06:02:18 EDT Tue 22 May 2018
Enter Symbol
or Name
USA
CA



Login ID:
Password:
Save
Starlight US Multi-Family (No 1) Value-Add Fu
Symbol C : SUVA.A
Shares Issued 1,714,405
Close 2018-05-11 C$ 9.00
Recent Sedar Documents

Starlight U.S. (No. 1) earns $5.52-million (U.S.) in Q1

2018-05-16 18:41 ET - News Release

Mr. Evan Kirsh reports

STARLIGHT U.S. MULTI-FAMILY (NO. 1) VALUE-ADD FUND ANNOUNCES 2018 FIRST QUARTER FINANCIAL RESULTS, COMPLETES DEPLOYMENT OF OFFERING PROCEEDS AND MAY 2018 DISTRIBUTIONS

Starlight U.S. Multi-Family (No. 1) Value-Add Fund has released its results of operations and financial condition for the three months ended March 31, 2018.

All amounts in this press release are in thousands of U.S. dollars except for average market rent (AMR) or unless otherwise stated. The forecast figures represent the financial forecast as set out in the fund's final long-form prospectus dated June 12, 2017, as part of the initial public offering.

First quarter highlights:

  • On Jan. 9, 2018, the fund acquired a 50-per-cent interest in Landmark at Coventry Pointe, a 250-suite value-add property, located in Atlanta, Ga., for $17,563. The fund's share of the acquisition price was partly financed by the fund's share of a first mortgage of $12,070, with the balance provided by cash proceeds from the offering. As part of the fund's business plan, Coventry Pointe will be repositioned to a modern standard with upgraded suite finishes and attractive common areas and amenity spaces.
  • The fund continued to ramp up its value-add capital improvement program during the first quarter. The fund upgraded and re-leased an additional 57 suites, achieving average rent increases of $160 per month for each upgraded suite and an estimated average return on investment of 22.9 per cent. Substantially all of the upgrades were made to one- and two-bedroom suites.
  • During the first quarter, the fund recognized a fair value increase on its properties of $10,609 primarily driven by capitalization rate compression.
  • Indebtedness to gross book value improved to 61.4 per cent as at March 31, 2018, in comparison with 65.1 per cent as at Dec. 31, 2017.
  • Revenue from property operations, including the fund's 50-per-cent interest in Coventry Pointe, was $3,745 for the first quarter. This was $107 or 2.9 per cent higher than forecast primarily due to the impact of the acquisition of Coventry Pointe, partially offset by a reduction in economic occupancy at the Landing at Round Rock.
  • Net operating income (NOI), including the fund's 50-per-cent interest in Coventry Pointe, was $2,091 for the first quarter in comparison with forecast of $2,097. NOI margin for the first quarter, including the fund's 50-per-cent interest in Coventry Pointe was 55.8 per cent (forecast: 57.6 per cent).
  • Net income and comprehensive income were $5,526 for the first quarter (forecast: net loss and comprehensive loss of $369). The increase during the first quarter was primarily due to the fair value increases on the fund's properties.
  • Economic occupancy for the first quarter was 88.3 per cent, in comparison with forecast of 93.8 per cent. The Landing experienced a slower leasing period for larger three- and four-bedroom suites. Demand for these suites is typically higher in the second and third quarters.
  • The fund's adjusted funds from operations (AFFO) for the first quarter were $792, in comparison with forecast of $923. The $131 or 14.2-per-cent shortfall to forecast was primarily related to increased interest expense as a result of the U.S. 30-day London interbank offered rate (LIBOR) being higher than the rate used in the forecast and lower economic occupancy at the Landing. The fund's AFFO payout ratio was 127.0 per cent (forecast: 91.5 per cent).
  • Interest coverage ratio and indebtedness coverage ratio were 1.63 times for the first quarter.
  • As at March 31, 2018, the weighted-average interest rate on mortgages payable was 3.70 per cent, and the weighted-average term to maturity was 2.25 years.

                        FINANCIAL CONDITION AND OPERATING RESULTS
  
                                                  As at March 31, 2018      As at Dec. 31, 2017
Operational information
Number of properties                                                 3                        2
Total suites                                                     1,193                      943
Economic occupancy (1)                                            88.3%                    90.9%
AMR (in actual dollars) (2)                                     $1,199                   $1,212
AMR per square foot (in actual dollars) (2)                       1.08                     1.13

Summary of financial information
Gross book value (3)                                          $191,950                 $161,142
Indebtedness (3)                                              $117,782                 $104,950
Indebtedness to gross book value (4)                              61.4%                    65.1%
Weighted-average mortgage interest rate                           3.70%                    3.41%
Weighted-average mortgage term to maturity                  2.25 years               2.50 years
                                                            ----------               ----------

                                                                                             Q1
Summary of financial information
Revenue from property operations (5)                                                     $3,745
Property operating costs (5)                                                              ($954)
Property taxes (5) (6)                                                                    ($700)
NOI (5)                                                                                  $2,091
Net income and comprehensive income                                                      $5,526
                                                                                     ----------
Funds from operations (FFO)                                                                $693
FFO per unit -- basic and diluted                                                         $0.08
AFFO                                                                                       $792
AFFO per unit -- basic and diluted                                                        $0.10
Interest coverage ratio                                                                   1.63x
Indebtedness coverage ratio                                                               1.63x
FFO payout ratio                                                                          145.2%
AFFO payout ratio                                                                         127.0%
                                                                                     ----------
(1) Economic occupancy for the first quarter and three months ended Dec. 31, 2017.
(2) The decrease in AMR (average market rent) and AMR per square foot is primarily 
related to the weighted-average impact of the acqusition of Coventry Pointe, which 
had an AMR and AMR per square foot of $1,077 and 82 cents, respectively.                               
(3) Gross book value and indebtedness include the proportionate amounts of the 
fund's 50-per-cent interest in Coventry Pointe.   
(4) Defined as indebtedness divided by gross book value.      
(5) Revenue from property operations, property operating costs, property taxes and 
NOI (net operating income) includes the proportionate amounts for the fund's 50-
per-cent interest in Coventry Pointe.   
(6) Property taxes were adjusted to exclude the international financial reporting 
interpretations committee 21 (Levies) adjustment and treat property taxes as 
an expense that is amortized during the fiscal year for the purpose of calculating 
NOI.

As at March 31, 2018, the Landing and Spectra on 7th South AMR was $1,354 and $996, respectively, compared with forecast of $1,392 and $1,025, respectively. The shortfall to forecast at the Landing was primarily due to higher vacancy in larger suites, which carry higher average rents. The shortfall at Spectra South was primarily related to higher vacancy in suites which carry higher average rents. This vacancy in suites which carry higher average rents was primarily related to the timing of lease expiries. Since March 31, 2018, the fund has experienced enhanced leasing activity with respect to these suites at Spectra South. For the three months ended March 31, 2018, economic occupancy at the Landing was 85.3 per cent (forecast: 94.0 per cent), Spectra South economic occupancy was 92.7 per cent (forecast: 93.6 per cent) and Coventry Pointe economic occupancy was 94.9 per cent. Economic occupancy at the Landing for the three months ended March 31, 2018, was lower than forecast primarily due to a slower leasing period for larger three- and four-bedroom suites. The Landing typically sees higher demand for its three- and four-bedroom suites in the second and third quarters. When this property was acquired, the lease expiration profile was not optimal, resulting in uneven lease expirations. The fund is in the process of optimizing lease expirations for this property in conjunction with the release of upgraded suites.

AFFO per unit and AFFO payout ratio for the first quarter were 10 cents and 127.0 per cent, respectively, compared with forecast of 12 cents and 91.5 per cent, respectively. These variances from forecast are primarily related to the lower economic occupancy at the Landing and higher interest on mortgages payable due to an increase in LIBOR. The fund expects to see an improvement in the economic occupancy at the Landing and expects an increase in rents as a result of the suite upgrade program, resulting in an improved AFFO payout ratio in the second and third quarters.

May, 2018, distributions

The fund also announced its May, 2018, cash distribution amounts on its outstanding Class A units, Class C units, Class D units, Class E units, Class F units, Class H units and Class U units, payable on June 15, 2018, to holders of units of record at May 31, 2018. The distribution amounts will be as follows:

  • Five Canadian cents per Class A unit, representing approximately 60 Canadian cents per unit on an annualized basis;
  • Five Canadian cents per Class C unit, representing approximately 60 Canadian cents per unit on an annualized basis;
  • Five Canadian cents per Class D unit, representing approximately 60 Canadian cents per unit on an annualized basis;
  • Five U.S. cents per Class E unit, representing approximately 60 U.S. cents per unit on an annualized basis;
  • Five Canadian cents per Class F unit, representing approximately 60 Canadian cents per unit on an annualized basis;
  • For Class H units, 1.667 Canadian cents, representing approximately 60 Canadian cents per unit on an annualized basis less a portion of the cost of the derivative instrument purchased by the fund to provide the holders of Class H units with some protection against any weakening of the U.S. dollar as compared with the Canadian dollar on termination and liquidation of the fund;
  • Five U.S. cents per Class U unit, representing approximately 60 U.S. cents per unit on an annualized basis.

A wholly owned subsidiary of Starlight Group Property Holdings Inc., the manager of the fund, may at its sole discretion, discontinue the Class H unit liquidation hedge in the event that derivative instruments are not available on an economical basis or the manager determines that the continuation of the Class H unit liquidation is no longer in the best interests of holders of Class H units.

About Starlight U.S. Multi-Family (No. 1) Value-Add 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 interests in 1,193 suites with an average year of construction in 2003.

We seek Safe Harbor.

© 2018 Canjex Publishing Ltd. All rights reserved.