market dynamics and our talented operations team will continue to drive NOI and occupancy. Furthermore, we will continue to evaluate our capital allocation decisions in this volatile capital markets environment to balance growing and upgrading our portfolio in target markets while simultaneously maximizing our cash flow per unit over the long term."

Q3 2022 Highlights

• Average monthly rent was $1,714, an increase of 3.8% compared to the third quarter ended September 30, 2021 ("Q3 2021"). Average monthly rent for the Same Property Portfolio² was $1,720, an increase of 4.2% compared to Q3 2021;
• Average occupancy of unfurnished suites increased to 96.2%, compared to 92.9% in Q3 2021 and 94.7% in the second quarter of 2022 ("Q2 2022"). End of period occupancy at Q3 2022 was 97.4% compared to 94.8% at the end of Q3 2021;
• Total revenue was $37.8 million, an increase of 21.1% compared to Q3 2021; total revenue for the Same Property Portfolio was $34.3 million, an increase of 9.8% compared to Q3 2021;
• Net Operating Income ("NOI") was $24.2 million, an increase of 24.8% compared to Q3 2021; NOI for the Same Property Portfolio was $22.0 million, an increase of 13.3% compared to Q3 2021;
• NOI margin was 64.0%, an improvement of 190 basis points compared to Q3 2021;
• The REIT executed 574 new leases, achieving an average rental rate that was 14.5% higher than the expiring rents, representing the second highest quarterly gain-to-lease in the REIT's history. As rental markets have strengthened, the gain-to-lease potential on sitting rents increased sequentially to 12.1% from 10.9% at the end of the Q2 2022;
• Funds from Operations ("FFO") increased by 25.7% to $15.7 million, compared to $12.5 million in Q3 2021; FFO per unit increased by 12.8% to $0.2380, compared to $0.2109 in Q3 2021. Excluding the impact of proceeds from a one-time insurance recovery of approximately $594,000, FFO increased by 20.9% and FFO per unit increased by 8.6% both compared to Q3 2021;
• Adjusted Funds from Operations ("AFFO") increased by 28.2% to $14.0 million, compared to $10.9 million in Q3 2021; AFFO per unit increased by 15.1% to $0.2121, compared to $0.1842 in Q3 2021. Excluding the impact of proceeds from a one-time insurance recovery of approximately $594,000, AFFO increased by 22.7% and AFFO per unit increased by 10.2% both compared to Q3 2021;
• Net income and comprehensive income was $39.7 million, compared to $80.9 million in Q3 2021;
• The REIT repositioned 75 suites across its portfolio in Q3 2022 generating an annualized return of 9.4%;
• During Q3 2022 the REIT acquired 182,227 Units under its previously announced normal course issuer bid at an average price of $15.15 per unit;
• On September 23, 2022, the REIT announced that its Chief Financial Officer, Julie Morin, will be transitioning back full-time to the Minto Group as Chief Financial Officer following Q3 2022 reporting. Edward Fu, currently the REIT's Vice President, Finance, was selected to succeed her as Chief Financial Officer of the REIT.

Subsequent to Quarter End

• The Board of Trustees approved an annual distribution increase of $0.015 per Unit or 3.2%, effective for the November 2022 cash distribution.
• The REIT released its 2021 Environmental Social and Governance Report ("ESG Report") including the results from its 2022 Green Real Estate Sustainability Benchmark ("GRESB") assessment. The REIT earned a GRESB score of 80, a 3-Star GRESB Rating, and Green Star Designation. This score is a ten-point improvement over 2021 and places the REIT fourth out of 16 in our peer comparison group of North American residential firms. The REIT's ESG Report can be found by visiting its website at www.mintoapartments.com/2021ESGreport.

Financial Summary

Q3 2022 Operating Results

Revenue in Q3 2022 totalled $37.8 million, an increase of 21.1% from $31.2 million in Q3 2021. The increased revenue in Q3 2022 reflected higher occupancy, higher average rents, reduced amortization of promotions, and property acquisitions completed subsequent to Q3 2021 (Le Hill-Park in Montreal, Niagara West in Toronto and The International in Calgary). Same Property Portfolio revenue was $34.3 million, an increase of 9.8% from Q3 2021, reflecting the improved occupancy, higher average monthly rent and reduced amortization of promotions.

Average monthly rent at the end of Q3 2022 was $1,714, an increase of 3.8% compared to $1,651 as at the end of Q3 2021. Average monthly rent for the Same Property Portfolio was $1,720 at the end of Q3 2022, an increase of 4.2% compared to the end of Q3 2021.

Average occupancy was 96.2% in Q3 2022, compared to 92.9% in Q3 2021 and 94.7% in Q2 2022. The significant year-over-year increase in occupancy reflected consistent improvement in urban rental market conditions in the REIT's major markets.

Operating expenses were 15.1% higher (4.2% for the Same Property Portfolio) in Q3 2022 compared to Q3 2021, reflecting inflationary pressures and acquisitions completed subsequent to Q3 2021. The REIT continues to evaluate opportunities for operational efficiencies and cost reductions. While inflation has placed pressure on operating expenses, it has also increased rental rates which help absorb, or at least partly offset, the rise in costs.

NOI for Q3 2022 totalled $24.2 million, representing 64.0% of revenue, an increase of 24.8% compared to $19.4 million, or 62.1% of revenue, in Q3 2021. Same Property Portfolio NOI for Q3 2022 was $22.0 million, representing 64.1% of revenue, an increase of 13.3% compared to $19.4 million, or 62.1% of revenue, in Q3 2021. The increase in NOI in Q3 2022 reflected higher revenue, partially offset by higher operating expenses as noted above, as well as property acquisitions completed subsequent to Q3 2021. The increase in Same Property Portfolio NOI reflected the higher average monthly rent and occupancy, partially offset by higher operating expenses.

