Mr. Edward Fu reports

MINTO APARTMENT REIT REPORTS 2024 FIRST QUARTER FINANCIAL RESULTS

Minto Apartment Real Estate Investment Trust has released its financial results for the first quarter ended March 31, 2024 (Q1 2024). The condensed consolidated interim financial statements and management's discussion and analysis (MD&A) for Q1 2024 are available on the REIT's website and on SEDAR+ (1).

"It was a great start to 2024. In the first quarter, we generated outstanding year-over-year growth in net operating income and cash flow per unit. Normalized same-property portfolio NOI increased by 12.3 per cent and normalized FFO and AFFO per unit increased by 27.3 per cent and 32.8 per cent, respectively," said Jonathan Li, president and chief executive officer of the REIT. "Our strategy of growing cash flow per unit has been successful. We have increased our FFO per unit growth for five consecutive quarters, reflecting continued strong rental market conditions, outstanding operating performance from our high-quality urban portfolio, execution of accretive asset sales and disciplined capital allocation decisions. Collectively, these strategies have materially reduced leverage, increased our cash flow per unit and strengthened our balance sheet. In Q1 2024, our interest costs were 11 per cent lower than the prior year, our variable-rate debt as a percentage of total debt decreased to 6 per cent by quarter-end and our debt-to-adjusted-EBITDA and debt-to-gross-book-value ratios improved significantly."

(1) This news release contains certain non-IFRS (international financial reporting standards) and other financial measures.

Q1 2024 highlights:

• Same-property portfolio (SPP) revenue was $38.2-million, an increase of 6.1 per cent, and total revenue was $38.9-million, an increase of 1.4 per cent compared with the first quarter ended March 31, 2023 (Q1 2023).
• Average monthly rent was $1,911, an increase of 8.0 per cent compared with Q1 2023.
• Average occupancy of unfurnished suites was 96.9 per cent, compared with 97.2 per cent in Q1 2023:
• The REIT executed 369 new leases, achieving an average rental rate that was 12.5 per cent higher than the expiring rents. The gain-to-lease potential on sitting rents remains attractive at 15.9 per cent as at March 31, 2024.
• SPP annualized turnover was 15.9 per cent, in line with seasonal norms.
• SPP normalized net operating income (NOI) increased 12.3 per cent, compared with Q1 2023, and SPP normalized NOI margin was 63.0 per cent, an increase of 350 basis points from Q1 2023.
• Normalized funds from operations were 22.72 cents per unit, an increase of 27.3 per cent from 17.85 cents per unit in Q1 2023.
• Normalized adjusted funds from operations (AFFO) were 20.26 cents per unit, an increase of 32.8 per cent compared with 15.26 cents per unit in Q1 2023.
• Normalized AFFO payout ratio declined by 1,800 basis points to 62.3 per cent.
• Net loss and comprehensive loss totalled $18.8-million, compared with $24.2-million in Q1 2023.
• On Jan. 31, 2024, the REIT received repayment of the $30.0-million convertible development loan (CDL) on the Fifth + Bank property from Minto Properties Inc. (MPI). The proceeds were used to pay down a portion of the variable-rate revolving credit facility.
• On Feb. 15, 2024, the REIT completed the sale of the Tanglewood property and a selection of suites at the Parkwood Hills property in Ottawa, Ont., to Ottawa Community Housing Corporation for a combined 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 variable-rate revolving credit facility.
• Debt-to-adjusted-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio decreased by 0.85 times to 10.94 times and debt-to-gross-book-value ratio decreased by 140 basis points to 41.4 per cent.

Summary of Q1 2024 operating results

Achieved normalized same-property NOI growth of 12.3 per cent in Q1 2024

The REIT achieved SPP normalized NOI growth of 12.3 per cent in Q1 2024 compared with Q1 2023. This was primarily driven by an increase in SPP average monthly rent of 6.6 per cent and lower operating expenses. The reduction in normalized operating expenses was driven by a significant drop in natural gas rates from Q1 2023, lower repairs and maintenance, and the continued benefits of a milder winter that reduced snow removal costs and decreased natural gas usage, partially offset by higher property taxes. SPP normalized NOI margin increased by 350 basis points to 63.0 per cent, reflecting higher revenue and lower normalized operating expenses.

Significant growth in normalized FFO and AFFO per unit driven by NOI growth and reduction to interest costs

In Q1 2024, normalized FFO per unit and normalized AFFO per unit increased by 27.3 per cent and 32.8 per cent, respectively, compared with Q1 2023. The increases reflect normalized NOI growth and the effect of accretive debt reduction initiatives that also reduced variable-rate debt. Debt to gross book value decreased by 140 basis points to 41.4 per cent, debt to adjusted EBITDA decreased by 0.85 times to 10.94 times and variable-rate debt was reduced to 6 per cent of total debt at quarter-end. As a result, interest costs in Q1 2024 declined by 11.0 per cent compared with Q1 2023.

IFRS net loss and comprehensive loss

The REIT's net asset value (NAV) per unit as at March 31, 2024, was $22.26 per unit, a decline from $22.76 as at Dec. 31, 2023, primarily resulting from a non-cash fair value loss on investment properties of $38.6-million in Q1 2024. This was driven by higher capitalization rates within certain geographies of the residential portfolio, primarily due to the high-interest-rate environment and an increase to the capital expenditure reserve, partially offset by growth in forecast NOI for the overall portfolio.

The REIT recorded a non-cash fair value gain on Class B LP units of $8.5-million in Q1 2024, reflecting a decrease in the unit price during the quarter.

The REIT reported a net loss and comprehensive loss of $18.8-million in Q1 2024, compared with $24.2-million in Q1 2023. The positive variance was primarily attributable to higher NOI and the non-cash fair value gain on Class B LP units during the quarter, partially offset by a larger non-cash fair value loss on investment properties in Q1 2024 compared with Q1 2023.

Gain on lease, repositioning program and commercial

The REIT generated organic growth through 369 new leases signed in Q1 2024, achieving an average gain on lease of 12.5 per cent. The REIT realized double-digit gain on lease in every market except Toronto, where approximately 70 per cent of new leases signed were at Niagara West, a non-rent-controlled property where there was a lower gap to market rents. Excluding Niagara West, realized gain on lease in Toronto was 19.0 per cent and 13.8 per cent across the portfolio.

The REIT estimates a gain-to-lease potential of 15.9 per cent as at March 31, 2024, representing future annualized potential revenue of $21.4-million. The REIT's ability to realize these embedded leasing gains is dependent on natural turnover. SPP annualized turnover was 15.9 per cent in Q1 2024, which was in line with seasonal norms. The REIT expects turnover will slow in 2024 relative to seasonal norms 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 seven suites across its portfolio in Q1 2024, generating an average annual unlevered return on investment of 9.4 per cent. The REIT strategically assesses each repositioning and currently expects to reposition a total of 50 to 90 suites in 2024, compared with 116 suites in 2023.

The REIT experienced positive momentum for its Toronto retail spaces, with Dollarama opening its doors in Q1 2024 at Niagara West and strong interest in the ground floor retail unit at Minto Yorkville. Management anticipates a lease will be executed in 2024, with lease payments commencing in 2025 to account for the fixturing period for a new tenant.

Disciplined capital allocation strengthens balance sheet

During Q1 2024, management remained focused on disciplined capital allocation in order to strengthen the REIT's balance sheet and provide flexibility with respect to its refinancing, operating and investment strategies. These measures included:

• Partially paying down the REIT's variable-rate revolving credit facility by $30-million after receiving repayment of the CDL on the Fifth + Bank property from MPI;
• Selling the Tanglewood property and a selection of suites at the Parkwood Hills property. Net proceeds of $68.0-million were used to further reduce the balance on the REIT's revolving credit facility;
• Continuing to pursue upward refinancing for three properties with the potential to generate proceeds of $55-million to $65-million. Management is considering the impact that each potential refinancing has on FFO per unit by considering the refinancing interest rates, pro forma balances outstanding and the REIT's debt maturity schedule.

As of March 31, 2024, the REIT had total debt outstanding of $1.07-billion, with a weighted average effective interest rate on term debt of 3.43 per cent and a weighted average term to maturity on term debt of 5.81 years. Debt to gross book value was 41.4 per cent, debt to adjusted EBITDA was 10.94 times and variable-rate debt was 6 per cent of total debt.

The REIT continues to maintain a strong financial position. Total liquidity was approximately $188.1-million as at March 31, 2024, with a liquidity ratio (total liquidity/total debt) of 17.6 per cent.

Subsequent event

On May 7, 2024, the REIT and MPI amended the terms of the Hyland CDL. The REIT's purchase option was extended to Feb. 28, 2025, and the maturity of the CDL was extended to April 30, 2025. In addition, the annual interest rate of 6 per cent on the CDL was adjusted and, commencing June 1, 2024, it will be equal to the all-in interest rate the REIT pays on its revolving credit facility (7.07 per cent at March 31, 2024), subject to a maximum interest rate of 7.25 per cent per annum and a minimum interest rate of 5.25 per cent per annum.

Conference call

Management will host a conference call for analysts and investors on Wednesday, May 8, 2024, at 10 a.m. ET. To join the conference call without operator assistance, participants can register and enter their phone number on-line to receive an instant automated callback. Alternatively, they can dial 416-764-8688 or 1-888-390-0546 to reach a live operator who will join them into the call.

In addition, the call will be webcast live.

A replay of the call will be available until Wednesday, May 15, 2024. To access the replay, dial 416-764-8677 or 888-390-0541 (passcode 127031 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, develop and operate income-producing multiresidential properties located in urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multiresidential rental properties located in Toronto, Montreal, Ottawa and Calgary.

We seek Safe Harbor.