Firm Capital Apartment REIT Reports Q2/2024 Results and Provides Strategic Review Update

All figures in $USD unless otherwise noted.
TORONTO, Aug. 07, 2024 (GLOBE NEWSWIRE) — Firm Capital Apartment Real Estate Investment Trust (the “Trust”), (TSXV: FCA.U), (TSXV: FCA.UN) is pleased to report its financial results for the three and six months ended June 30, 2024 as well as provide an update regarding the previously announced Strategic Review:

EARNINGS

• For the three months ended June 30, 2024, net loss was approximately $2.8 million, in comparison to the $1.3 million net loss reported for the three months ended March

31, 2024 and the $1.9 million net loss reported for the three months ended June 30, 2023;

• Excluding non-cash fair value adjustments, net loss was $0.4 million for the three months ended June 30, 2024, in comparison to the $0.06 million net loss reported for the three months ended March 31, 2024 and the $0.2 million net income reported for the three months ended June 30, 2023;

• For the three months ended June 30, 2024, AFFO was negative $0.4 million, in comparison to the negative $0.04 million reported for the three months ended March 31, 2024 and the negative $0.2 million reported for the three months ended June 30, 2023;

For the three months ended June 30, 2024, net loss before fair value and other adjustments was $0.4 million, an increase over the $0.06 million net loss reported for the three months ended March 31, 2024, and the $0.2 million net loss reported for the three months ended June 30, 2024. The increase for the quarter ended June 30, 2024 is due to a combination of the Trust earning less rental income due to the sale of its Florida portfolio during the quarter, while the Trust continued to incur interest expense on the outstanding Convertible Debentures throughout the quarter as this liability could only be redeemed as early as July 2, 2024 at par value without penalty. On July 2, 2024, the Trust took advantage of and redeemed all of its Convertible Debentures prior to its 2026 maturity and also made a partial $3 million repayment of one of the mortgages secured by a property located in Houston, Texas, resulting in the interest rate on this mortgage being reduced to 8.25% per annum from 9% per annum. As a result of these debt repayments, the Trust anticipates a reduction in its finance costs of approximately $1.4 million a year or $0.35 million per quarter on a go forward basis.

• NET ASSET VALUE (“NAV”) AT $6.48 PER TRUST UNIT (CAD $8.87):
Including disposition costs and the principal amount of the convertible debenture, the Trust reported NAV of $6.48 per Trust Unit (CAD $8.87).

STRATEGIC REVIEW
On November 15, 2022, the Trust initiated a strategic review process to identify, evaluate and pursue a range of strategic alternatives with the goal of maximizing unitholder value (the “Strategic Review”). By way of update, the Trust is pleased to report on the following:

• DEBT REDUCTION: As at Q4/2022, the Trust had total debt of $90.8 million and Debt to Gross Book Value (“D/GBV”) of 56%. Since Q4/2022, the Trust has reduced its secured and unsecured debt by $60.7 million. This reduction in debt includes the following:
  1. Repayment of $37.6 million of associated mortgage debt on assets sold;
  2. Redemption of $14.0 million (CAD $18.8 million), 6.25% convertible unsecured subordinated debentures due June 30, 2026 (the “Convertible Debentures”);
  3. Repayment of the $5.1 million (CAD$6.9 million) Bridge Loan;
  4. Repayment of $1.0 million Credit Facility with a Canadian Chartered Bank; and
  5. $3.0 million partial repayment of one of the mortgages secured by a property located in Houston, Texas, resulting in the interest rate on this mortgage being reduced to 8.25% per annum from 9% per annum and the term extended to February 4, 2026.

As a result, the Trust has made improvement on its total D/GBV which now sits at 40%.

• WHOLLY OWNED ASSET DISPOSITIONS: As at Q4/2022, the Trust had six wholly owned assets comprised of 985 apartment units located in Florida, Texas and New Jersey. Since the commencement of the Strategic Review, the Trust has sold four of the wholly owned assets located in all three of these states for gross proceeds of approximately $71.6 million and net proceeds of $28 million. All asset sales were at or above IFRS value. The REIT has two remaining wholly owned assets located in Houston, Texas comprised of 485 apartment units that are being actively marketed.
• JOINT VENTURE ASSET DISPOSITIONS: As at Q4/2022, the Trust had interests in five joint venture investment properties. On January 31, 2024, the Trust completed the sale of one of its joint venture properties located in Maryland for $15.9 million (100% of the property). Net of associated mortgage debt and closing costs, the net sale proceeds were approximately $4.1 million, of which the Trust received approximately $1.1 million given its 25% ownership in the property. The Trust continues to work with the remaining various Joint Venture sponsors in either various sale processes or to hold for longer periods of time until unitholder value is realized.
• PREFERRED CAPITAL INVESTMENTS: As of June 30, 2024, the Trust had three Preferred Capital Investments located in Texas, South Dakota and Florida that aggregate approximately $9.1 million, gross principal balance. The Trust continues to hold these investments and earns income at 10% on the Texas portfolio, 12% on the South Dakota portfolio, and 9% on the Florida portfolio. All preferred capital investments are current in terms of their interest payments.

GOING FORWARD
Based on senior management’s forecasts, the Trust is expected to be positive cash flow going forward given the progress it has made on dispositions and debt repayment. Furthermore, the board continues to evaluate uses for the Trust and has had multiple discussions with a number of third parties as to the best use for the entity going forward. Senior management and the board will report back to unitholders in due course.

The Board will continue to assess matters on a quarterly basis and determine if the Trust should: (i) distribute excess income; (ii) distribute net proceeds from asset sales, after debt repayment; (iii) reinvest net proceeds into other investments; (iv) distribute proceeds as a return of capital or special distribution; and/or (v) use excess proceeds to repurchase Trust units in the marketplace. It is the Trust’s current intention not to disclose developments with respect to the Strategic Review unless and until it is determined that disclosure is necessary or appropriate, or as required under applicable securities laws.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:

Certain information in this news release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may”, “should”, “anticipate”, “expect”, “intend” and similar expressions.

Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse factors affecting the U.S. real estate market generally or those specific markets in which the Trust holds properties; volatility of real estate prices; inability to access sufficient capital from internal and external sources, the completion of the Strategic Review; and/or inability to access sufficient capital on favourable terms; industry and government regulation; changes in legislation, income tax and regulatory matters; the ability of the Trust to implement its business strategies; competition; currency and interest rate fluctuations and other risks. Additional risk factors that may impact the Trust or cause actual results and performance to differ from the forward looking statements contained herein are set forth in the Trust’s Annual Information form under the heading Risk Factors (a copy of which can be obtained under the Trust’s profile on www.sedar.com).

Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Except as required by applicable law, the Trust undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Certain financial information presented in this press release reflect certain non-International Financial Reporting Standards (“IFRS”) financial measures, which include, but not limited to NOI, FFO and AFFO. These measures are commonly used by real estate investment companies as useful metrics for measuring performance, however, they do not have standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other real estate investment companies. These terms are defined in the Trust’s Management Discussion and Analysis for the three and six months ended June 30, 2024 filed on www.sedar.com.

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