MISSISSAUGA, ON, Feb. 14,
2023 /CNW/ - Morguard North American Residential REIT
(the "REIT") (TSX: MRG.UN) today announced its financial results
for the year ended December 31,
2022.
Highlights
The REIT is reporting performance of:
- Net operating income ("NOI") of $151.2
million for the year ended December
31, 2022, an increase of $21.7
million, or 16.8% compared to 2021.
- Same Property Proportionate NOI in the U.S. increased by 19.4%,
and in Canada increased by 6.7%,
compared to 2021.
- Net income of $239.6 million for
the year ended December 31, 2022, a
decrease of $5.4 million, or 2.2%
compared to 2021.
- Basic funds from operations ("FFO") of $82.8 million for the year ended December 31, 2022, an increase of $18.0 million, or 27.8% over the same period in
2021.
- Basic FFO of $1.47 per Unit for
the year ended December 31, 2022, a
27.8% increase as compared to the $1.15 in 2021.
- FFO payout ratio for the year ended December 31, 2022 of 47.8% compared to 60.8% in
2021.
The REIT is reporting the following corporate and portfolio
highlights:
- During the year ended December 31,
2022, the REIT completed the refinancing of three US
properties providing gross mortgage proceeds of $116.6 million (US$89.3
million) at a weighted average interest rate of 4.65% and
for a weighted average term of 8.4 years. The maturing mortgages
associated with the refinanced properties had a balance at maturity
of $78.3 million (US$59.4 million) at a weighted average interest
rate of 3.84%, resulting in net proceeds of $38.3 million (US$29.9
million), before financing costs.
- During the year ended December 31,
2022, the REIT sold three properties comprising 776 suites,
for net proceeds of $250.9 million
(US$190.5 million), including closing
costs, and repaid the mortgages payable secured by the properties
in the amount of $65.1 million
(US$49.7 million).
- During the third quarter of 2022, the REIT acquired a
multi-suite residential property comprising 350 suites located in
Chicago, Illinois, 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) for a term of seven years at an interest rate of
4.71%.
- During the third quarter of 2022, the REIT acquired a retail
property comprising 186,712 square feet of commercial area located
in Rockville, Maryland, for a
purchase price of $46.8 million
(US$34.1 million), including closing
costs. The retail property is part of a mixed-use complex where the
REIT owns the residential property, creating operational
efficiencies and the opportunity to enhance our long-term vision
within the immediate submarket.
- As at December 31, 2022, average
monthly rent ("AMR") in the U.S., on a Same Property basis,
increased by 13.1% compared to December 31,
2021, while occupancy was 95.3% at December 31, 2022, compared to 96.2% at
December 31, 2021.
- As at December 31, 2022, AMR in
Canada increased by 3.5% compared
to December 31, 2021, while occupancy
improved to 98.6% at December 31,
2022, compared to 93.6% at December
31, 2021.
- As at December 31, 2022,
indebtedness to gross book value ratio of 38.0%, lower compared to
40.2% as at December 31, 2021.
- As at December 31, 2022, the
REIT's total assets were valued at $3.9
billion, compared to $3.5
billion as at December 31,
2021.
Financial and Operational Highlights
As at December
31
|
|
|
(In thousands of
dollars, except as otherwise noted)
|
2022
|
2021
|
Operational
Information
|
|
|
Number of
properties
|
42
|
43
|
Total suites
|
12,849
|
13,275
|
|
|
|
Occupancy percentage –
Canada
|
98.6 %
|
93.6 %
|
Occupancy percentage –
U.S.
|
95.3 %
|
96.3 %
|
Average monthly rent -
Canada (in actual dollars)
|
$1,588
|
$1,535
|
Average monthly rent -
U.S. (in actual U.S. dollars)
|
US$1,771
|
US$1,525
|
|
|
|
Summary of Financial
Information
|
|
|
Gross book
value(1)
|
$3,934,417
|
$3,473,287
|
Indebtedness(1)
|
$1,496,179
|
$1,395,438
|
|
|
|
Indebtedness to gross
book value ratio(1)
|
38.0 %
|
40.2 %
|
Weighted average
mortgage interest rate
|
3.50 %
|
3.31 %
|
Weighted average term
to maturity on mortgages payable (years)
|
4.9
|
5.0
|
Exchange rates - United
States dollar to Canadian dollar
|
$1.35
|
$1.27
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.74
|
$0.79
|
(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.
|
For the years ended
December 31
|
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
Summary of Financial
Information
|
|
|
Revenue from real
estate properties
|
$278,491
|
$245,566
|
NOI
|
$151,215
|
$129,495
|
Proportionate
NOI(1)
|
$154,109
|
$130,584
|
Same Property
Proportionate NOI(1)
|
$143,322
|
$122,590
|
NOI margin -
IFRS
|
54.3 %
|
52.7 %
|
NOI margin –
Proportionate(1)
|
54.2 %
|
52.3 %
|
Net income
|
$239,563
|
$244,974
|
|
|
|
FFO –
basic(1)
|
$82,803
|
$64,770
|
FFO –
diluted(1)
|
$86,651
|
$68,618
|
FFO per Unit –
basic(1)
|
$1.47
|
$1.15
|
FFO per Unit –
diluted(1)
|
$1.43
|
$1.13
|
Distributions per
Unit
|
$0.7030
|
$0.6996
|
FFO payout
ratio(1)
|
47.8 %
|
60.8 %
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
Basic
|
56,310
|
56,265
|
Diluted
|
60,543
|
60,498
|
Average exchange rates
- United States dollar to Canadian dollar
|
$1.30
|
$1.25
|
Average exchange rates
- Canadian dollar to United States dollar
|
$0.77
|
$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 year ended
December 31, 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 table provides 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
|
|
|
|
|
|
|
Proportionate
|
|
|
|
Proportionate
|
For the years ended
December 31
|
|
NCI
|
Equity
|
|
Basis
|
|
NCI
|
Equity
|
Basis
|
(In thousands of
dollars)
|
IFRS
|
Share
|
Interest
|
IFRIC
21
|
(Non-GAAP)
|
IFRS
|
Share
|
Interest
|
(Non-GAAP)
|
Revenue from
properties
|
|
|
|
|
|
|
|
|
|
Same
Property
|
$256,126
|
($15,303)
|
$20,893
|
$—
|
$261,716
|
$227,320
|
($13,196)
|
$17,198
|
$231,322
|
Disposition/Acquisition/Development
|
22,365
|
—
|
—
|
—
|
22,365
|
18,246
|
—
|
—
|
18,246
|
Total revenue from
properties
|
278,491
|
(15,303)
|
20,893
|
—
|
284,081
|
245,566
|
(13,196)
|
17,198
|
249,568
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
Same
Property
|
115,676
|
(6,583)
|
9,301
|
—
|
118,394
|
105,819
|
(6,865)
|
9,778
|
108,732
|
Disposition/Acquisition/Development
|
11,600
|
—
|
—
|
(22)
|
11,578
|
10,252
|
—
|
—
|
10,252
|
Total property
operating expenses
|
127,276
|
(6,583)
|
9,301
|
(22)
|
129,972
|
116,071
|
(6,865)
|
9,778
|
118,984
|
NOI
|
|
|
|
|
|
|
|
|
|
Same
Property
|
140,450
|
(8,720)
|
11,592
|
—
|
143,322
|
121,501
|
(6,331)
|
7,420
|
122,590
|
Disposition/Acquisition/Development
|
10,765
|
—
|
—
|
22
|
10,787
|
7,994
|
—
|
—
|
7,994
|
Total
NOI
|
$151,215
|
($8,720)
|
$11,592
|
$22
|
$154,109
|
$129,495
|
($6,331)
|
$7,420
|
$130,584
|
NOI
Margin
|
54.3 %
|
|
|
|
54.2 %
|
52.7 %
|
|
|
52.3 %
|
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
December 31
|
Year ended
December 31
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
2022
|
2021
|
Net income (loss)
for the period attributable to Unitholders
|
($175,846)
|
$112,610
|
$219,282
|
$242,088
|
Add/(deduct):
|
|
|
|
|
Realty taxes accounted
for under IFRIC 21
|
(5,818)
|
(6,751)
|
22
|
—
|
Fair value loss (gain)
on conversion option on the convertible debentures
|
(147)
|
276
|
(1,934)
|
451
|
Distributions on Class
B LP Units recorded as interest expense
|
3,071
|
3,012
|
12,108
|
12,049
|
Foreign exchange loss
(gain)
|
23
|
5
|
(69)
|
15
|
Fair value loss (gain)
on real estate properties, net
|
212,962
|
(132,167)
|
(206,249)
|
(289,598)
|
Non-controlling
interests' share of fair value gain (loss) on real estate
properties
|
(5,845)
|
(3,368)
|
15,445
|
285
|
Fair value loss (gain)
on Class B LP Units
|
14,640
|
10,678
|
(26,007)
|
30,313
|
Loss on tax liability
on redemption of Class C LP Units
|
—
|
3,775
|
—
|
3,775
|
Deferred income tax
expense (recovery)
|
(19,514)
|
28,800
|
70,205
|
65,392
|
FFO –
basic
|
$23,526
|
$16,870
|
$82,803
|
$64,770
|
Interest expense on the
convertible debentures
|
970
|
970
|
3,848
|
3,848
|
FFO –
diluted
|
$24,496
|
$17,840
|
$86,651
|
$68,618
|
FFO per Unit –
basic
|
$0.42
|
$0.30
|
$1.47
|
$1.15
|
FFO per Unit –
diluted
|
$0.40
|
$0.29
|
$1.43
|
$1.13
|
|
|
|
|
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,328
|
56,282
|
56,310
|
56,265
|
Diluted
|
60,561
|
60,515
|
60,543
|
60,498
|
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 December
31
|
|
|
(In thousands of
dollars)
|
2022
|
2021
|
Total Assets / Gross
book value
|
$3,934,417
|
$3,473,287
|
Mortgage
payable
|
$1,382,174
|
$1,288,555
|
Add: deferred financing
costs
|
12,270
|
12,318
|
|
1,394,444
|
1,300,873
|
Convertible debentures,
face value
|
85,500
|
85,500
|
Lease
liabilities
|
16,235
|
9,065
|
Indebtedness
|
$1,496,179
|
$1,395,438
|
Indebtedness / Gross
book value
|
38.0 %
|
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 audited consolidated financial statements for the
year ended December 31, 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.
Subsequent Event
Subsequent to December 31, 2022,
the REIT acquired from Morguard Corporation, the remaining 50%
interest in Fenestra at Rockville Town Square, comprising 492
residential suites, for a purchase price of $96.8 million (US$71.5
million), excluding closing costs, and assumed mortgages
payable of $46.0 million
(US$34.0 million).
Conference Call Details
Morguard North American Residential Real Estate Investment Trust
will hold a conference call on Thursday,
February 16, 2023 at 3:00 p.m.
(ET) to discuss the financial results for the years
ended December 31, 2022 and 2021. To
participate in the conference call, please
dial 416-764-8688 or 1-888-390-0546. Please quote
conference ID 05833425.
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
February 14, 2023) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $3.7 billion at
December 31, 2022. For more information, visit the REIT's
website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust