Forum Real Estate Income and Impact Fund Announces Fourth Quarter Results

TORONTO, ON / ACCESSWIRE / February 9, 2023 / The Forum Real Estate Income and Impact Fund ("REIIF" or the "Fund") announced its results for the quarter ended December 31, 2022.

Initial Series F investors in REIIF have earned a return of 10.51%¹ for 2022, including a 4.50% distribution yield (3.75 cents/month)².

As reported by CMHC², despite the number of apartments added to Canadian rental stock in 2022 being the highest in recent decades, the national vacancy rate dropped from 3.1% to 1.9%, the lowest national rate since 2001. This decline in the national vacancy rate has been largely driven by the 431,645 new permanent residents that entered Canada in 2022, the largest yearly influx of newcomers in Canadian history. The Canadian government plans to welcome an additional 1.45 million new permanent residents over the next three years - 8x higher than the UK and 4x than the US per capita. This increase in permanent residents resulted in an 18% rental rate growth on new leases nationally in 2022, which is not expected to subside given the forecasted numbers of entrants over the coming years.

"REIIF is well-positioned to continue to deliver strong returns, with a portfolio of Canadian rental housing assets focused on purpose-built student accommodations, co-living communities, micro-units and non-rent controlled apartments. These types of residential housing experience naturally higher tenant turnover relative to rent controlled, traditional apartments," said Aly Damji, Managing Partner at Forum Asset Management ("Forum") and a Trustee of REIIF. "As we capture rental rate increases in one of the tightest rental housing markets in the world, we anticipate significant cash flow growth for 2023."

Portfolio Update

With six acquisitions completed in 2022, including the addition of Quad C3 and C4 in the fourth quarter, REIIF's portfolio is now comprised of ten properties, and over 1,200 units spanning approximately 625,000 square feet of residential gross leasable area. REIIF owns over 1,500 beds at Canada's third largest post-secondary institution, York University, and remains focused on adding to its purpose-built student accommodation ("PBSA") allocation given the inflation protection characteristics and defensive positioning offered by this sub-sector of rental housing.

One of REIIF's avenues of strategic growth is exclusive access to Forum's completed development pipeline under a right of first offer agreement ("ROFO"). REIIF's ROFO with Forum is comprised of over of $650M of rental housing, including over $300M of newly constructed PBSA, to be delivered over the next several years.

Further, at the end of the Fund's full first year, the portfolio is well diversified across Canada with assets in Toronto, Vancouver, Montreal, Ottawa, and Winnipeg, with an average age under 3 years.

"With high inflation in 2022, we witnessed divergence in the performance and valuation of rent-controlled assets and those not subject to rent control, with higher relative valuations from non-rent controlled assets driven by the ability to better capture market rent increases," said Greg Spafford, Fund Head for REIIF. "In the fourth quarter, we pro-actively recorded valuation decreases on rent-controlled assets to reflect that trend."

Valuation declines recorded on rent-controlled assets within the portfolio resulted in 13 bps of capitalization rate expansion versus the end of the third quarter and a 4.2% capitalization rate for the portfolio as of December 31, 2022.

Distributions

The December 31, 2022 distribution was paid to unitholders of record as at December 30, 2022 and is the twelfth monthly distribution since the launch of REIIF in December 2021.

The Fund also announced its 2023 distribution as follows:

The new 2023 distribution rate per unit will be payable to unitholders of record as at January 31, 2023 and paid in February 2023.

"The distribution in 2023 is consistent with 2022, equating to a 4.3%³ distribution yield," said Rajeev Viswanathan, Managing Partner and CFO at Forum. "REIIF's distribution provides an attractive, tax efficient yield while allowing REIIF to retain capital to grow future cash flows and value."

Balance Sheet Update

As of December 31, 2022, the Fund has a conservative debt to assets ratio of 54% and more than half of REIIF's indebtedness is priced at fixed rates, with an effective fixed coupon rate of 2.64% and average term to maturity of over 4 years.⁴ In addition, the Fund's strong balance sheet is supplemented by over $40 M of available liquidity.

By mid-2023, once REIIF's planned CMHC-insured financing initiatives are complete, the Fund's debt structure is expected to be over 90% fixed rate, with an effective coupon of just over 3% and an average term to maturity of approximately 7 years.

Impact Initiatives

REIIF's impact and environmental, social and governance ("ESG") initiatives are focused on reducing its environmental footprint and increasing social engagement. Key 2022 impact initiatives involved establishing performance baselines for both energy consumption and carbon emissions across each property in the portfolio, along with completing REIIF's inaugural GRESB submission.

"We are pleased to have received a ranking of third overall in our peer group and an above average score relative to first time GRESB submitters." said Kathleen Beaumont, Director Impact & ESG for Forum. "With 50% of the portfolio carbon neutral and one asset achieving net zero status, we will build on the progress last year by focusing our attention on executing decarbonization plans and reducing REIIF's carbon footprint in 2023, while ensuring positive impact also results in positive financial returns."

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

1 - The yield and total return is for the December 2021 Series F units and is no guarantee of future results. The distribution rate and total return received by a unit holder will differ based on the series of trust units in which a unit holder invests.

2 - CMHC, January, 2023 Annual Rental Market Report.

3 - The yield is for the January 2023 Series F units and is no guarantee of future results. The distribution rate and total return received by a unit holder will differ based on the series of trust units in which a unit holder invests.

4 - Weighted average term to maturity (WATM) aggregates each loan's remaining years to maturity, weighted by the loan's principal balance outstanding over total indebtedness.

About REIIF

REIIF invests principally in institutional-quality, multi-family rental apartments, purpose-built student accommodations, 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 will 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, the manager of REIIF, 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 in the top tier of alternative asset returns since 2002, while positively impacting over 6,000 lives. For more information about Forum, visit: www.forumam.com.

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 may contain 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. 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