MI.UN Minto Apartment Real Estate Investment Trust

— Normalized FFO and AFFO per unit growth of 27.3% and 32.8%, respectively —

OTTAWA, ON, May 7, 2024 /CNW/ - Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced 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 at www.mintoapartmentreit.com and at www.sedarplus.ca.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% and Normalized FFO and AFFO per unit increased by 27.3% and 32.8%, 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% lower than the prior year, our variable-rate debt as a percentage of Total Debt decreased to 6% by quarter end and our Debt-to-Adjusted EBITDA and Debt-to-Gross Book Value ratios improved significantly."

Q1 2024 Highlights

• Same Property Portfolio ("SPP") revenue was $38.2 million, an increase of 6.1% and total revenue was $38.9 million, an increase of 1.4% compared to the first quarter ended March 31, 2023 ("Q1 2023");
• Average monthly rent was $1,911, an increase of 8.0% compared to Q1 2023;
• Average occupancy of unfurnished suites was 96.9%, compared to 97.2% in Q1 2023;
• The REIT executed 369 new leases, achieving an average rental rate that was 12.5% higher than the expiring rents. The gain-to-lease potential on sitting rents remains attractive at 15.9% as at March 31, 2024;
• SPP annualized turnover was 15.9%, in line with seasonal norms;
• SPP Normalized Net Operating Income ("Normalized NOI") increased 12.3% compared to Q1 2023 and SPP Normalized NOI margin was 63.0%, an increase of 350 bps from Q1 2023;
• Normalized Funds from Operations ("Normalized FFO") were $0.2272 per unit, an increase of 27.3% from $0.1785 per unit in Q1 2023;
• Normalized Adjusted Funds from Operations ("Normalized AFFO") were $0.2026 per unit, an increase of 32.8% compared to $0.1526 per unit in Q1 2023;
• Normalized AFFO payout ratio declined by 1,800 bps to 62.3%;
• Net loss and comprehensive loss was $18.8 million, compared to $24.2 million in Q1 2023;
• On January 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 February 15, 2024, the REIT completed the sale of the Tanglewood property and a selection of suites at the Parkwood Hills property in Ottawa, Ontario 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; and,
• Debt-to-adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") ratio decreased by 0.85x to 10.94x and Debt-to-Gross Book Value ratio decreased by 140 basis points to 41.4%.
• Financial Summary

Achieved Normalized Same Property NOI Growth of 12.3% in Q1 2024

The REIT achieved SPP Normalized NOI growth of 12.3% in Q1 2024 compared to Q1 2023. This was primarily driven by an increase in SPP average monthly rent of 6.6% 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 bps to 63.0%, 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% and 32.8%, respectively, compared to 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%, Debt-to-Adjusted EBITDA decreased by 0.85x to 10.94x and variable-rate debt was reduced to 6% of Total Debt at quarter end. As a result, interest costs in Q1 2024 declined by 11.0% compared to 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 December 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 to $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 to Q1 2023.

The REIT generated organic growth through 369 new leases signed in Q1 2024, achieving an average gain-on-lease of 12.5%. The REIT realized double-digit gain-on-lease in every market except Toronto, where approximately 70% 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% and 13.8% across the portfolio.

The REIT estimates a gain-to-lease potential of 15.9% 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% 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%. The REIT strategically assesses each repositioning and currently expects to reposition a total of 50 to 90 suites in 2024, compared to 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.

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% and a weighted average term to maturity on Term Debt of 5.81 years. Debt-to-Gross Book Value was 41.4%, Debt-to-Adjusted EBITDA was 10.94x and variable-rate debt was 6% 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%.

On May 7, 2024, the REIT and MPI amended the terms of The Hyland CDL. The REIT's purchase option was extended to February 28, 2025 and the maturity of the CDL was extended to April 30, 2025. In addition, the 6% annual interest rate 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% at March 31, 2024), subject to a maximum interest rate of 7.25% per annum and a minimum interest rate of 5.25% per annum.

Management will host a conference call for analysts and investors on Wednesday, May 8, 2024 at 10:00 am ET. To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/4cIZVKM 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.

In addition, the call will be webcast live at:

Minto Apartment REIT Q1 2024 Earnings Webcast

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 #). A transcript of the call will be archived on the REIT's website.

Minto Apartment Real Estate Investment Trust 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 multi-residential properties located in urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa and Calgary. For more information on Minto Apartment REIT, please visit the REIT's website at: www.mintoapartmentreit.com.

This news release may contain forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will", "expects", "potential" and "anticipated". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in the REIT's Annual Information Form dated March 6, 2024, which is available on SEDAR+ (www.sedarplus.ca). The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks only as of the date of this news release.

This news release contains certain non-IFRS and other financial measures which are measures commonly used by publicly traded entities in the real estate industry. Management believes that these metrics are useful for measuring different aspects of performance and assessing the underlying operating and financial performance on a consistent basis. However, these measures do not have a standardized meaning prescribed by IFRS Accounting Standards ("IFRS") and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should strictly be considered supplemental in nature and not a substitute for financial information prepared in accordance with IFRS. The REIT has adopted the guidance under NI 52-112 Non-GAAP and Other Financial Measures Disclosure for the purpose of this news release. These non-IFRS and other financial measures are defined below:

