Mr. Jonathan Li reports

MINTO APARTMENT REIT REPORTS 2023 FOURTH QUARTER AND YEAR-END FINANCIAL RESULTS

Minto Apartment Real Estate Investment Trust today released its financial results for the fourth quarter and year ended Dec. 31, 2023. The audited consolidated financial statements and management's discussion and analysis (MD&A) for Q4 2023 and FY 2023 are available on the REIT's website and at SEDAR+.

"Minto Apartment REIT ended the year with an exceptionally strong fourth quarter. Continued strong operating performance combined with prudent capital allocation decisions led to a 21.2-per-cent increase in normalized FFO per unit and a 25.9-per-cent increase in normalized AFFO per unit compared with Q4 last year," said Jonathan Li, president and chief executive officer of the REIT. "For the full year, the REIT delivered 10.1-per-cent same property portfolio normalized NOI growth, driven by strong market fundamentals in Canada's major cities and strong operating performance from our high-quality, urban portfolio. Importantly, we successfully converted NOI growth into cash flow per unit growth by delivering normalized FFO per unit growth of 4.9 per cent and normalized AFFO per unit growth of 6.0 per cent, despite carrying a high amount of expensive variable-rate debt earlier in the year.

"The successful execution of our capital recycling program has strengthened our balance sheet and further reduced our variable-rate debt exposure into early 2024. Including assets which closed subsequent to year-end, we sold five non-core assets at prices in line with their IFRS fair values for $128-million and we used the net proceeds to repay variable-rate debt. Importantly, in February, 2024, we sold two assets comprising 311 suites to Ottawa Community Housing Corp. who will maintain affordability in these suites going forward, helping to improve some of the affordability challenges faced by our country."

"Two thousand twenty-three was an important year for the REIT. Looking back, we made many disciplined capital allocation decisions throughout the year, including waiving on an acquisition, deferring a major intensification project, waiving on opportunities presented to the REIT, securing upward refinancings and successfully executing on our capital recycling program. At times, these decisions were difficult - but they were necessary -- as they have best positioned the REIT to become a growth story once again."

Q4 2023 highlights

• Average monthly rent was $1,877, an increase of 8.4 per cent compared with the fourth quarter ended Dec. 31, 2022 (Q4 2022);
• Average occupancy of unfurnished suites was consistent at 97.2 per cent, compared with 97.1 per cent in Q4 2022;
• The REIT executed 335 new leases, achieving an average rental rate that was 16.1 per cent higher than the expiring rents. The gain-to-lease potential on sitting rents remains attractive at 17.1 per cent as at Dec. 31, 2023;
• Annualized turnover for the same-property portfolio (SPP) was 20.3 per cent, in line with historical norms;
• SPP revenue was $36.9-million, an increase of 6.3 per cent compared with Q4 2022;
• SPP normalized net operating income (normalized NOI) increased 9.0 per cent compared with Q4 2022 and SPP normalized NOI margin was 63.0 per cent, an increase of 150 bps (basis points) from Q4 2022;
• Revenue was $40.3-million, an increase of 6.3 per cent compared with Q4 2022;
• Net operating income (NOI) increased 13.4 per cent compared with Q4 2022; NOI margin was 64.6 per cent, an increase of 410 bps from Q4 2022;
• Normalized funds from operations (normalized FFO) were 23.18 cents per unit, an increase of 21.2 per cent from 19.13 cents per unit in Q4 2022;
• Normalized adjusted funds from operations (normalized AFFO) were 20.83 cents per unit, an increase of 25.9 per cent compared with 16.54 cents per unit in Q4 2022;
• Net loss and comprehensive loss was $77.2-million;
• On Oct. 31, 2023, the REIT published its 2022 environmental, social and governance (ESG) report, which shares the REIT's progress in implementing ESG initiatives and setting targets to further its objectives and goals across all its operations and with all its stakeholders.

FY 2023 highlights

• SPP revenue was $144.3-million, an increase of 8.0 per cent compared with the year ended Dec. 31, 2022 (FY 2022);
• SPP normalized NOI increased 10.1 per cent compared with FY 2022 and SPP normalized NOI margin was 62.8 per cent, an increase of 120 bps compared with the same period;
• Revenue was $157.9-million, an increase of 9.8 per cent from FY 2022;
• NOI increased 13.0 per cent from FY 2022 and NOI margin was 62.8 per cent, an increase of 170 bps compared with the same period;
• Normalized FFO was 86.17 cents per unit, an increase of 4.9 per cent compared with 82.15 cents per unit in FY 2022;
• Normalized AFFO was 76.08 cents per unit, an increase of 6.0 per cent compared with 71.76 cents per unit in FY 2022;
• Net loss and comprehensive loss was $116.7-million;
• The REIT refinanced a total of eight mortgages for net proceeds of $97.9-million which were used to pay down a portion of the REIT's credit facility;
• The REIT sold three non-core properties in Edmonton in line with their IFRS (international financial reporting standards) fair values, completing an exit from that market;
• The board of trustees approved a 3.1-per-cent increase to the annual distribution in November, 2023, bringing it to 50.50 cents per unit.

Subsequent to year-end

On Feb. 15, 2024, the REIT completed the sale of the Tanglewood and a selection of suites at the Parkwood Hills community in Ottawa, Ont., to Ottawa Community Housing Corp. for a sale price of $86.0-million, which was in line with their IFRS fair values. Net proceeds of $68.0-million were used to pay down a portion of the REIT's variable-rate revolving credit facility.

Summary of Q4 2023 and FY 2023 operating results

Achieved same property NOI growth of 9.0 per cent in Q4 2023 and 10.1 per cent in FY 2023

The REIT achieved strong SPP normalized NOI growth of 9.0 per cent in Q4 2023 compared with Q4 2022. This was primarily driven by an increase in SPP average monthly rent of 6.8 per cent and slightly higher average occupancy. In addition, SPP normalized operating expenses increased by 2.0 per cent in Q4 2023. Property operating expenses benefited from a mild start to winter and also lower natural gas costs, offset by higher property taxes. SPP normalized NOI margin increased by 150 bps to 63.0 per cent, reflecting revenue growth, particularly from unfurnished suites, which outpaced growth in normalized operating expenses.

For FY 2023, the REIT achieved strong SPP normalized NOI growth of 10.1 per cent, driven by increased average monthly rent and a 160 bps increase in average occupancy to 97.2 per cent, compared with 95.6 per cent for FY 2022. Revenue growth outpaced an increase in normalized operating expenses, driven by higher property taxes and partially offset by decreased natural gas costs from lower rates. This growth resulted in SPP normalized NOI margin of 62.8 per cent, an increase of 120 bps compared with 61.6 per cent for FY 2022.

Converted NOI into normalized FFO and AFFO per unit growth

In Q4 2023, normalized FFO per unit growth and normalized AFFO per unit growth were 21.2 per cent and 25.9 per cent over Q4 2022, respectively. For FY 2023, normalized FFO per unit growth and normalized AFFO per unit growth were 4.9 per cent and 6.0 per cent, respectively. The increases reflect normalized NOI growth, the impact of implementing accretive capital allocation decisions, including reducing exposure to variable-rate debt through the second half of the year, and accretive asset sales.

IFRS net loss and comprehensive loss

The REIT's net asset value (NAV) per unit as at Dec. 31, 2023, was $22.76, a decline from $23.01 as at Sept. 30, 2023, primarily resulting from a fair value loss on investment properties of $21.2-million in Q4 2023. This was reflected through higher capitalization rates within certain geographies of the residential portfolio and an increase to the capital expenditure reserve, partially offset by growth in forecast NOI for the overall portfolio.

The fair value loss on Class B LP units of $65.7-million in Q4 2023 reflected the increase in the REIT's unit price during the quarter as it climbed from $13.63 per unit at the start of the quarter and closed at 16.18 per unit.

The REIT reported a net loss and comprehensive loss of $77.2-million in Q4 2023, compared with $32.4-million in Q4 2022. The variance was primarily attributable to larger non-cash, fair value losses on investment properties and Class B LP units in Q4 2023 compared with Q4 2022.

Gain on lease, turnover and gain-to-lease potential

The REIT realized on organic growth with 335 new leases signed in Q4 2023, achieving an average gain on lease of 16.1 per cent. The REIT realized significant double-digit gain on lease in all markets during Q4 2023, supported by strong Canadian urban rental market conditions. Further organic growth is embedded in the unfurnished suite portfolio, and the REIT estimates a gain-to-lease potential of 17.1 per cent as at Dec. 31, 2023, representing future annualized potential revenue of $23.8-million. The REIT's ability to realize these embedded leasing gains is dependent on natural turnover. SPP annualized turnover was 20.3 per cent in Q4 2023. The REIT expects turnover will slow in 2024 due to the gap between sitting rents and market rents. The REIT expects that it will be able to realize a significant portion of the gain-to-lease potential over a period of four to six years.

The REIT repositioned a total of 18 suites across its portfolio in Q4 2023, generating an average annual unlevered return on investment of 11.8 per cent. The REIT strategically assesses each repositioning and currently expects to reposition a total of 50 to 90 suites in 2024, down from 116 suites in 2023.

Disciplined capital allocation has strengthened the balance sheet

During FY 2023 and the first quarter of 2024 (Q1 2024), management has been focused on disciplined capital allocation in order to strengthen the REIT's balance sheet to provide flexibility with respect to its refinancing, operating and investment strategies. These measures have included:

• Reducing variable-rate debt with the proceeds from the sale of five non-core properties for a combined price of $128.2-million which was in line with their IFRS fair values, raising net proceeds of $77.9-million;
• Refinancing a total of eight maturing mortgages with an outstanding balance of $290.8-million with new CMHC-insured financing of $402.6-million, resulting in net proceeds of $97.9-million which were used to repay variable-rate debt;
• Waiving the REIT's purchase option on the Fifth + Bank property. On Jan. 31, 2024, the REIT received repayment of the $30-million convertible development loan (CDL) from Minto Properties Inc. (MPI) that was associated with the property, which was used to repay variable-rate debt;
• Waiving the REIT's right of first opportunity for four purpose-built rental developments and one existing multiresidential opportunity presented by MPI, preserving capital;
• Deferring the construction start of the intensification project at High Park Village in Toronto, preserving approximately $75-million of future equity requirements related to the REIT's portion of the project.

Management continues to explore upward refinancing for three properties with the potential to generate proceeds of $55.0-million and $65.0-million. Management will consider the impact that each potential refinancing has on funds from operations (FFO) per unit by considering interest rates on maturing mortgages relative to the potential refinanced interest rates, pro forma balance outstanding and the REIT's debt maturity schedule.

As of Dec. 31, 2023, the REIT had total debt outstanding of $1.16-billion, with a weighted average effective interest rate on term debt of 3.39 per cent and a weighted average term to maturity on term debt of 5.84 years.

The debt-to-gross-book-value (GBV) ratio as at Dec. 31, 2023, was 42.8 per cent.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $97.5-million as at Dec. 31, 2023, with a liquidity ratio (total liquidity/total debt) of 8.4 per cent.

Capital recycling update

The REIT continues to view capital recycling as an attractive source of potential capital. However, given the anticipated low outstanding balance on its revolving credit facility by the end of Q1 2024 (resulting from the $30-million CDL repayment, asset sale proceeds and potential refinancings noted above), the REIT will be opportunistic regarding any other potential asset sales but will consider them under the appropriate circumstances.

Conference call

Management will host a conference call for analysts and investors on Thursday, March 7, 2024, at 10 a.m. ET. To join the conference call without operator assistance, participants can register and enter their phone number on-line (link available in the original version of this news release) to receive an instant automated call back. Alternatively, they can dial 416-764-8688 or 1-888-390-0546 to reach a live operator who will join them into the call.

A replay of the call will be available until Thursday, March 14, 2023. To access the replay, dial 416-764-8677 or 888-390-0541 (pass code: 648597 followed by the pound key). A transcript of the call will be archived on the REIT's website.

About Minto Apartment Real Estate Investment Trust

Minto Apartment is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario to own income-producing multiresidential properties located in Canada. The REIT owns a portfolio of high-quality multiresidential rental properties located primarily in urban centres in Canada's major markets of Toronto, Montreal, Ottawa and Calgary.