Mr. Evan Kirsh reports

STARLIGHT U.S. MULTI-FAMILY (NO. 2) CORE PLUS FUND ANNOUNCES Q2-2023 OPERATING RESULTS INCLUDING SAME PROPERTY AMR GROWTH OF 6.3%

Starlight U.S. Multi-Family (No. 2) Core Plus Fund has released its results of operations and financial condition for the three months ended June 30, 2023, and the six months ended June 30, 2023. Certain comparative figures are included for the three months ended June 30, 2022, and the six months ended June 30, 2022.

All amounts in this press release are in thousands of U.S. dollars except for average monthly rent (AMR) (1) or unless otherwise stated.

"The fund owns a high-quality, well-located portfolio of multifamily communities, which has continued to demonstrate strong operating results, including an increase in same-property average monthly rents of 6.3 per cent from [second quarter] 2022 to Q2 2023," commented Evan Kirsh, the fund's president. "The fund continues to focus on increasing net operating income at its properties through active asset management strategy and navigating the present period of capital markets uncertainty with the goal of maximizing the total return for investors upon exit."

Q2 2023 highlights:

• Q2 2023 revenue from property operations and net operating income (NOI) (1) were $5,251 and $3,302 (Q2 2022: $4,565 and $3,029), respectively, representing an increase of $686 and $274 relative to Q2 2022 primarily as a result of the acquisition of Summermill at Falls River, as well as strong same-property revenue growth of 7.0 per cent and strong same-property NOI (1) growth of 3.2 per cent.
• The fund achieved a 6.3-per-cent increase in same-property AMR from Q2 2022 to Q2 2023, as well as an estimated gap to market versus in-place rents (1) of 12.0 per cent as at the end of Q2 2023, providing further opportunity for rental increases in future periods.
• The fund completed 19 in-suite value-add upgrades at Summermill during Q2 2023, which generated an average rental premium of $299 and an average return on cost of approximately 21.0 per cent.
• As at Aug. 8, 2023, the fund had collected 98.3 per cent of rents for Q2 2023, with further amounts expected to be collected in future periods, demonstrating the fund's high-quality resident base and operating performance.
• The fund reported a net loss and comprehensive loss for Q2 2023 of $9,520 (Q2 2022: net income and comprehensive income of $180), primarily resulting from the fair value loss on investment properties reported in Q2 2023 and increases in finance costs, partially offset by the increases in NOI, including strong same-property NOI growth, as well as recoveries during Q2 2023 for carried interest and deferred tax provisions.
• Subsequent to Q2 2023, the fund amended the existing loan payable to modify the Hudson loan to a fixed-rate loan bearing interest-only payments at 5.75 per cent from the date of the amendment to the initial maturity date of May 7, 2025. As part of such amendment, the fund discharged its obligation to purchase a replacement interest rate cap in November, 2023, which is expected to allow the fund to retain substantial liquidity that otherwise would have been utilized for the purchase of a replacement interest rate cap. The fund continues to have interest rate caps, swaps or fixed-rate debt in place for 100 per cent of its mortgages on the fund's properties.
• On Aug. 9, 2023, Starlight U.S. Multi-Family (No.2) Core Plus GP Inc., the general partner of the fund, approved a one-year extension of the fund's term to Jan. 8, 2025, to provide the fund with the opportunity to capitalize on more robust market dynamics.

YTD 2023 highlights:

• Revenue from property operations and NOI for year-to-date 2023 were $10,530 and $6,573 (YTD 2022: $8,018 and $5,325), respectively, representing a $2,512 and $1,249 increase relative to YTD 2022. The significant increases were primarily due to the acquisition of Summermill in Q2 2022, strong same-property revenue growth of 9.6 per cent and same-property NOI growth of 3.9 per cent.
• Net loss and comprehensive loss for YTD-2023 were $11,392 (YTD 2022: net income and comprehensive income of $9,000) primarily as a result of fair value loss on investment properties reported during YTD 2023, as well as increases in finance costs, partially offset by the increases in NOI, including strong same-property NOI growth, as well as recoveries recorded during YTD 2023 for carried interest and deferred tax provisions.
• The fund completed 35 in-suite value-add upgrades at Summermill during YTD 2023, which generated an average rental premium of $301 and an average return on cost of approximately 21.0 per cent.

(1) This metric is a non-international financial reporting standard measure.

Financial condition and operating results

Highlights of the financial and operating performance of the fund as at June 30, 2023, for Q2 2023 and YTD 2023, including a comparison with Dec. 31, 2022, Q2 2022 and YTD 2022 as applicable, are provided herein.

Future outlook

Since early 2022, concerns over elevated levels of inflation have resulted in a significant increase in interest rates with the U.S. Federal Reserve raising the federal funds rate by approximately 525 basis points. Interest rate increases typically lead to increases in borrowing costs for the fund, reducing cash flow, given the fund primarily employs a variable-rate debt strategy due to the fund's initial three-year term to provide maximum flexibility upon the eventual sale of the fund's properties during or at the end of the fund's term. Historically, investments in multifamily properties have provided an effective hedge against inflation given the short-term nature of each resident lease, which has been demonstrated in the rent growth achieved at the fund's properties, where same-property AMR increased by 6.3 per cent from Q2 2022 to Q2 2023. Furthermore, the fund does have certain interest rate caps, swaps or fixed-rate debt in place, which protect the fund from increases in interest rates beyond stipulated levels and for stipulated terms as described in detail in the fund's condensed consolidated interim financial statements for the three and six months ended June 30, 2023, and the audited consolidated financial statements for the year ended Dec. 31, 2022, which are available at SEDAR+. The fund also continues to closely monitor the U.S. employment and inflation data, as well as the U.S. Federal Reserve's monetary policy decisions in relation to future interest rates and the resulting impact these may have on the fund's financial performance in future periods.

The impact of rising interest rates and higher levels of inflation have also significantly disrupted active and new construction of comparable communities in the primary markets in which the fund operates, which may create a temporary imbalance in supply of multisuite residential properties in future periods. This imbalance, alongside the continued economic strength and solid fundamentals, may be supportive of favourable supply and demand conditions for the fund's properties in future periods, and could result in future increases in occupancy and rent growth. The fund believes it is well positioned to take advantage of these conditions should they transpire given the quality of the fund's properties and the benefit of having a resident pool employed across a diverse job base.

The fund continues to closely monitor the financial impact of elevated interest rates and higher levels of inflation on the fund's liquidity and financial performance.

Further disclosure surrounding the future outlook is included in the fund's management's discussion and analysis in the future outlook section for Q2 2023 under the fund's profile, which is available on SEDAR+.

About Starlight U.S. Multi-Family (No. 2) Core Plus Fund

The fund is a limited partnership formed under the Limited Partnerships Act (Ontario) for the primary purpose of indirectly acquiring, owning and operating a portfolio of value-add, income-producing rental properties in the U.S. multifamily real estate market. The fund currently owns interests in three properties, consisting of 995 suites with an average year of construction in 2013.

For the fund's complete condensed consolidated interim financial statements and MD&A for the three and six months ended June 30, 2023, and any other information related to the fund, please visit SEDAR+. Further details regarding the fund's unit performance and distributions, market conditions where the fund's properties are located, performance by the fund's properties, and a capital investment update are also available in the fund's August, 2023, newsletter, which is available on the fund's profile at the Starlight website.

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