MISSISSAUGA, ON, Nov. 4, 2015 /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, 2015.
Third Quarter Highlights
Acquisition of a 51% interest in a garden-style property comprising 252 suites located in Cooper City, Florida, for $37 million. The acquisition was funded by cash on hand and an advance from Morguard Corporation.
The REIT is reporting performance of:
- Third quarter adjusted net operating income (“Adjusted NOI”) of $26.4 million, which excludes realty taxes accounted for under IFRIC 21, an increase of $3.8 million over the same period in 2014.
- Basic funds from operations (“FFO”) of $13.3 million for the three months ended September 30, 2015, an increase of $2.5 million, or 22.8% over the same period in 2014.
- Basic FFO of $0.29 per Unit for the three months ended September 30, 2015, a 26% increase as compared to the $0.23 per Unit for the third quarter of 2014.
- Basic adjusted funds from operations (“AFFO”) of $0.22 per Unit for the three months ended September 30, 2015, a 29% increase as compared to the $0.17 per Unit generated over the same period in 2014.
- FFO and AFFO payout ratios for the three months ended September 30, 2015 of 52.6% and 67.6%, respectively.
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Financial and Operational Highlights |
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As at (In thousands of dollars, except as noted otherwise) |
September 30, |
December 31, |
September 30, |
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Operational Information |
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Number of properties |
45 |
44 |
44 |
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Total suites |
13,102 |
12,850 |
12,850 |
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Occupancy percentage |
95.7% |
96.0% |
3396.4% |
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Average monthly rent â Canada (in actual dollars) |
$1,267 |
$1,246 |
$1,241 |
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Average monthly rent â U.S. (in actual U.S. dollars) |
US$994 |
US$945 |
US$938 |
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Summary of Financial Information |
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Gross book value |
$2,040,922 |
$1,832,287 |
$1,772,163 |
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Indebtedness |
$1,116,781 |
$1,022,555 |
$983,290 |
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Indebtedness to gross book value ratio |
55% |
56% |
55% |
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Weighted average mortgage interest rate |
3.9% |
3.9% |
4.1% |
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Weighted average term to maturity on mortgages payable (years) |
5.1 |
5.6 |
4.9 |
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Financial and Operational Highlights (Continued) |
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Three months ended |
Nine months ended |
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(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
2015 |
2014 |
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Summary of Financial Information |
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Interest coverage ratio(1) |
1.96 |
1.89 |
1.95 |
1.84 |
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Indebtedness coverage ratio(1) |
1.32 |
1.33 |
1.33 |
1.34 |
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Revenue from income producing properties |
$50,310 |
$43,828 |
$145,527 |
$129,679 |
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NOI |
$29,857 |
$25,324 |
$73,584 |
$64,748 |
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Adjusted NOI(1) |
$26,360 |
$22,601 |
$76,617 |
$67,627 |
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Net operating margin(1) |
52% |
52% |
53% |
52% |
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FFO – basic |
$13,277 |
$10,808 |
$38,337 |
$33,034 |
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FFO – diluted |
$13,980 |
$11,512 |
$40,424 |
$35,121 |
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FFO per Unit â basic |
$0.29 |
$0.23 |
$0.82 |
$0.71 |
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FFO per Unit â diluted |
$0.28 |
$0.23 |
$0.80 |
$0.70 |
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AFFO – basic |
$10,326 |
$7,895 |
$29,522 |
$23,889 |
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AFFO – diluted |
$11,029 |
$8,599 |
$31,609 |
$25,976 |
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AFFO per Unit â basic and diluted |
$0.22 |
$0.17 |
$0.63 |
$0.51 |
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Distributions per Unit |
$0.15 |
$0.15 |
$0.45 |
$0.45 |
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FFO payout ratio |
52.6% |
65.2% |
54.6% |
63.4% |
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AFFO payout ratio |
67.6% |
88.2% |
70.9% |
88.2% |
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Weighted average number of Units outstanding (in thousands): |
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Basic |
46,549 |
46,525 |
46,542 |
46,519 |
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Diluted |
50,420 |
50,396 |
50,413 |
50,390 |
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Average exchange rates â United States dollar to Canadian dollar |
$1.31 |
$1.09 |
$1.26 |
$1.09 |
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(1) Excludes realty taxes accounted for under IFRIC 21, which have been adjusted on a pro-rata basis over the entire fiscal year.
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Net Operating Income |
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Three months ended |
Nine months ended |
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(In thousands of dollars) |
2015 |
2014 |
2015 |
2014 |
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Revenue from income producing properties |
$50,310 |
$43,828 |
$145,527 |
$129,679 |
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Property operating expenses |
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Operating costs |
14,335 |
12,374 |
40,047 |
35,690 |
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Realty taxes |
1,870 |
2,218 |
19,101 |
17,585 |
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Utilities |
4,248 |
3,912 |
12,795 |
11,656 |
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Total property operating expenses |
20,453 |
18,504 |
71,943 |
64,931 |
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NOI |
29,857 |
25,324 |
73,584 |
64,748 |
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Realty taxes accounted for under IFRIC 21 |
(3,497) |
(2,723) |
3,033 |
2,879 |
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Adjusted NOI |
$26,360 |
$22,601 |
$76,617 |
$67,627 |
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For the three months ended September 30, 2015, consolidated Adjusted NOI increased by $3.8 million, or 16.6%, to $26.4 million, compared to $22.6 million in 2014. The increase was mainly due to an increase in Adjusted NOI in Canada and the U.S. of $532 (or 5.8%) and US$388 (or 3.1%), respectively, and the change in the U.S. foreign exchange rate which increased Adjusted NOI by $2.8 million. The increase in NOI was due to higher rental revenue and lower overall operating expenses in Canada, partially offset by an increase in operating costs in the U.S.
