MISSISSAUGA, ON, July 27, 2021 /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, 2021.
Second Quarter Highlights
The REIT is reporting
second quarter performance of:
- Net operating income ("NOI") of $37.4
million for the three months ended June 30, 2021, a decrease of $3.9 million, or 9.4% compared to 2020, and
Proportionate NOI of $32.4 million
for the three months ended June 30,
2021, a decrease of $4.0
million, or 10.9% compared to 2020. The change in foreign
exchange rate decreased NOI and Proportionate NOI by $3.0 million and $2.6
million, respectively.
- Same Property Proportionate NOI in Canada decreased by $1.2 million (or 8.7%), and in the U.S. decreased
by US$0.1 million (or 0.9%), compared
to 2020.
- Basic funds from operations ("FFO") of $16.1 million for the three months ended
June 30, 2021 compared to
$19.3 million over the same period in
2020.
- Basic FFO $0.29 per Unit for the
three months ended June 30, 2021 as
compared to the $0.34 per Unit over
the same period in 2020. The change in foreign exchange and
non-recurring income received in 2020 had a $0.045 per Unit negative impact on FFO.
- FFO payout ratio for the three months ended June 30, 2021 of 61.0% compared to 50.9% in
2020.
- Net income of $20.3 million for
the three months ended June 30, 2021
compared to a net income of $19.3
million over the same period in 2020.
The REIT is reporting the following corporate and portfolio
highlights:
- As at July 27, 2021, the REIT
collected 98.7% of second quarter rental revenue and approximately
95.6% (95.6% in Canada / 95.6% in
the U.S.) of July rental revenue which is materially in line with
historical collection rates.
- As at June 30, 2021, average
monthly rent ("AMR") in Canada
increased by 4.5% compared to June 30,
2020, while occupancy decreased to 91.8% at June 30, 2021, compared to 97.5% at June 30, 2020.
- As at June 30, 2021, AMR in the
U.S. on a Same Property basis increased by 0.8% compared to
June 30, 2020, while occupancy
reached optimum levels at 96.8% at June 30,
2021, compared to 93.6% at June 30,
2020.
- As at June 30, 2021, indebtedness
to gross book value ratio was 41.4%, compared to 42.8% as at
December 31, 2020.
Financial and Operational Highlights
As
at
|
June
30,
|
December
31,
|
June 30,
|
(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
|
13,275
|
|
|
|
|
Occupancy percentage
– Canada
|
91.8%
|
94.9%
|
97.5%
|
Occupancy percentage
– U.S.
|
95.9%
|
92.2%
|
93.6%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,520
|
$1,500
|
$1,454
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,438
|
US$1,428
|
US$1,424
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
Gross book
value
|
$3,101,841
|
$3,084,358
|
$3,172,796
|
Indebtedness
|
$1,283,230
|
$1,320,708
|
$1,381,741
|
|
|
|
|
Indebtedness to gross
book value ratio
|
41.4%
|
42.8%
|
43.5%
|
Weighted average
mortgage interest rate
|
3.45%
|
3.45%
|
3.46%
|
Weighted average term
to maturity on mortgages payable (years)
|
4.3
|
4.8
|
5.3
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.24
|
$1.27
|
$1.36
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.81
|
$0.79
|
$0.73
|
|
Three months
ended
|
Six months
ended
|
|
June
30
|
June
30
|
(In thousands of
dollars, except per Unit amounts)
|
2021
|
2020
|
2021
|
2020
|
Summary of
Financial Information
|
|
|
|
|
Interest coverage
ratio
|
2.33
|
2.44
|
2.32
|
2.40
|
Indebtedness coverage
ratio
|
1.54
|
1.67
|
1.54
|
1.64
|
|
|
|
|
|
Revenue from real
estate properties
|
$59,814
|
$63,202
|
$120,136
|
$125,499
|
NOI
|
$37,373
|
$41,255
|
$52,557
|
$58,545
|
Proportionate
NOI
|
$32,399
|
$36,361
|
$64,217
|
$71,723
|
Same Property
Proportionate NOI
|
$32,418
|
$36,361
|
$64,427
|
$71,723
|
NOI margin -
IFRS
|
62.5%
|
65.3%
|
43.7%
|
46.6%
|
NOI margin -
Proportionate
|
53.3%
|
56.1%
|
52.7%
|
55.7%
|
Net income
|
$20,269
|
$19,264
|
$47,664
|
$116,424
|
|
|
|
|
|
FFO -
basic
|
$16,128
|
$19,324
|
$31,747
|
$37,431
|
FFO -
diluted
|
$17,087
|
$20,283
|
$33,649
|
$39,344
|
FFO per Unit -
basic
|
$0.29
|
$0.34
|
$0.56
|
$0.66
|
FFO per Unit -
diluted
|
$0.28
|
$0.34
|
$0.56
|
$0.66
|
Distributions per
Unit
|
$0.1749
|
$0.1749
|
$0.3498
|
$0.3498
|
FFO payout
ratio
|
61.0%
|
50.9%
|
62.0%
|
52.5%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,260
|
56,217
|
56,254
|
56,212
|
Diluted
|
60,493
|
60,450
|
60,487
|
60,445
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.23
|
$1.39
|
$1.25
|
$1.37
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.81
|
$0.72
|
$0.80
|
$0.73
|
Operational and Liquidity Update
The following
information as of July 27, 2021
provides an operating update on the REIT's portfolio and liquidity
position:
- As at July 27, 2021, the REIT
collected 98.7% of the second quarter rental revenue and
approximately 95.6% (95.6% in Canada / 95.6% in the U.S.) of July 2021 rental revenue which is materially in
line with historical collection rates.
- As at July 27, 2021, the REIT's
occupancy in Canada and in the
U.S. with the exception of certain properties in Canada 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. Specifically,
occupancy in the Greater Toronto
Area ("GTA") has declined by approximately 4-5 basis points
due to the above noted reasons as well as management's focus on
maintaining existing rent levels at most properties within the GTA
submarket. Further, management believes the higher vacancy
experienced in the GTA is temporary and as the economy re-opens,
the REIT's GTA suites which comprise larger square foot floor plans
at attractive rental rates will continue to appeal to prospective
tenants at or above existing market rental rates. In addition,
management will closely monitor any impact Ontario's recent state of emergency as well as
the expiry 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 $18.1 million in cash and $97.8 million available under its revolving
credit facility with Morguard Corporation and has approximately
$45.3 million of unencumbered assets.
In addition, the REIT continues to undertake the refinancing of
four CMHC-insured residential properties schedule to mature in the
third quarter of 2021, which is anticipated to provide additional
mortgage proceeds of approximately $110.0
million. 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
$20.3 million for the three months
ended June 30, 2021, an increase of
$1.0 million compared to a net income
of $19.3 million over the same period
in 2020. The increase in net income was primarily due to the
following:
- A decrease in net operating income of $3.9 million;
- A decrease in interest expense of $1.1
million;
- A decrease in trust expenses of $0.6
million;
- A decrease in equity income from investments of $0.9 million;
- A decrease in foreign exchange loss of $0.8 million;
- A decrease in other income of $1.0
million;
- An increase in net fair value gain on real estate properties of
$9.4 million;
- An increase in fair value loss on Class B LP Units of
$0.5 million; and
- An increase in income taxes (current and deferred) of
$4.6 million.
Net Operating Income
Three months ended June 30,
2021
For the three months ended June 30, 2021, NOI from the REIT's properties
decreased by $3.9 million (or 9.4%)
to $37.4 million, compared to
$41.3 million in 2020, of which
a change in the foreign exchange rate decreased NOI by
$3.0 million. The decrease in NOI is
primarily due to a decrease in Same Property NOI of $3.9 million (or 9.5%) due to a decrease in
Canada of $1.2 million (or 8.6%), partially offset by an
increase in the U.S. of US$0.3
million (or 1.7%) and the change in foreign exchange rate
which decreased NOI by $3.0
million.
For the three months ended June 30,
2021, Proportionate NOI from the REIT's properties decreased
by $4.0 million (or 10.9%) to
$32.4 million, compared to
$36.4 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $2.6 million. The decrease in Proportionate NOI
is primarily due to a decrease in Same Property Proportionate NOI
of $3.9 million (or 10.8%) due to a
decrease in Canada of $1.2 million (or 8.7%), a decrease in the U.S. of
US$0.1 million (or 0.9%) and the
change in foreign exchange rate which decreased Proportionate NOI
by $2.6 million.
Six months ended June 30,
2021
For the six months ended June 30, 2021, NOI from the REIT's properties
decreased by $6.0 million (or 10.2%)
to $52.6 million, compared to
$58.6 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $3.3 million. The decrease in NOI is due to a
decrease in Same Property NOI of $5.7
million (or 9.7%) 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 $5.7 million is due to a
decrease in Canada of $2.3 million (or 8.1%), a decrease in the U.S. of
US$0.1 million (or 0.5%) and the
change in foreign exchange rate which decreased NOI by $3.3 million.
For the six months ended June 30,
2021, Proportionate NOI from the REIT's properties decreased
by $7.5 million (or 10.5%) to
$64.2 million, compared to
$71.7 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $4.1 million. The decrease in Proportionate NOI
is due to a decrease in Same Property Proportionate NOI of
$7.3 million (or 10.2%) 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 $7.3 million is
due to a decrease in Canada of
$2.3 million (or 8.2%), a decrease in
the U.S. of US$1.0 million (or 3.0%)
and the change in foreign exchange rate which decreased
Proportionate NOI by $4.1
million.
Funds From Operations
Three months ended June 30,
2021
Basic FFO for the three months ended
June 30, 2021, decreased by
$3.2 million (or 16.5%) to
$16.1 million ($0.29 per Unit), compared to $19.3 million ($0.34 per Unit) in 2020. The decrease is mainly
due to lower Proportionate NOI of $4.0
million and a decrease in other income of $1.0 million, primarily from a wage subsidy
received during 2020, partially offset by a decrease in trust
expenses and interest expense (excluding distributions on Class B
LP Units and fair value adjustments on the conversion option on the
convertible debentures).
Basic FFO per Unit for the three months ended June 30, 2021, decreased by $0.05 to $0.29 per
Unit, compared to $0.34 per Unit in
2020 due to the following factors:
i)
|
a change in the
foreign exchange rate on a Same Property Proportionate Basis had a
$0.03 per Unit negative impact and in local currency, a decrease in
NOI from increased vacancy, partly offset by a decrease in interest
expense and trust expenses had a $0.005 per Unit negative impact;
and
|
ii)
|
a decrease in other
income due to a wage subsidy received during 2020 had a $0.015 per
Unit negative impact.
|
Six months ended June 30,
2021
Basic FFO for the six months ended June 30, 2021, decreased by $5.7 million (or 15.2%) to $31.7 million ($0.56 per Unit), compared to $37.4 million ($0.66 per Unit) in 2020. The decrease is mainly
due to lower Proportionate NOI of $7.5
million and a decrease in other income of $1.2 million (for the same reason noted above),
partially offset by a decrease in trust expenses and interest
expense (excluding distributions on Class B LP Units and fair value
adjustments on the conversion option on the convertible
debentures). Basic FFO for the six months ended June 30, 2020, includes $0.5 million from a successful property tax
appeal, net of consulting fees.
Basic FFO per Unit for the six months ended June 30, 2021, decreased by $0.10 to $0.56 per
Unit, compared to $0.66 per Unit in
2020 due to the following factors:
i)
|
a change in the
foreign exchange rate on a Same Property Proportionate Basis had a
$0.05 per Unit negative impact and in local currency, a decrease in
NOI from increased vacancy, partly offset by a decrease in interest
expense and trust expenses had a $0.035 per Unit negative impact,
of which a successful property tax appeal in 2020 impacted FFO per
Unit by $0.01; and
|
ii)
|
a decrease in other
income due to a wage subsidy received during 2020 had a $0.015 per
Unit negative impact.
|
The REIT's unaudited condensed consolidated financial statements
for the three and six months ended June 30,
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 and six months ended June 30, 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, July 29, 2021 at 3:00 p.m. (ET) to discuss the financial
results for the six months ended June
30, 2021 and 2020. To participate in the conference
call, please dial 416-764-8688 or 1-888-390-0546.
Please quote conference ID 59351811
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 July 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
June 30, 2021. For more information,
visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust