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
– Canada
|
99.4%
|
99.1%
|
99.5%
|
Occupancy percentage
– 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