MISSISSAUGA, ON, Oct. 25,
2022 /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, 2022.
Highlights
The REIT is reporting third quarter performance of:
- Net operating income ("NOI") of $44.9
million for the three months ended September 30, 2022, an increase of $7.7 million, or 20.8% compared to 2021. The
change in foreign exchange rate increased NOI by $1.9 million.
- Same Property Proportionate NOI in the U.S. increased by 20.0%,
and in Canada increased by 10.5%,
compared to 2021.
- Net income of $81.2 million for
the three months ended September 30,
2022, a decrease of $5.5
million compared to 2021. The decrease in net income is
predominantly due to a lower non-cash fair value gain on real
estate properties, partially offset by an increase in fair value
gain on Class B LP Units and an increase in NOI.
- Basic funds from operations ("FFO") of $21.1 million for the three months ended
September 30, 2022, an increase of
$5.0 million, or 30.9% over the same
period in 2021.
- Basic FFO of $0.38 per Unit for
the three months ended September 30,
2022, a 31.0% increase as compared to the $0.29 in 2021.
- FFO payout ratio for the three months ended September 30, 2022 of 46.6% compared to 60.9% in
2021.
The REIT is reporting the following corporate and portfolio
highlights:
- The REIT has also announced it will increase its annual cash
distribution by $0.02 per Unit
(2.86%). The increase is expected to be effective for the
November 2022 distribution, payable
in December 2022. This will bring the
distributions to $0.72 per Unit on an
annualized basis from the current level of $0.70 per Unit.
- On August 8, 2022, the REIT
acquired a multi-suite residential property, comprising 350 suites
located in Chicago, Illinois
("Echelon Chicago"), for a purchase price of $174.3 million (US$135.6
million), including closing costs. Concurrent with the
acquisition, the REIT completed mortgage financing on the property
in the amount of $96.0 million
(US$74.7 million) at an interest rate
of 4.71% and for a term of seven years.
- On September 26, 2022, the REIT
acquired a retail property ("Rockville Town Square") comprising
186,712 square feet of commercial area located in Rockville, Maryland, for a purchase price of
$46.4 million (US$33.8 million), including closing costs. The
retail property is part of a mixed-use complex where the REIT
currently owns a 50% interest in the residential property through a
joint venture with Morguard Corporation.
- On August 24, 2022, the REIT sold
a property, comprising 144 suites located in Slidell, Louisiana, for net proceeds of
$32.8 million (US$25.2 million), including closing costs and
repaid the mortgage payable secured by the property in the amount
of $10.0 million (US$7.7 million).
- On July 1, 2022, the REIT
completed the refinancing of a multi-suite residential property
located in Palm Beach County,
Florida, for additional net proceeds of $29.7 million (US$23.0
million) at an interest rate of 4.19% and for a term of 10
years.
- As at September 30, 2022, average
monthly rent ("AMR") in the U.S., on a Same Property basis,
increased by 13.8% compared to September 30,
2021, while occupancy was 95.8% at September 30, 2022, compared to 96.3% at
September 30, 2021.
- As at September 30, 2022, AMR in
Canada increased by 2.8% compared
to September 30, 2021, while
occupancy improved to 98.3% at September 30,
2022, compared to 92.7% at September
30, 2021.
- As at September 30, 2022,
indebtedness to gross book value ratio of 36.7%, lower compared to
40.2% as at December 31, 2021.
- As at September 30, 2022, the
REIT's total assets were valued at $4.2
billion compared to $3.5
billion as at December 31,
2021.
Financial and Operational Highlights
As
at
|
September
30,
|
December
31,
|
September
30,
|
(In thousands of
dollars, except as otherwise noted)
|
2022
|
2021
|
2021
|
Operational
Information
|
|
|
|
Number of
properties
|
43
|
43
|
43
|
Total
suites
|
13,189
|
13,275
|
13,275
|
|
|
|
|
Occupancy percentage –
Canada
|
98.3 %
|
93.6 %
|
92.7 %
|
Occupancy percentage –
U.S.
|
95.7 %
|
96.3 %
|
96.1 %
|
Average monthly rent -
Canada (in actual dollars)
|
$1,573
|
$1,535
|
$1,530
|
Average monthly rent -
U.S. (in actual U.S. dollars)
|
US$1,742
|
US$1,525
|
US$1,490
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
Gross book
value(1)
|
$4,227,268
|
$3,473,287
|
$3,262,415
|
Indebtedness(1)
|
$1,550,637
|
$1,395,438
|
$1,311,062
|
|
|
|
|
Indebtedness to gross
book value ratio(1)
|
36.7 %
|
40.2 %
|
40.2 %
|
Weighted average
mortgage interest rate
|
3.45 %
|
3.31 %
|
3.45 %
|
Weighted average term
to maturity on mortgages payable (years)
|
4.9
|
5.0
|
4.1
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.38
|
$1.27
|
$1.27
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.72
|
$0.79
|
$0.78
|
(1)
|
Represents a non-GAAP
financial measure/ratio that does not have any standardized meaning
prescribed by IFRS and is not necessarily comparable to similar
measures presented by other reporting issuers in similar or
different industries. This measure should be considered as
supplemental in nature and not as substitutes for related financial
information prepared in accordance with IFRS.
|
|
Three months
ended
|
Nine
months ended
|
|
September
30
|
September
30
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
2022
|
2021
|
Summary of
Financial Information
|
|
|
|
|
Revenue from real
estate properties
|
$70,766
|
$61,955
|
$203,415
|
$182,091
|
NOI
|
$44,875
|
$37,142
|
$104,755
|
$89,699
|
Proportionate
NOI(1)
|
$39,597
|
$32,641
|
$111,825
|
$96,858
|
Same Property
Proportionate NOI(1)
|
$37,569
|
$31,604
|
$107,242
|
$93,962
|
NOI margin –
IFRS
|
63.4 %
|
59.9 %
|
51.5 %
|
49.3 %
|
NOI margin –
Proportionate(1)
|
54.8 %
|
51.7 %
|
53.9 %
|
52.4 %
|
Net income
|
$81,168
|
$86,654
|
$418,860
|
$134,318
|
|
|
|
|
|
FFO –
basic(1)
|
$21,137
|
$16,153
|
$59,277
|
$47,900
|
FFO –
diluted(1)
|
$22,113
|
$17,129
|
$62,155
|
$50,778
|
FFO per Unit –
basic(1)
|
$0.38
|
$0.29
|
$1.05
|
$0.85
|
FFO per Unit –
diluted(1)
|
$0.37
|
$0.28
|
$1.03
|
$0.84
|
Distributions per
Unit
|
$0.1749
|
$0.1749
|
$0.5247
|
$0.5247
|
FFO payout
ratio(1)
|
46.6 %
|
60.9 %
|
49.8 %
|
61.6 %
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,315
|
56,271
|
56,304
|
56,260
|
Diluted
|
60,548
|
60,504
|
60,537
|
60,493
|
Average exchange rates
- United States dollar to Canadian dollar
|
$1.31
|
$1.26
|
$1.28
|
$1.25
|
Average exchange rates
- Canadian dollar to United States dollar
|
$0.77
|
$0.79
|
$0.78
|
$0.80
|
(1)
|
Represents a non-GAAP
financial measure/ratio that does not have any standardized meaning
prescribed by IFRS and is not necessarily comparable to similar
measures presented by other reporting issuers in similar or
different industries. This measure should be considered as
supplemental in nature and not as substitutes for related financial
information prepared in accordance with IFRS.
|
Specified Financial Measures
The REIT reports
its financial results in accordance with International Financial
Reporting Standards ("IFRS"). However, this earnings release also
uses specified financial measures that are not defined by IFRS,
which follow the disclosure requirements established by National
Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure. Specified financial measures are categorized as
non-GAAP financial measures, non-GAAP ratios, and other financial
measures. Additional details on specified financial measures
including supplementary financial measures, capital management
measures and total segment measures are set out in the REIT's
Management's Discussion and Analysis for the three and nine months
ended September 30, 2022 and
available on the REIT's profile on SEDAR at www.sedar.com.
The following Non-GAAP financial measures do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. These measures should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with IFRS. The
REIT's management uses these measures to aid in assessing the
REIT's underlying core performance and provides these additional
measures so that investors may do the same. Management believes
that the non-GAAP financial measures, which supplement the IFRS
measures, provide readers with a more comprehensive understanding
of management's perspective on the REIT's operating results and
performance.
A reconciliation of each non-GAAP financial measure referred to
in this earnings release is provided below.
Proportionate Share NOI ("Proportionate NOI") & Same
Property Proportionate NOI
Proportionate NOI and Same Property Proportionate NOI are
important measures in evaluating the operating performance of the
REIT's real estate properties and are a key input in determining
the fair value of the REIT's properties. Proportionate NOI
represents NOI (an IFRS measure) adjusted for the following: i) to
exclude the impact of realty taxes accounted for under
International Financial Reporting Interpretations Committee
("IFRIC") Interpretation 21, Levies ("IFRIC 21"). Proportionate NOI
records realty taxes for all properties on a pro rata basis
over the entire fiscal year; ii) to exclude the non-controlling
interest share of NOI for those properties that are consolidated
under IFRS ("NCI Share"); and iii) to include equity-accounted
investments NOI at the REIT's ownership interest ("Equity
Interest").
Same Property Proportionate NOI is presented in this earnings
release because management considers this non-GAAP measure to be an
important measure of the REIT's operating performance, representing
Proportionate NOI for properties owned by the REIT continuously for
the current and comparable reporting period and does not take into
account the impact of the operating performance of property
acquisitions and dispositions as well as development properties
until reaching stabilized occupancy. In addition, Same Property
Proportionate NOI is presented in local currency and by country,
isolating any impact of foreign exchange fluctuations.
The following tables provide a reconciliation of Proportionate
Share NOI and Same Property Proportionate Share NOI to its closely
related financial statement measurement for the following
periods:
|
|
|
|
|
2022
|
|
|
|
|
|
2021
|
|
|
Non-GAAP
Adjustments
|
|
|
Non-GAAP
Adjustments
|
|
For the three months
ended
|
|
|
|
|
Proportionate
|
|
|
|
|
Proportionate
|
September
30
|
|
NCI
|
Equity
|
|
Basis
|
|
NCI
|
Equity
|
|
Basis
|
(In thousands of
dollars)
|
IFRS
|
Share
|
Interest
|
IFRIC
21
|
(Non-GAAP)
|
IFRS
|
Share
|
Interest
|
IFRIC 21
|
(Non-GAAP)
|
Revenue from
properties
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
$67,539
|
($3,937)
|
$5,486
|
$—
|
$69,088
|
$59,278
|
($3,353)
|
$4,536
|
$—
|
$60,461
|
Disposition/Acquisition/
Development
|
3,227
|
—
|
—
|
—
|
3,227
|
2,677
|
—
|
—
|
—
|
2,677
|
Total revenue from
properties
|
70,766
|
(3,937)
|
5,486
|
—
|
72,315
|
61,955
|
(3,353)
|
4,536
|
—
|
63,138
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
25,090
|
(1,186)
|
1,620
|
5,995
|
31,519
|
23,439
|
(1,347)
|
1,978
|
4,787
|
28,857
|
Disposition/Acquisition/
Development
|
801
|
—
|
—
|
398
|
1,199
|
1,374
|
—
|
—
|
266
|
1,640
|
Total property
operating expenses
|
25,891
|
(1,186)
|
1,620
|
6,393
|
32,718
|
24,813
|
(1,347)
|
1,978
|
5,053
|
30,497
|
NOI
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
42,449
|
(2,751)
|
3,866
|
(5,995)
|
37,569
|
35,839
|
(2,006)
|
2,558
|
(4,787)
|
31,604
|
Disposition/Acquisition/
Development
|
2,426
|
—
|
—
|
(398)
|
2,028
|
1,303
|
—
|
—
|
(266)
|
1,037
|
Total
NOI
|
$44,875
|
($2,751)
|
$3,866
|
($6,393)
|
$39,597
|
$37,142
|
($2,006)
|
$2,558
|
($5,053)
|
$32,641
|
NOI
Margin
|
63.4 %
|
|
|
|
54.8 %
|
59.9 %
|
|
|
|
51.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
2021
|
|
|
Non-GAAP
Adjustments
|
|
|
Non-GAAP
Adjustments
|
|
For the nine months
ended
|
|
|
|
|
Proportionate
|
|
|
|
|
Proportionate
|
September
30
|
|
NCI
|
Equity
|
|
Basis
|
|
NCI
|
Equity
|
|
Basis
|
(In thousands of
dollars)
|
IFRS
|
Share
|
Interest
|
IFRIC
21
|
(Non-GAAP)
|
IFRS
|
Share
|
Interest
|
IFRIC 21
|
(Non-GAAP)
|
Revenue from
properties
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
194,554
|
($11,134)
|
$15,117
|
$—
|
$198,537
|
$174,859
|
($9,799)
|
$12,621
|
$—
|
$177,681
|
Disposition/Acquisition/
Development
|
8,861
|
—
|
—
|
—
|
8,861
|
7,232
|
