TORONTO, May 25, 2026 /CNW/ - Starlight U.S. Residential (Multi-Family) Investment LP (TSXV:SURF) (the "SURF LP") announced today its results of operations and financial condition for the three months ended March 31, 2026 ("Q1-2026"). Certain comparative figures are included for SURF LP's financial and operational performance as at December 31, 2025 and for the three months ended March 31, 2025 ("Q1-2025").
All amounts in this press release are in thousands of United States ("U.S.") dollars except for average monthly rent ("AMR")1, or unless otherwise stated. All references to C$ are to Canadian dollars.
Q1-2026 HIGHLIGHTS
Revenue from property operations for Q1-2026 was $4,896 (Q1-2025 - $9,798) representing a decrease of 50.0% in revenue due to SURF LP completing the dispositions of Lyric Apartments ("Lyric"), Eight at East and Emerson at Buda ("Emerson") in Q2-2025, Q3-2025 and Q4-2025, respectively ("Primary Variance Driver") as well as a decrease in same property revenue of 2.9% primarily as a result of decreases in AMR due to SURF LP facing heavy competition from new supply and aggressive pricing to lease new properties in Phoenix.
Net operating income ("NOI")1 for Q1-2026 was $3,090 (Q1-2025 - $6,052), representing a decrease of 48.9% in NOI primarily due to the Primary Variance Driver and reduction in same property NOI1 of 1.4% relative to Q1-2025 as a result of the competition from new supply described above. Q1-2026 normalized same property NOI to exclude the impact of the Phoenix property competing with heavy new supply would have been an increase of approximately 1.5% relative to Q1-2025.
SURF LP reported a net loss and comprehensive loss attributable to partners of SURF LP (the "Partners") for Q1-2026 of $17,100 (Q1-2025 - $24,020), primarily due to higher fair value loss on investment properties during Q1-2026 due to the expansion of capitalization rates used to value SURF LP's investment properties.
SURF LP completed ten in-suite light value-add upgrades at the multi-family properties ("Properties") during Q1-2026, which generated an average rental premium of $194 and an average return on cost of approximately 22.8%.
SURF LP achieved economic occupancy1 of 94.2% during Q1-2026 and as at May 24, 2026, had collected approximately 99.8% of rents for Q1-2026, with further amounts expected to be collected in future periods, demonstrating SURF LP's high quality resident base and operating performance.
1 This metric is a non-IFRS measure. Non-IFRS financial measures do not have standardized meanings prescribed by IFRS (see "Non-IFRS Financial Measures and Reconciliations").
FINANCIAL CONDITION AND OPERATING RESULTS
Highlights of the financial and operating performance of SURF LP as at March 31, 2026 and for Q1-2026, including a comparison to March 31, 2025 and Q1-2025, as applicable, are provided below:
March 31,2026
December 31, 2025
Key multi-family operational information
Number of multi-family properties owned
3
3
Total multi-family suites
1,029
1,029
Economic occupancy(1)
94.2 %
93.5 %
Physical occupancy(1)(2)
93.2 %
94.2 %
AMR (in actual dollars)(1)
$
1,550
$
1,552
AMR per square foot (in actual dollars)(1)
$
1.71
$
1.71
Estimated gap to market versus in-place rents(2)
1.3 %
(0.4) %
Selected financial information
Gross book value(2)
$
250,900
$
265,700
Indebtedness(2)(3)
$
258,103
$
256,400
Indebtedness to gross book value(2)(3)
102.9 %
96.5 %
Weighted average interest rate - as at period end(4)
7.76 %
7.81 %
Weighted average term to maturity
0.93 years
1.13 years
Q1-2026
Q1-2025
Summarized income statement (excluding non-controlling interest)(5)
Revenue from property operations
$
4,896
$
9,798
Property operating
(1,299)
(2,561)
Property taxes(6)
(507)
(1,185)
Adjusted Income from Operations / NOI
3,090
6,052
Partnership expenses
(426)
(601)
Finance costs(7)
(5,173)
(8,294)
Other income and expense(8)
(14,591)
(21,177)
Net loss and comprehensive loss - attributable to Partners(5)
$
(17,100)
$
(24,020)
Other selected financial information
FFO(2)
$
(2,526)
$
(1,830)
AFFO(2)
(482)
(593)
Weighted average interest rate - average during period(4)
7.74 %
6.04 %
Interest and indebtedness coverage ratio(2)(9)
0.86x
0.92x
(1) Economic occupancy for Q1-2026 and December 31, 2025 and physical occupancy as at the end of each applicable reporting period. The decrease in AMR from December 31, 2025 to Q1-2026 was primarily due to SURF LP focusing on maintaining high levels of occupancy at the Properties during Q1-2026 as well as SURF LP competing with new supply in certain Primary Markets.
(2) This metric is a non-IFRS measure. Non-IFRS financial measures do not have standardized meanings prescribed by IFRS (see "Non-IFRS Financial Measures"). The increase in AFFO from Q1-2025 to Q1-2026 is primarily due to the impact of accrued interest costs added back to AFFO, partially offset by decrease in NOI as a result of the Primary Variance Driver. The decrease in Interest and Indebtedness Coverage Ratios during Q1-2026 relative to Q1-2025 is due to Primary Variance Driver as well as decrease in same property NOI, partially offset by an increase in deferred interest costs which are payable at maturity of the loan. AFFO and Interest Coverage Ratio and Indebtedness Coverage Ratio presented herein exclude $1,703 of interest costs or debt service shortfall funding for Q1-2026 (Q1-2025 - $743) from applicable lenders which are payable upon maturity of the applicable loan payable.
(3) The maximum allowable leverage ratio under the LPA restricts SURF LP from entering into any additional indebtedness whereby at the time of entering into such indebtedness, the leverage ratio does not exceed 75% (as defined in the LPA). As of the date of issuance of this MD&A, SURF LP met the maximum leverage condition and continues to focus on managing SURF LP's capital structure, including the overall leverage. Although the indebtedness of SURF LP exceeded the total gross book value as at March 31, 2026, two of the three properties owned by SURF LP reported fair values of the investment properties less than the value of the outstanding indebtedness with such loans being non-recourse. Refer to "Future Outlook" for a breakdown of the net assets of SURF LP between those related to the two properties mentioned and the remaining net assets of SURF LP which amounted to approximately $16,712 as at March 31, 2026.
(4) The weighted average interest rate on loans payable is presented as at March 31, 2026 reflecting the prevailing index rate, 30-day New York Federal Reserve Secured Overnight Financing Rate ("NY SOFR") or one-month term Secured Overnight Financing Rate ("Term SOFR" and together with NY SOFR, "SOFR"), as at that date or based on the average rate for the applicable periods as it relates to quarterly rates.. The weighted average interest rate presented above as at March 31, 2026 included the maximum interest rate on the Unsecured Financing of 12.00% and also included the impact of deferred interest costs or deferred debt service shortfall funding. The increase ...