• "AFFO" is defined as FFO adjusted for items such as maintenance capital expenditures and straight-line rental revenue differences. AFFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating AFFO may differ from other issuers' methods and, accordingly, may not be comparable to AFFO reported by other issuers. The REIT also uses AFFO in assessing its capacity to make distributions.
• "AFFO per unit" is calculated as AFFO divided by the weighted average number of Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership outstanding over the period. The REIT regards AFFO per unit as a key measure of operating performance.
• "AFFO payout ratio" is the proportion of the total distributions on Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership to AFFO. The REIT uses AFFO payout ratio in assessing its capacity to make distributions.
• "annualized turnover" is calculated as the number of move-outs for the period divided by total number of unfurnished suites in the portfolio. This percentage is extrapolated to determine an annual rate.
• "average annual unlevered return" refers to the return on repositioning activities, and is calculated by dividing the average annual rental increase per suite after repositioning by the average repositioning cost per suite, excluding the impact of financing costs.
• "average monthly rent" represents the average monthly rent per suite for occupied unfurnished suites at the end of the period.
• "average occupancy" is defined as the ratio of occupied unfurnished suites to the total unfurnished suites in the portfolio for the period.
• "Debt-to-Adjusted EBITDA" is calculated by dividing interest-bearing debt (net of cash) by Adjusted EBITDA. Adjusted EBITDA is a non-IFRS Financial Measure and used for evaluation of the REIT's financial health and liquidity. Adjusted EBITDA is calculated as the trailing twelve-month NOI adjusted for a full year of stabilized earnings including finance income, fees and other income and general and administrative expenses from recently completed acquisitions or dispositions, but excluding fair value adjustments. The REIT regards Debt-to-Adjusted EBITDA ratio as a measure of financial health and liquidity.
• "Debt-to-Gross Book Value ratio" is calculated by dividing total interest-bearing debt consisting of fixed and variable rate mortgages, credit facilities, construction loans and Class C limited partnership units of Minto Apartment Limited Partnership by Gross Book Value and is used as the REIT's primary measure of its leverage.
• "FFO" is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of investment properties, effects of puttable instruments classified as financial liabilities and changes in fair value of financial instruments and derivatives. FFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities determined in accordance with IFRS. The REIT's method of calculating FFO may differ from other issuers' methods and, accordingly, may not be comparable to FFO reported by other issuers.
• "FFO per unit" is calculated as FFO divided by the weighted average number of Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership outstanding over the period. The REIT regards FFO per unit as a key measure of operating performance.
• "gain-on-lease" refers to the gap between rents achieved on new leases of unfurnished suites as compared to the expiring leases.
• "gain-to-lease potential" refers to the gap between Management's estimate of monthly market rent and average monthly in-place rent per occupied unfurnished suite.
• "Gross Book Value" is defined as the total assets of the REIT as at the balance sheet date.
• "interest costs" are calculated as the sum of costs incurred on mortgages, credit facility, and Class C limited partnership units of Minto Apartment Limited Partnership and excludes debt retirement costs.
• "NAV" is calculated as the sum of the value of REIT Unitholders' equity and Class B limited partnership units of Minto Apartment Limited Partnership as at the balance sheet date.
• "NAV per unit" is calculated by dividing NAV by the number of Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership outstanding as at the balance sheet date.
• "NOI" is defined as revenue from investment properties less property operating costs, property taxes and utilities (collectively referred to as "property operating expenses" or "operating expenses") prepared in accordance with IFRS. NOI should not be construed as an alternative to net income determined in accordance with IFRS. The REIT's method of calculating NOI may differ from other issuers' methods and, accordingly, may not be comparable to NOI reported by other issuers. It is a key input in determining the value of the REIT's properties.
• "NOI margin" is defined as NOI divided by revenue from investment properties.
• "Normalized AFFO" is calculated as AFFO net of nonrecurring items that occurred during the period which are not indicative of the REIT's typical operating results.
• "Normalized AFFO per unit" is calculated as Normalized AFFO divided by the weighted average number of Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership outstanding over the period.
• "Normalized AFFO payout ratio" is the proportion of the total distributions on Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership to Normalized AFFO.
• "Normalized FFO" is calculated as FFO net of nonrecurring items that occurred during the period which are not indicative of the REIT's typical operating results.
• "Normalized FFO per unit" is calculated as Normalized FFO divided by the weighted average number of Units of the REIT and Class B limited partnership units of Minto Apartment Limited Partnership outstanding over the period.
• "Normalized NOI" is calculated as NOI net of nonrecurring items that occurred during the period which are not indicative of the REIT's typical operating results.
• "Normalized NOI margin" is defined as Normalized NOI divided by revenue from investment properties.
• "Normalized operating expenses" are calculated as operating expenses net of non-recurring items that occurred during the period which are not indicative of the REIT's typical operating results.
• "Term Debt" is calculated as the sum of value of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C limited partnership units of Minto Apartment Limited Partnership.
• "Total Debt" is calculated as the sum of value of interest-bearing debt consisting of mortgages, credit facilities, construction loans and Class C limited partnership units of Minto Apartment Limited Partnership.
• "Total liquidity" is calculated as the sum of the undrawn balance under the revolving credit facility and cash.
• "weighted average term to maturity on Term Debt" is calculated as the weighted average of the term to maturity on the outstanding fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C limited partnership units of Minto Apartment Limited Partnership.
• "weighted average effective interest rate on Term Debt" is calculated as the weighted average of the effective interest rates on the outstanding balances of fixed rate mortgages, a variable rate mortgage fixed through an interest rate swap and Class C limited partnership units of Minto Apartment Limited Partnership.

Reconciliations of Non-IFRS Financial Measures and Ratios

FFO and AFFO

Normalized FFO and AFFO

NOI and NOI Margin

NAV and NAV per unit

SOURCE Minto Apartment Real Estate Income Trust