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
|
—
|
8,972
|
—
|
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
|
—
|
4,864
|
—
|
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
|
—
|
4,108
|
—
|
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 –
basic
|
$14,871
|
$13,277
|
$42,781
|
$38,337
|
Interest expense on
the Debentures
|
703
|
703
|
2,093
|
2,087
|
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
|
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)
|
—
|
(322)
|
—
|
Amortization of
tenant incentive and cash flow hedge
|
20
|
56
|
117
|
168
|
Maintenance capital
expenditures
|
(1,495)
|
(1,447)
|
(4,438)
|
(4,285)
|
AFFO –
basic
|
11,689
|
10,326
|
33,645
|
29,522
|
Interest expense on
the Debentures
|
703
|
703
|
2,093
|
2,087
|
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
|
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