SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Colony Starwood Homes (NYSE:SFR) (the “Company”), a leading single-family rental real estate investment trust (“REIT”), today announced operating and financial results for the three months ended March 31, 2017. Capitalized terms used herein have the meanings set forth in the Appendix to the Supplemental Report of financial and operating information posted on the Company's website.
First Quarter 2017 Highlights
- Total revenues increased to $151.0 million in Q1 2017, driven by Same Home revenue growth of 6.9%
- Occupancy was 96.1% for the Same Home cohort of 28,732 homes
- Net loss of $11.3 million or ($0.11) per share; Core FFO of $52.8 million or $0.48 per share
- Same Home NOI increased 6.5% over Q1 2016; Same Home Core NOI margin was 65.4%
- Completed a $345.0 million convertible note offering with five-year term at a 3.5% coupon rate
- Completed a $750.0 million follow-on equity offering ($350.0 million primary and $400.0 million secondary)
- Subsequently to March 31, 2017 paid down $300.0 million of principal on SWAY 2014-1 resulting in fixed rate debt of over 90%
“Our Same Home revenue growth of 6.9% reflects the continued robust demand and muted supply within Colony Starwood Homes’ high growth markets in the first quarter of 2017. Quarter ending occupancy of 96.1% positions us well as we enter the 2017 peak leasing season while Same Home Core NOI Margin of 65.4% indicates continued gains in operating efficiencies,” stated Fred Tuomi, the Company’s CEO. “We were very pleased with the execution of the Company’s first primary equity offering of $350.0 million, which demonstrated strong investor demand, further strengthened our balance sheet and provided substantial growth capital. Looking forward, we see 2017 as another year of strong fundamentals and superior results.”
First Quarter 2017 Operating Results
Total revenues were $151.0 million for the three months ended March 31, 2017, and net loss attributable to common shareholders was $11.3 million, or ($0.11) per share, driven by depreciation and amortization expense.
NAREIT FFO was $33.9 million for the three months ended March 31, 2017, or $0.31 per share, and Core FFO was $52.8 million, or $0.48 per share. NAREIT FFO and Core FFO are common supplemental measures of operating performance for a REIT, and the Company believes both are useful to investors as a complement to GAAP measures because they facilitate an understanding of the operating performance of the Company’s properties.
Same Home Results
For the Company’s Same Home portfolio of 28,732 homes, revenue, operating expenses and NOI were $137.4 million, $50.7 million and $86.7 million, respectively, for the three months ended March 31, 2017. Year-over-year Same Home revenue and expense growth were affected by the implementation of a third-party utility billing service provider during the third quarter 2016, whereby water, sewer and trash services are now held in the Company’s name during resident occupancy and subsequently billed-back to the resident; this had the effect of increasing both revenue growth and expense growth. Core Rental Revenue and Core Property Operating Expense measures reflect the net effect of these utility reimbursements, as well as other chargebacks. Core Revenue growth for the quarter was 5.6% with Core Expense growth of 4.0%. Same Home Core NOI margin for the three months ended March 31, 2017 and March 31, 2016 was 65.4% and 64.9%, respectively. The table below summarizes Same Home operating results.
| Same Home | Q1 Results | |||||||
| Homes as of March 31, 2017 | 28,732 | |||||||
| Occupancy as of March 31, 2017 | 96.1% | |||||||
| Revenue/Core Revenue Growth (March 31, 2017 as compared to March 31, 2016) | 6.9%/5.6% | |||||||
| Operating Expense/Core Expense Growth (March 31, 2017 as compared to March 31, 2016) | 7.6%/4.0% | |||||||
| NOI Growth (March 31, 2017 as compared to March 31, 2016) | 6.5% | |||||||
| NOI/Core NOI Margin | 63.1%/65.4% | |||||||
Investments
During the three months ended March 31, 2017, the Company acquired 397 homes for an aggregate total investment of approximately $92.4 million, or approximately $233,000 per home, including estimated investment costs for renovation. The Company sold 136 single-family rental homes for gross sales proceeds of $27.8 million, resulting in a gain of approximately $0.7 million.
Balance Sheet and Capital Markets Activities
As of March 31, 2017, the Company had $3.8 billion of debt outstanding and approximately $250.0 million of undrawn commitments on its credit facilities.
In January, the Company sold $345.0 million of 3.50% convertible senior notes due 2022. The Company used the net proceeds from the new convertible offering to repurchase, in privately negotiated transactions, substantially all of its 4.50% convertible senior notes due in 2017. Remaining proceeds from the note issuance were used to repay amounts drawn on the Company’s credit facilities, to fund ongoing asset acquisitions and for general corporate purposes. During January, the Company also entered into a five-year $550.0 million swap contract, effectively fixing its floating securitization debt at an average rate of 3.59% over the term bringing the Company’s fixed rate debt to over 90% of total debt.