FFO in Q3 2022 increased to $15.7 million compared to $12.5 million in Q3 2021. FFO per unit was $0.2380 in Q3 2022, an increase of 12.8% compared to Q3 2021. The higher FFO in Q3 2022 primarily reflected the positive NOI variance. AFFO in Q3 2022 increased to $14.0 million compared to $10.9 million in Q3 2021. AFFO per unit was $0.2121 per unit in Q3 2022, an increase of 15.1% compared to Q3 2021. The increase in AFFO for Q3 2022 was primarily due to the higher FFO, partially offset by an increase in the maintenance capital expenditure reserve from the addition of the three properties acquired subsequent to Q3 2021.

The REIT reported net income and comprehensive income of $39.7 million in Q3 2022, compared to $80.9 million in Q3 2021. The negative variance was primarily attributable to a fair value loss on investment properties of $18.7 million, compared to a gain of $34.7 million in Q3 2021. The fair value loss reflects capitalization rate expansion on select properties and an increased capital reserve offset by higher forecasted NOI across the portfolio.

The REIT paid cash distributions of $0.1187 per unit for Q3 2022, an increase of 4.3% compared to Q3 2021 and representing an AFFO payout ratio of 55.9%. Cash distributions of $0.1138 per unit were paid in Q3 2021, representing an AFFO payout ratio of 61.7%.

Gain-to-Lease and Repositioning

The REIT signed 574 new leases in Q3 2022, realizing an average gain-to-lease of 14.5%, the second highest quarterly gain in the REIT's history. This resulted in an annualized incremental revenue gain of approximately $1.4 million. By comparison, the REIT realized gains on new leases of 4.4% in Q3 2021 and 12.1% in Q2 2022. Significant gains were realized in all markets during Q3 2022, including a 15.5% gain in Toronto. This strong performance reflected the continued improvement in urban rental market conditions, which is supported by increased immigration and the growing affordability gap between rentals and home ownership. As a result of increased demand for rentals, the REIT has increased rental rates and reduced the use of promotions to drive occupancy.

Management estimates that the REIT holds embedded gain-to-lease potential in its unfurnished suite portfolio of 12.1% as at September 30, 2022, representing future annualized embedded potential revenue of approximately $16.0 million. That compares to embedded gain-to-lease potential of 6.6% and an estimated annualized revenue growth opportunity of $7.3 million as at September 30, 2021, and 10.9% or $14.0 million as at June 30, 2022. The embedded gain-to-lease potential is increasing as Canadian urban rental markets strengthen, backed by strong leasing and higher average monthly rents achieved.

The REIT repositioned a total of 75 suites across its portfolio in Q3 2022. The annualized revenue gains realized on the repositioned suites generated an average annual unlevered return on investment of 9.4%. The REIT has a total of 2,024 suites remaining to be repositioned under its current program and expects to reposition an additional 40 to 50 suites in Q4 of 2022, subject to turnover.

Property Development and Intensification

The REIT has eight projects in its development pipeline at various stages of the development process. Three of these projects involve the intensification of existing properties and five projects have been financed through the REIT's convertible development loan program.

Six of these eight total opportunities are under construction, and the eight projects combined have the potential to increase the REIT's suite count by 2,301 suites by 2029, a 28% increase from the current level. Updated information on these opportunities, including development timelines and estimated project costs, is available in the REIT's Q3 2022 MD&A.

The Minto Group has agreed to extend the maturity of the REIT's convertible development loan on Fifth + Bank in Ottawa to July 31, 2023 and its option to purchase the property at 95% of its then-appraised fair value has been extended to June 30, 2023. Fifth + Bank is fully leased and stabilized, with current occupancy of 100% and is not subject to rent control. The REIT has not yet made a decision regarding the exercise of its purchase option and any decision will be based on market conditions and other factors at that time.

Increase to Monthly Distributions

The Board of Trustees approved a $0.015 or 3.2% increase to the REIT's annual distribution from $0.4750 per Unit to $0.49 per Unit. The monthly distribution will be $0.04083 per Unit, increased from $0.03958 per Unit. The increase will be effective for the REIT's November 2022 cash distribution, to be paid on December 15, 2022.

The distribution increase highlights the positive business outlook shared by our management team and Board of Trustees. While steadily increasing distributions is a key part of our long-term strategy, we are also committed to maintaining a conservative AFFO payout ratio, allowing us to continue to reinvest capital to fund future growth.

Balance Sheet

As of September 30, 2022, the REIT had total debt outstanding of $1.08 billion, with a weighted average interest rate on fixed rate debt of 2.90% and a weighted average term to maturity on fixed rate debt of 4.48 years. The Debt-to-Gross Book Value ("GBV") ratio was 39.9%. The REIT's net asset value ("NAV") per unit as at September 30, 2022 was $24.12, an increase of 0.5% from $24.00 as at December 31, 2021.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $145.1 million as at September 30, 2022, with a liquidity ratio (total liquidity/total debt) of 13.4%.

Conference Call

Management will host a conference call for analysts and investors on Wednesday, November 9, 2022 at 11:00 am ET. The dial-in numbers for participants are 416-764-8688 or 888-390-0546. In addition, the call will be webcast live at: