Morguard North American Residential REIT Announces 2013 Second Quarter Results

TSX: MRG.UN

MISSISSAUGA, ON, July 31, 2013 /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, 2013.

All amounts in CAD thousands, except suites and per unit amounts, unless otherwise noted.

PORTFOLIO HIGHLIGHTS

  • Between April 17, 2013 and May 22, 2013, the REIT acquired 12 multi-unit residential properties, comprised of 3,752 suites located in Colorado, Florida, North Carolina, Georgia and Texas for US$450,000 financed by the assumption of in-place mortgages of US$218,676 and newly arranged mortgages of US$57,660.
  • On June 28, 2013, the REIT acquired from Morguard Corporation six multi-unit residential properties comprised of 1,690 suites located in Alabama and Florida for US$88,990 financed by the assumption of in-place mortgages of US$64,364.
  • The REIT's property portfolio is now valued at $1.6 billion (139% increase over IPO) and is comprised of 12,850 suites (139% increase over IPO).
  • FFO payout ratio for Q2 2013 was 83.3% (AFFO payout ratio - 93.8%)
  • The REIT completed the refinancing of one Canadian property in the amount of $35,838 (maturing principal was $22,614) at an interest rate of 2.96% (maturing interest rate was 6.0%) for a term of 10 years.

FINANCIAL AND OPERATIONAL HIGHLIGHTS                  
As at   June 30,
2013
    December 31,
2012
      June 30,
2012
Operational information                  
Number of properties   44     20       17
Total suites   12,850     6,376       5,439
Occupancy percentage   95.5%     96.7%       98.4%
Monthly weighted average in-place rent   $1,041     $1,133       $1,134
                   
Summary of Financial Information                  
Total gross book value   $1,642,905     $1,020,681       $740,332
Debt   $930,371     $432,020       $386,157
Debt to gross book value   57%     42%       52%
Weighted average interest rate on mortgage payable   4.2%     4.3%       4.4%
Weighted average term to maturity on mortgage payable (years)   4.8     4.7       4.3

 

FINANCIAL AND OPERATIONAL HIGHLIGHTS (cont'd)
(in thousands of dollars, except per unit amounts) Three months ended
June 30,
    Six months ended
June 30,
2013 2012     2013 2012
Summary of Financial Information            
Revenue from income producing properties $34,716 $18,941     $59,563 $37,584
Net operating income $18,152 $10,758     $30,781 $20,010
Interest coverage 1.75 2.25     1.84 2.18
             
Funds from Operations (FFO) - basic $8,193 $5,268     $14,570 $9,499
Funds from Operations (FFO) - diluted $8,897 $5,268     $15,396 $9,499
FFO per unit - basic and diluted $0.18 $0.21     $0.34 $0.37
             
Adjusted Funds from Operations (AFFO) - basic $7,395 $5,020     $13,371 $9,073
Adjusted Funds from Operations (AFFO) - diluted $8,099 $5,020     $14,197 $9,073
AFFO per unit - basic and diluted $0.16 $0.20     $0.31 $0.36
             
FFO payout ratio 83.33% 71.43%     88.24% 81.08%
AFFO payout ratio 93.75% 75.00%     96.77% 83.33%
Weighted average number of units outstanding during the period (000's)        
- Basic 46,501 25,473     43,159 25,473
- Diluted 50,372 25,473     45,469 25,473

NET OPERATING INCOME            
  Three months ended
June 30,
    Six months ended
June 30,
(In thousands of dollars) 2013 2012     2013 2012
Revenue from income producing properties            
Same property $19,145 $18,941     $38,198 $37,584
Acquisitions 15,571 -     21,365 -
Total revenue from income producing properties 34,716 18,941     59,563 37,584
Property Operating Expenses            
Same property            
  Operating expenses $4,784 $4,391     $9,179 $8,722
  Utilities 1,994 1,987     4,803 4,830
  Taxes 2,221 1,805     4,463 4,022
Same property 8,999 8,183     18,445 17,574
Acquisitions 7,565 -     10,337 -
Total property operating expenses 16,564 8,183     28,782 17,574
Net Operating Income            
Same property 10,146 10,758     19,753 20,010
Acquisitions 8,006 -     11,028 -
Total Net Operating Income $18,152 $10,758     $30,781 $20,010

Net operating income increased by $7.4 million during the three months ended June 30, 2013, to $18.2 million, compared to $10.8 million in 2012 and increased by $10.8 million for the six months ended June 30, 2013, to $30.8 million, compared to $20.0 million in 2012.  The increase was predominantly due to the U.S. acquisitions (24 properties acquired during the current year and three properties acquired during the third quarter of 2012), which increased NOI by $8.0 million for the three months ended and $11.0 million for the six months ended June 30, 2013.  The positive impact of the acquisitions was partially offset by a decrease in NOI for the Canadian properties due to an increase in realty taxes for non-recurring prior year tax rebates received in 2012 of $0.3 million and an increase in repairs and maintenance for the Canadian and the three U.S. properties that were acquired as part of the Initial Public Offering.

             
FUNDS FROM OPERATIONS ("FFO") Three months ended
June 30,
    Six months ended
June 30,
(In thousands of dollars, except per unit amounts) 2013 2012     2013 2012
Net income for the period attributable to the unitholders $24,192 $91,181     $20,253 $96,773
Add (deduct):            
Fair value (gain) loss on income producing properties (2,598) (34,629)     3,214 (37,223)
Non-controlling interests' share of fair value gain on
  income producing properties
131 1,001     196 1,143
Fair value (gain) loss on Class B LP Units (18,600) 20,496     (17,223) 20,496
Distributions on Class B LP Units recorded as interest
  expense
2,584 2,094     5,167 2,094
Deferred income tax provision (recovery) 2,484 (74,875)     2,963 (73,784)
Funds from operations $8,193 $5,268     $14,570 $9,499
Interest expense on convertible debentures 704 -     826 -
Diluted FFO $8,897 $5,268     $15,396 $9,499
FFO per unit - basic and diluted $0.18 $0.21     $0.34 $0.37

FFO increased by $2.9 million or 55.5% during the three months ended June 30, 2013, to $8.2 million ($0.18 per unit) compared to $5.3 million ($0.21 per unit) in 2012 and increased by $5.1 million for the six months ended June 30, 2013, to $14.6 million ($0.34 per unit) compared to $9.5 million ($0.37 per unit) in 2012.  The increase in FFO is mainly attributable to the U.S. acquisitions which had a positive impact on NOI of $8.0 million for the three months ended and $11.0 million for the six months ended June 30, 2013.  The increase in NOI was partially offset by an increase in interest expense of $4.2 million for the three months ended and $5.4 million for the six months ended June 30, 2013 due to the mortgages on the U.S. acquisitions and the convertible debentures issued during the first quarter of 2013.  Trust expenses also increased by $0.9 million for the three months ended and $1.8 million for the six months ended June 30, 2013 predominantly due to an increase in asset management fee on the acquisitions completed in 2013.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")            
  Three months ended
June 30,
    Six months ended
June 30,
(In thousands of dollars, except per unit amounts) 2013 2012     2013 2012
Funds from Operations $8,193 $5,268     $14,570 $9,499
Add (deduct):            
Amortization of deferred financing costs assumed on
  Initial Properties
366 309     733 689
Non-controlling interests' share of amortization of deferred
  financing costs assumed on Initial Properties
(10) (11)     (23) (22)
Maintenance capital expenditures (1,207) (597)     (2,014) (1,194)
Amortization of cash flow hedge 53 51     105 101
Adjusted funds from operations 7,395 5,020     13,371 9,073
Interest expense on convertible debentures 704 -     826 -
Diluted AFFO $8,099 $5,020     $14,197 $9,073
AFFO per unit - basic and diluted $0.16 $0.20     $0.31    $0.36

AFFO increased by $2.4 million during the three months ended June 30, 2013, to $7.4 million ($0.16 per unit) compared to $5.0 million ($0.20 per unit) in 2012 and increased by $4.3 million for the six months ended June 30, 2013, to $13.4 million ($0.31 per unit) compared to $9.1 million ($0.36 per unit) in 2012 .  The increase is mainly due to an increase in FFO of $2.9 million for the three months and $5.1 million for the six months ended June 30, 2013, partially offset by an increase in maintenance capital expenditures of $0.6 million for the quarter and $0.8 million for the six months as a result of the U.S. acquisitions completed in 2013.

ABOUT MORGUARD NORTH AMERICAN RESIDENTIAL REIT
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario.  It trades on the Toronto Stock Exchange under the ticker symbol MRG.UN.  With a strategic focus on the acquisition of high-quality multi-unit 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 12,850 residential suites (as of July 31, 2013) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.6 billion at June 30, 2013. 

SOURCE: Morguard North American Residential Real Estate Investment Trust

For further information:

Morguard Corporation
K. (Rai) Sahi
Chief Executive Officer
(905) 281-3800     

Paul Miatello
Chief Financial Officer
(905) 281-3800


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