—
|
—
|
—
|
7,232
|
Total revenue from
properties
|
203,415
|
(11,134)
|
15,117
|
—
|
207,398
|
182,091
|
(9,799)
|
12,621
|
—
|
184,913
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
94,104
|
(5,846)
|
8,599
|
(5,562)
|
91,295
|
87,655
|
(5,824)
|
8,238
|
(6,350)
|
83,719
|
Disposition/Acquisition/
Development
|
4,556
|
—
|
—
|
(278)
|
4,278
|
4,737
|
—
|
—
|
(401)
|
4,336
|
Total property
operating expenses
|
98,660
|
(5,846)
|
8,599
|
(5,840)
|
95,573
|
92,392
|
(5,824)
|
8,238
|
(6,751)
|
88,055
|
NOI
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
100,450
|
(5,288)
|
6,518
|
5,562
|
107,242
|
87,204
|
(3,975)
|
4,383
|
6,350
|
93,962
|
Disposition/Acquisition/
Development
|
4,305
|
—
|
—
|
278
|
4,583
|
2,495
|
—
|
—
|
401
|
2,896
|
Total
NOI
|
$104,755
|
($5,288)
|
$6,518
|
$5,840
|
$111,825
|
$89,699
|
($3,975)
|
$4,383
|
$6,751
|
$96,858
|
NOI
Margin
|
51.5 %
|
|
|
|
53.9 %
|
49.3 %
|
|
|
|
52.4 %
|
Funds From Operations
FFO (and FFO per Unit) is
a non-GAAP financial measure widely used as a real estate industry
standard that supplements net income and evaluates operating
performance but is not indicative of funds available to meet the
REIT's cash requirements. FFO can assist with comparisons of the
operating performance of the REIT's real estate between periods and
relative to other real estate entities. FFO is computed by the REIT
in accordance with the current definition of the Real Property
Association of Canada ("REALPAC")
and is defined as net income attributable to Unitholders adjusted
for fair value adjustments, distributions on the Class B LP Units,
realty taxes accounted for under IFRIC 21, deferred income taxes
(on the REIT's U.S. properties), gains/losses on the sale of real
estate properties (including income taxes on the sale of real
estate properties) and other non-cash items. The REIT considers FFO
to be a useful measure for reviewing its comparative operating and
financial performance. FFO per Unit is calculated as FFO divided by
the weighted average number of Units outstanding (including Class B
LP Units) during the period.
The following table provides a reconciliation of FFO to its
closely related financial statement measurement for the following
periods:
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
2022
|
2021
|
Net income for the
period attributable to Unitholders
|
$70,097
|
$83,704
|
$395,128
|
$129,478
|
Add/(deduct):
|
|
|
|
|
Realty taxes accounted
for under IFRIC 21
|
(6,393)
|
(5,053)
|
5,840
|
6,751
|
Fair value loss (gain)
on conversion option on the convertible debentures
|
(640)
|
(20)
|
(1,787)
|
175
|
Distributions on Class
B LP Units recorded as interest expense
|
3,012
|
3,012
|
9,037
|
9,037
|
Foreign exchange loss
(gain)
|
(75)
|
(28)
|
(92)
|
10
|
Fair value gain on real
estate properties, net
|
(57,079)
|
(95,498)
|
(419,211)
|
(157,431)
|
Non-controlling
interests' share of fair value gain on real estate
properties
|
9,293
|
1,879
|
21,290
|
3,653
|
Fair value loss (gain)
on Class B LP Units
|
(17,740)
|
4,995
|
(40,647)
|
19,635
|
Deferred income tax
provision
|
20,662
|
23,162
|
89,719
|
36,592
|
FFO -
basic
|
$21,137
|
$16,153
|
$59,277
|
$47,900
|
Interest expense on the
convertible debentures
|
976
|
976
|
2,878
|
2,878
|
FFO -
diluted
|
$22,113
|
$17,129
|
$62,155
|
$50,778
|
FFO per Unit -
basic
|
$0.38
|
$0.29
|
$1.05
|
$0.85
|
FFO per Unit -
diluted
|
$0.37
|
$0.28
|
$1.03
|
$0.84
|
|
|
|
|
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,315
|
56,271
|
56,304
|
56,260
|
Diluted
|
60,548
|
60,504
|
60,537
|
60,493
|
Indebtedness and Gross Book Value
Indebtedness (as
defined in the REIT's Declaration of Trust) is a measure of the
amount of debt financing utilized by the REIT. Indebtedness is
presented in this earnings release because management considers
this non-GAAP financial measure to be an important measure of the
REIT's financial position.
Gross book value (as defined in the REIT's Declaration of Trust)
is a measure of the value of the REIT's assets. Gross book value is
presented in this earnings release because management considers
this non-GAAP financial measure to be an important measure of the
REIT's asset base and financial position.
The following table provides a reconciliation of gross book
value and indebtedness as defined in the REIT's Declaration of
Trust from their IFRS financial statement presentation:
As at
|
September
30,
|
December 31,
|
(In thousands of
dollars)
|
2022
|
2021
|
Total Assets / Gross
book value
|
$4,227,268
|
$3,473,287
|
Mortgage
payable
|
$1,435,970
|
$1,288,555
|
Add: deferred financing
costs
|
12,582
|
12,318
|
|
1,448,552
|
1,300,873
|
Convertible debentures,
face value
|
85,500
|
85,500
|
Lease
liability
|
16,585
|
9,065
|
Indebtedness
|
$1,500,637
|
$1,395,438
|
Indebtedness / Gross
book value
|
36.7 %
|
40.2 %
|
Non-GAAP Ratios
Non-GAAP ratios do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. These measures should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with IFRS. The
REIT's management uses these measures to aid in assessing the
REIT's underlying core performance and provides these additional
measures so that investors may do the same. Management believes
that the non-GAAP ratios described below, provide readers with a
more comprehensive understanding of management's perspective on the
REIT's operating results and performance.
The following discussion describes the non-GAAP ratios the REIT
uses in evaluating its operating results.
Proportionate NOI Margin
Proportionate NOI
margin is calculated as Proportionate NOI divided by revenue (on a
Proportionate Basis) and is an important measure in evaluating the
operating performance (including the level of operating expenses)
of the REIT's real estate properties. Proportionate NOI margin is
presented in this earnings release because management considers
this non-GAAP ratio to be an important measure of the REIT's
operating performance and financial position.
FFO Payout Ratio
FFO payout ratio compares
distributions declared (including Class B LP Units) to FFO.
Distributions declared (including Class B LP Units) is calculated
based on the monthly distribution per Unit multiplied by the
weighted average number of Units outstanding (including Class B LP
Units) during the period and is an important metric in assessing
the sustainability of retained cash flow to fund capital
expenditures and distributions. FFO payout ratio is presented in
this earnings release because management considers this non-GAAP
ratio to be an important measure of the REIT's operating
performance and financial position.
Indebtedness to Gross Book Value
Ratio
Indebtedness to gross book value ratio is a
compliance measure in the REIT's Declaration of Trust and
establishes the limit for financial leverage of the REIT.
Indebtedness to gross book value ratio is presented in this
earnings release because management considers this non-GAAP ratio
to be an important measure of the REIT's financial position.
The REIT's condensed consolidated financial statements for the
three and nine months ended September 30,
2022, 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
also announced it will increase the REIT's annual cash distribution
by $0.02 per Unit (2.86%). The
increase is expected to be effective for the November 2022 distribution, payable in
December 2022. This will bring the
distributions to $0.72 per Unit on an
annualized basis from the current level of $0.70 per Unit.
Subsequent Event
Subsequent to September 30, 2022, the REIT sold a property,
comprising of 340 suites located in Coconut Creek, Florida, for gross proceeds of
$127.2 million (US$92.0 million), excluding closing costs and
repaid the mortgage payable secured by the property in the amount
of $28.3 million (US$20.4 million).
Conference Call Details
Morguard North American
Residential Real Estate Investment Trust will hold a conference
call on Thursday, October 27, 2022 at 3:00 p.m. (ET) to discuss the financial
results for the three and nine months ended September 30, 2022 and 2021. To participate in
the conference call, please dial 416-764-8688 or
1-888-390-0546. Please quote conference ID 96591356.
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 12,849 residential
suites and 239,500 square feet of commercial area (as of
October 25, 2022) located in
Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $4.0 billion at September 30, 2022. For more information, visit
the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust