MISSISSAUGA, ON, Feb. 16,
2021 /CNW/ - Morguard North American Residential REIT (the
"REIT") (TSX: MRG.UN) today announced its financial results for the
year ended December 31, 2020,
including a brief operational and liquidity update as we continue
to focus on our essential service of providing safe homes to our
tenants during this COVID-19 pandemic.
Highlights
The REIT is reporting performance of:
- Net operating income ("NOI") of $135.5
million for the year ended December
31, 2020, an increase of $2.6
million, or 2.0% compared to 2019.
- Same Property Proportionate NOI in Canada increased by $1.6 million (or 3.1%), and in the U.S. increased
by US$1.0 million (or 1.8%), compared
to 2019.
- Basic funds from operations ("FFO") of $68.9 million for the year ended December 31, 2020, an increase of $4.7 million, or 7.4% over the same period in
2019.
- Basic FFO of $1.23 per Unit for
the year ended December 31, 2020, a
0.8% increase as compared to the $1.22 per Unit in 2019.
- FFO payout ratio for the year ended December 31, 2020 of 57.0% compared to 56.1% in
2019.
- Net income of $166.8 million for
the year ended December 31, 2020, an
increase of $86.7 million over the
same period in 2019. The increase in net income is predominantly
due to a higher non-cash fair value gain on real estate properties
and a higher fair value gain on Class B LP Units.
The REIT is reporting the following corporate and portfolio
highlights:
- As at February 16, 2021, the REIT
collected 98.7% of fourth quarter rental revenue and approximately
97.5% (98.0% in Canada / 97.1% in
the U.S.) of January 2021 rental
revenue which is materially in line with historical collection
rates.
- As at December 31, 2020, average monthly rent ("AMR") in
Canada increased by 4.7% compared
to December 31, 2019, while occupancy was 94.9% at
December 31, 2020, compared to 98.8% at December 31,
2019. Occupancy in Canada declined
due to reduced leasing traffic, lower immigration levels as well as
two properties impacted by university closures.
- As at December 31, 2020, AMR in the U.S., on a Same
Property basis, increased by 1.3% compared to December 31,
2019, while occupancy was stable at 93.6% at December 31,
2020, compared to 94.5% at December 31, 2019.
- As at December 31, 2020, indebtedness to gross book value
ratio of 42.8%, lower compared to 44.1% as at December 31,
2019.
- The REIT substantially completed the redevelopment of its Class
A mid-rise residential property, 1643 Josephine, New Orleans, Louisiana, with first occupancies
taking place in late-October.
Financial and Operational Highlights
As at December
31
|
|
|
(In thousands of
dollars, except as noted otherwise)
|
2020
|
2019
|
Operational
Information
|
|
|
Number of
properties
|
43
|
43
|
Total
suites
|
13,275
|
13,277
|
|
|
|
Occupancy percentage
– Canada
|
94.9%
|
98.8%
|
Occupancy percentage
– U.S.
|
92.2%
|
94.5%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,500
|
$1,432
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,428
|
US$1,409
|
Summary of
Financial Information
|
|
|
Gross book
value
|
$3,084,358
|
$3,033,427
|
Indebtedness
|
$1,320,708
|
$1,337,229
|
|
|
|
Indebtedness to gross
book value ratio
|
42.8%
|
44.1%
|
Weighted average
mortgage interest rate
|
3.45%
|
3.48%
|
Weighted average term
to maturity on mortgages payable (years)
|
4.8
|
5.6
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.27
|
$1.30
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.79
|
$0.77
|
For the years
ended December 31
|
|
(In thousands of
dollars, except per Unit amounts)
|
2020
|
2019
|
Summary of
Financial Information
|
|
|
Interest coverage
ratio
|
2.32
|
2.29
|
Indebtedness coverage
ratio
|
1.58
|
1.60
|
|
|
|
Revenue from real
estate properties
|
$248,683
|
$245,596
|
NOI
|
$135,533
|
$132,862
|
Proportionate
NOI
|
$137,965
|
$128,338
|
Same Property
Proportionate NOI
|
$130,407
|
$126,577
|
NOI margin -
IFRS
|
54.5%
|
54.1%
|
NOI margin -
Proportionate
|
54.3%
|
53.9%
|
Net income
|
$166,805
|
$80,128
|
|
|
|
FFO -
basic
|
$68,945
|
$64,218
|
FFO -
diluted
|
$72,793
|
$68,066
|
FFO per Unit -
basic
|
$1.23
|
$1.22
|
FFO per Unit -
diluted
|
$1.20
|
$1.19
|
Distributions per
Unit
|
$0.6996
|
$0.6826
|
FFO payout
ratio
|
57.0%
|
56.1%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
Basic
|
56,222
|
52,766
|
Diluted
|
60,455
|
56,999
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.34
|
$1.33
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.75
|
$0.75
|
Operational and Liquidity Update
Ontario represents the REIT's
largest region in terms of suites and net operating income and in
response to Ontario's eviction
moratorium, the REIT is committed to working with residents on a
case-by-case basis on rent deferral arrangements discussed in more
detail below. In late July 2020, the
Ontario government ended its
moratorium on residential evictions after it lifted its state of
emergency and the Landlord and Tenant Board ("LTB") began working
through its backlog of pending eviction orders, gradually expanding
services in August however, all in-person service counters remain
closed until further notice. Effective August 1, 2020, the LTB started to issue eviction
orders that are pending, issue consent eviction orders which are
based on landlord and tenants settling their dispute through an
agreement and scheduled hearings for non-urgent evictions.
On December 26, 2020, the
Ontario government announced
another province-wide shutdown and stay-at-home Order; and further
announced on February 8, 2021, the
transition to a regional approach to staged reopening. During this
state of emergency, the Ontario
government has issued an emergency order temporarily halting the
enforcement of residential evictions. While the LTB will continue
to hear eviction applications and issue eviction orders, these
orders will not be carried out while the province is under a state
of emergency.
In the U.S. regions where the REIT operates, similar measures
have been taken in late March and early April to pause evictions
and late fees for a period of 120 days, expiring in late
July 2020 and on September 4, 2020, the Department of Health and
Human Services and the Centers for Disease Control and Prevention
issued an order titled Temporary Halt in Residential Evictions
to Prevent the Further Spread of COVID-19 for eligible tenants
until December 31, 2020 which has
subsequently been extended to March 31,
2021.
In September 2020, the Government
of Ontario introduced Helping
Tenants and Small Businesses Act legislation to freeze rent in
2021. For the calendar year 2021, the guideline amount was
established at 0.0% (2.2% for 2020). However, an application for an
above-guideline increase ("AGI") approved by the LTB is permitted.
Currently, the REIT has AGIs at seven Ontario properties providing additional rent
increases for a twelve-month period commencing at various effective
dates in 2020, ranging from 0.50% to 2.00% and five other pending
applications that will provide AGIs into 2021. Although the rental
market has softened, the REIT still has the ability to increase
rents on turnover and through above guideline applications.
The following information as of February
16, 2021 provides an operating update on the REIT's
portfolio and liquidity position:
- As at February 16, 2021, the
REIT's collection of rental revenue during 2020 is summarized by
region:
|
Region
|
Q1
2020
|
Q2
2020
|
Q3
2020
|
October
2020
|
November
2020
|
December
2020
|
Rental
Revenue
|
|
Canada
|
99.8%
|
99.8%
|
99.5%
|
99.4%
|
99.0%
|
99.0%
|
38.1%
|
|
U.S.
|
100.0%
|
99.7%
|
99.5%
|
99.0%
|
98.3%
|
98.0%
|
61.9%
|
|
Total
|
99.9%
|
99.7%
|
99.5%
|
99.2%
|
98.6%
|
98.4%
|
100.0%
|
Management will monitor rent
collections and compassionately follow up with those accounts in
arrears as the impact of the pandemic continues to weigh on the
North American economy over the remainder of the year.
- The REIT implemented a rent deferral program for our
residential tenants who are financially constrained due to the
impact of COVID-19. The REIT is actively working with residents on
a case-by-case basis on rent deferral arrangements and will also
ensure pertinent and timely information regarding Government
financial support programs is shared with tenants. As at
February 16, 2021, approximately
0.9% of residential tenants have deferred payment plans. In
addition, commencing with April's rental payment, the REIT waived
the collection of rental increases and late fees for existing
tenants up to and including August's rental payment.
- As at February 16, 2021, the REIT's occupancy in
Canada and in the U.S. with the
exception of a few properties directly impacted by university and
local business closures remains stable as leasing agents work
remotely and utilize online technology to continue leasing activity
following the onset of social distancing guidelines. Generally
speaking, current conditions including social distancing have
reduced leasing traffic. In addition, management will closely
monitor any impact Ontario's
current state of emergency as well as the extension of the U.S.
eviction moratorium may have on traffic and turnover levels in the
coming months.
- The REIT has liquidity of $120.7
million, comprised of approximately $27.3 million in cash and $93.4 million available under its revolving
credit facility with Morguard Corporation. In addition, the REIT
has no significant debt maturities until the third quarter of 2021
and the REIT has approximately $45.3
million of unencumbered assets. The REIT has also narrowed
down the scope of its capital expenditure program to ensure the
availability of resources, allocating an amount that enables the
REIT to maintain the structural and overall safety of the
properties.
Net Income
The REIT reported a net income of $166.8
million for the year ended December
31, 2020, an increase of $86.7
million compared to compared to $80.1
million in 2019. The increase in net income was primarily
due to the following:
- An increase in net operating income of $2.6 million;
- A decrease in interest expense of $3.7
million;
- An increase in trust expenses of $0.9
million;
- A decrease in equity income from investments of $10.0 million, mainly due to a higher fair value
loss on real estate properties;
- A decrease in foreign exchange gain of $0.6 million;
- A decrease in other income of $1.1
million;
- An increase in net fair value gain on real estate properties of
$16.3 million;
- An increase in fair value gain on Class B LP Units of
$66.8 million; and
- A decrease in income taxes (current and deferred) of
$8.5 million.
Net Operating Income
For the year ended December 31,
2020, NOI from the REIT's properties increased by
$2.6 million (or 2.0%) to
$135.5 million, compared to
$132.9 million in 2019. The increase
in NOI is due to an increase in Same Property NOI of $3.1 million (or 2.4%) and a net decrease from
acquisition and disposition of properties of $0.5 million. The Same Property increase of
$3.1 million is due to an increase in
Canada of $1.6 million (or 3.1%) and an increase in the
U.S. of US$0.5 million (or 0.8%) and
the change in foreign exchange rate which increased NOI by
$1.0 million.
For the year ended December 31,
2020, Proportionate NOI from the REIT's properties increased
by $9.6 million (or 7.5%) to
$138.0 million, compared to
$128.4 million in 2019. The increase
in Proportionate NOI is due to an increase in Same Property
Proportionate NOI of $3.8 million (or
3.0%) and a net increase from acquisition and disposition of
properties of $5.8 million. The Same
Property increase of $3.8 million is
due to an increase in Canada of
$1.6 million (or 3.1%), an increase
in the U.S. of US$1.0 million (or
1.8%) and the change in foreign exchange rate which increased
Proportionate NOI by $1.2
million.
Funds From Operations
Basic FFO for the year ended December 31,
2020, increased by $4.7
million (or 7.4%) to $68.9
million ($1.23 per Unit),
compared to $64.2 million
($1.22 per Unit) in 2019. The
increase is mainly due to higher Proportionate NOI of $9.6 million, partially offset by an increase in
interest expense (excluding distributions on Class B LP Units and
fair value adjustments on the conversion option on the convertible
debentures), an increase in trust expenses and a decrease in other
income.
Basic FFO per Unit for the year ended December 31, 2020, increased by $0.01 to $1.23 per
Unit, compared to $1.22 per Unit in
2019 due to the following factors:
i)
|
an increase on a Same
Property Proportionate Basis predominantly due to an increase in
NOI and a decrease in interest expense, partially offset by higher
trust expenses and lower Morguard Facility interest income earned,
had a $0.045 per Unit positive impact, of which a successful
property tax appeal, net of consulting fees contributed $0.01 per
Unit;
|
ii)
|
the dilutive impact
from the issuance of Units on August 28, 2019, offset by interest
income earned on proceeds advanced on the Morguard Facility, net of
the partial use of proceeds and additional FFO generated from the
acquisition of Marquee at Block 37 on December 9, 2019, had a
$0.045 per Unit negative impact; and
|
iii)
|
the change in the
foreign exchange rate had a $0.01 per Unit positive
impact.
|
For the year ended December 31,
2020, the disposal of five Louisiana properties during the first half of
2019 had a $nil per Unit impact as the decrease in FFO generated
from the properties disposed of was offset by the extinguishment of
mortgages payable.
The REIT's audited consolidated financial statements for the
year ended December 31, 2020, 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, 2020 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, February 18,
2021 at 3:00 p.m. (ET) to discuss
the financial results for the years ended December 31, 2020 and 2019. To participate in the
conference call, please dial 416-764-8688 or
1-888-390-0546. Please quote conference ID 63391237.
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. The REIT's portfolio is comprised of 13,275 residential
suites (as of February 16, 2021)
located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $3.0 billion at
December 31, 2020. For more
information, visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust