MISSISSAUGA, ON, Feb. 11, 2020 /CNW/ - Morguard North American
Residential REIT (the "REIT") (TSX: MRG.UN) today announced its
financial results for the year ended December 31, 2019.
Highlights
The REIT is reporting performance of:
- Net operating income ("NOI") of $132.9
million for the year ended December
31, 2019, an increase of $1.2
million, or 0.9% compared to 2018.
- Same Property Proportionate NOI increased by $5.3 million (or 4.4%) to $126.6 million, compared to 2018.
- Basic funds from operations ("FFO") of $64.2 million for the year ended December 31, 2019, an increase of $3.1 million, or 5.0% over the same period in
2018.
- Basic FFO of $1.22 per Unit for
the year ended December 31, 2019, a
1.7% increase as compared to $1.20
per Unit in 2018.
- FFO payout ratio for the year ended December 31, 2019 of 56.1% compared to 55.2% in
2018.
- Net income of $80.1 million for
the year ended December 31, 2019,
compared to $174.7 million over the
same period in 2018. The decrease in net income is predominantly
due to a lower non-cash fair value gain on real estate properties,
partially offset by a lower non-cash fair value loss on Class B LP
Units and a decrease in deferred income taxes.
The REIT is reporting the following corporate and portfolio
highlights:
- As at December 31, 2019, average
monthly rent ("AMR") in Canada
increased by 4.3% compared to December 31,
2018, while occupancy remained near a historically high
level at 98.8% at December 31, 2019,
compared to 99.1% at December 31,
2018.
- As at December 31, 2019, AMR in
the U.S., on a Same Property basis, increased by 3.7% compared to
December 31, 2018, while occupancy
was stable at 94.6% at December 31,
2019, compared to 95.0% at December
31, 2018.
- As at December 31, 2019,
indebtedness to gross book value ratio of 44.1%, compared to 47.9%
as at December 31, 2018.
- On December 9, 2019, the REIT
acquired a 50% interest in the Marquee at Block 37, a property
located in Chicago, Illinois, for
a purchase price (at the REIT's 50% interest) of $177.7 million (US$134.3
million), including closing costs. The property is a
38-storey apartment building located in the heart of downtown
Chicago and features 690 suites
and extensive best-in-class amenities. Concurrent with the
acquisition, the REIT secured financing in the amount (at the
REIT's 50% interest) of $109.2
million (US$82.5 million),
with a fixed term of 10 years and an interest rate of 3.27%.
- On October 29, 2019, the REIT
announced an increase to its annual cash distributions by
$0.02 per Unit (2.94%) to
$0.70 per Unit on an annualized basis
from the current level of $0.68 per
Unit. The increase became effective for the November 2019 distribution, paid on December 16, 2019.
- 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.
- During the first half of 2019, the REIT sold the five
properties located in Louisiana,
comprising 843 suites, for gross proceeds of $63.8 million (US$48.0
million), including closing costs. The disposition of the
five Louisiana properties, which
were constructed between 1967 and 1984, and have an average age of
40 years, follows the sale of the REIT's Alabama properties in July 2017 and is consistent with management's
strategy to dispose of non-core assets and to focus on
opportunities to acquire properties located in urban centres and
major suburban markets in Canada
and the United States.
Financial and Operational Highlights
As at December
31
|
|
|
(In thousands of
dollars, except as noted otherwise)
|
2019
|
2018
|
Operational
Information
|
|
|
Number of
properties
|
43
|
47
|
Total
suites
|
13,277
|
13,430
|
Occupancy percentage
– Canada
|
98.8%
|
99.1%
|
Occupancy percentage
– U.S.
|
94.5%
|
94.7%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,432
|
$1,373
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,409
|
US$1,236
|
Summary of
Financial Information
|
|
|
Gross book
value
|
$3,033,427
|
$3,011,469
|
Indebtedness
|
$1,337,229
|
$1,442,607
|
Indebtedness to gross
book value ratio
|
44.1%
|
47.9%
|
Weighted average
mortgage interest rate
|
3.48%
|
3.49%
|
Weighted average term
to maturity on mortgages payable (years)
|
5.6
|
5.8
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.30
|
$1.36
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.77
|
$0.73
|
For the years
ended December 31
|
|
(In thousands of
dollars, except per Unit amounts)
|
2019
|
2018
|
Summary of
Financial Information
|
|
|
Interest coverage
ratio
|
2.29
|
2.20
|
Indebtedness coverage
ratio
|
1.60
|
1.58
|
Revenue from real
estate properties
|
$245,596
|
$241,368
|
NOI
|
$132,862
|
$131,693
|
Proportionate
NOI
|
$128,338
|
$125,789
|
Same Property
Proportionate NOI
|
$126,577
|
$121,244
|
NOI margin –
IFRS
|
54.1%
|
54.6%
|
NOI margin –
Proportionate
|
53.9%
|
54.1%
|
Net income
|
$80,128
|
$174,710
|
FFO –
basic
|
$64,218
|
$61,161
|
FFO –
diluted
|
$68,066
|
$64,983
|
FFO per Unit –
basic
|
$1.22
|
$1.20
|
FFO per Unit –
diluted
|
$1.19
|
$1.18
|
Distributions per
Unit
|
$0.6826
|
$0.6632
|
FFO payout
ratio
|
56.1%
|
55.2%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
Basic
|
52,766
|
50,930
|
Diluted
|
56,999
|
55,247
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.33
|
$1.30
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.75
|
$0.77
|
Net Income
The REIT reported a net income of $80.1
million for the year ended December
31, 2019, compared to $174.7
million in 2018. The change was primarily due to the
following:
- An increase in net operating income of $1.2 million;
- A decrease in interest expense of $0.3
million;
- An increase in trust expenses of $0.6
million;
- A decrease in equity income from investment of $0.2 million;
- An increase in foreign exchange loss of $3.1 million;
- An increase in other income of $1.4
million;
- A decrease in net fair value gain on real estate properties of
$124.3 million;
- A decrease in fair value loss on Class B LP Units of
$13.4 million; and
- A decrease in income taxes (current and deferred) of
$17.3 million.
Net Operating Income
For the year ended December 31,
2019, NOI from the REIT's properties increased by
$1.2 million (or 0.9%) to
$132.9 million, compared to
$131.7 million in 2018. The increase
in NOI is due to an increase in Same Property NOI of $5.3 million (or 4.2%) and a net decrease from
acquisition and disposition of properties of $4.1 million. The Same Property increase of
$5.3 million is due to an increase in
Canada of $1.4 million (or 2.8%), an increase in the U.S.
of US$1.6 million (or 2.7%) and the
change in foreign exchange rate which increased NOI by $2.3 million.
Funds From Operations
Basic FFO for the year ended December 31,
2019, increased by $3.1
million, or 5.0%, to $64.2
million ($1.22 per Unit),
compared to $61.1 million
($1.20 per Unit) in 2018. The
increase is mainly due to higher Proportionate NOI of $2.5 million and an increase in other income of
$1.4 million, partially offset by an
increase in trust expenses of $0.6
million. In addition, interest expense includes a lower
non-cash amortization of mark-to-market adjustments of $0.4 million and a $0.6
million loss on extinguishment of mortgages payable in
connection with the disposal of five Louisiana properties.
Basic FFO per Unit for the year ended December 31, 2019, increased by $0.02 to $1.22 per
Unit, compared to $1.20 per Unit in
2018 due to the following factors:
- the change in foreign exchange rate had a $0.02 per Unit positive impact;
- the disposal of the five Louisiana properties had a $0.035 per Unit negative impact;
- the acquisition on May 22, 2019,
of partial interests in three properties controlled by the REIT
located in Mississauga, Ontario,
had a $0.005 per Unit positive
impact; and
- the issuance of Units on August 28,
2019, which includes the dilution from additional Units of
the Offering offset by approximately four months of interest income
earned on proceeds advanced on the Morguard Facility, including the
partial use of proceeds on December 9,
2019, to acquire the Marquee at Block 37, had a $0.02 per Unit negative impact.
The REIT's audited consolidated financial statements for the
year ended December 31, 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 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, 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 Friday, February 14, 2020 at 3:00 p.m. (ET) to discuss the financial
results for the year ended December
31, 2019 and 2018. To participate in the conference
call, please dial 416-764-8688 or 1-888-390-0546.
Please quote conference ID 55605474.
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 13,277 residential
suites (as of February 11, 2020) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $2.9 billion at
December 31, 2019. For more information, visit the REIT's
website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust