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Monogram Residential Trust Announces Second Quarter 2017 Results

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PLANO, Texas, Aug. 3, 2017 /PRNewswire/ -- Monogram Residential Trust, Inc. (NYSE: MORE) ("Monogram" or the "Company"), an owner, operator and developer of luxury apartment communities with a significant presence in select coastal markets, today reported operational and financial results for the second quarter of 2017.

Second Quarter 2017 Summary

  • Net income attributable to common stockholders of $6.8 million as compared to net loss attributable to common stockholders of $9.2 million in the second quarter of 2016. The increase is primarily due to GAAP gains on property sales in the second quarter of 2017 of $28.6 million.
  • Stabilized two communities, Nouvelle in Tysons Corner, Virginia and Zinc in Cambridge, Massachusetts.
  • Sold two communities, Muse Museum District and Allusion West University, each located in Houston, Texas for a combined total gross sales price of $109.0 million.
  • Acquired Latitude in Arlington, Virginia as part of a 1031 exchange for a gross contract purchase price of $142.5 million.   
  • Increased total portfolio Proportionate Share Net Operating Income ("Proportionate NOI") by 0.8% to $29.2 million from $29.0 million for the same period in 2016.
  • Reported a decrease in Proportionate Same Store NOI of 0.1% as compared to the second quarter of 2016.
  • Achieved consolidated weighted average occupancy in the Company's Same Store portfolio of 95.4% with monthly rental revenue per unit of $1,977, a decrease of 0.1% as compared to rental revenue per unit in the second quarter of 2016.
  • Declared a $0.075 per share dividend which was paid on July 7, 2017 to common stockholders of record on June 30, 2017.
  • Subsequent to quarter end, sold one community, Veritas, located in Henderson, Nevada for a total gross sales price of $76.5 million. Acquired two communities, Boca City Walk in Boca Raton, Florida as part of a 1031 exchange for a gross contract purchase price of $80.5 million and The Washingtons in Melrose, Massachusetts as part of a 1031 exchange for a gross contract purchase price of $75.0 million

Subsequent to quarter end, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with newly formed affiliates of Greystar Real Estate Partners, LLC. Under the terms of the Merger Agreement, which was unanimously approved by Monogram's Board of Directors, Monogram's stockholders will receive $12.00 per share in cash. The Company expects to close the merger in the second half of 2017. The merger is subject to approval by Monogram's stockholders and other customary closing conditions.  

Financial Results for the Second Quarter 2017

The Company reported net income attributable to common stockholders of $6.8 million, or $0.04 per fully diluted share, which included $28.6 million of GAAP gains on sales of real estate, compared to net loss attributable to common stockholders of $9.2 million, or $(0.06) per fully diluted share, for the quarter ended June 30, 2016.

Core FFO totaled $16.2 million or $0.10 per fully diluted share, as compared to $14.3 million or $0.09 per fully diluted share, for the same period in 2016. AFFO totaled $17.1 million or $0.10 per fully diluted share, as compared to $14.7 million or $0.09 per fully diluted share, for the same period in 2016.

The quarter over quarter increase in Core FFO and AFFO is primarily due to a decrease in general and administrative expenses.

Financial Results for the Six Months Ended June 30, 2017

The Company reported net income attributable to common stockholders of $82.8 million, or $0.49 per fully diluted share, which included $115.3 million of GAAP gains on sales of real estate, compared to net loss attributable to common stockholders of $17.5 million, or $(0.11) per fully diluted share for the six months ended June 30, 2016.

Core FFO totaled $30.8 million or $0.18 per fully diluted share, as compared to $26.8 million or $0.16 per fully diluted share, for the same period in 2016. AFFO totaled $32.6 million or $0.19 per fully diluted share, as compared to $27.6 million or $0.16 per fully diluted share, for the same period in 2016.

The year over year difference in Core FFO and AFFO is primarily due to an increase in the Company's Proportionate NOI from stabilized non-comparable and lease up properties and a decrease in general and administrative expenses, which more than offset a decrease in NOI related to properties sold over the same period.

Operating Portfolio Results

Total consolidated revenues for the second quarter 2017 increased 4.7% to $71.8 million from $68.6 million for the same period in 2016. Total portfolio operating expenses decreased to $30.6 million from $31.0 million.

For the 32 Same Store communities, which excludes a community held for sale as of June 30, 2017, the Company's Proportionate Share of Same Store revenue increased 0.5%, expenses increased 1.8 % and NOI decreased 0.1% as compared to the same period in 2016.

Year to date compared to the same period in 2016, the Company's Proportionate Share of Same Store revenue increased 0.5%, expenses increased 1.7 % and NOI decreased 0.2%.

Average rental revenue per unit within the Same Store consolidated portfolio decreased 0.1% to $1,977 as of June 30, 2017 from $1,979 as of June 30, 2016, and weighted average occupancy increased to 95.4% as of June 30, 2017 from 95.2% as of June 30, 2016.

The Company defines Same Store communities as those that are stabilized and comparable for both the current and the prior reporting year, as of January 1, and excludes communities held for sale. The Company considers a property to be stabilized generally upon achieving 90% occupancy. 

Development and Lease Up Activity

Two development communities were stabilized during the second quarter:

  • Nouvelle, located in Tysons Corner, Virginia, contains 461 units and was 92% occupied at the end of the second quarter. The Company's proportionate ownership is 55%.
  • Zinc, located in Cambridge, Massachusetts, contains 392 units and was 91% occupied at the end of the second quarter. The Company's proportionate ownership is 55%.

One development community, Caspian Delray Beach, was completed during the quarter. As a result, the following two operating communities were in lease up at the end of the second quarter:

  • The Alexan, located in Dallas, Texas, contains 365 units and was 70% occupied at quarter end. The Company's proportionate ownership is 50%.
  • Caspian Delray Beach, located in Delray Beach, Florida, contains 146 units and was 21% occupied at quarter end.  The Company's proportionate ownership is 55%.

Two acquisition communities, which had recently completed construction at the time of our acquisition, were in lease up at the end of the second quarter:

  • Desmond at Wilshire, located in Los Angeles, California, contains 175 units and was 54% occupied at quarter end.  The Company wholly owns this asset.
  • Latitude, located Arlington, Virginia, contains 265 units and was 35% occupied at quarter end. The Company wholly owns this asset. 

As of June 30, 2017, Monogram's existing development program, which consists of three communities in lease up or under construction with 1,021 planned units is 72% complete based on the Company's Proportionate Share of Total Economic Costs. The Company's share of estimated remaining development costs to complete the existing development program totals $62 million. All but one of these projects are expected to be completed and stabilized by the end of 2017. Two of these communities are currently leasing and are 56% occupied on a weighted average basis and only one community, Lucé in Huntington Beach, California is under construction. 

The cumulative development program that was outlined at the time of Monogram's listing, on November 21, 2014, is 93% complete based on the Company's Proportionate Share of Total Economic Costs.

Transaction Activity

In April 2017, the Company acquired Latitude, a 265 unit multifamily asset located in Arlington, Virginia through a 1031 exchange for a gross contract purchase price of $142.5 million, excluding closing costs.

In June 2017, the Company sold Muse Museum District in Houston, Texas for a total gross sales price of $60.0 million.

In June 2017, the Company sold Allusion West University in Houston, Texas for a total gross sales price of $49.0 million.

Both Muse Museum District and Allusion West University were held in joint ventures, where the Company's proportionate share was 55%.

Subsequent to quarter end, the Company sold Veritas in Henderson, Nevada for a total gross sales price of $76.5 million. Veritas, which at the time of sale was wholly owned, was classified as held for sale as of June 30, 2017.

Subsequent to quarter end, the Company acquired Boca City Walk, a 229 unit wholly owned multifamily asset located in Boca Raton, Florida through a 1031 exchange for a gross contract purchase price of $80.5 million, excluding closing costs.

Subsequent to quarter end, the Company acquired The Washingtons, a 182 unit multifamily asset located in Melrose, Massachusetts through a 1031 exchange for a gross contract purchase price of $75.0 million, excluding closing costs.

Balance Sheet

At the end of the second quarter, the Company had total consolidated debt outstanding of $1.6 billion, including debt held at the co-investment venture level. The Company's Proportionate Share of contractual debt totaled $1.0 billion. The Company's net debt to Adjusted EBITDA was 9.8x at June 30, 2017 as compared to 10.8x at June 30, 2016. As of June 30, 2017, the Company's consolidated debt had a weighted average interest rate of 3.4%.

As of June 30, 2017, on a Proportionate Share basis, the Company had approximately $130 million in total availability comprised of cash and undrawn capacity on its two credit facilities.

Quarterly Dividend Declaration

On May 31, 2017, the Company declared a cash dividend of $0.075 per common share. The dividend was paid on July 7, 2017 to common stockholders of record on June 30, 2017. Per the terms of the Merger Agreement, the Company has not declared and does not expect to declare a dividend for the third quarter.

Outlook

As a result of the pending merger, the Company is not providing an outlook for the remainder of 2017 nor updating or affirming it's previously issued guidance for the full-year of 2017.

Conference Call

Due to the pending merger, the Company will not conduct an earnings call.

Forward-Looking Statements

Certain statements made in this press release and other written or oral statements made by or on behalf of the Company, may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of such statements in this press release and in the Company's outlook include, expectations regarding apartment market conditions and expectations regarding future operating conditions, including the Company's current outlook as to expected funds from operations, core funds from operations, adjusted funds from operations, revenue, operating expenses, net operating income, capital expenditures, depreciation, gains on sales and net income and anticipated development activities (including projected construction expenditures and timing). We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions.  All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements: we may abandon or defer development opportunities for a number of reasons, including, without limitation, changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; construction costs of a community may exceed our original estimates; we may not complete construction and lease up of communities under development or redevelopment on schedule, resulting in increased interest costs and construction costs and a decrease in our expected rental revenues; we may dispose of multifamily communities due to factors including changes in local market conditions, better net earnings opportunities or capital reallocation, where the redeployment of the capital, including into properties currently in lease-up, may negatively impact our financial results, cash flows and guidance; newly acquired properties may not stabilize according to our estimated schedule, which may negatively impact our financial results, cash flows and guidance; occupancy rates and market rents may be adversely affected by competition and local economic and market conditions which are beyond our control; financing may not be available on favorable terms or at all, and our cash flows from operations and access to cost effective capital may be insufficient for the growth of our development program which could limit our pursuit of opportunities; our cash flows may be insufficient to meet required payments of principal and interest, or to make dividend payments, and we may be unable to refinance existing indebtedness or the terms of such refinancing may not be as favorable as the terms of existing indebtedness; and we may be unsuccessful in managing changes in our portfolio composition. Other factors that could cause such differences include, but are not limited to, (i) the risk that the proposed merger may not be completed in a timely manner, or at all, which may adversely affect the Company's business and the price of its common stock, (ii) the failure to satisfy all of the closing conditions of the proposed merger, including the approval of the Merger Agreement by the Company's stockholders, (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, (iv) the effect of the announcement or pendency of the proposed merger on the Company's business, operating results, and relationships with joint venture partners, lenders, tenants, competitors and others, (v) risks that the proposed merger may disrupt the Company's current plans and business operations, (vi) potential difficulties retaining employees as a result of the proposed merger, (vii) risks related to the diverting of management's attention from the Company's ongoing business operations, and (viii) the outcome of any legal proceedings that may be instituted against the Company related to the merger agreement or the proposed merger. Other important risk factors regarding the Company are included under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and may be discussed in subsequent filings with the SEC, including the Company's most recent Quarterly Report on Form 10-Q.

About Monogram

Monogram is a fully integrated self-managed real estate investment trust that invests in, develops and operates high quality multifamily communities offering location and lifestyle amenities. Monogram invests in stabilized operating properties and properties in various phases of development, with a focus on communities in select markets. As of June 30, 2017, Monogram's portfolio includes investments in 48 multifamily communities in 10 states comprising 13,438 apartment homes.

Additional Information about the Proposed Transaction and Where to Find It

In connection with the proposed transaction, Monogram has filed a preliminary proxy statement with the U.S. Securities and Exchange Commission ("SEC") as of July 28, 2017, and will file with the SEC and mail to its stockholders a definitive proxy statement. Additionally, Monogram will file other relevant materials in connection with the proposed acquisition of Monogram by an affiliate of Greystar Real Estate Partners. The materials to be filed by Monogram with the SEC may be obtained free of charge at the SEC's web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Monogram on Monogram's website at www.monogramres.com or by contacting Monogram investor relations at ir@monogramres.com. INVESTORS AND SECURITY HOLDERS OF MONOGRAM ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Consolidated Balance Sheet


(in thousands) (unaudited)








June 30, 2017


December 31, 2016


Assets







Real estate







Land

$       544,617


$                527,944




Buildings and improvements

2,750,618


2,814,221




Gross operating real estate

3,295,235


3,342,165




Less: accumulated depreciation

(460,038)


(461,869)




Net operating real estate

2,835,197


2,880,296




Construction in progress, including land

108,052


120,423



Total real estate, net

2,943,249


3,000,719










Assets associated with real estate held for sale

47,843


-



Cash and cash equivalents

56,274


74,396



Tax like-kind exchange escrow

148,313


56,762



Intangibles, net

16,034


16,977



Other assets, net

59,001


51,248


Total assets

$    3,270,714


$             3,200,102









Liabilities






Mortgages and notes payable, net

$    1,131,901


$             1,522,207



Credit facilities payable, net

386,695


8,023



Construction costs payable 

18,390


26,859



Accounts payable and other liabilities

30,922


32,707



Deferred revenues and other gains

21,999


22,077



Distributions payable

12,527


12,512



Tenant security deposits

6,268


6,205



Obligations associated with real estate held for sale

33,589

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