Monogram Residential Trust, Inc. 2016 Annual Report

138 Pages·2017·5.52 MB·English

Our tailored approach to real estate reflects
Monogram’s commitment to owning, operating, and
developing luxury Class A multifamily properties
with a significant presence in select coastal markets.
Over the past year, we have made considerable
progress on the completion and stabilization of our
development program, while driving Same-Store
growth in our stabilized portfolio and enhancing
our balance sheet. As we close 2016 and look to 2017,
our primary objectives remain the same: we seek to
offer the best in luxury living for our residents while
creating long-term value for our shareholders.
|1| ANNUAL REPORT 2016
4
SHAREHOLDER LETTER
6
KEY ACCOMPLISHMENTS
7
FINANCIAL HIGHLIGHTS
9
STRATEGIC FOCUS
10
THE DEVELOPMENT PROGRAM
13
AN EVOLVING PORTFOLIO
16
TAILORED LIVING
24
APPENDIX
27
ANNUAL REPORT
ON FORM 10-K
MONOGRAM RESIDENTIAL TRUST |2| |3| ANNUAL REPORT 2016
A LETTER FROM THE CEO SH
A
R
In 2016, we were pleased to add three new members EHO
LD
who have extensive industry experience to our Board ER LET
of Directors. Ben Moreland is Executive Vice Chairman TER
DEAR SHAREHOLDERS, of Crown Castle International Corp., a wireless
2016 was another strong year infrastructure REIT. For 23 years, Tim Pire served as
for Monogram as we continued Managing Director at Heitman, a global real estate
to execute on our strategy to investment firm, and now teaches at Marquette
increase long-term shareholder University. Tammy Jones is President of Basis
value. We continued to stabilize Investment Group, a multi-strategy commercial real
our development portfolio, to estate finance platform in New York, and was recently
drive growth in our Same-Store honored as one of the 25 most influential black
portfolio, and to cultivate a women in business by Network Journal.
best-in-class multifamily
The Monogram luxury brand is well-posi- continue to dispose of non-core properties
company. I am very tioned with favorable demographic trends to strategically harvest gains and redeploy
in submarkets that offer strong opportu- capital into our core markets. Accordingly,
fortunate to work with such nities for growth. Demand for apartments we expect to increase our investments in
remains robust—a trend which we antici- our existing coastal markets where we can
a dynamic and talented pate will continue—as we are experiencing scale our strong local teams and expertise,
historically high absorption rates in many of and where low land availability and strong
management team and our markets. Headwinds from new supply economic growth drivers create long-term
persist, but we are seeing a significant stability in multifamily markets.
staff. Their perseverance slowdown in new construction in many
of our submarkets due to greater capital The Monogram team has a proven track
and fortitude position controls limiting the availability of con- record of Value Creation, and we look
struction financing. These capital barrier forward to another successful year ahead.
Monogram to take limitations on new construction will improve
the balance of demand and supply, which
advantage of strong strengthens Monogram’s position to realize
strong growth in future years. 
fundamentals to
In 2017, Monogram will continue to capture
outperform in the real substantial embedded growth and value
within our portfolio. We expect to stabilize
estate sector. all but one of our remaining development MARK T. ALFIERI - CEO
properties by year end 2017. Consistent with
our strategy since listing on the New York
Stock Exchange (NYSE) in 2014, we will
MONOGRAM RESIDENTIAL TRUST |4| |5| ANNUAL REPORT 2016
A LETTER FROM THE CEO SH
A
R
In 2016, we were pleased to add three new members EHO
LD
who have extensive industry experience to our Board ER LET
of Directors. Ben Moreland is Executive Vice Chairman TER
DEAR SHAREHOLDERS, of Crown Castle International Corp., a wireless
2016 was another strong year infrastructure REIT. For 23 years, Tim Pire served as
for Monogram as we continued Managing Director at Heitman, a global real estate
to execute on our strategy to investment firm, and now teaches at Marquette
increase long-term shareholder University. Tammy Jones is President of Basis
value. We continued to stabilize Investment Group, a multi-strategy commercial real
our development portfolio, to estate finance platform in New York, and was recently
drive growth in our Same-Store honored as one of the 25 most influential black
portfolio, and to cultivate a women in business by Network Journal.
best-in-class multifamily
The Monogram luxury brand is well-posi- continue to dispose of non-core properties
company. I am very tioned with favorable demographic trends to strategically harvest gains and redeploy
in submarkets that offer strong opportu- capital into our core markets. Accordingly,
fortunate to work with such nities for growth. Demand for apartments we expect to increase our investments in
remains robust—a trend which we antici- our existing coastal markets where we can
a dynamic and talented pate will continue—as we are experiencing scale our strong local teams and expertise,
historically high absorption rates in many of and where low land availability and strong
management team and our markets. Headwinds from new supply economic growth drivers create long-term
persist, but we are seeing a significant stability in multifamily markets.
staff. Their perseverance slowdown in new construction in many
of our submarkets due to greater capital The Monogram team has a proven track
and fortitude position controls limiting the availability of con- record of Value Creation, and we look
struction financing. These capital barrier forward to another successful year ahead.
Monogram to take limitations on new construction will improve
the balance of demand and supply, which
advantage of strong strengthens Monogram’s position to realize
strong growth in future years. 
fundamentals to
In 2017, Monogram will continue to capture
outperform in the real substantial embedded growth and value
within our portfolio. We expect to stabilize
estate sector. all but one of our remaining development MARK T. ALFIERI - CEO
properties by year end 2017. Consistent with
our strategy since listing on the New York
Stock Exchange (NYSE) in 2014, we will
MONOGRAM RESIDENTIAL TRUST |4| |5| ANNUAL REPORT 2016
KEY ACCOMPLISHMENTS FIN
A
N
C
IA
L H
IG
DNEEAVRELINOGP MCEONMTP PLRETOIGORNAM SPTORRATTFEOGLIICO DRIESFPIONSEIMTEIONNTS & HLIGH
T
S
We stabilized three development properties Monogram opportunistically sold two
totaling 1,191 units in 2016 - SoMa in non-core properties in 2016. In the third
Miami, FL, Verge in San Diego, CA, and quarter, we sold Renaissance and an adjacent 3.9%
Cyan on Peachtree in Atlanta, GA. As a land parcel located in Concord, CA for a
result, Monogram has now completed gross sales price of $65.4 million. The net
and fully stabilized 11 development proceeds of this sale were used to pay down SS NOI GROWTH
properties over the past three years, resulting debt. In the fourth quarter of 2016,
in significant profit and Value Creation. All Monogram sold The Reserve at La Vista Figures shown represent Monogram’s Proportionate Share
but one of the remaining six properties in our Walk, located in the non-core market of
development program are expected to be Atlanta, GA, for a gross sales price of $57.2
completed and stabilized by the end of 2017. million. Subsequent to year end, Monogram 2016 13.9%
sold Grand Reserve located in Dallas, TX
SOLID OPERATING RESULTS for a gross sales price of $42.0 million. FINANCIAL
TOTAL NOI GROWTH
In 2016, we increased our proportionate The combined sales proceeds of The HIGHLIGHTS
share of Same-Store Net Operating Income Reserve at La Vista Walk and Grand Reserve Figures shown represent Monogram’s Proportionate Share
(NOI) by 3.9%. As of the fourth quarter enabled Monogram to redeploy capital
2016, Monogram’s Same-Store portfolio through a tax efficient exchange
achieved monthly rental revenue of $1,882 transaction to acquire Desmond at Wilshire.
per unit, which represents approximately a The Desmond is a recently completed,
1% increase over the same period last year. 175-unit property located a quarter-block off
The Same-Store operating margins saw Wilshire Boulevard along the Miracle Mile in
improvements on a year-over-year basis, Los Angeles. We expect Desmond to pro-
ending 2016 at 65.1% as compared to duce stronger NOI growth and incremental
64.5% in 2015. Value Creation over the longer term.
BALANCE SHEET PROGRESS
Monogram continued its strategy to extend
debt maturities, while seeking to reduce
leverage over the longer term.
During 2016, we successfully refinanced $167
million of maturing debt at a lower weighted
94.6%
average interest rate. 1
Reduced net debt to Adjusted EBITDA 1
ACHIEVED OCCUPANCY
to 8.5x at December 31, 2016, compared to
11.3x at December 31, 2015.
$1,925
1
AVERAGE MONTHLY 1 Based on Total Stabilized Portfolio
RENTAL REVENUE
PER UNIT
1 See appendix for additional definitions and reconciliations.
MONOGRAM RESIDENTIAL TRUST |6| |7| ANNUAL REPORT 2016
KEY ACCOMPLISHMENTS FIN
A
N
C
IA
L H
IG
DNEEAVRELINOGP MCEONMTP PLRETOIGORNAM SPTORRATTFEOGLIICO DRIESFPIONSEIMTEIONNTS & HLIGH
T
S
We stabilized three development properties Monogram opportunistically sold two
totaling 1,191 units in 2016 - SoMa in non-core properties in 2016. In the third
Miami, FL, Verge in San Diego, CA, and quarter, we sold Renaissance and an adjacent 3.9%
Cyan on Peachtree in Atlanta, GA. As a land parcel located in Concord, CA for a
result, Monogram has now completed gross sales price of $65.4 million. The net
and fully stabilized 11 development proceeds of this sale were used to pay down SS NOI GROWTH
properties over the past three years, resulting debt. In the fourth quarter of 2016,
in significant profit and Value Creation. All Monogram sold The Reserve at La Vista Figures shown represent Monogram’s Proportionate Share
but one of the remaining six properties in our Walk, located in the non-core market of
development program are expected to be Atlanta, GA, for a gross sales price of $57.2
completed and stabilized by the end of 2017. million. Subsequent to year end, Monogram 2016 13.9%
sold Grand Reserve located in Dallas, TX
SOLID OPERATING RESULTS for a gross sales price of $42.0 million. FINANCIAL
TOTAL NOI GROWTH
In 2016, we increased our proportionate The combined sales proceeds of The HIGHLIGHTS
share of Same-Store Net Operating Income Reserve at La Vista Walk and Grand Reserve Figures shown represent Monogram’s Proportionate Share
(NOI) by 3.9%. As of the fourth quarter enabled Monogram to redeploy capital
2016, Monogram’s Same-Store portfolio through a tax efficient exchange
achieved monthly rental revenue of $1,882 transaction to acquire Desmond at Wilshire.
per unit, which represents approximately a The Desmond is a recently completed,
1% increase over the same period last year. 175-unit property located a quarter-block off
The Same-Store operating margins saw Wilshire Boulevard along the Miracle Mile in
improvements on a year-over-year basis, Los Angeles. We expect Desmond to pro-
ending 2016 at 65.1% as compared to duce stronger NOI growth and incremental
64.5% in 2015. Value Creation over the longer term.
BALANCE SHEET PROGRESS
Monogram continued its strategy to extend
debt maturities, while seeking to reduce
leverage over the longer term.
During 2016, we successfully refinanced $167
million of maturing debt at a lower weighted
94.6%
average interest rate. 1
Reduced net debt to Adjusted EBITDA 1
ACHIEVED OCCUPANCY
to 8.5x at December 31, 2016, compared to
11.3x at December 31, 2015.
$1,925
1
AVERAGE MONTHLY 1 Based on Total Stabilized Portfolio
RENTAL REVENUE
PER UNIT
1 See appendix for additional definitions and reconciliations.
MONOGRAM RESIDENTIAL TRUST |6| |7| ANNUAL REPORT 2016
ST
R
A
T
EG
Following our stated roadmap, we will IC
FO
C
U
S
continue to execute our strategy in 2017.
As part of our “tailored living” brand
and approach, we continue to work to
exceed our residents’ expectations
STRATEGIC
for luxury living. Similarly, we take a FOCUS
tailored approach to our investment
SUBSTANTIAL COMPLETION COSTAL MARKET FOCUS
OF DEVELOPMENT PROGRAM & PORTFOLIO REFINEMENT
strategy and aim to craft a portfolio
Our plan is to stabilize our four develop- Our portfolio strategy focuses on Class A
ments in lease-up and deliver on our two multifamily properties in high-density urban
that is positioned to perform throughout remaining development properties under and infill submarkets. We have a significant
construction. We will continue to focus on presence in select coastal markets. We look
realizing NOI growth in developments by for locations with high walkability within
market cycles. By the end of 2017, we achieving stabilized occupancy. All but one vibrant transit-oriented areas, offering both
of these six remaining properties in our retail and cultural amenities. Our properties
development program are expected to are in affluent neighborhoods, where the
expect Monogram’s collection of Class A stabilize by the end of 2017. high cost and inflexibility of single-family
housing makes renting attractive.
PRODUCE STRONG
multifamily properties to better reflect OPERATING RESULTS We will continue to evaluate opportunities
to sell non-core properties to harvest gains
Our team continues to work to drive and redeploy capital to maximize long-term
the vision we set out at the time of our Same-Store NOI growth through strong stockholder value. As such, we expect to
property operations. Amidst the ongoing continue to refine our portfolio and
challenge of new multifamily deliveries in increase our exposure in existing coastal
NYSE listing, with a significant coastal our markets, we expect to focus on growing markets, where long-term growth rates are
occupancy and driving rent growth through expected to exceed the national average
lease renewals in order to achieve our and where we have opportunities to capture
market focus and a substantially revenue goals for the year. As our portfolio operational efficiencies.
revenues increase, we continue to manage
controllable operating expenses prudently
stabilized portfolio. and push to increase operating margins.
MONOGRAM RESIDENTIAL TRUST |8| |9| ANNUAL REPORT 2016
ST
R
A
T
EG
Following our stated roadmap, we will IC
FO
C
U
S
continue to execute our strategy in 2017.
As part of our “tailored living” brand
and approach, we continue to work to
exceed our residents’ expectations
STRATEGIC
for luxury living. Similarly, we take a FOCUS
tailored approach to our investment
SUBSTANTIAL COMPLETION COSTAL MARKET FOCUS
OF DEVELOPMENT PROGRAM & PORTFOLIO REFINEMENT
strategy and aim to craft a portfolio
Our plan is to stabilize our four develop- Our portfolio strategy focuses on Class A
ments in lease-up and deliver on our two multifamily properties in high-density urban
that is positioned to perform throughout remaining development properties under and infill submarkets. We have a significant
construction. We will continue to focus on presence in select coastal markets. We look
realizing NOI growth in developments by for locations with high walkability within
market cycles. By the end of 2017, we achieving stabilized occupancy. All but one vibrant transit-oriented areas, offering both
of these six remaining properties in our retail and cultural amenities. Our properties
development program are expected to are in affluent neighborhoods, where the
expect Monogram’s collection of Class A stabilize by the end of 2017. high cost and inflexibility of single-family
housing makes renting attractive.
PRODUCE STRONG
multifamily properties to better reflect OPERATING RESULTS We will continue to evaluate opportunities
to sell non-core properties to harvest gains
Our team continues to work to drive and redeploy capital to maximize long-term
the vision we set out at the time of our Same-Store NOI growth through strong stockholder value. As such, we expect to
property operations. Amidst the ongoing continue to refine our portfolio and
challenge of new multifamily deliveries in increase our exposure in existing coastal
NYSE listing, with a significant coastal our markets, we expect to focus on growing markets, where long-term growth rates are
occupancy and driving rent growth through expected to exceed the national average
lease renewals in order to achieve our and where we have opportunities to capture
market focus and a substantially revenue goals for the year. As our portfolio operational efficiencies.
revenues increase, we continue to manage
controllable operating expenses prudently
stabilized portfolio. and push to increase operating margins.
MONOGRAM RESIDENTIAL TRUST |8| |9| ANNUAL REPORT 2016
THE DEVELOPMENT PROGRAM CONSTRUCTION LEASE-UP TH
E D
EV
ELO
SiSntcaeb Liliiszteedd 2012 2013 2014 2015 2016 2017 PMENT
As we look forward in STABILIZATION There are six projects in PRO
2017, we expect to Since listing on the NYSE, lceoansset-ruupc toior nu ntodtearling 1,995 Allusion WHOesUt SUTnOivNer,s TitXy GRAM
we stabilized 11 properties units. Monogram’s share Blue Sol
continue to realize the out of the 17 originally in of estimated remaining COSTA MESA, CA
the development program. development costs to 4110 Fairmount
positive impact of our Monogram successfully complete the existing DALLAS, TX
portfolio’s embedded tprraonjesictitos nferodm e alecahs oef- uthpe tsoe dtoetvaelslo $p8m6 emnitl lpiorno.g Arallm ArpeggioD VAicLtLoAryS P, aTrXk
operating properties with but one of these projects
growth and value as all results generally at or above are expected to be com- Muse MHuOseUuSmT ODiNst, rTicXt
pro forma underwriting. pleted and stabilized by
but one of our remaining We continue to prove our the end of 2017. Everly
WAKEFIELD, MA
team’s ability to create real
development properties value by delivering attrac- Four of these properties Point 21
tive returns on cost. These are currently leasing and DENVER, CO
is expected to stabilize. results include: are 59% occupied on a SEVEN
weighted average basis. AUSTIN, TX
Since the time of our NOI Yields at Stabilization Two projects, Lucé in
NYSE listing, Monogram of approximately 7% 1 Hanudn Ctinagsptoiann B Deaeclrha,y C BAea ch CyaAnT oLnA PNeTacAh,t GreAe
Returns on cost at average in Delray Beach, FL, are SoMa
has made substantial spreads over market cap under construction. MIAMI, FL
rates generally in excess of Verge
progress on its 150-200 basis pts This program is approxi- SAN DIEGO, CA
mately 82% complete
cumulative development Total Value Creation of based on proportionate Developments
over $150 million on these share of total Economic 2013 2014 2015 2016 2017
program, which is 11 stabilized properties 2 Costs incurred. In Lease-Up
now 91% complete, CURRENT Potential Value Creation SAN FRANCISCOOl,u CmAe
PROGRAM totals approximately $90
based on Monogram’s million for projects in Nouvelle
Monogram’s remaining lease-up and under TYSONS CORNER, VA
proportionate share of development program construction.3 Zinc
consists of six projects out CAMBRIDGE, MA
total Economic Costs. of the 17 in our program 1 P12r omjeocnttehds NofO NI OYiIe sludb aste Sqtuaebnilti ztaot siotanb iisl iczaaltciounla dteivdi daes d THE Alexan
at the time of our NYSE bady dtoittioaln Ealc donefiomniticio Cnso.sts. See Appendix for DALLAS, TX
listing. Our development 2 Represents estimates of current value less estimated
program is designed to tportoapl oErctioonnoamtei cs hCaorest. Sfoere e Aacphp eonf dthixe fporrojects at our Under
drive accretive growth and additional definitions. 2014 2015 2016 2017 2018 2019
enhance the portfolio. The 3 Pprootjeencttieadl Vfuatluuere C streabatiliiozne dre vparleusee lnetsss t thoet auln Edcisocnooumntice d Construction
spread between projected Cadodsittsio fnoar lo duer fipnroitpioonrsti.onate share. See Appendix for
stabilized yields and market Caspian Delray Beach
cap rates drives growth in DELRAY BEACH, FL
cash flows and Net Asset Lucé
Value (NAV) over time. HUNTINGTON BEACH, CA
MONOGRAM RESIDENTIAL TRUST |10| |11| ANNUAL REPORT 2016