Morguard North American Residential REIT Announces 2015 Results

MISSISSAUGA, ON, Feb. 17, 2016 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its results for the year ended December 31, 2015.

Highlights

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI") of $103.7 million for the year ended December 31, 2015, an increase of $13.5 million, or 15.0% compared to 2014.
  • Basic funds from operations ("FFO") of $51.1 million for the year ended December 31, 2015, an increase of $6.4 million, or 14.3% compared to 2014.
  • Basic FFO of $1.10 per Unit for the year ended December 31, 2015, a 14.6% increase as compared to the $0.96 per Unit for 2014.
  • Basic adjusted funds from operations ("AFFO") of $0.85 per Unit for the year ended December 31, 2015, a 26.9% increase as compared to the $0.67 per Unit generated over the same period in 2014.
  • FFO and AFFO payout ratios for the year ended December 31, 2015 of 54.6% and 70.5%, respectively.
  • Average monthly rent increased by 4.3% at December 31, 2015, compared to 2014. Occupancy decreased to 94.8% at December 31, 2015 from 96.0% at December 31, 2014.
  • Acquisition of a 51% interest in a garden-style property comprising of 252 suites located in Cooper City, Florida (the "Monterra Acquisition"), for a gross purchase price of $73.9 million (US$56.0 million). The acquisition was funded by cash on hand and a mortgage of $41.3 million (US$29.6 million) at an interest rate of 3.86% for a term of seven years.

Financial and Operational Highlights

As at December 31,




(In thousands of dollars, except as noted otherwise)

2015


2014

Operational Information




Number of properties

45


44

Total suites

13,102


12,850

Occupancy percentage

94.8%


96.0%

Average Monthly Rent - Canada (in actual dollars)

$1,272


$1,246

Average Monthly Rent - U.S. (in actual U.S. dollars)

US$1,002


US$945

Summary of Financial Information




Gross book value

$2,160,015


$1,832,287

Indebtedness

$1,186,131


$1,022,555

Indebtedness to gross book value ratio

55%


56%

Weighted average mortgage interest rate

3.8%


3.9%

Weighted average term to maturity on mortgages payable (years)

5.1


5.6

Exchange rates - Canadian dollar to United States dollar

$0.72


$0.86

Exchange rates - United States dollar to Canadian dollar

$1.38


$1.16





Financial and Operational Highlights (Continued)

For the years ended December 31,


(In thousands of dollars, except per Unit amounts)

2015

2014

Summary of Financial Information



Interest coverage ratio

1.96

1.85

Indebtedness coverage ratio

1.33

1.33

Revenue from income producing properties

$198,442

$174,815

NOI

$104,182

$90,217

Adjusted NOI

$103,710

$90,217

Net operating margin

52%

52%

FFO - basic

$51,112

$44,726

FFO - diluted

$53,902

$47,516

FFO per Unit - basic

$1.10

$0.96

FFO per Unit - diluted

$1.07

$0.94

AFFO - basic

$39,627

$31,031

AFFO - diluted

$42,417

$33,821

AFFO per Unit - basic

$0.85

$0.67

AFFO per Unit - diluted

$0.84

$0.67

Distributions per Unit

$0.60

$0.60

FFO payout ratio

54.6%

62.5%

AFFO payout ratio

70.5%

89.6%

Weighted average number of Units outstanding (in thousands):



Basic

46,545

46,522

Diluted

50,416

50,393

Average exchange rates - Canadian dollar to United States dollar

$0.78

$0.91

Average exchange rates - United States dollar to Canadian dollar

$1.28

$1.10

Net Operating Income

For the years ended December 31,


(In thousands of dollars)

2015

2014

Revenue from income producing properties

$198,442

$174,815

Property operating expenses




Operating costs

55,068

48,824


Realty taxes

22,162

20,014


Utilities

17,030

15,760

Total property operating expenses

94,260

84,598

NOI

104,182

$90,217

Realty taxes accounted for under IFRIC 21

(472)

-

Adjusted NOI

$103,710

$90,217

For the year ended December 31, 2015, consolidated Adjusted NOI increased by $13.5 million (or 15.0%) to $103.7 million, compared to $90.2 million in 2014.  The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $2.0 million (or 5.6%) and US$2.3 million (or 4.7%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $9.2 million. The increase in Adjusted NOI was due to higher rental revenue and lower overall operating expense in Canada and the Monterra Acquisition, partially offset by an increase in operating cost in the U.S.

Funds from Operations ("FFO")

For the years ended December 31,


(In thousands of dollars, except per Unit amounts)

2015

2014

Net income attributable to unitholders

$38,784

$38,157

Add (deduct):



Realty taxes accounted for under IFRIC 21

(241)

-

Fair value gain on conversion option on the Debentures

(53)

(57)

Distributions on Class B LP Units recorded as interest expense

10,333

10,333

Foreign exchange gain

(2,882)

(830)

Fair value gain on income producing properties, net

(38,804)

(40,104)

Non-controlling interests' share of fair value gain on income producing properties

(413)

610

Fair value loss on Class B LP Units

11,195

10,506

Deferred income tax provision

33,193

26,111

FFO - basic

$51,112

$44,726

Interest expense on the Debentures

2,790

2,790

FFO - diluted

$53,902

$47,516

FFO per Unit - basic

$1.10

$0.96

FFO per Unit - diluted

$1.07

$0.94




Basic FFO for the year ended December 31, 2015, increased by $6.4 million, or 14.3%, to $51.1 million ($1.10 per Unit), compared to $44.7 million ($0.96 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $13.5 million, partially offset by an increase in interest expense of $3.0 million (excluding distributions on Class B LP Units and fair value adjustments), an increase in trust expenses of $1.7 million and a decrease in other income resulting from the 2014 gain on early extinguishment of mortgage payable of $1.5 million. The change in foreign exchange rates had a positive impact on FFO of $4.9 million, an amount that is predominantly included in the increase to NOI and interest expense.

Adjusted Funds from Operations ("AFFO")

For the years ended December 31,


(In thousands of dollars, except per Unit amounts)

2015

2014

FFO - basic

$51,112

$44,726

Add (deduct):



Amortization of mark-to-market adjustments on mortgages

(6,740)

(7,457)

Amortization of deferred financing costs assumed on the Initial Properties

440

818

Non-controlling interests' share of amortization of deferred financing costs

assumed on the Initial Properties

(8)

(35)

Gain from early extinguishment of mortgages payable

-

(1,517)

Amortization of tenant incentive and cash flow hedge 

565

218

Maintenance capital expenditures

(5,742)

(5,722)

AFFO – basic

39,627

31,031

Interest expense on the Debentures

2,790

2,790

AFFO – diluted

$42,417

$33,821

AFFO per Unit – basic

$0.85

$0.67

AFFO per Unit – diluted

$0.84

$0.67

Basic AFFO for the year ended December 31, 2015, increased by $8.6 million or 27.7%, to $39.6 million ($0.85 per Unit), compared to $31.0 million ($0.67 per Unit) in 2014.  The increase was primarily driven by the increase in FFO and the 2014 deduction included in AFFO from the gain on early extinguishment of mortgages payable of $1.5 million.

Subsequent Events

On January 26, 2016, the REIT repurchased 70,400 Units under its NCIB for cash consideration of $0.7 million at a weighted average price of $10.45 per Unit.

On February 1, 2016, the REIT acquired a multi-suite residential property comprising 370 suites located in Ottawa, Ontario, from a third party for a gross purchase price of approximately $67.0 million. The acquisition was partially financed by a new mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.

The REIT's audited consolidated financial statements for the year ended December 31, 2015, 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 consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, Adjusted NOI, FFO, AFFO, indebtedness, gross book value, indebtedness to gross book value ratio, interest coverage ratio and indebtedness coverage ratio (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 year ended December 31, 2015 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, February 18, 2016 at 3:00 p.m. (ET) to discuss the financial results for the year ended December 31, 2015 and 2014.  To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID # 34555610.

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 13,472 residential suites (as of February 16, 2016) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $2.0 billion as at December 31, 2015. For more information, visit the REIT's website at www.morguard.com.

SOURCE Morguard North American Residential Real Estate Investment Trust

For further information: Morguard North American Residential REIT: K. Rai Sahi, Chief Executive Officer, (905) 281-3800; Robert Wright, Chief Financial Officer, (905) 281-3800

RELATED LINKS
www.morguard.com

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