Bluestone Nanaimo has achieved LEED® BD+C Gold certification
BRITISH COLUMBIA – Starlight Western Canada Multi-Family (No. 2) Fund recently announced its results of operations and financial condition for the three months ended June 30, 2022 (“Q2-2022”) and six months ended June 30, 2022 (“YTD-2022”), which includes 128 days of operating activity following the closing of the Fund’s initial public offering on February 22, 2022 through June 30, 2022.
All amounts in this press release are in thousands of Canadian dollars except for average monthly rent or unless otherwise stated.
“We are pleased to announce the Fund’s strong Q2-2022 operating performance with net operating income in line with the Fund’s forecast,” commented Daniel Drimmer, the Fund’s President and Chief Executive Officer. “The Fund continues to focus on optimizing operating results for its existing portfolio while deploying the remaining proceeds from the Offering by actively pursuing potential acquisition opportunities for multi-family properties in the Fund’s target markets to complement its existing portfolio.”
Acquisition And Liquidity Highlights
Subsequent to the Offering, on February 23, 2022, the Fund completed the acquisition of five properties in Nanaimo, Langford and Vernon, which included a total of 495 multi-family suites located on Vancouver Island and the mainland of the Province of British Columbia.
On March 1, 2022 and June 7, 2022, the Fund acquired its sixth and seventh properties, adding 166 multi-family suites in Langford, British Columbia and 57 multi-family suites in Langley, British Columbia, respectively.
During Q2-2022, the Fund entered into an agreement to acquire an eighth property, which on completion would add an additional 120 multi-family suites in Nanaimo, BC.
As at June 30, 2022, the Fund had approximately $41,883 of available liquidity, which included cash remaining from the Offering to be used primarily to acquire additional multi-family properties.
Q2-2022 Highlights
One of the Initial Properties in Nanaimo (Bluestone) achieved LEED® BD+C Gold certification on March 10, 2022. LEED® is an internationally recognized system that plays a critical role in addressing climate change in development and design. LEED-certified buildings save residents’ money, improve efficiency, lower carbon emissions, and create healthier places for people to live.
Revenue from property operations for Q2-2022 was $3,535, representing an increase of $813 or 29.9% compared to the financial forecast included in the Fund’s prospectus dated January 27, 2022 (the “Forecast”), primarily as a result of the Non-Forecast Properties not being included in the Forecast. For the Initial Properties, revenue was slightly below the Forecast by $53 or 1.9%, primarily as a result of lower than Forecast occupancy, partially offset by increases in AMR and ancillary income.
Total portfolio net operating income for Q2-2022 was $2,507, representing an increase of $586 or 30.5% compared to Forecast, primarily as a result of the Non-Forecast Properties not being included in the Forecast. For the Initial Properties, NOI was $60 or 3.1% below the Forecast primarily driven by lower than forecasted revenue from property operations and higher than forecasted property operating costs, partially offset by lower than forecasted property taxes.
As at August 15, 2022, the Fund had collected approximately 99.0% of rents for Q2-2022, with further amounts expected to be collected in future periods, demonstrating the Fund’s strong resident base and operating performance.
Net loss and comprehensive loss attributable to unitholders of the Fund for Q2-2022 was $575, representing a decline of $643 relative to Forecast primarily as a result of higher distributions to Unitholders due to the Fund electing to pay a 3.1% annualized distribution despite 100% of the Offering not yet being fully deployed. Net loss and comprehensive loss attributable to Unitholders would have been $186 for Q2-2022, assuming the Fund had paid distributions based on actual equity deployed.
Adjusted funds from operations for Q2-2022 was $633, representing a decrease of $130 or 17% relative to the Forecast primarily due to higher than forecasted finance costs and fund and trust expenses attributable to Non-Forecast Properties not being included in the Forecast, partially offset by higher than forecasted NOI as a result of Non-Forecast Properties, which were not included in the Forecast.
Additional Ytd-2022 Highlights
The Fund completed the Offering on February 22, 2022 and raised gross subscription proceeds of $130,000, achieving the maximum offering allowable as set out in the Fund’s prospectus.
Revenue from property operations was $4,946, representing an increase of $1,113 or 29.0% compared to the Forecast, primarily as a result of the Non-Forecast Properties not being included in the Forecast. For the Initial Properties, revenue was slightly below the Forecast by $27 or 0.7%, primarily as a result of lower than forecasted occupancy, partially offset by higher AMR and ancillary income.
Total portfolio NOI was $3,617, representing an increase of $921 or 34.2% compared to Forecast, primarily as a result of the Non-Forecast Properties not being included in the Forecast. For the Initial Properties, NOI was $52 or 1.9% higher than the Forecast primarily driven by lower than forecasted property taxes, partially offset by higher property operating costs and lower revenue from operations.
Net loss and comprehensive loss attributable to Unitholders was $661, representing a decline of $741 relative to the Forecast primarily as a result of higher distributions to Unitholders due to the Fund electing to pay a 3.1% annualized distribution during the Initial Reporting Period despite 100% of the Offering proceeds not yet being fully deployed. Net loss and comprehensive loss attributable to Unitholders would have been $97 for YTD-2022, assuming the Fund had paid distributions based on actual equity deployed.
AFFO for YTD-2022 was $1,032, representing a decrease of $28 or 2.6% relative to the Forecast primarily due to higher than forecasted finance costs and fund and trust expenses attributable to Non-Forecast Properties not being included in the Forecast, partially offset by higher than forecasted NOI as a result of Non-Forecast Properties, which were not included in the Forecast.
Future Outlook and Covid-19 Impact
The Fund intends to actively monitor any continued impact that COVID-19 may have on the Fund’s operating results in future periods specifically as they relate to rent collections, occupancy, rent growth, ancillary fees and expenses incurred for preventative measures in response to COVID-19.
During 2022, inflation concerns have contributed to a significant increase in interest rates with the Bank of Canada raising its target interest rate from 0.25% to 2.50% as at June 30, 2022. Additional target interest rate increases are anticipated in the second half of 2022. The increases in target interest rates typically lead to increases in borrowing costs related to variable rate debt. As at June 30, 2022, 28.8% of the Fund’s debt was variable rate. Historically, investments in multi-family properties have provided an effective hedge against inflation given the short-term nature of lease terms, reflected in the higher AMR achieved at the Properties during Q2-2022. Given the Fund was formed as a “closed-end” fund with an initial term of three years, it is the Fund’s intention to maintain its targeted yield of 3.0% to 4.0% across all classes of units of the Fund despite potential periods of increasing interest rates. The Fund continues to actively monitor the current interest rate environment and any associated impact this may have on the Fund’s financial performance.
Canada’s unemployment rate decreased to 4.7% in June 2022, falling below pre-pandemic levels. Despite the Canadian economy’s strong recovery from the pandemic, the war in Ukraine has added uncertainty to the global economic outlook. According to Statistics Canada, British Columbia gained approximately 86,800 jobs between June 2021 and June 2022. The unemployment rate in June 2022 was 4.5% in British Columbia including the Vancouver Island and Coast Region which are lower than the national average of 4.7%.
The primary markets in which the Fund operates, including Langford, Nanaimo, Vernon and Langley, possess attractive qualities such as some of the fastest growing populations in British Columbia with strong demographics of highly educated young professionals and families, diverse local job sectors, desirable locations with waterfront and mountain views as well as significant economic growth and a limited supply of multi-family suites creating an environment for continued demand for suites which drive occupancy and rent growth. The Fund believes it is well positioned to take advantage of these favourable conditions.
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