MISSISSAUGA, ON, Nov. 1, 2016 /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, 2016.
Third Quarter Highlights
- The Board of Trustees has also announced it will increase the REIT’s annual cash distribution by $0.04 per Unit (6.7%). The increase is expected to be effective for the November 2016 distribution, payable on December 15, 2016 to unitholders of record as at November 30, 2016. This will bring the distributions to $0.64 per Unit on an annualized basis from the current level of $0.60 per Unit.
The REIT is reporting performance of:
- Adjusted net operating income (“Adjusted NOI”) of $29.2 million for the three months ended September 30, 2016, an increase of $2.8 million, or 10.7% compared to 2015.
- Basic funds from operations (“FFO”) of $14.9 million for the three months ended September 30, 2016, an increase of $1.6 million, or 12.0% over the same period in 2015.
- Basic FFO of $0.32 per Unit for the three months ended September 30, 2016, a 10.3% increase as compared to the $0.29 per Unit for 2015.
- Basic adjusted funds from operations (“AFFO”) of $0.25 per Unit for the three months ended September 30, 2016, a 13.6% increase as compared to the $0.22 per Unit generated over the same period in 2015.
- FFO and AFFO payout ratios for the three months ended September 30, 2016 of 46.9% and 59.7%, respectively.
- On September 30, 2016, the REIT completed the refinancing of 10 multi-suite residential properties located in Louisiana and Florida in the amount of US$95.1 million at a weighted average interest rate of 3.47% and a weighted average term of 8.7 years. The refinancing resulted in US$19.4 million of upfinancing mortgage proceeds on the maturing loans which had a weighted average contractual interest rate of 5.60% (4.75% net of instalment receipts).
Financial and Operational Highlights
|
As at |
September 30, |
December 31, |
September 30, |
|
(In thousands of dollars, except as noted otherwise) |
2016 |
2015 |
2015 |
|
Operational Information |
|||
|
Number of properties |
46 |
45 |
45 |
|
Total suites |
13,472 |
13,102 |
13,102 |
|
Occupancy percentage |
95.5% |
94.8% |
95.7% |
|
Average monthly rent – Canada (in actual dollars) |
$1,289 |
$1,272 |
$1,267 |
|
Average monthly rent – U.S. (in actual U.S. dollars) |
US$1,031 |
US$1,002 |
US$994 |
|
Summary of Financial Information |
|||
|
Gross book value |
$2,222,272 |
$2,160,015 |
$2,040,922 |
|
Indebtedness |
$1,226,543 |
$1,186,131 |
$1,116,781 |
|
Indebtedness to gross book value ratio |
55% |
55% |
55% |
|
Weighted average mortgage interest rate |
3.6% |
3.8% |
3.9% |
|
Weighted average term to maturity on mortgages payable (years) |
5.9 |
5.1 |
5.1 |
|
Exchange rates – Canadian dollar to United States dollar |
$0.76 |
$0.72 |
$0.75 |
|
Exchange rates – United States dollar to Canadian dollar |
$1.31 |
$1.38 |
$1.33 |
|
Three months ended |
Nine months ended |
|||
|
September 30, |
September 30, |
|||
|
(In thousands of dollars, except per Unit amounts) |
2016 |
2015 |
2016 |
2015 |
|
Summary of Financial Information |
||||
|
Interest coverage ratio |
2.05 |
1.96 |
2.01 |
1.95 |
|
Indebtedness coverage ratio |
1.39 |
1.32 |
1.37 |
1.33 |
|
Revenue from income producing properties |
$55,095 |
$50,310 |
$163,035 |
$145,527 |
|
NOI |
$33,009 |
$29,857 |
$81,269 |
$73,584 |
|
Adjusted NOI |
$29,179 |
$26,360 |
$85,846 |
$76,617 |
|
Same Property Adjusted NOI |
$27,488 |
$26,360 |
$81,286 |
$76,617 |
|
Net operating margin |
53% |
52% |
53% |
53% |
|
FFO – basic |
$14,871 |
$13,277 |
$42,781 |
$38,337 |
|
FFO – diluted |
$15,574 |
$13,980 |
$44,874 |
$40,424 |
|
FFO per Unit – basic |
$0.32 |
$0.29 |
$0.92 |
$0.82 |
|
FFO per Unit – diluted |
$0.31 |
$0.28 |
$0.89 |
$0.80 |
|
AFFO – basic |
$11,689 |
$10,326 |
$33,645 |
$29,522 |
|
AFFO – diluted |
$12,392 |
$11,029 |
$35,738 |
$31,609 |
|
AFFO per Unit – basic |
$0.25 |
$0.22 |
$0.72 |
$0.63 |
|
AFFO per Unit – diluted |
$0.25 |
$0.22 |
$0.71 |
$0.63 |
|
Distributions per Unit |
$0.15 |
$0.15 |
$0.45 |
$0.45 |
|
FFO payout ratio |
46.9% |
52.6% |
48.9% |
54.6% |
|
AFFO payout ratio |
59.7% |
67.6% |
62.2% |
70.9% |
|
Weighted average number of Units outstanding (in thousands): |
||||
|
Basic |
46,504 |
46,549 |
46,510 |
46,542 |
|
Diluted |
50,375 |
50,420 |
50,381 |
50,413 |
|
Average exchange rates – Canadian dollar to United States dollar |
$0.77 |
$0.76 |
$0.76 |
$0.79 |
|
Average exchange rates – United States dollar to Canadian dollar |
$1.30 |
$1.31 |
$1.32 |
$1.26 |
Net Operating Income
|
Three months ended |
Nine months ended |
||||
|
September 30, |
September 30, |
||||
|
(In thousands of dollars) |
2016 |
2015 |
2016 |
2015 |
|
|
Revenue from income producing properties |
|||||
|
Same Property |
$51,877 |
$50,310 |
$154,063 |
$145,527 |
|
|
Acquisitions |
3,218 |
â |
8,972 |
â |
|
|
Total revenue from income producing properties |
55,095 |
50,310 |
163,035 |
145,527 |
|
|
Property operating expenses |
|||||
|
Same Property |
|||||
|
Operating costs |
14,342 |
14,335 |
42,117 |
40,047 |
|
|
Realty taxes |
1,863 |
1,870 |
20,960 |
19,101 |
|
|
Utilities |
4,653 |
4,248 |
13,825 |
12,795 |
|
|
Same Property |
20,858 |
20,453 |
76,902 |
71,943 |
|
|
Acquisitions |
1,228 |
â |
4,864 |
â |
|
|
Total property operating expenses |
22,086 |
20,453 |
81,766 |
71,943 |
|
|
NOI |
|||||
|
Same Property |
31,019 |
29,857 |
77,161 |
73,584 |
|
|
Acquisitions |
1,990 |
â |
4,108 |
â |
|
|
Total NOI |
33,009 |
29,857 |
81,269 |
73,584 |
|
|
Realty taxes accounted for under IFRIC 21 |
(3,830) |
(3,497) |
4,577 |
3,033 |
|
|
Adjusted NOI |
$29,179 |
$26,360 |
$85,846 |
$76,617 |
|
For the three months ended September 30, 2016, consolidated Adjusted NOI increased by $2.8 million (or 10.7%) to $29.2 million, compared to $26.4 million in 2015. The increase was due to higher Adjusted NOI in Canada and the U.S. of $1.5 million (or 15.4%) and US$1.0 million (or 8.3%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $0.3 million. The increase in Adjusted NOI was attributable to the acquisitions completed during and subsequent to the three months ended September 30, 2015 and an increase in Same Property Adjusted NOI in Canada driven by higher rental revenue, lower vacancy and lower operating costs, partially offset by increase in utilities, as well as an increase in Same Property Adjusted NOI in the U.S. driven by higher rental revenue, partially offset by higher vacancy and an increase in operating costs.
For the nine months ended September 30, 2016, consolidated Adjusted NOI increased by $9.2 million (or 12.0%) to $85.8 million, compared to $76.6 million in 2015. The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $4.2 million (or 14.9%) and US$2.0 million (or 5.2%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $3.0 million. The increase in Adjusted NOI was attributable to acquisitions completed during and subsequent to the three months ended September 30, 2015 and an increase in Same Property Adjusted NOI in Canada driven by higher rental revenue and lower vacancy, partially offset by an increase in overall operating expenses.
Funds from Operations
|
Three months ended |
Nine months ended |
|||
|
September 30, |
September 30, |
|||
|
(In thousands of dollars, except per Unit amounts) |
2016 |
2015 |
2016 |
2015 |
|
Net income attributable to unitholders |
$25,264 |
$15,005 |
$6,081 |
$36,493 |
|
Add/(deduct): |
||||
|
Realty taxes accounted for under IFRIC 21 |
(3,683) |
(3,557) |
4,356 |
2,973 |
|
Fair value loss (gain) on conversion option on the Debentures |
4 |
(4) |
232 |
(63) |
|
Distributions on Class B LP Units recorded as interest expense |
2,583 |
2,583 |
7,750 |
7,750 |
|
Foreign exchange loss (gain) |
(311) |
(1,121) |
1,039 |
(2,185) |
|
Fair value gain on income producing properties, net |
(25,198) |
(17,559) |
(40,160) |
(35,475) |
|
Non-controlling interests’ share of fair value gain on income producing properties |
418 |
147 |
908 |
2 |
|
Fair value loss on Class B LP Units |
2,067 |
7,234 |
33,930 |
3,101 |
|
Deferred income tax provision |
13,727 |
10,549 |
28,645 |
25,741 |
|
FFO â basic |
$14,871 |
$13,277 |
$42,781 |
$38,337 |
|
Interest expense on the Debentures |
703 |
703 |
2,093 |
2,087 |
|
FFO â diluted |
$15,574 |
$13,980 |
$44,874 |
$40,424 |
|
FFO per Unit â basic |
$0.32 |
$0.29 |
$0.92 |
$0.82 |
|
FFO per Unit â diluted |
$0.31 |
$0.28 |
$0.89 |
$0.80 |
Basic FFO for the three months ended September 30, 2016, increased by $1.6 million, or 12.0%, to $14.9 million ($0.32 per Unit), compared to $13.3 million ($0.29 per Unit) in 2015. The increase is mainly due to higher Adjusted NOI of $2.8 million, partially offset by an increase in interest expense of $0.6 million (excluding distributions on Class B LP Units and fair value adjustments), and an increase in trust expenses of $0.3 million. The change in foreign exchange rates had a positive impact on FFO of $0.1 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, 2016, increased by $4.4 million, or 11.6%, to $42.8 million ($0.92 per Unit), compared to $38.4 million ($0.82 per Unit) in 2015. The increase is mainly due to higher Adjusted NOI of $9.2 million, partially offset by an increase in interest expense of $2.9 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 $1.5 million, of which amount is predominantly included in the increase to Adjusted NOI and interest expense.
Adjusted Funds from Operations
|
Three months ended |
Nine months ended |
|||
|
September 30, |
September 30, |
|||
|
(In thousands of dollars, except per Unit amounts) |
2016 |
2015 |
2016 |
2015 |
|
FFO – basic |
$14,871 |
$13,277 |
$42,781 |
$38,337 |
|
Add/(deduct): |
||||
|
Amortization of mark-to-market adjustment on mortgages |
(1,474) |
(1,671) |
(4,770) |
(5,024) |
|
Amortization of deferred financing costs assumed on the Initial Properties |
91 |
113 |
283 |
332 |
|
Non-controlling interests’ share of amortization of deferred financing costs assumed on the Initial Properties |
(2) |
(2) |
(6) |
(6) |
|
Gain on extinguishment of mortgages payable |
(322) |
â |
(322) |
â |
|
Amortization of tenant incentive and cash flow hedge |
20 |
56 |
117 |
168 |
|
Maintenance capital expenditures |
(1,495) |
(1,447) |
(4,438) |
(4,285) |
|
AFFO â basic |
11,689 |
10,326 |
33,645 |
29,522 |
|
Interest expense on the Debentures |
703 |
703 |
2,093 |
2,087 |
|
AFFO â diluted |
$12,392 |
$11,029 |
$35,738 |
$31,609 |
|
AFFO per Unit â basic |
$0.25 |
$0.22 |
$0.72 |
$0.63 |
|
AFFO per Unit â diluted |
$0.25 |
$0.22 |
$0.71 |
$0.63 |
Basic AFFO for the three months ended September 30, 2016, increased by $1.4 million or 13.2%, to $11.7 million ($0.25 per Unit), compared to $10.3 million ($0.22 per Unit) in 2015. The increase was primarily driven by the increase in FFO.
Basic AFFO for the nine months ended September 30, 2016, increased by $4.1 million or 14.0%, to $33.6 million ($0.72 per Unit), compared to $29.5 million ($0.63 per Unit) in 2015. The increase was primarily driven by the increase in FFO.
The REIT’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2016, 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.
Distribution Increase
The REIT also announced today that its Board of Trustees has approved an increase to its monthly cash distributions to $0.05333 per Unit, representing $0.64 per Unit on an annualized basis. The increase is expected to be effective for the November 2016 distribution, payable on December 15, 2016 to unitholders of record as at November 30, 2016 and represents an approximate 6.7% increase from the REIT’s current $0.60 per Unit annualized distribution.
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, Same Property NOI, Same Property 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 meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. 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, 2016 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 3, 2016 at 3:00 p.m. (ET) to discuss the financial results for the quarter ended September 30, 2016 and 2015. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID # 90236049.
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 13,472 residential suites (as of November 1, 2016) located in Alberta, Ontario, Colorado, Texas, Louisiana, Alabama, Georgia, Florida and North Carolina with an appraised value of approximately $2.2 billion as at September 30, 2016. For more information, visit the REIT’s website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate Investment Trust
