MARWEST APARTMENT REAL ESTATE INVESTMENT TRUST ANNOUNCES 2023 ANNUAL RESULTS

MARWEST APARTMENT REAL ESTATE INVESTMENT TRUST ANNOUNCES 2023 ANNUAL RESULTS

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

WINNIPEG, MB, March 15, 2024 /CNW/ – Marwest Apartment Real Estate Investment Trust (the “REIT”) (TSXV: MAR.UN) reported financial results for the year ended December 31, 2023.  This press release should be read in conjunction with the REIT’s Consolidated Financial Statements and Management’s Discussion and Analysis (2023 Annual MD&A”) for the year ended December 31, 2023, which are available on the REIT’s website at www.marwestreit.com and at www.sedarplus.ca1.

MARWEST APARTMENT REAL ESTATE INVESTMENT TRUST ANNOUNCES 2023 ANNUAL RESULTSMARWEST APARTMENT REAL ESTATE INVESTMENT TRUST ANNOUNCES 2023 ANNUAL RESULTS

Marwest Apartment Real Estate Investment Trust Logo (CNW Group/Marwest Apartment Real Estate Investment Trust)

Mr. William Martens, Chief Executive Officer and Trustee commented, “In 2023 we were able to grow our NAV from $1.44 per Unit to $1.90 per Unit.  The REIT has benefitted from the current economic pressures which continue to limit the amount of housing supply in the market resulting in lower vacancy rates and higher rental rates.  Management expects similar demand and low vacancy rates to continue throughout 2024.”

2023 Annual Highlights

  • Increased distributions by 2% to Unitholders on record at August 31, 2023

  • Reported Net Asset Value per Unit (“NAV“) of $1.90 at December 31, 2023 compared to $1.44 at December 31, 2022

  • Same Property Net Operating Income1 (“Same Property NOI“) increased by 14.71% in 2023 compared to 2022

  • Reported funds from operations (“FFO“) per Unit of $0.0970 for the year ended December 31, 2023, compared to $0.0796 for 2022

  • Reported adjusted funds from operations (“AFFO“) per Unit of $0.0936 for year ended December 31, 2023, compared to $0.0694 for 2022

  • Average Occupancy rate of 99.00% reported for the year ended December 31, 2023

Operations Summary

Year ended
December 31, 2023

Year ended
December 31, 2022

Portfolio Operational Information

Number of properties

4

4

Number of suites

516

516

Average Occupancy Rate

99.00 %

97.23 %

Average rental rate

$1,540

$1,511

Same property Net Operating Income

$             4,614,455

$             4,022,639

 

Three months ended

Year ended

December 31

December 31

Reconciliation of Same Property NOI2 to IFRS

2023

2022

2023

2022

Revenue from investment properties

$1,916,224

$  1,781,187

$7,093,994

$  6,698,998

Expenses:

Property operating expenses

551,655

503,809

1,878,301

2,025,945

Realty taxes

145,066

162,967

601,238

650,414

Total property operating expenses

696,721

666,776

2,479,539

2,676,359

Same Property NOI2

$1,219,503

$  1,114,411

$4,614,455

$  4,022,639

1 This news release contains certain non-IFRS and other financial measures.  Refer to “Notice with respect to Non-IFRS Measures” in this news release for a complete list of measures and their meaning.

2 Same Property Portfolio consists of 3 multi-residential properties owned by the REIT for comparable periods in Q4 2023 and Q4 2022 – See “Notice with respect to Non-IFRS Measures” below.

 

Reconciliation of Debt-to-Gross Book Value ratio

Total interestbearing debt

$100,767,840

Total assets on balance sheet

139,770,463

Debt-to-Gross Book Value ratio

72.10 %

Reconciliation of Debt Service Coverage ratio


Net Operating Income for the year ended December 31, 2023

$   6,359,930

Mortgage payments for the year ended December 31, 2023

4,899,297

Debt Service Coverage ratio

1.30

Weighted average term to maturity on fixed rate debt

67.30 months

Weighted average interest rate on fixed debt

3.01 %

Financial Summary

The REIT generated FFO and AFFO per Unit of $0.0970 and $0.0942, respectively, during the year ended December 31, 2023.

Reconciliation of Net Income (Loss) and
Comprehensive Income (Loss) to FFO and
AFFO

Three months ended

Year ended

December 31

December 31

2023

2022

2023

2022

Revenue from investment properties

$2,521,270

$ 2,253,104

$9,958,861

$7,170,916

Property operating expenses

(675,977)

(620,091)

(2,695,493)

(2,144,127)

Realty taxes

(225,864)

(236,430)

(903,438)

(721,977)

Net Operating Income 

1,619,429

1,396,583

6,359,930

4,304,812

NOI Margin 

64.23 %

61.98 %

63.86 %

60.03 %

General and administrative

(308,952)

(208,624)

(887,564)

(715,467)

Finance costs

(932,431)

(836,569)

(3,745,064)

(2,193,845)

Fair value gain (loss) on:

Investment properties

4,337,052

(2,561,638)

7,510,095

2,079,396

Unit-based compensation

(49,067)

(2,170)

5,944

13,575

Warrants liability

21,359

Exchangeable Units

(3,686,033)

(650,476)

(542,063)

(108,412)

Net income (loss) and

comprehensive income (loss)

$  979,998

$(2,862,894)

$8,701,278

$3,401,418

 

Three months ended

Year ended

December 31

December 31

Reconciliation of FFO 

2023

2022

2023

2022

Net income (loss) and comprehensive income (loss)

979,998

(2,862,894)

8,701,278

3,401,418

Distributions on Exchangeable Units

41,468

40,607

163,968

162,617

Fair value (gain) loss on investment properties

(4,337,052)

2,561,638

(7,510,095)

(2,079,396)

Fair value loss (gain) on unit-based compensation

49,067

2,170

(5,944)

(13,575)

Fair value gain on warrant liability

(21,359)

Fair value loss on Exchangeable Units

3,686,033

650,476

542,063

108,412

FFO

419,514

391,997

1,891,270

1,558,117

Weighted average number of Units

19,498,838

19,508,838

19,501,276

19,565,490

FFO/unit

$   0.0215

$    0.0201

$    0.0970

$    0.0796

Reconciliation of AFFO 

FFO

$ 419,514

$  391,997

$1,891,270

$1,558,117

Capital expenditures

(10,560)

(65,702)

(52,729)

(167,845)

Leasing costs

(2,388)

(368)

(14,146)

(32,183)

AFFO

406,566

325,927

1,824,395

1,358,089

Weighted average number of Units

19,498,838

19,508,838

19,501,276

19,565,490

AFFO/unit

$   0.0209

$    0.0167

$    0.0936

$    0.0694

AFFO payout ratio

18.34 %

22.45 %

16.17 %

21.61 %

 

NAV and NAV per Unit Reconciliation

At December 31, 2023

At December 31, 2022

Unitholders’ Equity

$              27,578,331

$             19,014,023

Exchangeable Units

9,757,146

9,215,083

NAV

37,335,477

28,229,106

Trust Units

8,657,564

8,667,564

Exchangeable Units 

10,841,274

10,841,274

Deferred Units

167,265

110,036

Total Units oustanding

19,666,103

19,618,874

NAV per unit

$                        1.90

$                       1.44

The overall increase in NAV from $1.44 at December 31, 2022 to $1.90 at December 31, 2023, was due compression of capitalization rates in the valuation of the portfolio compared to 2022, as well as market conditions throughout all properties and net operating income less finance costs and general and administrative expenses exceeding distributions.

Outlook

Management is focused on growing the portfolio and unitholder value through increasing rental rates where the market allows, future acquisition opportunities that will increase the overall size and performance of the REIT, as well as maintaining a manageable debt structure.   The current debt of the REIT is all fixed rates with an average remaining mortgage term of over five years.  The majority of the REIT’s debt is CMHC insured.

Subsequent to year end, the Element Phase I debt that matured on January 1, 2024 was refinanced with a CMHC insured mortgage with a term of 10 years, interest rate of 4.3% and amortization of 40 years.  The total debt advanced was, including $347,700 of CMHC premiums and fees, $8,387,700.

Management believes the organic growth in NAV due to paydown of debt over the mortgage terms is a positive outcome of the higher leveraged position as well as lowering the REIT’s debt to GBV ratio and thereby increasing the NAV per Unit over time.

Management anticipates the demand for rental housing to continue to grow in the coming quarters due to increasing immigration and the affordability gap in rental vs. home ownership.  As interest rates maintain their current levels, the cost of home ownership remains elevated.

The increase in the portfolio’s operating costs due to inflation may be offset by increases in rental rates, where the market allows, as 56 percent of the portfolio at December 31, 2023 is not under rent control or restrictive financing agreements.

About Marwest Apartment Real Estate Investment Trust

The REIT is an unincorporated open-ended trust governed by the laws of the Province of Manitoba. The REIT was formed to provide holders of Units with the opportunity to invest in the Canadian multi-family rental sector through the ownership of high-quality income-producing properties, with an initial focus on stable markets throughout Western Canada.

Forward-looking Statements

The information in this news release includes certain information and statements about management’s views of future events, expectations, plans and prospects that constitute forward‐looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties.  Because of these risks and uncertainties and as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated and indicated by these forward‐looking statements. A number of factors could cause actual results to differ materially from these forward‐looking statements, including the risks described under the heading “Risk Factors” in the REIT’s latest annual information form and management’s discussion and analysis.  The payment of cash distributions will be dependent upon a number of factors, including but not limited to the financial performance, financial condition and financial requirements of the REIT.  Although management of the REIT believes that the expectations reflected in forward‐looking statements are reasonable, it can give no assurances that the expectations of any forward‐looking statements will prove to be correct. Except as required by law, the REIT disclaims any intention and assumes no obligation to update or revise any forward‐looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward‐looking statements or otherwise.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this news release.

