MISSISSAUGA, ON, Aug. 1, 2017 /CNW/ - Morguard North American
Residential REIT (the "REIT") (TSX: MRG.UN) today announced its
financial results for the three and six months ended June 30, 2017.
Second Quarter Highlights
On May 15, 2017, the REIT acquired
a newly-constructed property comprising 60 rental townhomes located
in Toronto, Ontario, for a
purchase price of $16.7 million,
including closing costs.
The REIT is reporting performance of:
- Adjusted net operating income ("Adjusted NOI") of $31.0 million for the three months ended
June 30, 2017, an increase of
$2.8 million, or 10.1% compared to
2016.
- Basic funds from operations ("FFO") of $16.3 million for the three months ended
June 30, 2017, an increase of
$2.4 million, or 17.4% over the same
period in 2016.
- Basic FFO of $0.32 per Unit for
the three months ended June 30, 2017,
a 6.7% increase as compared to the $0.30 per Unit for the second quarter of
2016.
- FFO payout ratio for the three months ended June 30, 2017 of 49.9%.
- During second quarter, the REIT completed $81.3 million (US$60.9
million) of refinancing secured by three residential
properties located in Colorado,
Georgia and Florida, at a weighted average interest rate
of 3.84% and a weighted average term of 10 years. The
refinancing resulted in $26.6 million
(US$20.0 million) of additional
mortgage proceeds on the maturing loans which had a weighted
average interest rate of 4.46%. The REIT has now completed
financing arrangements on all mortgages scheduled to mature during
2017.
Financial and Operational Highlights
As
at
|
June
30,
|
December
31,
|
June 30,
|
(In thousands of
dollars, except as noted otherwise)
|
2017
|
2016
|
2016
|
Operational
Information
|
|
|
|
Number of
properties
|
47
|
46
|
46
|
Total
suites
|
13,532
|
13,472
|
13,472
|
Occupancy
percentage
|
95.7%
|
95.2%
|
95.6%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,308
|
$1,296
|
$1,279
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,052
|
US$1,038
|
US$1,020
|
Summary of
Financial Information
|
|
|
|
Gross book
value
|
$2,354,943
|
$2,285,727
|
$2,151,617
|
Indebtedness
|
$1,172,213
|
$1,237,613
|
$1,196,995
|
Indebtedness to gross
book value ratio
|
50%
|
54%
|
56%
|
Weighted average
mortgage interest rate
|
3.5%
|
3.6%
|
3.7%
|
Weighted average term
to maturity on mortgages payable (years)
|
6.1
|
5.7
|
5.3
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.77
|
$0.74
|
$0.77
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.30
|
$1.34
|
$1.29
|
|
|
|
|
Three months
ended
|
Six
months ended
|
|
June
30
|
June
30
|
(In thousands of
dollars, except per Unit amounts)
|
2017
|
2016
|
2017
|
2016
|
Summary of
Financial Information
|
|
|
|
|
Interest coverage
ratio
|
2.38
|
2.00
|
2.32
|
1.99
|
Indebtedness coverage
ratio
|
1.64
|
1.36
|
1.58
|
1.36
|
Revenue from income
producing properties
|
$57,201
|
$53,586
|
$112,822
|
$107,940
|
NOI
|
$35,165
|
$31,988
|
$52,082
|
$48,260
|
Adjusted
NOI
|
$31,021
|
$28,185
|
$60,447
|
$56,667
|
Same Property
Adjusted NOI
|
$31,039
|
$28,185
|
$58,775
|
$55,545
|
Net operating
margin
|
54%
|
53%
|
54%
|
52%
|
FFO -
basic
|
$16,305
|
$13,891
|
$31,582
|
$27,910
|
FFO -
diluted
|
$17,001
|
$14,587
|
$32,966
|
$29,300
|
FFO per Unit -
basic
|
$0.32
|
$0.30
|
$0.62
|
$0.60
|
FFO per Unit -
diluted
|
$0.31
|
$0.29
|
$0.60
|
$0.58
|
Distributions per
Unit
|
$0.16
|
$0.15
|
$0.32
|
$0.30
|
FFO payout
ratio
|
49.9%
|
50.2%
|
51.4%
|
50.0%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
50,894
|
46,498
|
50,698
|
46,513
|
Diluted
|
54,765
|
50,369
|
54,569
|
50,384
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.74
|
$0.78
|
$0.75
|
$0.75
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.34
|
$1.29
|
$1.33
|
$1.33
|
Net Operating Income
|
Three months
ended
|
Six
months ended
|
|
June
30
|
June
30
|
(In thousands of
dollars)
|
2017
|
2016
|
2017
|
2016
|
Revenue from
income producing properties
|
|
|
|
|
Same
Property
|
$57,201
|
$53,586
|
$109,736
|
$105,565
|
Acquisitions
|
—
|
—
|
3,086
|
2,375
|
Total revenue from
income producing properties
|
57,201
|
53,586
|
112,822
|
107,940
|
Property operating
expenses
|
|
|
|
|
Same
Property
|
|
|
|
|
|
Operating
costs
|
14,891
|
14,748
|
28,563
|
28,532
|
|
Realty
taxes
|
2,674
|
2,477
|
21,389
|
20,554
|
|
Utilities
|
4,453
|
4,373
|
9,374
|
9,341
|
Same
Property
|
22,018
|
21,598
|
59,326
|
58,427
|
Acquisitions
|
18
|
—
|
1,414
|
1,253
|
Total property
operating expenses
|
22,036
|
21,598
|
60,740
|
59,680
|
NOI
|
|
|
|
|
Same
Property
|
35,183
|
31,988
|
50,410
|
47,138
|
Acquisitions
|
(18)
|
—
|
1,672
|
1,122
|
Total
NOI
|
35,165
|
31,988
|
52,082
|
48,260
|
Realty taxes
accounted for under IFRIC 21
|
(4,144)
|
(3,803)
|
8,365
|
8,407
|
Adjusted
NOI
|
$31,021
|
$28,185
|
$60,447
|
$56,667
|
For the three months ended June 30,
2017, consolidated Adjusted NOI increased by $2.8 million (or 10.1%) to $31.0 million, compared to $28.2 million in 2016. The increase was due
to higher Adjusted NOI in Canada
and the U.S. of $1.1 million (or
9.7%) and US$0.7 million (or 5.7%),
respectively, and the change in the U.S. foreign exchange rate,
which increased Adjusted NOI by $1.0
million. The increase in Adjusted NOI (in local
currency) was attributable to higher rental revenue and improved
occupancy in Canada and the U.S.
as well as lower overall operating expenses, as a decrease in
operating expenses in Canada was
offset by a slight increase in the U.S.
For the six months ended June 30,
2017, consolidated Adjusted NOI increased by $3.8 million (or 6.7%) to $60.5 million, compared to $56.7 million in 2016. The increase was due
to higher Adjusted NOI in Canada
and the U.S. of $1.7 million (or
8.0%) and US$1.5 million (or 5.5%),
respectively, partially offset by the change in the U.S. foreign
exchange rate, which increased Adjusted NOI by $0.6 million. The increase in Adjusted NOI
was attributable to the full period impact of the 160 Chapel
acquisition completed during the three months ended March 31, 2016 and an increase in Same Property
NOI in Canada and the U.S.
The increase in Same Property NOI was mainly driven by higher
rental revenue and improved occupancy, partially offset by higher
realty taxes.
Funds from Operations
|
Three months
ended
|
Six
months ended
|
|
June
30
|
June
30
|
(In thousands of
dollars, except per Unit amounts)
|
2017
|
2016
|
2017
|
2016
|
Net income (loss)
for the period attributable to unitholders
|
$59,351
|
$5,262
|
$61,379
|
($19,183)
|
Add/(deduct):
|
|
|
|
|
Realty taxes
accounted for under IFRIC 21
|
(3,935)
|
(3,635)
|
7,957
|
8,039
|
Fair value loss on
conversion option on the Debentures
|
511
|
104
|
1,390
|
228
|
Distributions on
Class B LP Units recorded as interest expense
|
2,756
|
2,584
|
5,512
|
5,167
|
Foreign exchange
loss
|
599
|
104
|
789
|
1,350
|
Fair value gain on
income producing properties, net
|
(61,778)
|
(8,773)
|
(85,129)
|
(14,962)
|
Non-controlling
interests' share of fair value gain on income producing
properties
|
1,590
|
179
|
2,285
|
490
|
Fair value loss on
Class B LP Units
|
9,472
|
10,850
|
29,796
|
31,863
|
Deferred income tax
provision
|
7,739
|
7,216
|
7,603
|
14,918
|
FFO –
basic
|
$16,305
|
$13,891
|
$31,582
|
$27,910
|
Interest expense on
the Debentures
|
696
|
696
|
1,384
|
1,390
|
FFO –
diluted
|
$17,001
|
$14,587
|
$32,966
|
$29,300
|
FFO per Unit –
basic
|
$0.32
|
$0.30
|
$0.62
|
$0.60
|
FFO per Unit –
diluted
|
$0.31
|
$0.29
|
$0.60
|
$0.58
|
Basic FFO for the three months ended June
30, 2017, increased by $2.4
million, or 17.4%, to $16.3
million ($0.32 per Unit),
compared to $13.9 million
($0.30 per Unit) in 2016. The
increase is mainly due to higher Adjusted NOI of $2.8 million and a decrease in interest expense
of $0.1 million (excluding
distributions on Class B LP Units and fair value adjustments),
partially offset by an increase in trust expenses of $0.5 million. The change in foreign exchange
rates had a positive impact on FFO of $0.4
million.
Basic FFO for the six months ended June
30, 2017, increased by $3.7
million, or 13.2%, to $31.6
million ($0.62 per Unit),
compared to $27.9 million
($0.60 per Unit) in 2016. The
increase is mainly due to higher Adjusted NOI of $3.8 million and a decrease in interest expense
of $0.4 million (excluding
distributions on Class B LP Units and fair value adjustments),
partially offset by an increase in trust expenses of $0.6 million. The change in foreign exchange
rates had a positive impact on FFO of $0.1
million.
Excluding the impact of the offering, basic FFO per unit
amounted to $0.33 and $0.65 per Unit for the three and six months ended
June 30, 2017, respectively. The
impact includes the dilution from additional Units of the
January 9, 2017 offering offset by
interest savings on the repayment of mortgages on February 1, 2017.
Subsequent Events
On July 6, 2017, the REIT acquired
a property comprising 104 suites and 32,000 square feet of
commercial area located in Falls Church,
Virginia, for a purchase price of $55.7 million (US$43.0
million), excluding closing costs. The property is subject
to a long-term land lease, with a fixed price land purchase option
available in 12.25 years. The acquisition was partially financed by
a new mortgage of $30.6 million
(US$23.7 million) at an interest rate
of 4.05% for a term of 12.25 years.
On July 10, 2017, the REIT
acquired a property comprising 515 suites and 18,000 square feet of
commercial area located in Chicago,
Illinois, for a purchase price of $286.8 million (US$222.5
million), excluding closing costs. The acquisition was
partially financed by a new mortgage of $157.9 million (US$122.5
million) at an interest rate of 3.49% for a term of eight
years.
The REIT entered into a binding agreement to acquire a property
comprising 492 suites located in Rockville, Maryland, for a purchase price of
US$129.0 million, excluding closing
costs. The acquisition is expected to close during the third
quarter of 2017.
On July 12, 2017, the REIT sold
four U.S properties located in Mobile,
Alabama, comprising 1,329 suites, for gross proceeds of
$89.7 million (US$70.1 million).
The REIT's unaudited condensed consolidated financial statements
for the three and six months ended June 30, 2017,
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, Adjusted NOI, Same Property
NOI, FFO, 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 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 six months
ended June 30, 2017 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,
August 3, 2017 at 3:00 p.m.
(ET) to discuss the financial results for the quarter
ended June 30, 2017 and 2016. To
participate in the conference call, please dial 647-427-7450 or
1-888-231-8191. Please quote conference ID #
47320330.
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 12,822 residential
suites (as of August 1, 2017) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina and Virginia with
an appraised value of approximately $2.3
billion at June 30, 2017. For more information,
visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust