Forum Real Estate Income and Impact Fund Reports Q2 2024 Results

TORONTO, ON / ACCESSWIRE / August 8, 2024 / The Forum Real Estate Income and Impact Fund ("REIIF" or the "Fund") released its results for the quarter ended June 30, 2024.

Series F investors in REIIF have earned a time-weighted return of 7.46% year-to-date, including the monthly distribution of 3.97 cents, or 4.2% per annum projected. Over a trailing 12-month basis, REIIF has delivered a time-weighted return of 15.45%.¹

REIIF's Purpose-Built Student Accommodation ("PBSA") properties across the portfolio have shown substantial leasing velocity for the upcoming school year. This demand has been driven by the lack of purpose-built supply across the country. The Globe and Mail has published numerous articles recently highlighting the lack of student housing supply affecting Universities and Colleges across Canada, notwithstanding recent caps imposed by governments on international student visas. The lack of supply of purpose-built student accommodations continues to exacerbate supply challenges in the general rental housing market, contributing to strong rental growth in major markets across Canada. With elevated costs due to higher interest rates, increasing governmental charges and continued construction cost escalations, the supply/demand imbalance and thus strong rental rate growth is anticipated to continue into the long-term.

"The demand for PBSA in Canada continues to surge as students struggle to find housing given the shortfall of beds on and off-campus, underscoring the need for increased investment and development in the PBSA sector," said Aly Damji, Managing Partner at Forum Asset Management ("Forum"), Fund Head and a Trustee of REIIF. "The Fund completed another PBSA acquisition through Forum's proprietary development pipeline this quarter in Oshawa, Ontario expanding REIIF's PBSA allocation to over 70%. The sector remains a key target of the Fund's investment strategy and is expected to meaningfully contribute to its stated 8-12% target net return objectives for 2024."

Acquisitions

On June 1, 2024, pursuant to REIIF's right of first offer agreement (ROFO) with Forum, the Fund acquired a newly built PBSA asset located in the Greater Golden Horseshoe (GGH), Ontario (ALMA @ Oshawa). This institutional-quality, non-rent-controlled asset adds 211 beds to REIIF's student-housing portfolio, serving several high-quality post-secondary institutions such as the University of Ontario Institute of Technology (UOIT), Trent University (Durham Campus), and Durham College. This central location next to UOIT's downtown campus is expected to support long-term rental demand. UOIT has witnessed a nearly 20% increase in domestic student applications year-over-year and an 18.2% growth in total applications year-over-year, higher than any other university in Ontario.²

With the addition of ALMA @ Oshawa, REIIF's PBSA beds now total 2,478 with 98% of the portfolio focused on high-turnover rental housing, allowing investors to benefit from long-term supply shortfalls in Canadian housing, from more frequent mark-to-market of rental income.

Subsequent to quarter end, on July 1, 2024, pursuant to REIIF's ROFO, the Fund also acquired a furnished rental community in Ottawa, Ontario encompassing 180,000 square feet with 460 beds located near a future LRT station, close to major employment centres as well as Algonquin College, one of Canada's largest public colleges. The property has CMHC financing in place at a coupon rate of 4.2% for a 10-year term. At a rental density of 4.5 apartments per 100 people and minimal new stock under construction, the local Nepean rental housing market is severely undersupplied.³ The current market vacancy of 1.6%, coupled with a growing local young population and student cohort, provides favorable tailwinds to future rent growth.

With the closing of both assets, the Fund has completed all previously announced ROFO acquisitions for 2024. Following the acquisitions of ALMA @ Oshawa and Woodroffe Place, the Fund now comprises 14 properties, with 2,092 units serving over 3,000 residents, Gross Asset Value ("GAV") over $650M, and an over 70% strategic allocation to PBSA.

Portfolio Update

The portfolio currently boasts a 97.7% occupancy rate, based on units available for lease, with 1.5% of units being repositioned to capture higher rents. Comparative Property Net Operating Income (NOI) growth versus the prior year's comparable quarter was 13.5%.

The Fund's performance in the quarter was largely fueled by fair value gains from recently appraised PBSA properties located in the Greater Toronto Area (GTA). Ahead of the Fall term, strong leasing activity across the Fund's institutional-quality PBSA assets indicates a growing demand for fully amenitized student housing.

Fair value was also impacted by a modest capitalization rate compression in the externally appraised properties resulting in an overall portfolio weighted average capitalization rate of 4.4% (4.5% at March 31, 2024). As at June 30, 2024, REIIF's weighted average portfolio age is approximately 4.2 years with geographic concentration of assets being 70% in the GTA and GGH, 16% in Winnipeg, 9% in the Greater Vancouver Area (GVA), 3% in the Greater Ottawa Area (GOA), and 2% in the Greater Montreal Area (GMA).

Balance Sheet Update

The Fund has maintained a conservative net debt to net assets ratio of 42.8% and over $60M of liquidity. In June, REIIF's main revolving credit facility was extended to December 31, 2025, with a further 1-year extension option available.

The Fund's balance sheet is supported by CMHC-insured fixed-rate mortgages, representing 92.1% of total indebtedness, with an overall coupon of 3.11% and a weighted average term of 7.4 years. The Fund is in the process of closing additional CMHC-insured loans which is anticipated to take the total indebtedness to 100% fixed-rate mortgages, by the end of Q3.

Distributions

The monthly distribution was paid on July 15th, 2024 to unitholders of record as at June 28, 2024 as follows:

1. Includes REIIF Trust A Lead, A Oct 2023, A Nov 2023, and A Dec 2023 Series.

2. Includes REIIF Trust F Lead, F Oct 2023, F Nov 2023, and F Dec 2023 Series, and REII LP July 2023 F Series.

3. Includes REIIF Trust H Lead, H Nov 2023, and H Dec 2023 Series.

4. Includes REIIF Trust I Lead Series, and REII LP July 2023 I Series.

5. Represents the annual distribution per Unit divided by 12, rounded to four decimal places.

Impact Update

Key to REIIF's impact and environmental, social, and governance (ESG) initiatives is driving sustainable value to residents and investors. Offering an unparalleled and well-designed resident experience is central to REIIF's strategy. ALMA @ Guelph, the inaugural property under REIIF's ALMA brand, exemplifies the Fund's commitment to tenant engagement. The property hosted 20 resident events year-to-date, boasts high-value amenities, and an enhanced sense of community which has contributed to its top-performing Net Promoter Score, and correspondingly, market-leading rents.

Further, as part of the Fund's strategic resident-centric model, Simplydbs was engaged to conduct the first annual Student Living Index, to better understand resident engagement. The study provided key insights that will inform REIIF's hands-on active management strategy to continue to focus on increasing resident satisfaction to drive higher retention and long term rent growth.

REIIF is pleased to share that 90% of portfolio GFA is certified by credible third parties, including the Canadian Green Building Council and BOMA.*

More information on REIIF's Impact Framework is available at www.forumreiif.ca/impact.

1. Total net returns (net of all REIIF expenses) for the Lead Series F units and is no guarantee of future results. The distribution rate and total return received by a unitholder will differ based on the series of trust units in which a unitholder invests. The expectations of the yield and returns is based on various assumptions and subject to certain risks, including those risk factors identified in REIIF's confidential offering memorandum.

2. Ontario Universities' Application Centre 2024 Statistics | The City of Oshawa's Economic Development Strategy 2023.

3. Internal calculation based on using population data from Statistics Canada and rental universe data from CMHC.

   * Includes assets held in 2023.

About REIIF

REIIF invests principally in institutional-quality, multi-family rental apartments, purpose-built student accommodations, and furnished rentals located in supply constrained markets in Canada. The Fund also strives to deliver a sector-leading impact and ESG-driven portfolio that is designed to enhance yields and total returns while future-proofing the portfolio to ensure diversity and resiliency of income. For more information, please visit our website at www.forumreiif.ca.

About Forum

Forum is an investor, developer and asset manager operating across North America for over 25 years. Our core purpose is to deliver Extraordinary Outcomes™ to our stakeholders. Our adaptable, agile, and dynamic team is committed to sustainability and responsible investing, creating value that benefits the communities in which we invest.

Our investment focus includes real estate, private equity, and infrastructure. The enterprise value of our assets under management currently exceeds C$1.7 billion. Our investments have attracted a number of material investors. We're proud to have delivered top-tier alternative asset returns since 2002, while positively impacting over 10,600 lives.

Contacts

Name: Lara Iannucci, Chief Financial Officer, Real Estate
Phone Number: 416-947-0389
Email: [email protected]

Cautionary Statement

This news release is for informational purposes only and is not intended as investment, financial or other advice or a recommendation to invest in the Fund. It is also not an offer, solicitation, or basis for any investment decision regarding REIIF securities, which are available only to "accredited investors" within certain jurisdictions of Canada and not for sale to the general public.

The information in this news release regarding the Fund's portfolio, including the number of properties, units, residents served, and Gross Asset Value (GAV) as well as Fund performance and returns are based on current estimates developed from Forum's unaudited financial information, and are subject to change. Series F returns as expressed herein, are net of REIIF expenses like administrative costs, management fees, and unit class specific fees. The targeted distribution rate and total return received by a unitholder will differ based on the series of REIIF units in which a unitholder invests and the distribution reinvestment plan strategy that such unitholder elects to pursue. Past performance is historical and not a guarantee of future results. Investors should not place undue reliance on these figures and are encouraged to perform their own due diligence or consult with a professional advisor before making any investment decisions.

Forward Looking Statements

This news release includes forward-looking statements under Canadian securities laws, identifiable by terms like "expect," "intends," and "anticipates," or variations of these, and those which imply forward looking statements such as those statements relating to the Fund, strategy, objectives and plans, outlining REIIF's investment objectives, strategies, opportunity pursuits, expected annual net operating income growth, GAV growth, acquisition completions, expectations of the yield and returns on units within the Fund, ESG targets, financing strategies, distribution expectations, rental housing demand and supply expectations, rental housing shortfall estimates, and general market outlook. However, these statements are based on current management beliefs and available information, and they are not guarantees of future performance. They are subject to risks and uncertainties that could cause actual outcomes to vary significantly, including economic conditions, real estate market volatility, funding access challenges, timing issues, and currency or interest rate changes. Unforeseen factors may lead to material differences in actual outcomes. For more information on these factors, risks and uncertainties as well as the assumptions underlying management's forecasts, please refer to REIIF's confidential offering memorandum as amended or supplemented from time to time, which may be accessed here. These forward-looking statements reflect our position as of this release, with no obligation for updates unless required by law.

SOURCE: Forum Asset Management