Morguard North American Residential REIT Announces 2015 First Quarter Results

TSX: MRG.UN

MISSISSAUGA, ON, May 7, 2015 /CNW/ - Morguard North American Residential REIT (the 'REIT") (TSX: MRG.UN) today announced its financial results for the three months ended March 31, 2015.

All amounts in CAD thousands, except suites and per unit amounts, unless otherwise noted.

HIGHLIGHTS

The REIT is reporting performance of:

Adjusted net operating income ("Adjusted NOI"), excluding the impact of IFRIC 21, of $24.9 million for the three months ended March 31, 2015, an increase of $2.7 million over the same period in 2014.
Funds from Operations ("FFO") of $12.2 million for the three months ended March 31, 2015, an increase of $1.5 million over the same period in 2014.
FFO of $0.26 per unit for the three months ended March 31, 2015 compared to $0.23 per unit for the first quarter of 2014.
Adjusted Funds from Operations ("AFFO") of $0.20 per unit for the three months ended March 31, 2015, a 25% increase as compared to the $0.16 value generated over the same period in 2014.
FFO payout ratio for the three months ended March 31, 2015 was 57.69% (AFFO payout ratio – 75.00%).

FINANCIAL AND OPERATIONAL HIGHLIGHTS
As at	March 31, 2015	December 31, 2014
Operational Information
Number of properties	44	44
Total suites	12,850	12,850
Occupancy percentage	95.8%	96.0%
Monthly weighted average in-place rent - Canada	$1,250	$1,246
Monthly weighted average in-place rent - U.S. (in U.S. dollars)	US$952	US$945
Summary of Financial Information
Total gross book value	$1,931,755	$1,832,287
Debt	$1,082,562	$1,022,555
Debt to gross book value	56%	56%
Weighted average interest rate on mortgages payable and retained debt	3.9%	3.9%
Weighted average term to maturity on mortgages payable (years)	5.6	5.6

FINANCIAL AND OPERATIONAL HIGHLIGHTS (CONT'D)

For the three months ended March 31
(in thousands of dollars, except per unit amounts)	2015	2014
Summary of Financial Information
Revenue from income producing properties	$47,687	$42,761
Adjusted NOI⁽¹⁾	$24,861	$22,132
Net operating income	$14,997	$13,762
Net operating margin⁽¹⁾	52%	52%
Interest coverage⁽¹⁾	2.02	1.77

Funds from Operations (FFO) - basic	$12,248	$10,742
FFO per unit – basic and diluted	$0.26	$0.23

Adjusted Funds from Operations (AFFO) - basic	$9,269	$7,592
AFFO per unit – basic and diluted	$0.20	$0.16

FFO payout ratio	57.69%	65.22%
AFFO payout ratio	75.00%	93.75%
Weighted average number of units outstanding during the period (000's)
- Basic	46,536	46,514
- Diluted	50,407	50,385

^{1 Excludes realty taxes accounted for under IFRIC
21.}

NET OPERATING INCOME

For the three months ended March 31
(in thousands of dollars)		2015	2014
Revenue from income producing properties		$47,687	$42,761

Property Operating Expenses
	Operating expenses	12,349	11,344
	Utilities	4,853	4,392
	Realty taxes	15,488	13,263
Total property operating expenses		32,690	28,999
Net Operating Income		14,997	13,762
Realty taxes accounted for under IFRIC 21		9,864	8,370
Adjusted Net Operating Income		$24,861	$22,132

Adjusted NOI for the three months ended March 31, 2015, increased by $2.7 million, or 12.3% to $24.9 million, compared to $22.1 million in 2014. The increase was due to higher rental revenue due to rental increases in Canada and U.S. of $0.2 million and US$0.7 million, respectively, and the change in the foreign exchange rate, which increased Adjusted NOI by $1.9 million.

FUNDS FROM OPERATIONS ("FFO")
For the three months ended March 31
(In thousands of dollars, except per unit amounts)	2015	2014

Net (loss) income for the period attributable to the unitholders	$(10,139)	$9,112
Add (deduct):
Realty taxes accounted for under IFRIC 21	9,864	8,370
Net fair value gain on income producing properties	(4,204)	(21,254)
Non-controlling interests' share of fair value (loss) gain on income producing properties	(237)	366
Fair value loss on Class B LP Units	9,818	5,856
Fair value loss on conversion option on debentures	29	77
Distributions on Class B LP Units recorded as interest expense	2,583	2,583
Foreign exchange gain	(1,270)	(31)
Deferred income tax provision	5,804	5,663
Funds from operations	$12,248	$10,742
Interest expense on convertible debentures	688	688
Diluted FFO	$12,936	$11,430
FFO per unit – basic and diluted	$0.26	$0.23

FFO for the three months ended March 31, 2015, increased by $1.5 million, or 14.0%, to $12.2 million ($0.26 per Unit), compared to $10.7 million ($0.23 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $2.7 million, partially offset by an increase in interest expense of $0.7 million, and an increase in trust expenses of $0.5 million. The change in foreign exchange rates of $0.14 had a positive impact on FFO of $1.1 million.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")
For the three months ended March 31
(In thousands of dollars, except per unit amounts)	2015	2014
Funds from Operations	$12,248	$10,742
Add (deduct):
Amortization of deferred financing costs assumed on Initial Properties	109	249
Non-controlling interests' share of amortization of deferred financing costs assumed on Initial Properties	(2)	(12)
Amortization of mark to market adjustments on mortgages	(1,731)	(2,030)
Maintenance capital expenditures	(1,411)	(1,411)
Amortization of cash flow hedge	56	54
Adjusted funds from operations	9,269	7,592
Interest expense on convertible debentures	688	688
Diluted AFFO	$9,957	$8,280
AFFO per unit - basic and diluted	$0.20	$0.16

AFFO for the three months ended March 31, 2015, increased by $1.7 million, or 22.1%, to $9.3 million ($0.20 per Unit), compared to $7.6 million ($0.16 per Unit) in 2014, mainly due to an increase in FFO of $1.5 million during the period.

CONFERENCE CALL DETAILS
Morguard North American Residential Real Estate Investment Trust will hold a conference call on Friday, May 8, 2015 at 10:30 a.m. (ET) to discuss the financial results for the three months ended March 31, 2015 and 2014. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID# 30279282.

ABOUT MORGUARD NORTH AMERICAN RESIDENTIAL REIT
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. It trades on the Toronto Stock Exchange under the ticker symbol MRG.UN. With a strategic focus on the acquisition of high-quality multi-unit 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 12,850 residential suites (as of May 6, 2015) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.9 billion at March 31, 2015.