The Units are not registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons, except in certain transactions exempt from the registration requirements of the U.S. Securities Act. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, securities of the REIT in the United States or in any other jurisdiction.

Notice with respect to Non-IFRS Measures Disclosure

The REIT’s financial statements are prepared in accordance with IFRS.  In addition to IFRS measures, this news release and the REIT’s Annual 2023 MD&A disclose certain non-IFRS financial measures that are commonly used by Canadian real estate investment trusts as an indicator of performance.  Non-IFRS measures and ratios include the following:

Net Operating Income (“NOI”)

The Trust calculates net operating income as revenue less property operating expenses such as utilities, repairs and maintenance and realty taxes.  Charges for interest or other expenses not specific to the day‑to‑day operations of the Trust’s properties are not included.  The Trust regards NOI as an important measure of the income generated by income-producing properties and is used by management in evaluating the performance of the Trust’s properties.  NOI is also a key input in determining the value of the Trust’s properties. For reconciliation to IFRS measures, refer to “Financial Operations and Results” in the REIT’s Annual 2023 MD&A

Funds from Operations (“FFO”)

The Trust calculates FFO substantially in accordance with the guidelines set out in the white paper titled “White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS” by the Real Property Association of Canada (“REALpac”) as revised in January 2022.  FFO is defined as IFRS consolidated net income adjusted for items such as unrealized changes in the fair value of the 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 Trust regards FFO as a key measure of operating performance. For reconciliation to IFRS measures, refer to “Financial Operations and Results” in the REIT’s Annual 2023 MD&A

Adjusted Funds from Operations (“AFFO”)

The Trust calculates AFFO substantially in accordance with the guidelines set out in the white paper titled “White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS” by REALpac as revised in January 2022.  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 Trust regards AFFO as a key measure of operating performance.  The Trust also uses AFFO in assessing its capacity to make distributions. For reconciliation to IFRS measures, refer to “Financial Operations and Results” in the REIT’s Annual 2023 MD&A

The following other non‑IFRS measures (including non-IFRS ratios) are defined as follows:

  • “FFO per unit” is calculated as FFO divided by the weighted average number of Trust Units and Exchangeable Units of the Partnership outstanding over the period.

  • “AFFO per unit” is calculated as AFFO divided by the weighted average number of Trust Units and Exchangeable Units of the Partnership outstanding over the period.

  • “AFFO Payout Ratio” is the proportion of the total distributions on Trust Units and Exchangeable Units of the Partnership to AFFO per Unit.

  • “Net Asset Value” is calculated as the sum of unitholders’ equity and Exchangeable Units

  • “Net Asset Value per Unit” or “NAV per Unit” is calculated as the sum of unitholders’ equity and Exchangeable Units divided by the sum of Trust Units, Exchangeable Units and Deferred Units outstanding at the end of the period.

  • “Debt‑to‑Gross Book Value ratio” is calculated by dividing total interest‑bearing debt consisting of mortgages by total assets and is used as the REIT’s primary measure of its leverage.

  • “Debt Service Coverage ratio” is the ratio of NOI to total debt service consisting of interest expenses recorded as finance costs and principal payments on mortgages.

  • “Stabilized net operating income” is the estimated 12-month net operating income that a property could generate at full occupancy, less a vacancy rate and stable operating expenses.

  • “Average occupancy rate” is defined as the ratio of occupied suites to the total suites in the portfolio for the period.

  • “Same Property NOI” is defined as Net Operating Income from properties owned by the REIT throughout comparative periods, which removes the impact of situations that result in the comparative period to be less meaningful, such as acquisitions, or properties going through a lease-up period.

Management believes that these measures are helpful to investors because, while not necessarily calculated comparably among issuers, they are widely recognized measures of the REIT’s performance and tend to provide a relevant basis for comparison among real estate entities.  These non-IFRS financial measures are not defined under IFRS and are not intended to represent financial performance, financial position or cash flows for the period and should not be viewed as an alternative to net income, cash flow from operations or other measures of financial performance calculated in accordance with IFRS.

The above non-IFRS measures are not standardized under the financial reporting framework used to prepare the financial statements of the REIT.  Readers should be further cautioned that the above measures as calculated by the REIT may not be comparable to similar measures presented by other issuers.  For further information, refer to the sections entitled “Non-IFRS measures” and “Financial Operations and Results” in the REIT’s Annual 2023 MD&A, which is incorporated by reference herein, for further information (available on SEDAR at www.sedarplus.ca or the REIT’s website www.marwestreit.com).

SOURCE Marwest Apartment Real Estate Investment Trust

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