MISSISSAUGA, ON, Feb. 12, 2019 /CNW/ – Morguard North American Residential REIT (the “REIT”) (TSX: MRG.UN) today announced its financial results for the year ended December 31, 2018.
Highlights
The REIT is reporting performance of:
- Net operating income (“NOI”) of $131.7 million for the year ended December 31, 2018, an increase of $9.0 million, (or 7.3%) compared to 2017.
- Same Property NOI in Canada increased by $2.7 million, (or 5.7%) and in the U.S. increased by US$1.5 million, (or 3.0%) compared to 2017.
- Basic funds from operations (“FFO”) of $61.1 million for the year ended December 31, 2018, an increase of $1.4 million, (or 2.4%) over the same period in 2017.
- Basic FFO of $1.20 per Unit for the year ended December 31, 2018, a 1.7% increase as compared to the $1.18 per Unit in 2017.
- FFO payout ratio for the year ended December 31, 2018 of 55.2% compared to 54.7% in 2017.
- Net income of $174.7 million for the year ended December 31, 2018, an increase of $1.6 million, (or 0.9%) compared to 2017.
The REIT is reporting the following corporate and portfolio highlights for 2018:
- As at December 31, 2018, average monthly rent (“AMR”) in Canada increased by 3.5% compared to December 31, 2017, while occupancy remained near a historically high level at 99.1% at December 31, 2018, compared to 99.3% at December 31, 2017.
- As at December 31, 2018, AMR in the U.S. increased by 2.7% compared to December 31, 2017, while occupancy improved to 94.7% at December 31, 2018, compared to 90.9% at December 31, 2017.
- As at December 31, 2018, the REIT’s total assets were $3.0 billion compared to $2.7 billion as at December 31, 2017.
- As at December 31, 2018, indebtedness to gross book value ratio of 47.9%, lower compared to 51.4% as at December 31, 2017.
- On October 30, 2018, the REIT announced an increase to its annual cash distributions by $0.02 per Unit (or 3.03%) to $0.68 per Unit on an annualized basis from the current level of $0.66 per Unit. The increase became effective for the November 2018 distribution, paid on December 14, 2018.
- On April 5, 2018, the REIT acquired a property comprising 116 suites located in New Orleans, Louisiana, for a purchase price of $14.9 million (US$11.6 million), including closing costs. The property is vacant and designated as a property under development. The REIT plans to complete capital upgrades during the first half of 2019, at which point initial lease-up will commence.
- On February 13, 2018, the REIT issued $75.0 million principal amount of 4.50% convertible unsecured subordinated debentures maturing on March 31, 2023. On February 21, 2018, an additional principal amount of $10.5 million was issued pursuant to the exercise of the over-allotment option. On February 26, 2018, the REIT redeemed the remaining $60.0 million of its outstanding 4.65% convertible unsecured subordinated debentures in advance of their March 30, 2018 maturity date.
Financial and Operational Highlights
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As at December 31, |
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|
(In thousands of dollars, except as noted otherwise) |
2018 |
2017 |
|
Operational Information |
||
|
Number of properties |
47 |
46 |
|
Total suites |
13,430 |
13,314 |
|
Occupancy percentage â Canada |
99.1% |
99.3% |
|
Occupancy percentage â U.S. |
94.7% |
90.9% |
|
Average monthly rent – Canada (in actual dollars) |
$1,373 |
$1,327 |
|
Average monthly rent – U.S. (in actual U.S. dollars) |
US$1,236 |
US$1,203 |
|
Summary of Financial Information |
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|
Gross book value |
$3,011,469 |
$2,651,097 |
|
Indebtedness |
$1,442,607 |
$1,363,228 |
|
Indebtedness to gross book value ratio |
47.9% |
51.4% |
|
Weighted average mortgage interest rate |
3.49% |
3.50% |
|
Weighted average term to maturity on mortgages payable (years) |
5.8 |
6.2 |
|
Exchange rates – United States dollar to Canadian dollar |
$1.36 |
$1.25 |
|
Exchange rates – Canadian dollar to United States dollar |
$0.73 |
$0.80 |
|
For the years ended December 31, |
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|
(In thousands of dollars, except per Unit amounts) |
2018 |
2017 |
|
Summary of Financial Information |
||
|
Interest coverage ratio |
2.20 |
2.19 |
|
Indebtedness coverage ratio |
1.58 |
1.54 |
|
Revenue from real estate properties |
$241,368 |
$226,495 |
|
NOI |
$131,693 |
$122,736 |
|
Proportionate NOI |
$125,789 |
$118,970 |
|
Same Property Proportionate NOI |
$113,435 |
$109,091 |
|
NOI margin â IFRS |
54.6% |
54.2% |
|
NOI margin â Proportionate |
54.1% |
53.7% |
|
Net income |
$174,710 |
$173,131 |
|
FFO â basic |
$61,161 |
$59,725 |
|
FFO â diluted |
$64,983 |
$62,515 |
|
FFO per Unit â basic |
$1.20 |
$1.18 |
|
FFO per Unit â diluted |
$1.18 |
$1.14 |
|
Distributions per Unit |
$0.66 |
$0.64 |
|
FFO payout ratio |
55.2% |
54.7% |
|
Weighted average number of Units outstanding (in thousands): |
||
|
Basic |
50,930 |
50,802 |
|
Diluted |
55,247 |
54,673 |
|
Average exchange rates – United States dollar to Canadian dollar |
$1.30 |
$1.30 |
|
Average exchange rates – Canadian dollar to United States dollar |
$0.77 |
$0.77 |
Net Operating Income
For the year ended December 31, 2018, NOI from the REIT’s properties increased by $9.0 million (or 7.3%) to $131.7 million, compared to $122.7 million in 2017. The increase in NOI is due to an increase in Same Property NOI of $4.5 million (or 4.0%) and an increase from acquisitions net of dispositions of properties of $4.5 million. The Same Property increase of $4.5 million is due to an increase in Canada of $2.7 million (or 5.7%), an increase in the U.S. of US$1.5 million (or 3.0%) and the change in foreign exchange rate which increased NOI by $0.3 million.
Funds From Operations
Basic FFO for the year ended December 31, 2018, increased by $1.4 million, or 2.4%, to $61.1 million ($1.20 per Unit), compared to $59.7 million ($1.18 per Unit) in 2017. The increase is mainly due to higher NOI of $9.0 million and an increase in other income of $0.6 million, partially offset by an increase in interest expense of $7.6 million and an increase in trust expenses of $1.1 million. The increase in interest expense of $7.6 million reflects lower amortization of mark-to-market adjustments of $1.8 million from the refinancing of mortgages that were assumed on properties acquired during 2013.
Basic FFO per Unit for the year ended December 31, 2018, increased by $0.02 to $1.20 per Unit, compared to $1.18 per Unit.
Net Income
Net income of $174.7 million for the year ended December 31, 2018, increased by $1.6 million compared to $173.1 million in 2017. The increase in net income was primarily due to the following:
- An increase in net operating income of $9.0 million;
- An increase in interest expense of $7.6 million;
- An increase in trust expenses of $1.1 million;
- An increase in equity income from investment of $1.4 million;
- An increase in foreign exchange gain of $3.9 million;
- An increase in other income of $0.6 million;
- An increase in net fair value gain on real estate properties of $50.7 million ;
- An increase in fair value loss on Class B LP Units of $12.2 million; and
- An increase in income taxes (current and deferred) of $43.0 million.
Subsequent Event
On February 1, 2019, the REIT sold a property located in Shreveport, Louisiana, comprising 194 suites, for gross proceeds of $13.8 million (US$10.5 million) and the purchaser assumed the mortgage secured by the property in the amount of $7.0 million (US$5.3 million).
The REIT’s audited consolidated financial statements for the year ended December 31, 2018, 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, 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 year ended December 31, 2018 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, February 14, 2019 at 3:00 p.m. (ET) to discuss the financial results for the year ended December 31, 2018 and 2017. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546. Please quote conference ID 58771268.
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 13,236 residential suites (as of February 12, 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 December 31, 2018. 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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