MISSISSAUGA, ON, Oct. 31, 2017 /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, 2017.
Third Quarter Highlights
The Board of Trustees has approved an increase to the REIT's
annual cash distribution by $0.02 per
Unit (3.1%). The increase is expected to be effective for the
November 2017 distribution, payable
on December 15, 2017 to unitholders
of record as at November 30, 2017.
This will bring the distributions to $0.66 per Unit on an annualized basis from the
current level of $0.64 per Unit.
On July 6, 2017, the REIT acquired
a property comprising 104 suites and approximately 33,000 square
feet of commercial area located in Falls
Church, Virginia, for a purchase price of $56.5 million (US$43.7
million), including closing costs.
On July 10, 2017, the REIT
acquired a property comprising 515 suites and approximately 20,000
square feet of commercial area located in Chicago, Illinois, for a purchase price of
$292.7 million (US$227.1 million), including closing costs. The
acquisition was partially financed by a new mortgage in the amount
of $157.9 million (US$122.5 million) at an interest rate of 3.49%
for a term of eight years. On October 2,
2017, the REIT sold a 49% interest in the property to an
institutional partner for $63.5
million (US$50.8 million).
On July 12, 2017, the REIT sold
four U.S. properties located in Mobile,
Alabama, comprising 1,329 suites, for net proceeds of
$88.7 million (US$69.3 million).
On August 17, 2017, the REIT
acquired a 50% interest in a property comprising 492 suites located
in Rockville, Maryland, in which
the REIT had a net investment of $40.1
million (US$31.7
million).
The REIT is reporting third quarter performance of:
- Net operating income ("NOI") of $35.2
million for the three months ended September 30, 2017, an increase of $2.2 million, or 6.6% compared to 2016.
- Proportionate share net operating income ("Proportionate NOI")
of $30.6 million for the three months
ended September 30, 2017, an increase
of $2.1 million, or 7.5% compared to
2016.
- Net income of $7.9 million for
the three months ended September 30,
2017, compared to a net income of $26.2 million for the three months ended
September 30, 2016. The decrease was
largely attributable to a decrease in fair value gain on income
producing properties and deferred income taxes.
- Basic funds from operations ("FFO") of $14.5 million for the three months ended
September 30, 2017, a decrease of
$0.4 million, or 2.6% over the same
period in 2016.
- Basic FFO of $0.29 per Unit for
the three months ended September 30,
2017, a 9.4% decrease as compared to the $0.32 per Unit for the third quarter of 2016.
- FFO payout ratio for the three months ended September 30, 2017 of 56.2%.
Financial and Operational Highlights
As
at
|
September
30,
|
December
31,
|
September
30,
|
(In thousands of
dollars, except as noted otherwise)
|
2017
|
2016
|
2016
|
Operational
Information
|
|
|
|
Number of
properties
|
46
|
46
|
46
|
Total
suites
|
13,314
|
13,472
|
13,472
|
Occupancy
percentage
|
94.1%
|
95.2%
|
95.5%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,320
|
$1,296
|
$1,289
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,308
|
US$1,038
|
US$1,031
|
Summary of
Financial Information
|
|
|
|
Gross book
value
|
$2,575,375
|
$2,285,727
|
$2,222,272
|
Indebtedness
|
$1,403,950
|
$1,237,613
|
$1,226,543
|
Indebtedness to gross
book value ratio
|
55%
|
54%
|
55%
|
Weighted average
mortgage interest rate
|
3.5%
|
3.6%
|
3.6%
|
Weighted average term
to maturity on mortgages payable (years)
|
6.2
|
5.7
|
5.9
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.25
|
$1.34
|
$1.31
|
|
Three months ended September
30
|
Nine months ended September
30
|
(In thousands of
dollars, except per Unit amounts)
|
2017
|
2016
|
2017
|
2016
|
Summary of
Financial Information
|
|
|
|
|
Interest coverage
ratio
|
2.12
|
2.05
|
2.25
|
2.01
|
Indebtedness coverage
ratio
|
1.52
|
1.39
|
1.56
|
1.37
|
Revenue from income
producing properties
|
$56,787
|
$55,095
|
$169,609
|
$163,035
|
NOI
|
$35,202
|
$33,009
|
$87,284
|
$81,269
|
Proportionate
NOI
|
$30,641
|
$28,508
|
$89,699
|
$83,802
|
Same Property
Proportionate NOI
|
$27,220
|
$26,880
|
$79,891
|
$76,838
|
NOI margin -
IFRS
|
62.0%
|
59.9%
|
51.5%
|
49.8%
|
NOI margin -
Proportionate
|
54.5%
|
53.0%
|
53.9%
|
52.6%
|
Net income
|
$7,907
|
$26,173
|
$71,932
|
$7,758
|
FFO -
basic
|
$14,489
|
$14,871
|
$46,071
|
$42,781
|
FFO -
diluted
|
$15,192
|
$15,574
|
$48,158
|
$44,874
|
FFO per Unit -
basic
|
$0.29
|
$0.32
|
$0.91
|
$0.92
|
FFO per Unit -
diluted
|
$0.28
|
$0.31
|
$0.88
|
$0.89
|
Distributions per
Unit
|
$0.16
|
$0.15
|
$0.48
|
$0.45
|
FFO payout
ratio
|
56.2%
|
46.9%
|
52.9%
|
48.9%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
50,900
|
46,504
|
50,766
|
46,510
|
Diluted
|
54,771
|
50,375
|
54,637
|
50,381
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.25
|
$1.30
|
$1.31
|
$1.32
|
Net Income
Net income of $7.9 million for the
three months ended September 30,
2017, decreased by $18.3
million, compared to net income of $26.2 million for the three months ended
September 30, 2016. The decrease in
net income was primarily due to the following:
- An increase in net operating income of $2.2 million;
- An increase in interest expense of $1.7
million, primarily due to a decrease in non-cash items
included in interest expense;
- An increase in trust expenses of $0.1
million;
- An equity loss from investment of $1.5
million, primarily due to fair value loss attributable to
acquisition costs;
- A decrease in net fair value gain on income producing
properties of $20.5 million;
- An increase in fair value loss on Class B LP Units of
$2.2 million; and
- A decrease in income taxes (current and deferred) of
$7.6 million.
Net Operating Income
Three months ended September 30,
2017 and 2016
For the three months ended September 30, 2017, NOI from the REIT's
properties increased by $2.2 million
(or 6.6%) to $35.2 million, compared
to $33.0 million in 2016. The
increase in NOI is due to an increase from acquisitions net of the
disposal of properties of $1.8
million and an increase in Same Property NOI of $0.4 million (or 1.4%). The Same Property
increase of $0.4 million is due to an
increase in Canada of $1.3 million (or 11.4%), a decrease in the U.S.
of US$0.04 million (or 0.3%) and the
change in foreign exchange rate which decreased NOI by $0.8 million.
For the three months ended September 30,
2017, Proportionate NOI from the REIT's properties increased
by $2.1 million (or 7.5%) to
$30.6 million, compared to
$28.5 million in 2016. The increase
in Proportionate NOI is due to an increase from acquisitions net of
the disposal of properties of $1.8
million and an increase in Same Property Proportionate NOI
of $0.3 million (or 1.3%). The Same
Property increase of $0.3 million is
due to an increase in Canada of
$1.2 million (or 11.3%), a decrease
in the U.S. of US$0.3 million (or
2.2%) and the change in foreign exchange rate which decreased
Proportionate NOI by $0.6
million.
Nine months ended September 30,
2017 and 2016
For the nine months ended September 30, 2017, NOI from the REIT's
properties increased by $6.0 million
(or 7.4%) to $87.3 million, compared
to $81.3 million in 2016. The
increase in NOI is due to an increase from acquisitions net of the
disposal of properties of $2.8
million and an increase in Same Property NOI of $3.2 million (or 4.2%). The Same Property
increase of $3.2 million is due to an
increase in Canada of $2.4 million (or 7.7%) and an increase in the
U.S. of US$0.8 million (or 2.4%).
For the nine months ended September 30,
2017, Proportionate NOI from the REIT's properties increased
by $5.9 million (or 7.0%) to
$89.7 million, compared to
$83.8 million in 2016. The increase
in Proportionate NOI is due to an increase from acquisitions net of
the disposal of properties of $2.8
million and an increase in Same Property Proportionate NOI
of $3.1 million (or 4.0%). The Same
Property increase of $3.1 million is
due to an increase in Canada of
$2.3 million (or 7.6%), an increase
in the U.S. of US$1.0 million (or
2.8%) and the change in foreign exchange rate which decreased
Proportionate NOI by $0.2
million.
Funds from Operations
Basic FFO for the three months ended September 30, 2017, decreased by $0.4 million, or 2.6%, to $14.5 million ($0.29 per Unit), compared to $14.9 million ($0.32 per Unit) in 2016. The decrease is
mainly due to increase in interest expense of $1.4 million (excluding distributions on Class B
LP Units and fair value adjustments), an increase in other expenses
of $0.8 million and increase in trust
expenses of $0.1 million, partially
offset by higher Proportionate NOI of $2.1
million.
Basic FFO per Unit for the three months ended September 30, 2017, decreased by $0.03 to $0.29 per
Unit, compared to $0.32 per Unit due
to the following non-recurring factors:
i)
|
the change in the
foreign exchange rate had a $0.01 per Unit negative
impact;
|
ii)
|
a decrease in U.S.
Same Property Proportionate NOI due to higher than normal
vacancy;
|
iii)
|
the Downsview
Acquisition currently under lease-up has not yet contributed to
stabilized NOI;
|
iv)
|
the recent U.S.
acquisitions (net of disposals) full period impact on its net
contribution to NOI; and
|
v)
|
during transition of
management of the recent U.S. acquisitions certain initial
operational challenges that management had to overcome for which
the stabilization of NOI is not yet fully reflected in the current
period.
|
Basic FFO for the nine months ended September 30, 2017, increased by $3.3 million, or 7.7%, to $46.1 million ($0.91 per Unit), compared to $42.8 million ($0.92 per Unit) in 2016. The increase is
mainly due to higher Proportionate NOI of $5.9 million, partially offset by an increase in
interest expense of $1.0 million
(excluding distributions on Class B LP Units and fair value
adjustments), an increase in trust expenses of $0.7 million and an increase in other expenses of
$0.6 million.
The REIT's unaudited condensed consolidated financial statements
for the three and nine months ended September 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.
Distribution Increase
The Board of Trustees has approved an increase to its monthly
cash distributions to $0.055 per
Unit, representing $0.66 per Unit on
an annualized basis. The increase is expected to be effective for
the November 2017 distribution,
payable on December 15, 2017 to
unitholders of record as at November 30,
2017 and represents an approximate 3.1% increase from the
REIT's current $0.64 per Unit
annualized distribution.
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 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 nine months
ended September 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,
November 2, 2017 at 3:00 p.m.
(ET) to discuss the financial results for the three and
nine months ended September 30, 2017
and 2016. To participate in the conference call, please dial
647-427-7450 or 1-888-231-8191. Please quote conference
ID # 93185516.
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 13,314 residential
suites (as of October 31, 2017) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $2.5 billion at
September 30, 2017. For more information, visit the
REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust