MISSISSAUGA, ON, April 27, 2021 /CNW/ - Morguard North
American Residential REIT (the "REIT") (TSX: MRG.UN) today
announced its financial results for the three months ended
March 31, 2021, 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.
First Quarter Highlights
The REIT is reporting first
quarter performance of:
- Net operating income ("NOI") of $15.2
million for the three months ended March 31, 2021, a decrease of $2.1 million, or 12.2% compared to 2020, and
Proportionate NOI (excluding the impact of realty taxes accounted
for under IFRIC 21) of $31.8
million for the three months ended March 31, 2021, a decrease of $3.5 million, or 10.0% compared to 2020.
- Same Property Proportionate NOI in Canada decreased by $1.1 million (or 7.6%), and in the U.S. decreased
by US$0.8 million (or 5.2%), compared
to 2020.
- Basic funds from operations ("FFO") of $15.6 million for the three months ended
March 31, 2021, a decrease of
$2.5 million, or 13.7% over the same
period in 2020.
- Basic FFO of $0.28 per Unit for
the three months ended March 31,
2021, a 12.5% decrease as compared to the $0.32 in 2020. The change in foreign exchange
rate had a $0.02 per Unit negative
impact.
- FFO payout ratio for the three months ended March 31, 2021 of 63.0% compared to 54.3% in
2020.
- Net income of $27.4 million for
the three months ended March 31,
2021, a decrease of $69.8
million over the same period in 2020. The decrease in net
income is predominantly due to a lower non-cash fair value gain on
Class B LP Units, partially offset by a higher fair value gain on
income producing properties.
The REIT is reporting the following corporate and portfolio
highlights:
- As at April 27, 2021, the REIT collected 98.4% of first
quarter rental revenue and approximately 95.4% (95.2% in
Canada / 95.5% in the U.S.) of
April 2021 rental revenue which is
materially in line with historical collection rates.
- As at March 31, 2021, average monthly rent ("AMR") in
Canada increased by 4.3% compared
to March 31, 2020, while occupancy decreased to 93.6% at
March 31, 2021, compared to 98.8% at March 31, 2020.
Occupancy in Canada declined due
to reduced leasing traffic, lower immigration levels as well as two
properties impacted by university closures.
- As at March 31, 2021, AMR in U.S. on a Same Property
basis, increased by 0.7% compared to March 31, 2020, while
occupancy was stable at 95.1% at March 31, 2021, compared to
95.4% at March 31, 2020.
- As at March 31, 2021, indebtedness to gross book value
ratio of 42.1%, lower compared to 42.8% as at December 31,
2020.
Financial and Operational Highlights
As
at
|
March
31,
|
December
31,
|
March 31,
|
(In thousands of
dollars, except as noted otherwise)
|
2021
|
2020
|
2020
|
Operational
Information
|
|
|
|
Number of
properties
|
43
|
43
|
43
|
Total
suites
|
13,275
|
13,275
|
13,277
|
|
|
|
|
Occupancy percentage
– Canada
|
93.6%
|
94.9%
|
98.8%
|
Occupancy percentage
– U.S.
|
93.7%
|
92.2%
|
95.4%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,509
|
$1,500
|
$1,447
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,429
|
US$1,428
|
US$1,419
|
Summary of
Financial Information
|
|
|
|
Gross book
value
|
$3,090,429
|
$3,084,358
|
$3,197,607
|
Indebtedness
|
$1,302,145
|
$1,320,708
|
$1,406,102
|
|
|
|
|
Indebtedness to gross
book value ratio
|
42.1%
|
42.8%
|
44.0%
|
Weighted average
mortgage interest rate
|
3.45%
|
3.45%
|
3.49%
|
Weighted average term
to maturity on mortgages payable (years)
|
4.6
|
4.8
|
5.4
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.26
|
$1.27
|
$1.42
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.80
|
$0.79
|
$0.70
|
For the three
months ended March 31
|
|
(In thousands of
dollars, except per Unit amounts)
|
2021
|
2020
|
Summary of
Financial Information
|
|
|
Interest coverage
ratio
|
2.32
|
2.36
|
Indebtedness coverage
ratio
|
1.54
|
1.61
|
|
|
|
Revenue from real
estate properties
|
$60,322
|
$62,297
|
NOI
|
$15,184
|
$17,290
|
Proportionate
NOI
|
$31,818
|
$35,362
|
Same Property
Proportionate NOI
|
$32,009
|
$35,362
|
NOI margin -
IFRS
|
25.2%
|
27.8%
|
NOI margin -
Proportionate
|
52.2%
|
55.3%
|
Net income
|
$27,395
|
$97,160
|
|
|
|
FFO -
basic
|
$15,619
|
$18,107
|
FFO -
diluted
|
$16,562
|
$19,061
|
FFO per Unit -
basic
|
$0.28
|
$0.32
|
FFO per Unit -
diluted
|
$0.27
|
$0.32
|
Distributions per
Unit
|
$0.1749
|
$0.1749
|
FFO payout
ratio
|
63.0%
|
54.3%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
Basic
|
56,248
|
56,207
|
Diluted
|
60,481
|
60,440
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.27
|
$1.34
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.79
|
$0.74
|
Operational and Liquidity Update
With the guidance of
public health authorities, and at the direction of various levels
of government, Morguard continues to implement measures to help
reduce the spread of COVID-19. We are actively monitoring the
ongoing developments with regards to COVID-19 and are committed to
ensuring a healthy and safe environment, adjusting our service
model as necessary.
In September 2020, the Government
of Ontario introduced Helping
Tenants and Small Businesses Act legislation to freeze rent in
2021. The 2021 Ontario rent freeze will impact rental increases as
the annual guideline rental increase has been set at 0.0% in 2021
(2.2% for 2020). However, the REIT can apply for an above-guideline
increase ("AGI") relating to eligible capital repairs and security
services. 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 additional AGI
applications have been submitted during 2021 with effective start
dates between April to June 2021.
Although the rental market has softened, the REIT still has the
ability to increase rents on turnover and through above guideline
applications.
On December 26, 2020, the
Ontario government announced
another province-wide shutdown and stay-at-home order and on
February 8, 2021, the Ontario government announced the transition to
a regional approach to staged reopening. On April 7, 2021, the Ontario government announced sweeping changes
to its COVID-19 lockdown framework and approved another
province-wide shutdown and 28-day stay-at-home order, which has
subsequently been extended by two weeks, requiring everyone to
remain at home except for essential purposes. During this state of
emergency, the Ontario government
has issued an emergency order temporarily halting the enforcement
of residential evictions. While the Landlord and Tenant Board
("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, 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 June 30, 2021.
The following information as of April 27,
2021, provides an operating update on the REIT's portfolio
and liquidity position:
- As at April 27, 2021, the REIT's
collection of rental revenue since January
1, 2020 is summarized by region as follows:
Region
|
Q1
2021
|
April
2021
|
|
|
%
Rental
Revenue
|
Canada
|
99.1%
|
95.2%
|
|
|
38.7%
|
U.S.
|
97.9%
|
95.5%
|
|
|
61.3%
|
Total
|
98.4%
|
95.4%
|
|
|
100.0%
|
|
|
|
|
|
|
Region
|
Q1
2020
|
Q2
2020
|
Q3
2020
|
Q4
2020
|
% Rental
Revenue
|
Canada
|
99.8%
|
99.8%
|
99.5%
|
99.5%
|
38.1%
|
U.S.
|
100.0%
|
99.7%
|
99.5%
|
99.3%
|
61.9%
|
Total
|
99.9%
|
99.7%
|
99.5%
|
99.4%
|
100.0%
|
- The details of bad debt expense (recovery) recorded in the
consolidated statements of income within property operating costs
for the three months ended March 31,
2021 and 2020 are provided below:
For the three
months ended March 31
(in thousands of
dollars)
|
|
2021
|
%
of Revenue
|
2020
|
%
of Revenue
|
Canada
|
|
($2)
|
0.0%
|
$10
|
0.0%
|
U.S.
|
|
526
|
1.4%
|
367
|
1.0%
|
Total
|
|
$524
|
0.9%
|
$377
|
0.6%
|
- 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
April 27, 2021, approximately 1.0% of residential tenants have
deferred payment plans.
- As at April 27, 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 $115.9
million, comprised of approximately $19.8 million in cash and $96.1 million available under its revolving
credit facility with Morguard Corporation and has approximately
$45.0 million of unencumbered assets.
In addition, the REIT has commenced the process to refinance four
CMHC-insured residential properties schedule to mature in the third
quarter of 2021. 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
$27.4 million for the three months
ended March 31, 2021, a decrease of
$69.8 million compared to
$97.2 million in 2020. The
decrease in net income was primarily due to the following:
- A decrease in net operating income of $2.1 million;
- An increase in interest expense of $2.0
million;
- A decrease in trust expenses of $0.5
million;
- A decrease in equity loss from investment of $0.8 million;
- A decrease in foreign exchange gain of $1.8 million;
- A decrease in other income of $0.2
million;
- An increase in net fair value gain on real estate properties of
$17.0 million;
- A decrease in fair value gain on Class B LP Units of
$81.3 million; and
- An increase in income taxes (current and deferred) of
$0.7 million.
Net Operating Income
For the three months ended
March 31, 2021, NOI from the REIT's
properties decreased by $2.1 million
(or 12.2%) to $15.2 million, compared
to $17.3 million in 2020. The
decrease in NOI is due to a decrease in Same Property NOI of
$1.8 million (or 10.4%) and a
decrease in NOI from the REIT's redevelopment property in
Louisiana currently under initial
lease-up of $0.3 million. The Same
Property decrease of $1.8 million is
due to a decrease in Canada of
$1.1 million (or 7.6%), a decrease in
the U.S. of US$0.4 million (or 17.0%)
and the change in foreign exchange rate which decreased NOI by
$0.3 million.
For the three months ended March 31,
2021, Proportionate NOI from the REIT's properties decreased
by $3.5 million (or 10.0%) to
$31.8 million, compared to
$35.3 million in 2020. The decrease
in Proportionate NOI is due to a decrease in Same Property
Proportionate NOI of $3.4 million (or
9.5%) and a decrease in NOI from the REIT's redevelopment property
in Louisiana currently under
initial lease-up of $0.2 million. The
Same Property decrease of $3.4
million is due to a decrease in Canada of $1.1
million (or 7.6%), a decrease in the U.S. of US$0.8 million (or 5.2%) and the change in
foreign exchange rate which decreased Proportionate NOI by
$1.5 million.
Funds From Operations
Basic FFO for the three months
ended March 31, 2021, decreased by
$2.5 million, or 13.7%, to
$15.6 million ($0.28 per Unit), compared to $18.1 million ($0.32 per Unit) in 2020. The decrease is mainly
due to lower Proportionate NOI of $3.5
million, partially offset by a decrease in interest expense
(excluding distributions on Class B LP Units and fair value
adjustments on the conversion option on the convertible debentures)
and a decrease in trust expenses. Basic FFO for the three months
ended March 31, 2020, includes
$0.5 million from a successful
property tax appeal, net of consulting fees.
Basic FFO per Unit for the three months ended March 31, 2021, decreased by $0.04 to $0.28 per
Unit, compared to $0.32 per Unit in
2020. The change in foreign exchange rate had a $0.02 per Unit negative impact.
The REIT's unaudited condensed consolidated financial statements
for the three months ended March 31,
2021, 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 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,
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 three months ended March 31, 2021 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, April 29, 2021 at 3:00 p.m. (ET) to discuss the financial
results for the three months ended March 31,
2021 and 2020. To participate in the conference call, please
dial 416-764-8688 or 1-888-390-0546. Please quote
conference ID 63852580.
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 13,275 residential
suites (as of April 27, 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
March 31, 2021. For more information, visit the REIT's website
at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust