MISSISSAUGA, ON, Oct. 29, 2019 /CNW/ – Morguard North American Residential REIT (the “REIT”) (TSX: MRG.UN) today announced its financial results for the three and nine months ended September 30, 2019.
Highlights
The REIT is reporting third quarter performance of:
- Net operating income (“NOI”) of $38.0 million for the three months ended September 30, 2019, a decrease of $0.2 million, or 0.4% compared to 2018.
- Same Property Proportionate NOI increased by $0.7 million (or 2.4%) to $31.4 million, compared to 2018.
- Basic funds from operations (“FFO”) of $16.1 million for the three months ended September 30, 2019, compared to $15.5 million over the same period in 2018.
- Basic FFO of $0.31 per Unit for the three months ended September 30, 2019, compared to the $0.30 per Unit over the same period in 2018.
- FFO payout ratio for the three months ended September 30, 2019 of 55.6%, compared to 54.2% in 2018.
- Net loss of $1.4 million for the three months ended September 30, 2019, compared to net income of $25.0 million over the same period in 2018. The decrease in net income of $26.4 million is predominantly due to a lower non-cash fair value gain on real estate properties and a higher non-cash fair value loss on Class B LP Units.
The REIT is reporting the following corporate and portfolio highlights:
- The REIT has also announced it will increase its annual cash distribution by $0.02 per Unit (2.94%). The increase is expected to be effective for the November 2019 distribution, payable in December 2019. This will bring the distributions to $0.70 per Unit on an annualized basis from the current level of $0.68 per Unit.
- On August 28, 2019, the REIT completed an offering for 5,226,200 Units sold for a price of $19.75 per Unit for aggregate gross proceeds of $103.2 million (the “Offering”). The net proceeds of the Offering, after underwriters’ commission and other closing costs was $99.6 million.
- As at September 30, 2019, average monthly rent (“AMR”) in Canada increased by 4.3% compared to September 30, 2018, while occupancy remained strong and stable at 99.4% at September 30, 2019, compared to 99.5% at September 30, 2018.
- As at September 30, 2019, AMR in the U.S., on a Same Property basis, increased by 3.7% compared to September 30, 2018, while occupancy improved to 94.4% at September 30, 2019, compared to 93.7% at September 30, 2018.
- As at September 30, 2019, and December 31, 2018, the REIT’s real estate properties were valued at $2.9 billion.
- As at September 30, 2019, indebtedness to gross book value ratio was 44.0%, compared to 47.9% as at December 31, 2018.
Financial and Operational Highlights
|
As at |
September 30, |
December 31, |
September 30, |
|
(In thousands of dollars, except as noted otherwise) |
2019 |
2018 |
2018 |
|
Operational Information |
|||
|
Number of properties |
42 |
47 |
47 |
|
Total suites |
12,587 |
13,430 |
13,430 |
|
Occupancy percentage â Canada |
99.4% |
99.1% |
99.5% |
|
Occupancy percentage â U.S |
94.4% |
94.7% |
93.5% |
|
Average monthly rent – Canada (in actual dollars) |
$1,417 |
$1,373 |
$1,358 |
|
Average monthly rent – U.S. (in actual U.S. dollars) |
US$1,340 |
US$1,236 |
US$1,231 |
|
Summary of Financial Information |
|||
|
Gross book value |
$3,070,572 |
$3,011,469 |
$2,865,815 |
|
Indebtedness |
$1,351,136 |
$1,442,607 |
$1,402,130 |
|
Indebtedness to gross book value ratio |
44.0% |
47.9% |
48.9% |
|
Weighted average mortgage interest rate |
3.49% |
3.49% |
3.48% |
|
Weighted average term to maturity on mortgages payable (years) |
5.1 |
5.8 |
6.1 |
|
Exchange rates – United States dollar to Canadian dollar |
$1.32 |
$1.36 |
$1.29 |
|
Exchange rates – Canadian dollar to United States dollar |
$0.76 |
$0.73 |
$0.77 |
|
Three months ended |
Nine months ended |
|||
|
September 30 |
September 30 |
|||
|
(In thousands of dollars, except per Unit amounts) |
2019 |
2018 |
2019 |
2018 |
|
Summary of Financial Information |
||||
|
Interest coverage ratio |
2.29 |
2.21 |
2.28 |
2.21 |
|
Indebtedness coverage ratio |
1.61 |
1.60 |
1.60 |
1.59 |
|
Revenue from real estate properties |
$61,135 |
$61,172 |
$184,353 |
$179,239 |
|
NOI |
$38,038 |
$38,183 |
$93,864 |
$93,616 |
|
Proportionate NOI |
$31,673 |
$31,884 |
$95,522 |
$94,031 |
|
Same Property Proportionate NOI |
$31,431 |
$30,702 |
$94,406 |
$90,636 |
|
NOI margin – IFRS |
62.2% |
62.4% |
50.9% |
52.2% |
|
NOI margin – Proportionate |
53.6% |
54.2% |
53.7% |
54.5% |
|
Net income (loss) |
($1,407) |
$25,012 |
$44,231 |
$125,105 |
|
FFO – basic |
$16,148 |
$15,510 |
$47,091 |
$45,946 |
|
FFO – diluted |
$17,113 |
$16,490 |
$49,969 |
$48,798 |
|
FFO per Unit – basic |
$0.31 |
$0.30 |
$0.91 |
$0.90 |
|
FFO per Unit – diluted |
$0.30 |
$0.30 |
$0.89 |
$0.88 |
|
Distributions per Unit |
$0.1698 |
$0.1650 |
$0.5094 |
$0.4950 |
|
FFO payout ratio |
55.6% |
54.2% |
55.8% |
54.9% |
|
Weighted average number of Units outstanding (in thousands): |
||||
|
Basic |
52,897 |
50,935 |
51,609 |
50,926 |
|
Diluted |
57,130 |
55,168 |
55,842 |
55,271 |
|
Average exchange rates – United States dollar to Canadian dollar |
$1.32 |
$1.31 |
$1.33 |
$1.29 |
|
Average exchange rates – Canadian dollar to United States dollar |
$0.76 |
$0.77 |
$0.75 |
$0.78 |
Net Income (Loss)
The REIT reported a net loss of $1.4 million for the three months ended September 30, 2019, compared to a net income of $25.0 million in 2018. The change was primarily due to the following:
- A decrease in net operating income of $0.2 million;
- An increase in interest expense of $1.2 million;
- An increase in foreign exchange gain of $0.7 million;
- An increase in other income of $0.5 million;
- A decrease in net fair value gain on real estate properties of $18.2 million;
- An increase in fair value loss on Class B LP Units of $7.8 million; and
- An increase in income taxes (current and deferred) of $0.3 million.
Net Operating Income
Three months ended September 30, 2019
For the three months ended September 30, 2019, NOI from the REIT’s properties decreased by $0.2 million (or 0.4%) to $38.0 million, compared to $38.2 million in 2018. The decrease in NOI is due to a decrease of $1.3 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT and an increase in Same Property NOI of $1.1 million (or 3.1%). The Same Property increase of $1.1 million is due to an increase in Canada of $0.4 million (or 3.4%), an increase in the U.S. of US$0.3 million (or 1.9%) and the change in foreign exchange rate which increased NOI by $0.4 million.
For the three months ended September 30, 2019, Proportionate NOI from the REIT’s properties decreased by $0.2 million (or 0.7%) to $31.7 million, compared to $31.9 million in 2018. The decrease in Proportionate NOI is due to a decrease of $0.9 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT and an increase in Same Property Proportionate NOI of $0.7 million (or 2.4%). The Same Property increase of $0.7 million is due to an increase in Canada of $0.4 million (or 3.4%), an increase in the U.S. of US$0.1 million (or 0.5%) and the change in foreign exchange rate which increased Proportionate NOI by $0.2 million.
Nine months ended September 30, 2019
For the nine months ended September 30, 2019, NOI from the REIT’s properties increased by $0.3 million (or 0.3%) to $93.9 million, compared to $93.6 million in 2018. The increase in NOI is due to an increase in Same Property NOI of $3.2 million (or 3.5%) and a decrease of $2.9 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT. The Same Property increase of $3.2 million is due to an increase in Canada of $1.4 million (or 3.6%), an increase in the U.S. of US$0.1 million (or 0.3%) and the change in foreign exchange rate which increased NOI by $1.7 million.
For the nine months ended September 30, 2019, Proportionate NOI from the REIT’s properties increased by $1.5 million (or 1.6%) to $95.5 million, compared to $94.0 million in 2018. The increase in Proportionate NOI is due to an increase in Same Property Proportionate NOI of $3.8 million (or 4.2%) and a decrease of $2.3 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT. The Same Property increase of $3.8 million is due to an increase in Canada of $1.3 million (or 3.6%), an increase in the U.S. of US$0.6 million (or 1.3%) and the change in foreign exchange rate which increased Proportionate NOI by $1.9 million.
Funds From Operations
Three months ended September 30, 2019
Basic FFO for the three months ended September 30, 2019, increased by $0.6 million, or 4.1%, to $16.1 million ($0.31 per Unit), compared to $15.5 million ($0.30 per Unit) in 2018. The increase is mainly due to an increase in other income of $0.5 million and a decrease in interest expense of $0.5 million (excluding distributions on Class B LP Units and fair value adjustments on the conversion option on the convertible debentures), partially offset by lower Proportionate NOI of $0.2 million and an increase in trust expenses of $0.1 million.
Basic FFO per Unit for the three months ended September 30, 2019, was $0.31 per Unit, compared to $0.30 per Unit for the three months ended September 30, 2018. The disposal of the five Louisiana properties had a $0.01 per Unit negative impact.
Nine months ended September 30, 2019
Basic FFO for the nine months ended September 30, 2019, increased by $1.2 million, or 2.5%, to $47.1 million ($0.91 per Unit), compared to $45.9 million ($0.90 per Unit) in 2018. The increase is mainly due to higher Proportionate NOI of $1.5 million and an increase in other income of $0.6 million, partially offset by an increase in interest expense of $0.4 million (excluding distributions on Class B LP Units and fair value adjustments on the conversion option on the convertible debentures) and an increase in trust expenses of $0.4 million. The increase in interest expense of $0.4 million includes lower amortization of mark-to-market adjustments of $0.4 million and a $0.6 million loss on extinguishment of mortgage payable in connection with the disposal of five Louisiana properties.
Basic FFO per Unit for the nine months ended September 30, 2019, increased by $0.01 to $0.91 per Unit, compared to $0.90 per Unit for the nine months ended September 30, 2018. The change in the foreign exchange rate had a $0.02 per Unit positive impact and the disposal of the five Louisiana properties had a $0.03 per Unit negative impact.
In addition, the issuance of Units on August 28, 2019 had a negative impact of $0.005 per Unit for the three and nine months ended September 30, 2019. The impact includes the dilution from additional Units of the Offering offset by approximately one month of interest income earned on proceeds advanced on the Morguard Facility.
Distribution Increase
The Board of Trustees has also announced it will increase the REIT’s annual cash distribution by $0.02 per Unit (2.94%). The increase is expected to be effective for the November 2019 distribution, payable in December 2019. This will bring the distributions to $0.70 per Unit on an annualized basis from the current level of $0.68 per Unit.
Subsequent Event
The October 1, 2019, the REIT completed the refinancing of three U.S. multi-suite residential properties located in Texas, in the amount of $109.3 million (US$82.5 million) at a weighted average interest rate of 3.24% and for terms of 10 years. The maturing mortgages amounted to $101.6 million (US$76.7 million) were open and prepayable at no penalty before their scheduled maturity on December 1, 2019 and had a weighted average interest rate of 3.21%.
The REIT’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2019, along with the Management’s Discussion and Analysis will be available on the REIT’s website at www.morguard.com and will be filed with SEDAR at www.sedar.com.
Non-IFRS Measures
The REIT’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, Proportionate NOI, Same Property NOI, Same Property Proportionate NOI, FFO, indebtedness, gross book value, indebtedness to gross book value ratio, interest coverage ratio, indebtedness coverage ratio and Proportionate Basis (collectively, the “non-IFRS measures”) as well as other measures discussed elsewhere in this press release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. The REIT uses these measures to better assess the REIT’s underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the REIT’s Management’s Discussion and Analysis for the three and nine months ended September 30, 2019 and available on the REIT’s profile on SEDAR at www.sedar.com.
Conference Call Details
Morguard North American Residential Real Estate Investment Trust will hold a conference call on Thursday, October 31, 2019 at 3:00 p.m. (ET) to discuss the financial results for the nine months ended September 30, 2019 and 2018. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546. Please quote conference ID 00397699.
About Morguard North American Residential REIT
The REIT is an unincorporated, open-ended real estate investment trust established under and governed by the laws of the Province of Ontario. The Units of the REIT trade on the Toronto Stock Exchange under the ticker symbol MRG.UN. With a strategic focus on the acquisition of high-quality multi-suite residential properties in Canada and the United States, the REIT maximizes long-term Unit value through active asset and property management. The REIT’s portfolio consists of 12,587 residential suites (as of October 29, 2019) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina, Virginia and Maryland with an appraised value of approximately $2.8 billion at September 30, 2019. For more information, visit the REIT’s website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate Investment Trust
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