True North Apartment REIT announces third quarter 2013 results

/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S. NEWSWIRES/

TORONTO, Nov. 7, 2013 /CNW/ - True North Apartment Real Estate Investment Trust (TSX: TN.UN) (the "REIT") today announced its results of operations and financial condition for the three months ended September 30, 2013 (the "third quarter").

THIRD QUARTER HIGHLIGHTS

• Increased net operating income ("NOI") by 4% to $7.7 million from the three months ended June 30, 2013 (the "second quarter"), attributable to an increase in NOI margin to 59.0% from 55.9% for the second quarter.
• Adjusted Funds from Operations ("AFFO") payout ratio continued to improve to 94%.
• Improved interest coverage of 3.3x, from 3.1x in the second quarter.
• Enhanced financial flexibility by increasing the revolving credit facility (the "Credit Facility") to $25 million, up from $15 million.
• Refinanced maturing mortgages totalling $62.8 million for a weighted average term to maturity of approximately 6.3 years.
• Entered into an automatic unit purchase plan in order to facilitate repurchases of the REIT's trust units ("Units") under the normal course issuer bid (the "NCIB").
• Subsequent to quarter end, announced the acquisition of a 119 suite property in Trenton, Ontario and the acquisition of a 148 suite property in Montréal, Québec, for a combined purchase price of approximately $23 million.
• Disposed of two non-core properties totaling 101 suites for proceeds of approximately $12.6 million.

"The REIT continued to strengthen both its property portfolio and its balance sheet during the third quarter," stated Leslie Veiner, the REIT's Chief Executive Officer. "Our recent series of transactions served to positively refocus our portfolio. While we will continue to pursue opportunistic acquisition opportunities, our prime focus continues to be improving the performance of our existing property portfolio. We see a number of opportunities to beneficially deploy capital in our portfolio in order to not only bolster our occupancy rates and rental revenues, but also to further improve our operating margins."

"The third quarter also saw the REIT continue to establish a track record of consistent NOI and AFFO performance," continued Mr. Veiner. "Although this quarter's results did benefit from seasonally lower utility costs, which will increase during the final months of the year, we are pleased with the overall trend of our payout ratio, and we are committed to the continued improvement of this metric as well as our leverage and liquidity.  During the fourth quarter, the REIT has continued to both reinvest in our portfolio and pursue the NCIB through the automatic purchase plan. We believe that this will prove to be a prudent strategy for creating unitholder value in the current capital markets environment."

Operating Results

Property revenues and NOI for the third quarter were $13.1 million and $7.7 million, respectively.

Average monthly rent ("AMR") for the third quarter was $755, an improvement of $6 when compared to the second quarter after excluding AMR for the properties sold. AMR increased in all regions, when compared to AMR for the second quarter.

Portfolio occupancy for the third quarter was 95.3%, a decline of 1.3 percentage points when compared to the second quarter. Occupancy improved in all regions with the exception of Québec, where occupancy of 91.8% represented a 5.0 percentage point decline when compared to the second quarter. The reduction in occupancy can be attributed to a large property that the REIT acquired during the third quarter of 2012. Initiatives aimed at improving tenant quality at this location led to a higher than usual number of leases not being renewed during the third quarter. Current management initiatives and recent property improvements are expected to drive increases in both occupancy and AMR at this property moving forward. The REIT's other Québec properties have minimal vacancy and are performing well.

NOI margin for the third quarter was 59.0%, a 3.1 percentage point improvement when compared to the second quarter. This increase can be attributed to seasonal reductions in utility costs, the REIT's active property management initiatives, and energy efficiency initiatives.

				Three months ended September 30, 2013		Three months ended September 30, 2012		Nine months ended September 30, 2013		For the period from January 12, 2012 to September 30, 2012
(in thousands of dollars)
Revenue				$	13,070	$	3,259	$	36,758	$	3,354
Expenses:
	Operating costs				3,796		749		12,144		778
	Property taxes				1,568		280		4,309		296
					5,364		1,029		16,453		1,074
NOI				$	7,706	$	2,230	$	20,305	$	2,280
NOI margin					59.0%		68.4%		55.2%		68.0%

 

						As at September 30, 2013	As at December 31, 2012	As at September 30, 2012
Operational Information
Number of properties						53	32	6
Total suites						5,877	3,953	1,877
Occupancy %						95.3%	95.4%	95.5%
AMR						$755	$710	$729

 

For the third quarter, basic and diluted Funds from Operations ("FFO") per Unit were $0.20. The basic FFO payout ratio was 86%. Basic AFFO per Unit was $0.19 and diluted AFFO was $0.18. The basic AFFO payout ratio was 94%, or 83% on a cash basis, when adjusted for distributions paid out through the REIT's distribution reinvestment plan.

					Three months ended September 30, 2013	Three months ended September 30, 2012	Nine months ended September 30, 2013	For the period from January 12, 2012 to September 30, 2012
(in thousands of dollars)
Summary of Financial Information
Interest coverage					3.33 x	3.16 x	3.05 x	3.08 x
Indebtedness coverage ratio					1.90 x	1.91 x	1.78 x	1.88 x
Revenue					$13,070	$3,259	$36,758	$3,354
NOI					$7,706	$2,230	$20,305	$2,280
Income (loss) and comprehensive income (loss)					($2,475)	($6,158)	$44,174	($19,959)
FFO - basic and diluted					$4,648	$1,107	$11,419	n/a
FFO per Unit - basic and diluted					$0.20	$0.15	$0.53	n/a
AFFO - basic and diluted					$4,235	$1,045	$10,494	n/a
AFFO per Unit - basic					$0.19	$0.15	$0.49	n/a
AFFO per Unit - diluted					$0.18	$0.13	$0.48	n/a
Distributions per Unit - basic					$0.175	$0.175	$0.35	n/a
FFO payout ratio					86%	128%	98%	n/a
AFFO payout ratio					94%	136%	107%	n/a
Units outstanding at period-end for FFO and AFFO per Unit:
	Weighted average (000s) - basic				22,880	7,187	21,396	n/a
	Add: Unexercised Unit Options (000s)				265	585	272	n/a
	Weighted average (000s) - diluted				23,145	7,772	21,668	n/a

Financial Position

On September 24, 2013, the REIT refinanced maturing mortgages totalling $62.8 million. The proceeds from the new financings were approximately $66.2 million and have a weighted average interest rate of 3.92% and an average term to maturity of approximately 6.3 years. Canadian Mortgage and Housing Corporation ("CMHC") insured mortgages represent 21% of the new financings. On September 27, 2013, the REIT's Credit Facility was amended to allow the REIT to borrow up to $25 million (previously $15 million). The Credit Facility bears interest on cash advances at 225 basis points per annum over the floating bankers' acceptance rate, or 125 basis points over the prime rate, and expires on October 1, 2014.

At the conclusion of the third quarter, the REIT's debt to Gross Book Value was 56.5%. The interest coverage ratio was 3.3 times. Both metrics fall within the REIT's stated targets. The weighted average interest rate on the REIT's portfolio was 2.98%, and the weighted average term to maturity was 4.49 years. CMHC-insured debt accounted for approximately 33% of the overall mortgage portfolio.

About the REIT

The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT focuses on a long-term strategy to generate stable cash distributions on a tax-efficient basis for unitholders. The REIT intends to actively look for opportunities to expand its asset base and increase its distributable cash flow through acquisitions of additional multi-suite residential rental properties across Canada, the United States, and other jurisdictions where opportunities may arise.

For complete financial statements and management's discussion and analysis for the period, and any other information relating to the REIT, please visit either www.sedar.com or the REIT's website, www.truenorthreit.com.

Non-IFRS measures

The REIT's unaudited consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, FFO, AFFO, indebtedness to gross book value ratio, gross book value, indebtedness, and interest coverage ratio as well as other measures discussed elsewhere in this press release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. The REIT uses these measures to better assess the REIT's underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the REIT's Management's Discussion and Analysis for the three and nine months ended September 30, 2013 ("MD&A") and available on the REIT's profile on SEDAR at www.sedar.com.

Forward-looking Statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information is provided for the purposes of assisting the reader in understanding the REIT's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to future results, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry and may include statements regarding: the REIT's financial position; business strategy; budgets; litigation; projected costs; capital expenditures; financial results; occupancy levels; AMR; taxes; the REIT's intention with respect to, and ability to execute, its internal and external growth strategies; the REIT's distribution policy and the distributions to be paid to holders of Units; the distributions to be paid to holders of class B limited partnership units; the REIT's debt strategy; plans and policies regarding capital expenditures; the REIT's payout ratio; the REIT's use of the NCIB; and the ability of the REIT to qualify as a "mutual fund trust", as defined in the Tax Act, and as a "real estate investment trust", as defined in the SIFT Rules.  In some cases, forward-looking information can be identified by terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "goal", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

Forward-looking information necessarily involves known and unknown risks and uncertainties, that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time, including the risks discussed in the REIT's annual information form and MD&A at "Risks and Uncertainties".  The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information as there can be no assurance that actual results will be consistent with such forward-looking information.

Information contained in forward-looking information is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; and that the risks referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

The forward-looking information included in this press release relate only to events or information as of the date hereof.  Except as specifically required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. 

SOURCE: True North Apartment Real Estate Investment Trust

Leslie Veiner
Chief Executive Officer
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or

Martin Liddell
Chief Financial Officer
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