In March, the Company completed a follow on equity offering of approximately $750.0, consisting of approximately $350.0 million primary shares sold by the Company and approximately $400.0 million in secondary shares sold by original sponsors. In March the Company also entered into an $800.0 million forward swap contract effective from 2019 through 2022 to extend existing swap contracts expiring in 2019.
Subsequent to March 31, 2017, the Company finalized a $675.0 million revolving credit facility, replacing two secured facilities originated prior to the merger between Colony American Homes and Starwood Waypoint. The Company entered into an at-the-market (ATM) sales agreement under which it may sell up to $300.0 million of its common shares in amounts and times to be determined by the Company. The Company paid down the principal balance of its SWAY 2014-1 securitization by $300 million from cash on hand.
On May 2, 2017, the Board declared a dividend of $0.22 per common share for the second quarter of 2017, which will be paid on July 14, 2017 to shareholders of record on June 30, 2017.
Full Year 2017 Financial Guidance
The Company is reaffirming it’s full-year 2017 guidance and the assumptions outlined below:
| 2017 Guidance | ||
| Core FFO/Share | $1.85 - $1.95 | |
| Same Home Revenue Growth (1) | 4 – 5% | |
| Same Home Expense Growth (1) | 2 – 3% | |
| Same Home Core NOI Margin | 63 – 65% | |
| Same Home Occupancy | 95 – 96% | |
| Same Home Turnover | 34 – 36% | |
|
(1) |
Growth rates presented exclude the impact of resident utility billing revenue and associated utility chargeback expenses as a result of the CSH utility chargeback transition beginning in Q3 2016, whereby water, sewer and trash services are held in the Company’s name during resident occupancy and subsequently billed back to the resident. |
|
The Company does not provide forward-looking guidance for certain financial measures on a GAAP basis because it is unable to reasonably predict certain items contained in the GAAP measures, including one-time and infrequent items that are not indicative of the Company’s ongoing operations. Such items include, but are not limited to, discontinued operations, share-based compensation and other items not reflective of the Company's ongoing operations.
This outlook is based on a number of assumptions, many of which are outside the Company’s control and all of which are subject to change. This outlook reflects the Company’s expectations on (1) existing investments and (2) yield on incremental investments inclusive of the Company’s existing pipeline. All guidance is based on current expectations of future economic conditions and the judgment of the Company’s management team. Please refer to the Forward Looking Statements disclosure.
First Quarter 2017 Conference Call
A conference call is scheduled on Tuesday, May 9, 2017, at 11:00 a.m. Eastern Time to discuss the Company’s financial results for the three months ended March 31, 2017. The domestic dial-in number is 1-877-407-9039 (for U.S. and Canada) and the international dial-in number is 1-201-689-8470 (passcode not required). An audio webcast may be accessed at www.colonystarwood.com in the investor relations section. A replay of the call will be available through June 9, 2017 and can be accessed by calling 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (international), replay pin number 13658913, or by using the link at www.colonystarwood.com, in the investor relations section.
About Colony Starwood Homes
Colony Starwood Homes (NYSE: SFR) is one of the largest publicly traded owners and operators of single-family rental homes in the United States. Colony Starwood Homes acquires, renovates, leases, maintains and manages single-family homes in markets that exhibit favorable demographics and long-term economic trends, as well as strengthening demand for rental properties. Colony Starwood Homes is building its business upon a foundation of respect for its residents and the communities in which it operates. Additional information can be found at www.colonystarwood.com.
Additional information
A copy of the First Quarter 2017 Supplemental Information Package (“Q1 2017 Supplement”) and this press release are available on the Company’s website at www.colonystarwood.com.
Notice Regarding Non-GAAP Financial Measures
This press release and the Q1 2017 Supplement contain and may refer to certain non-GAAP financial measures and terms that management believes are helpful in understanding our business, as further set forth in the definitions, explanations and reconciliations of each non-GAAP financial measure to its most comparable GAAP financial measures included in the Appendix. These measures and terms are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should be read together with the most comparable GAAP measures.
Forward-Looking Statements
Certain statements in this press release and the quarterly supplement/presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws and are based on certain assumptions and discuss future expectations, describe future plans and strategies and contain financial and operating projections or state other forward-looking information. The Company’s ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company’s actual results and performance could differ materially from those set forth in, or implied by, the forward-looking statements. Factors that could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations and prospects, as well as the Company’s ability to make distributions to its shareholders, include, but are not limited to: the factors referenced in the Company’s Annual Report on Form 10-K; unanticipated increases in financing and other costs, including a rise in interest rates; the availability, terms and the Company’s ability to effectively deploy short-term and long-term capital; the possibility that unexpected liabilities may arise from the Company’s merger (the “Merger”) with Colony American Homes (“CAH”), including the outcome of any legal proceedings that have been or may be instituted against the Company, CAH or others in connection with the Merger and the associated transactions; changes in the Company’s business and growth strategies; the Company’s ability to hire and retain highly skilled managerial, investment, financial and operational personnel; volatility in the real estate industry, interest rates and spreads, the debt or equity markets, the economy generally or the rental home market specifically, whether the result of market events or otherwise; events or circumstances that undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large financial institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts; declines in the value of single-family residential homes, and macroeconomic shifts in demand for, and competition in the supply of, rental homes; the availability of attractive investment opportunities in homes that satisfy the Company’s investment objective and business and growth strategies; the Company’s ability to convert the properties it acquires into rental homes generating attractive returns and to effectively control the timing and costs relating to the renovation and operation of the properties; the Company’s ability to complete its exit from the non-performing loan (“NPL”) (and related real estate owned) business in the anticipated time period on acceptable terms and to re-deploy net cash proceeds therefrom; the Company’s ability to lease or re-lease its rental homes to qualified residents on attractive terms or at all; the failure of residents to pay rent when due or otherwise perform their lease obligations; the Company’s ability to effectively manage its portfolio of rental homes; the concentration of credit risks to which the Company is exposed; the rates of default or decreased recovery rates on the Company’s target assets; the adequacy of the Company’s cash reserves and working capital; potential conflicts of interest with Starwood Capital Group, Colony Capital, LLC (“Colony Capital”), Colony NorthStar, Inc. (“Colony NorthStar”) and their affiliates and managed investment activities; the timing of cash flows, if any, from the Company’s investments; the Company’s expected leverage; financial and operating covenants contained in the Company’s credit facilities and securitizations that could restrict its business and investment activities; effects of derivative and hedging transactions; the Company’s ability to maintain effective internal controls as required by the Sarbanes-Oxley Act of 2002 and to comply with other public company regulatory requirements; the Company’s ability to maintain its exemption from registration as an investment company under the Investment Company Act of 1940, as amended; actions and initiatives of the U.S., state and municipal governments and changes to governments’ policies that impact the economy generally and, more specifically, the housing and rental markets; changes in governmental regulations, tax laws (including changes to laws governing the taxation of real estate investment trusts (“REITs”)) and rates, and similar matters; limitations imposed on the Company’s business and its ability to satisfy complex rules in order for the Company and, if applicable, certain of its subsidiaries to qualify as a REIT for U.S. federal income tax purposes and the ability of certain of the Company’s subsidiaries to qualify as taxable REIT subsidiaries for U.S. federal income tax purposes, and the Company’s ability and the ability of its subsidiaries to operate effectively within the limitations imposed by these rules; and estimates relating to the Company’s ability to make distributions to its shareholders in the future.
You should not place undue reliance on any forward-looking statement and should consider all of the uncertainties and risks described above, as well as those more fully discussed in the reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. Except as required by law, the Company is under no duty to, and the Company does not intend to, update any of the forward-looking statements appearing herein, whether as a result of new information, future events or otherwise.
Consolidated Financials
|
Balance Sheet (Unaudited) |
||||||||||||||
|
As of March 31, 2017 |
||||||||||||||
|
Dollars in thousands |
||||||||||||||
| Assets | Liabilities | |||||||||||||
| Investments in real estate properties: | Accounts payable and accrued expenses | $ | 90,617 | |||||||||||
| Land and land improvements | $ | 1,595,371 | Resident prepaid rent and security deposits | 60,403 | ||||||||||
| Buildings and building improvements | 4,469,092 | Mortgage loans, net | 3,327,374 | |||||||||||
| Furniture, fixtures and equipment | 140,333 | Convertible senior notes, net | 516,493 | |||||||||||
| Total investments in real estate properties | 6,204,796 | Liabilities related to assets held for sale | 6,005 | |||||||||||
| Accumulated depreciation | (411,968 | ) | Other liabilities | 87 | ||||||||||
| Investments in real estate properties, net | 5,792,828 | Total liabilities | 4,000,979 | |||||||||||
| Real estate held for sale, net | 23,759 | Equity | ||||||||||||
| Cash and cash equivalents | 430,926 | Common shares, at par | 1,127 | |||||||||||
| Restricted cash | 159,131 | Additional paid-in capital | 3,100,597 | |||||||||||
| Investments in unconsolidated joint ventures | 34,114 | Accumulated deficit | (357,540 | ) | ||||||||||
| Asset-backed securitization certificates | 141,103 | Accumulated other comprehensive income | 28,681 | |||||||||||
| Assets held for sale | 50,478 | Total shareholders' equity | 2,772,865 | |||||||||||
| Goodwill | 260,230 | Non-controlling interests | 190,029 | |||||||||||
| Other assets, net | 71,304 | Total equity | 2,962,894 | |||||||||||
| Total assets | $ | 6,963,873 | Total liabilities and equity | $ | 6,963,873 | |||||||||
| Statements of Operations (Unaudited) | ||||||||||
|
Dollars in thousands |
||||||||||
| Three Months Ended March 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Revenues | ||||||||||
| Rental income | $ | 141,095 | $ | 130,452 | ||||||
| Other property income | 7,171 | 4,924 | ||||||||
| Other Income | 2,774 | 2,890 | ||||||||
| Total revenues | 151,040 | 138,266 | ||||||||
| Expenses | ||||||||||
| Property operating and maintenance | 18,946 | 16,738 | ||||||||
| Real estate taxes, insurance and HOA costs | 28,299 | 27,319 | ||||||||
| Property management | 9,650 | 10,016 | ||||||||
| Interest expense | 38,999 | 37,457 | ||||||||
| Depreciation and amortization | 46,185 | 43,630 | ||||||||
| Impairment of real estate assets | 443 | 30 | ||||||||
| Share-based compensation | 1,561 | 387 | ||||||||
| General and administrative | 10,840 | 16,366 | ||||||||
| Merger and transaction-related expenses | - | 23,482 | ||||||||
| Total expenses | 154,923 | 175,425 | ||||||||
| Net gain on sales of real estate | 678 | 1,384 | ||||||||
| Equity in income from unconsolidated joint ventures | 180 | 197 | ||||||||
| Loss on extinguishment of debt | (7,153 | ) | - | |||||||
| Other expense, net | (1,639 | ) | (725 | ) | ||||||
| Loss before income taxes | (11,817 | ) | (36,303 | ) | ||||||
| Income tax expense | 157 | 245 | ||||||||
| Net loss from continuing operations | (11,974 | ) | (36,548 | ) | ||||||
| Loss from discontinued operations, net | (46 | ) | (10,501 | ) | ||||||
| Net loss | (12,020 | ) | (47,049 | ) | ||||||
| Net loss attributable to non-controlling interests | 678 | 2,850 | ||||||||
| Net loss attributable to common shareholders | $ | (11,342 | ) | $ | (44,199 | ) | ||||
| Earnings per share - basic | ||||||||||
| Net income available to common shareholders | $ | (0.11 | ) | $ | (0.43 | ) | ||||
| Weighted average common shares outstanding | 104,593,904 | 102,066,754 | ||||||||
|
Reconciliation to FFO and Core FFO |
||||||
|
Dollars in thousands, except share and per share data |
||||||
| Three Months Ended March 31, 2017 | ||||||
|
Reconciliation of net loss to NAREIT FFO |
||||||
| Net loss attributable to common shareholders | $ | (11,342 | ) | |||
| Adjustments: | ||||||
| Depreciation and amortization on real estate assets | 46,116 | |||||
| Impairment of real estate assets | 443 | |||||
| Net gain on sale of real estate | (678 | ) | ||||
| Non-controlling interests | (678 | ) | ||||
| Discontinued operations, net (NPL/REO) | 46 | |||||
| NAREIT FFO | $ | 33,907 | ||||
| NAREIT FFO per share (1) | $ | 0.31 | ||||
|
Adjustments for Core FFO |
||||||
| NAREIT FFO | $ | 33,907 | ||||
| Amortization of deferred financing costs, debt premium discounts, non-cash interest expense from interest rate caps and loss on extinguishment of debt | 17,330 | |||||
| Share-based compensation | 1,561 | |||||
| Core FFO | $ | 52,798 | ||||
| Core FFO per share (1) | $ | 0.48 | ||||
|
|
||||||
|
(1) |
Weighted-average common shares total 111,021,947 for the three-month period ended March 31, 2017. These share counts are comprised of 104,593,904 weighted-average common shares outstanding and 155,214 unvested RSUs for the three-month period ended, and outstanding OP units exchangeable for 6,272,829 common shares. |
|
|
|
|