Forum Real Estate Income and Impact Fund Reports Q4 2023 Results

TORONTO, ON / ACCESSWIRE / February 8, 2024 / The Forum Real Estate Income and Impact Fund ("REIIF" or the "Fund") released its results for the fourth quarter ending December 31, 2023.

Series F investors in REIIF earned a 10.74% return from inception and 10.88% for calendar year 2023 ("Total Return"), including the monthly distribution (3.83 cents/Series F/month).¹ Since the launch of the Fund in December 2021, REIIF has returned in the mid-to-high range of its target 8%-to-12% Total Return objective.¹

Canadian rental housing is benefitting from strong market fundamentals, with vacancy rates below 2% and surging rental rates, 2 symptomatic of the Canadian housing crisis.

To address the housing crisis, Canadian and provincial governments announced in late 2023 the elimination of HST on new rental housing construction. "Forum supports the government's recent steps in addressing the Canadian housing crisis", said Richard Abboud, CEO at Forum Asset Management ("Forum") and chairman of REIIF. "Even with government support, an additional 3.5 million units need to be delivered by 2030 requiring over $1 trillion of capital - posing a daunting challenge for the industry and reinforcing our continued investment conviction in the Canadian rental housing sector."²

Acquisitions

The Fund is under contract to acquire over $140 M of high-quality properties, including +$100 M of purpose-built student accommodation ("PBSA") and ~$40 M of furnished apartments across Ontario and Manitoba, the majority expected to close in the first two quarters of 2024.³

Following completion, the Fund will have grown from an initial $167 M of assets at the beginning of 2022 to over $600 M, with a 70% strategic allocation to PBSA.⁴

The student housing sector, globally, is experiencing increased institutional investment with recent multi-billion-dollar PBSA portfolio acquisitions across the United States and U.K.

While Canada's PBSA market has yet to experience the same level of institutional demand, Canada's strong fundamentals, including high population growth andinternational student population, are expected to continue to drive both investment and customer demand for the type of high-quality PBSA owned by REIIF.

"Unsustainable international student visas and associated housing has resulted in a policy response from governments to mitigate housing shortages, targeting students enrolling in private colleges. REIIF's strategic allocation to PBSA, serving the top universities and public colleges in primary markets, along with our sizeable gain-to-lease on rents, positions the Fund well to absorb these policy changes," said Aly Damji, Managing Partner at Forum and a trustee of REIIF.

"REIIF's institutional-quality PBSA and micro-unit portfolio benefits from higher tenant turnover, attainable monthly rents and is valued at a higher yield relative to traditional multi-family properties. Further, as REIIF's current PBSA portfolio was purposefully designed and built by Forum with four or less beds per unit, they benefit from low-cost, long-term CMHC financing - which together provides superior risk-adjusted cash flow versus other real estate asset classes," said Aly Damji.

Portfolio Update

The portfolio at the end of 2023 is substantially stabilized, with portfolio occupancy of 97.8% and just over 1% of units being repositioned to attract materially higher rents. ⁵ Comparative property net operating income growth versus the fourth quarter 2022 was 16.5%, with a further embedded potential gain-to-lease of 15.9% portfolio-wide.⁵

"Positive sector tailwinds and the Fund's allocation to transitional housing positions REIIF to continue to deliver on its target net return objectives for 2024, which will be bolstered by strategic capital investments in unit and common area amenity repositioning projects",⁶ said Aly Damji.

Balance Sheet Update

The Fund continues to maintain over $50 M of liquidity, with a net debt to asset ratio of 43.7%, below the low end of the Fund's target range. Further, the Fund's balance sheet is supported by fixed-rate mortgages, with an overall coupon of 3.0% and a weighted average term of 5.9 years, which will extend to 7 years after closing a 10-year, CMHC insured financing for ALMA Guelph Phase 1 expected to close later this quarter.⁷

"With the expected increase in portfolio size, the Fund will maintain a strong balance sheet and continue to grow its liquidity position, to protect unitholders through varying market conditions", ⁸ said Rajeev Viswanathan, Managing Partner and CFO of Forum.

Distributions

The monthly distribution was paid on January 17^th, 2024 to unitholders of record as at December 31, 2023. The Trustees of REIIF approved a +3% increase to the monthly distribution effective for unitholders of record as of January 31, 2024.

"REIIF's distribution is supported by a high-quality portfolio, all fixed rate indebtedness, low leverage and attractive cash flow growth", said Rajeev Viswanathan.

The change in distribution for 2024 is as follows:

Impact Initiatives

Forum remains focused on improving operating performance through ESG initiatives, with water conservation a key element supporting REIIF's Efficient and Climate Resilient Buildings strategy.

For example, at 87 Mann (Ottawa), low flow plumbing fixtures and the installation of smart valve technology have led to a 24% reduction in water consumption and a 15% decrease in water costs from May to November 2023, compared to the same period in 2022. "These positive outcomes underscore the tangible value creation from REIIF's proactive approach to sustainability", ⁹ said Kathleen Beaumont, Director, Impact & ESG at Forum.

Forum achieved a top-quartile ranking in the Real Estate module in its first submission to the United Nations Principles for Responsible Investment (UN PRI).10 "We understand the importance of incorporating ESG factors into our decision-making processes, to create long-term value for our stakeholders and contribute to a more sustainable future," said Kathleen Beaumont, Director of Impact & ESG.

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

1. The yield and all returns assume Series F units. The indicated returns are the historical annual compounded total returns reflecting changes in unit value and distributions. These returns are derived from unaudited financial information and are net of all REIIF expenses, including general and administrative expenses, management fees, performance participation allocation, and share class specific fees, but exclude the impact of early purchase deductions on the repurchase of units that have been outstanding for less than one year. 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. The expectations of the yield and returns are based on various assumptions and subject to certain risks, including those risk factors identified in the confidential offering memorandum of REIIF, as amended or supplemented from time to time (the "OM"). Performances annualized except for periods of less than one year.
2. CMHC Housing Information Portal. https://www03.cmhc-schl.gc.ca/hmip-pimh/en#Profile/1/1/Canada.
3. Management provides no guarantee or assurance that any of the prospective acquisitions contemplated will be completed as indicated or at all.
4. Forum internal research, data, and analysis (unaudited).
5. Forum internal data and analysis (unaudited). Past performance is historical and not a guarantee of future results. The expectations of potential gains are based on various assumptions and subject to certain risks, including those identified in REIIF's Confidential Offering Memorandum.
6. Based on forecasted Net Operating Income for the next twelve months.
7. Based on Forum's unaudited internal data and analysis. Management provides no guarantee or assurance that the financing will be closed during this period.
8. Management's beliefs and expectations are based on management's experience and internal assumptions and should not be construed as a guarantee or assurance of future performance.
9. Based on Forum figures. See our Impact Management Framework for methodology: Forum's Impact Framework.
10. 2023 PRI Assessment Report.

About REIIF

REIIF invests principally in institutional-quality, multi-family rental apartments, purpose-built student accommodations ("PBSA"), and co-living communities 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 top investors. We're proud to have delivered top tier alternative asset returns since 2002, while positively impacting over 10,600 lives.

Contacts

Name: Rajeev Viswanathan, Chief Financial Officer
Phone Number: 416-947-0389
Email: rajeev@forumam.com

Cautionary Statement

The information contained in this news release is for informational purposes only; is not investment, financial or other advice; and is not intended to be used as the basis for making an investment decision. This news release does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities, nor shall any part of this news release form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities of REIIF. The offering of units of REIIF is made pursuant to its confidential offering memorandum only to those "accredited investors" in certain jurisdictions of Canada who meet certain eligibility and cannot be sold in Canada to the general public. This news release does not constitute any form of commitment, recommendation, representation, or warranty on the part of any person. No reliance should be placed on the completeness of the information contained in this news release. This news release is not intended to be a comprehensive review of all matters concerning REIIF. Please visit www.forumreiif.ca for more information.

This news release contains forward-looking information within the meaning of applicable Canadian securities laws. Often, but not always, forward-looking information can be identified by the use of words such as "expect", "intends", "anticipated", "believes" or variations (including negative variations) of such words and phrases, or states that certain actions, events or results "may", "could", "would" or "will" be taken, occur or be achieved. Such forward-looking statements reflect management's current beliefs and are based on assumptions made by and information currently available to Forum. Forward-looking information contained in this news release includes, but is not limited to, statements with respect to REIIF's intentions or expectations concerning the investment objectives and strategies of REIIF; statements with respect to the types of opportunities being pursued by REIIF; forecasted annual net operating income growth of the portfolio properties; the ESG objectives and targets of REIIF; statements with respect to REIIF's financing strategies and expectation, timing and payment of distributions, including the target annual distribution and aggregate target total net return of an investor's investment in REIIF; and expectations with respect to Canada's rental growth and housing supply as well as general market outlook.

Readers are cautioned that these forward-looking statements are neither promises nor guarantees, and are subject to risks and uncertainties that may cause future results to differ materially from those expected including, without limitation, risks associated with general economic conditions; adverse factors affecting the real estate market generally or those specific markets in which REIIF holds properties; volatility of real estate prices; inability to access sufficient capital from internal and external sources and/or inability to access capital on favourable terms; currency and interest rate fluctuations and other risks. Although Forum has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. These forward-looking statements are made as of the date hereof and Forum does not assume any obligation to update or revise them to reflect new events or circumstances save as required under applicable securities legislation.

SOURCE: Forum Asset Management