For the nine months ended September 30, 2015, consolidated Adjusted NOI increased by $9.0 million, or 13.3% to $76.6 million, compared to $67.6 million in 2014. The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $1.3 million (or 4.9%) and US$1.2 million (or 3.3%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $6.5 million. The increase in NOI was due to higher rental revenue, partially offset by an increase in utilities in Canada and operating costs in the U.S.
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Funds from Operations (“FFO”) |
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Three months ended |
Nine months ended |
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(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
2015 |
2014 |
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Net income for the period attributable to the unitholders |
$15,005 |
$16,102 |
$36,493 |
$27,638 |
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Add (deduct): |
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Realty taxes accounted for under IFRIC 21 |
(3,557) |
(2,723) |
2,973 |
2,879 |
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Fair value gain on conversion option on the Debentures |
(4) |
(102) |
(63) |
(7) |
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Distributions on Class B LP Units recorded as interest expense |
2,583 |
2,583 |
7,750 |
7,750 |
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Foreign exchange gain |
(1,121) |
(576) |
(2,185) |
(361) |
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Net fair value gain on income producing properties |
(17,559) |
(6,580) |
(35,475) |
(37,761) |
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Non-controlling interests’ share of fair value gain on income producing properties |
147 |
102 |
2 |
514 |
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Fair value (gain) loss on Class B LP Units |
7,234 |
(4,306) |
3,101 |
13,951 |
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Deferred income tax provision |
10,549 |
6,308 |
25,741 |
18,431 |
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FFO – basic |
$13,277 |
$10,808 |
$38,337 |
$33,034 |
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Interest expense on Debentures |
703 |
704 |
2,087 |
2,087 |
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FFO – diluted |
$13,980 |
$11,512 |
$40,424 |
$35,121 |
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FFO per Unit – basic |
$0.29 |
$0.23 |
$0.82 |
$0.71 |
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FFO per Unit – diluted |
$0.28 |
$0.23 |
$0.80 |
$0.70 |
Basic FFO for the three months ended September 30, 2015, increased by $2.5 million, or 22.8%, to $13.3 million ($0.29 per Unit), compared to $10.8 million ($0.23 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $3.8 million, partially offset by an increase in interest expense of $1.0 million (excluding distributions on Class B LP Units and fair value adjustments), and an increase in trust expenses of $0.5 million. The change in foreign exchange rates had a positive impact on FFO of $1.7 million, of which amount is predominantly included in the increase to Adjusted NOI and interest expense.
Basic FFO for the nine months ended September 30, 2015, increased by $5.3 million, or 16.1%, to $38.3 million ($0.82 per Unit), compared to $33.0 million ($0.71 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $9.0 million, partially offset by an increase in interest expense of $2.6 million (excluding distributions on Class B LP Units and fair value adjustments), and an increase in trust expenses of $1.3 million. The change in foreign exchange rates had a positive impact on FFO of $3.8 million, of which amount is predominantly included in the increase to Adjusted NOI and interest expense.
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Adjusted Funds from Operations (“AFFO”) |
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Three months ended |
Nine months ended |
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(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
2015 |
2014 |
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FFO – basic |
$13,277 |
$10,808 |
$38,337 |
$33,034 |
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Add (deduct): |
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Amortization of mark to market adjustments on mortgages |
(1,671) |
(1,737) |
(5,024) |
(5,708) |
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Amortization of deferred financing costs assumed on Initial Properties |
113 |
220 |
332 |
713 |
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Non-controlling interests’ share of amortization of deferred financing costs assumed on Initial Properties |
(2) |
(9) |
(6) |
(33) |
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Amortization of cash flow hedge |
56 |
55 |
168 |
163 |
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Maintenance capital expenditures |
(1,447) |
(1,442) |
(4,285) |
(4,280) |
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AFFO – basic |
10,326 |
7,895 |
29,522 |
23,889 |
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Interest expense on the Debentures |
703 |
704 |
2,087 |
2,087 |
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AFFO – diluted |
$11,029 |
$8,599 |
$31,609 |
$25,976 |
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AFFO per Unit â basic and diluted |
$0.22 |
$0.17 |
$0.63 |
$0.51 |
Basic AFFO for the three months ended September 30, 2015, increased by $2.4 million or 30.8%, to $10.3 million ($0.22 per Unit) compared to $7.9 million ($0.17 per Unit) in 2014. The increase was primarily driven by the increase in FFO.
Basic AFFO for the nine months ended September 30, 2015, increased by $5.6 million or 23.6%, to $29.5 million ($0.63 per Unit) compared to $23.9 million ($0.51 per Unit) in 2014. The increase was primarily driven by the increase in FFO.
The REIT’s unaudited financial statements for the three months ended September 30, 2015, 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 consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, Adjusted NOI, FFO, AFFO, indebtedness, gross book value, indebtedness to gross book value ratio, interest coverage ratio and indebtedness coverage ratio (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 period ended September 30, 2015 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, November 5, 2015 at 3:00 p.m. (ET) to discuss the financial results for the three months ended September 30, 2015 and 2014. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID # 55767084.
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. Its portfolio consists of 13,102 residential suites (as of November 4, 2015) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $2.0 billion at September 30, 2015. For more information, visit the REIT’s website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate Investment Trust
