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 and twelve months ended December 31, 2016. Capitalized terms used herein have the meanings set forth in the Appendix.
Fourth Quarter 2016 Highlights
- Total revenues increased to $146.4 million in Q4 2016, driven by Quarterly Same Store revenue growth of 5.4%
- Occupancy was 95.5% for the Quarterly Same Store cohort of 28,146 homes
- Net loss of $10.5 million or ($0.10) per share; Core FFO of $51.0 million or $0.47 per share for the three months ended December 31, 2016
- Quarterly Same Store NOI increased 15.5% over Q4 2015; Quarterly Same Store Core NOI margin was 66.2%
Full Year 2016 Highlights
- Total revenues increased to $575.7 million in 2016, driven by Full Year Same Store revenue growth of 6.2%
- Occupancy was 95.9% for the Full Year Same Store cohort of 22,363 homes
- Net loss of $81.3 million or ($0.80) per share; Core FFO of $182.8 million or $1.69 per share
- Full Year Same Store NOI increased 11.0% over 2015; Full Year Same Store Core NOI margin was 63.8%
- Company substantially exited from the non-performing loan (“NPL”) business through portfolio sale with total proceeds of $265.3 million
- Reduced total debt in FY16 by $354.0 million with NPL proceeds, non-core asset disposition activity and cash from operations
- Exceeded target of $50 million in annualized Merger synergies
“Fourth quarter Core FFO of $0.47 per share, supported by our Same Store Core NOI margin of 66.2%, caps a year of tremendous accomplishments for Colony Starwood Homes,” stated Fred Tuomi, the Company’s CEO. “Demand for our high-quality, well-located single-family rental homes and operational efficiencies from market density produced Full Year Same Store NOI growth of 11.0%. Since completing our merger in early 2016, we have strengthened our balance sheet by reducing outstanding debt, extending maturities and increasing fixed rate debt from 10% to over 80% today. Having met or exceeded our stated goals for our first full year as Colony Starwood Homes, we are highly confident in our ability to continue delivering superior results. Our 2017 full-year growth expectations reflect strong fundamentals in our high growth markets, the underlying strength of our existing portfolio, and the additional growth opportunities we are pursuing.”
The 2016 financial results of the Company (other than Quarterly Same Store or Full Year Same Store results) include the historical financial results of Starwood Waypoint Residential Trust (“SWAY”) beginning on January 5, 2016, which was the date of the merger between Colony American Homes (“CAH”) and SWAY (the “Merger”). Historical financial results (other than Same Store results) as of dates or for periods prior to January 5, 2016 represent only the pre-Merger financial results of CAH and do not reflect what the financial results would have been had the Merger been complete during such periods.
Fourth Quarter 2016 Operating Results
Total revenues were $146.4 million for the three months ended December 31, 2016, and net loss attributable to common shareholders was approximately $10.5 million, or ($0.10) per share, driven by depreciation and amortization expense.
NAREIT FFO was $40.0 million for the three months ended December 31, 2016, or $0.37 per share, and Core FFO was $51.0 million, or $0.47 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 Store Results
For the Company’s Quarterly Same Store portfolio of 28,146 homes, revenue for the three months ended December 31, 2016 was $131.4 million, a 5.4% increase in those homes’ revenues as compared to the three months ended December 31, 2015. For the Company’s Full Year Same Store portfolio of 22,363 homes, revenue for the twelve months ended December 31, 2016 was $402.7 million, a 6.2% increase in those homes’ revenues as compared to the twelve months ended December 31, 2015. For the Quarterly Same Store portfolio, property operating expenses were down by 8.8% from the three months ended December 31, 2015, resulting in an 15.5% growth of Quarterly Same Store NOI for the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. For the Full Year Same Store portfolio, property operating expenses were down 0.7% from the twelve months ended December 31, 2015, resulting in an 11.0% increase of Full Year Same Store NOI for the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015. Quarterly and Full Year Same Store Core NOI margins were 66.2% and 63.8%, respectively. The table below summarizes Quarterly and Full Year Same Store operating results.
| Quarterly Same Store | Full Year Same Store | |||||
| Homes as of December 31, 2016 | 28,146 | 22,363 | ||||
| Occupancy as of December 31, 2016 | 95.5% | 95.9% | ||||
| Revenue Growth (December 31, 2016 as compared to December 31, 2015)(1) | 5.4% | 6.2% | ||||
| Operating Expense Growth (December 31, 2016 as compared to December 31, 2015) (1) | -8.8% | -0.7% | ||||
| NOI Growth (December 31, 2016 as compared to December 31, 2015) (1) | 15.5% | 11.0% | ||||
| Core NOI Margin(1) | 66.2% | 63.8% | ||||
(1) Quarterly Same Store and Full Year Same Store results reflect the three months and twelve months ended December 31, 2016, respectively.
Investments
During the three months ended December 31, 2016, the Company acquired 549 homes for an aggregate estimated total investment of approximately $132.0 million, or approximately $240,000 per home, including estimated investment costs for renovation. The Company sold 228 single-family rental homes for gross sales proceeds of $38.2 million, resulting in a gain of approximately $1.3 million.
For the twelve months ended December 31, 2016, the company acquired 1,079 homes for an aggregate estimated total investment of approximately $262.8 million, or $244,000 per home, including estimated investment costs for renovation. The Company sold 976 single-family rental homes for gross sales proceeds of $167.4 million, resulting in a gain of approximately $4.7 million.
NPL/REO Discontinued Operations
On May 4, 2016, the Company’s board of trustees (the “Board”) authorized the exit of the non-performing loan (“NPL”) business. The remaining operations of the NPL business segment are recorded as discontinued operations, net for the three and twelve months ended December 31, 2016 and all comparable periods.
In Q4 the Company sold 220 real estate owned (“REO”) homes in the NPL business segment for $31.4 million of total cash proceeds, of which $14.4 million was used to pay down associated debt. As of December 31, 2016 there was $19.3 million of outstanding associated debt; subsequent to December 31, 2016 this debt was paid in full and the warehouse line was extinguished.
Balance Sheet and Capital Markets Activities
As of December 31, 2016, the Company had $3.8 billion of debt outstanding and approximately $492.0 million of undrawn commitments on its credit facilities. Since the Merger closed on January 5, 2016 through December 31, 2016, the Company reduced its outstanding debt by approximately $354.0 million.
Subsequent to December 31, 2016, 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.
The Company did not repurchase any shares in the fourth quarter of 2016 under its $250.0 million repurchase program, which is authorized through May 6, 2017. To date, the Company has purchased 2.4 million shares for an aggregate purchase price of $52.8 million at an average of $22.19 per share under the program.
On February 22, 2017, the Board declared a dividend of $0.22 per common share for the first quarter of 2017, which will be paid on April 14, 2017 to shareholders of record on March 31, 2017.
Full Year 2017 Financial Guidance
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.
| 2017 Guidance | |||
| Core FFO/Share | $1.85 - $1.95 | ||
| Same Store Revenue Growth (1) | 4 – 5% | ||
| Same Store Expense Growth (1) | 2 – 3% | ||
| Same Store Core NOI Margin (1) | 63 – 65% | ||
| Same Store Occupancy (1) | 95 – 96% | ||
| Same Store Turnover (1) | 34 – 36% | ||
(1) 2017 Full Year Same Store property count is expected to be approximately 28,850, subject to dispositions throughout the year.
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 Statement disclosure on page 8.
Fourth Quarter 2016 Conference Call
A conference call is scheduled on Tuesday, February 28, 2017, at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the three and twelve months ended December 31, 2016. 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 March 31, 2017 and can be accessed by calling 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (international), replay pin number 13653043, 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 Fourth Quarter 2016 Supplemental Information Package (“Q4 2016 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 Q4 2016 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 (Condensed) |
|||||||||||
| Assets | Liabilities | ||||||||||
| Investments in real estate properties: | Accounts payable and accrued expenses | $ | 88,140 | ||||||||
| Land and land improvements | $ | 1,584,533 | Resident prepaid rent and security deposits | 57,823 | |||||||
| Buildings and building improvements | 4,403,871 | Secured credit facilities | 108,501 | ||||||||
| Furniture, fixtures and equipment | 131,502 | Mortgage loans, net | 3,333,241 | ||||||||
| Total investments in real estate properties | 6,119,906 | Convertible senior notes, net | 356,983 | ||||||||
| Accumulated depreciation | (370,394 | ) | Liabilities related to assets held for sale | 25,495 | |||||||
| Investments in real estate properties, net | 5,749,512 | Total liabilities | 3,970,183 | ||||||||
| Real estate held for sale, net | 22,201 | ||||||||||
| Cash and cash equivalents | 109,097 | Equity | |||||||||
| Restricted cash | 155,194 | Common shares, at par | 1,015 | ||||||||
| Investments in unconsolidated joint ventures | 34,384 | Additional paid-in capital | 2,734,034 | ||||||||
| Asset-backed securitization certificates | 141,103 | Accumulated deficit | (319,828 | ) | |||||||
| Assets held for sale | 76,870 | Accumulated other comprehensive loss | 23,667 | ||||||||
| Goodwill | 260,230 | Total shareholders' equity | 2,438,888 | ||||||||
| Other assets, net | 66,585 | Non-controlling interests | 206,105 | ||||||||
| Total equity | 2,644,993 | ||||||||||
| Total assets | $ | 6,615,176 | Total liabilities and equity | $ | 6,615,176 | ||||||
|
Statements of Operations |
||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2016 | 2015(1) | 2016 | 2015(1) | |||||||||||||
| Revenues | ||||||||||||||||
| Rental income | $ | 137,725 | $ | 75,633 | $ | 538,191 | $ | 283,635 | ||||||||
| Other property income | 6,014 | 2,298 | 25,844 | 17,167 | ||||||||||||
| Other income | 2,625 | 2,934 | 11,647 | 2,934 | ||||||||||||
| Total revenues | 146,364 | 80,865 | 575,682 | 303,736 | ||||||||||||
| Expenses | ||||||||||||||||
| Property operating and maintenance | 19,225 | 19,036 | 83,451 | 62,349 | ||||||||||||
| Real estate taxes, insurance and HOA costs | 26,973 | 10,433 | 110,112 | 53,894 | ||||||||||||
| Property management expenses | 8,276 | 4,635 | 34,736 | 18,422 | ||||||||||||
| Interest expense | 37,430 | 17,324 | 152,167 | 65,034 | ||||||||||||
| Depreciation and amortization | 42,945 | 28,007 | 178,763 | 108,307 | ||||||||||||
| Impairment of real estate assets | 220 | 10,724 | 750 | 11,780 | ||||||||||||
| Share-based compensation | 931 | - | 2,853 | - | ||||||||||||
| General and administrative | 11,932 | 7,483 | 54,332 | 34,251 | ||||||||||||
| Merger and transaction-related expenses | (562 | ) | 4,692 | 29,496 | 7,112 | |||||||||||
| Total expenses | 147,370 | 102,334 | 646,660 | 361,149 | ||||||||||||
| Net gain on sale of real estate owned | 1,309 | 730 | 4,673 | 1,133 | ||||||||||||
| Equity in income from unconsolidated joint ventures | 199 | 115 | 738 | 266 | ||||||||||||
| Other income (expense), net | (1,016 | ) | (975 | ) | (2,395 | ) | (3,607 | ) | ||||||||
| Loss before income taxes | (514 | ) | (21,599 | ) | (67,962 | ) | (59,621 | ) | ||||||||
| Income tax (expense) benefit | (249 | ) | 235 | (736 | ) | (816 | ) | |||||||||
| Net loss from continuing operations | (763 | ) | (21,364 | ) | (68,698 | ) | (60,437 | ) | ||||||||
| Income (loss) from discontinued operations, net | (10,419 | ) | 2,200 | (17,787 | ) | (1,578 | ) | |||||||||
| Net loss | (11,182 | ) | (19,164 | ) | (86,485 | ) | (62,015 | ) | ||||||||
| Net loss attributable to non-controlling interests | 689 | 7,026 | 5,218 | 23,152 | ||||||||||||
| Net loss attributable to Colony Starwood Homes | (10,493 | ) | (12,138 | ) | (81,267 | ) | (38,863 | ) | ||||||||
| Net income attributable to preferred shareholders | - | (4 | ) | - | (16 | ) | ||||||||||
| Net loss available to common shareholders | $ | (10,493 | ) | $ | (12,142 | ) | $ | (81,267 | ) | $ | (38,879 | ) | ||||
| Net loss per common share - basic and diluted | ||||||||||||||||
| Net loss attributable to common shareholders | $ | (0.10 | ) | $ | (0.19 | ) | $ | (0.80 | ) | $ | (0.60 | ) | ||||
(1) For GAAP purposes, the Merger resulted in a reverse acquisition of SWAY by CAH. Historical financial statements for periods prior to the Merger include only the results of operations and financial position of CAH.
|
Reconciliation to FFO and Core FFO |
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|
Three Months Ended |
Twelve Months Ended |
|||||||
|
Reconciliation of net loss to NAREIT FFO |
||||||||
| Net loss attributable to common shareholders | $ | (10,493 | ) | $ | (81,267 | ) | ||
| Adjustments: | ||||||||
| Depreciation and amortization on real estate assets | 41,889 | 176,811 | ||||||
| Impairment of real estate assets | 220 | 750 | ||||||
| Net gain on sale of real estate | (1,309 | ) | (4,673 | ) | ||||
| Non-controlling interests | (689 | ) | (5,218 | ) | ||||
| Discontinued operations, net (NPL/REO) | 10,419 | 17,787 | ||||||
| NAREIT FFO | $ | 40,037 | $ | 104,190 | ||||
| NAREIT FFO per share (1) | $ | 0.37 | $ | 0.96 | ||||
|
Adjustments for Core FFO |
||||||||
| NAREIT FFO | $ | 40,037 | $ | 104,190 | ||||
|
Amortization of deferred financing costs, debt premium discounts
and non-cash |
10,344 | 38,290 | ||||||
| Merger and transaction-related expenses | (562 | ) | 29,496 | |||||
| Integration Costs (2) | 294 | 7,971 | ||||||
| Share-based compensation | 931 | 2,853 | ||||||
| Core FFO | $ | 51,044 | $ | 182,800 | ||||
| Core FFO per share (1) | $ | 0.47 | $ | 1.69 | ||||
|
|
(1) Weighted-average common shares total 108,032,444 and
108,265,578 for the three and twelve month periods, respectively.
These share counts are comprised of 101,492,960 and 101,633,326
weighted-average common shares outstanding and 139,484 and 232,252
unvested RSUs for the three and twelve month periods ended,
respectively, and outstanding OP units exchangeable for 6,400,000
common shares.
(2) Please see Appendix A for a definition of Integration Costs, and Appendix B for a summary of Integration Costs through the three and twelve months ended December 31, 2016. We believe that identifying Integration Costs is useful for investors as it allows investors to separate these costs from the core operating performance of our Single-Family Rental business. |