News & Press

— Solid growth in rental revenue and NOI¹ despite lower demand for furnished suites —

OTTAWA, ON, Nov. 10, 2020 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced its financial results for the third quarter ("Q3 2020") and nine months ended September 30, 2020. The Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A") for Q3 2020 and the nine months ended September 30, 2020 are available on the REIT's website at www.mintoapartments.com and at www.sedarplus.ca.

Q3 2020 Highlights

• Total revenue was $31.2 million, an increase of 12.7% from the three months ended September 30, 2019 ("Q3 2019"); same property revenue² of $22.5 million decreased 3.5% from Q3 2019; same property revenue² excluding furnished suites was $20.7 million, an increase of 1.7% from Q3 2019;
   
• Net Operating Income ("NOI")¹ was $20.2 million, an increase of 14.6% from Q3 2019; same property NOI^1,2 of $14.2 million decreased 4.7% from Q3 2019; same property NOI^1,2 excluding furnished suites was $13.3 million, an increase of 2.6% from Q3 2019;
   
• NOI¹ margin was 64.7%, an increase of 110 basis points ("bps") from Q3 2019; same property NOI^1,2 margin was 63.0%, 80 bps lower than Q3 2019; same property NOI^1,2 margin excluding furnished suites was 64.1%, 50 bps higher than Q3 2019;
   
• Net income and comprehensive income was $56.6 million, compared to a net loss and comprehensive loss of $29.9 million in Q3 2019;
   
• Funds from Operations ("FFO")¹ increased by 22.0% to $13.2 million, compared to $10.8 million in Q3 2019; FFO¹ per unit³ declined by 2.1% to $0.2233, compared to $0.2280 in Q3 2019;
   
• Adjusted Funds from Operations ("AFFO")¹ increased by 23.8% to $11.6 million, compared to $9.4 million in Q3 2019; AFFO¹ per unit³ declined by 0.6% to $0.1968, compared to $0.1980 in Q3 2019;
   
• The REIT paid distributions during the quarter totalling $0.1125 per unit³ compared to $0.1100 per unit³ in Q3 2019, an increase of 2.3%;
   
• The Q3 2020 AFFO¹ payout ratio was 57.2%, compared to 54.4% in Q3 2019;
   
• Occupancy of available unfurnished suites as at September 30, 2020 was 97.0%, compared to 98.6% as at September 30, 2019; same property occupancy² of available unfurnished suites as at September 30, 2020 was 96.8%, compared to 98.5% as at September 30, 2019;
   
• Average monthly rent as at September 30, 2020, excluding furnished and/or unoccupied suites, was $1,613, an increase of 9.1% compared to $1,478 as at September 30, 2019; average monthly rent for the same property portfolio², excluding furnished and/or unoccupied suites, was $1,514 as at September 30, 2020, an increase of 3.8% compared to $1,458 as at September 30, 2019; and
   
• Debt to Gross Book Value ("Debt-to-GBV")¹ as at September 30, 2020 was 39.6%, compared to 39.3% at the end of 2019.

"The REIT's portfolio continues to generate solid performance despite the uncertainty created by COVID-19," said Michael Waters, the REIT's Chief Executive Officer and President. "Our rent collections remain strong, and we continue to execute on our internal and external growth strategies. Given our strong liquidity and superior property portfolio I am confident that we will emerge from the pandemic in an excellent competitive position."

COVID-19 Response and Impact on the REIT

In recent weeks, the number of COVID-19 cases has increased across Canada and certain provincial governments have re-introduced or imposed stricter restrictions in an attempt to limit further spread of the virus. The impact of COVID-19 is constantly evolving, and the REIT continues to adapt to the new realities brought on by the global pandemic. The REIT's priority remains the health and safety of its residents, employees, partners and communities.

The REIT's business has remained highly resilient throughout the pandemic. Rental collections have been consistent with pre-pandemic cycles and occupancy has remained strong. Notwithstanding its strong collections, the REIT will continue to work with its residents on a case-by-case basis to address any payment difficulties arising from the pandemic.

The REIT's suite turnover rate was 6% in Q3 2020, and 21% for the trailing twelve-month period ended September 30, 2020. These rates were slightly below the prior-year periods but were sequentially higher than Q2 2020 levels as turnover began normalizing towards the end of Q3 2020.

Due to the pandemic, the REIT has experienced increased variability in its expenses but the team is actively making adjustments to maintain operating margins. Overall, the REIT is not expecting the expense volatility to have any material impact on its NOI¹ margin.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $186.1 million as at September 30, 2020, with a liquidity ratio (total liquidity/total debt) of 22.11% and conservative Debt-to-GBV¹ ratio of 39.6%.

Growth Initiatives

During Q3 2020, the REIT signed 403 new leases at average monthly rents that were 9.4% higher than the expiring rents, resulting in an increase in annualized revenue of approximately $0.5 million. Higher rental rates were realized in all markets upon suite turnover except Alberta, with the largest increases being generated in Toronto and Ottawa. While leasing activity was lower than normal in Q3 2020 due to COVID-19, it was significantly stronger compared to the second quarter of 2020, when 339 new leases were signed at average monthly rents that were 9.1% higher than expiring rents.

Management estimates that the REIT holds an embedded gain-to-lease potential in its unfurnished suite portfolio of 11.8%, representing future annualized embedded potential revenue of approximately $12.7 million. The embedded potential revenue opportunity declined from approximately $13.4 million as at June 30, 2020 due to gains realized during Q3 2020, revised expectations for each market going forward, more suites taken offline for repositioning and a small increase in vacant suites.

The REIT also continued to productively deploy capital through its repositioning program in Q3 2020, repositioning a total of 62 suites across its portfolio. The annualized revenue gains realized on these suites generated returns on investment that were consistent with the REIT's target return of 8% to 15% for this program. The REIT has a total of 2,379 suites remaining to be repositioned at the following properties: Leslie York Mills and High Park Village in Toronto, Carlisle and Castle Hill in Ottawa, Rockhill, Le 4300 and Haddon Hall in Montreal and the Edmonton portfolio.

As described in the prospectus for the REIT's Initial Public Offering in 2018, the REIT acquired, but deferred payment for, the Skyline Maisonettes property. This property had been damaged by a fire in March 2017, which destroyed 32 units. The construction of the 32 replacement Skyline suites was substantially completed in Q3 2020 and the building is beginning its lease-up period. The REIT's operating results are expected to be positively impacted as the lease-up is completed over the coming quarters at which time the agreed payment will be completed.

Financial Summary