Morguard North American Residential REIT Announces 2015 Second Quarter Results

MISSISSAUGA, ON, Aug. 4, 2015 /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, 2015. 

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

Highlights

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI"), excluding the impact of IFRIC 21, of $25.4 million for the three months ended June 30, 2015, an increase of $2.5 million over the same period in 2014.
  • Funds from Operations ("FFO") of $12.8 million for the three months ended June 30, 2015, an increase of $1.3 million over the same period in 2014.
  • FFO of $0.28 per unit for the three months ended June 30, 2015, a 12% increase as compared to the $0.25 per unit for the second quarter of 2014.
  • Adjusted Funds from Operations ("AFFO") of $0.21 per unit for the three months ended June 30, 2015, a 17% increase as compared to the $0.18 value generated over the same period in 2014.
  • FFO payout ratio for the three months ended June 30, 2015 was 53.57% (AFFO payout ratio – 71.43%).

 

Financial and Operational Highlights




As at

June 30,

2015

December 31,
2014

June 30,
2014

Operational Information




Number of properties

44

44

44

Total suites

12,850

12,850

12,850

Occupancy percentage

95.8%

96.0%

95.9%

Monthly weighted average in-place rent – Canada

$1,258

$1,246

$1,238

Monthly weighted average in-place rent – U.S. (in U.S. dollars)

US$961

US$945

US$929

Summary of Financial Information




Total gross book value

$1,932,933

$1,832,287

$1,761,000

Debt

$1,069,013

$1,022,555

$1,000,298

Debt to gross book value

55%

56%

57%

Weighted average interest rate on mortgages payable and retained debt

3.8%

3.9%

4.0%

Weighted average term to maturity on mortgages payable (years)

5.4

5.6

5.2


Three months ended

June 30

Six months ended

June 30

(in thousands of dollars, except per unit amounts)

2015

2014

2015

2014

Summary of Financial Information










Revenue from income producing properties (IPP)

$47,530

$43,090

$95,217

$85,851

Adjusted net operating income(1)

$25,396

$22,895

$50,257

$45,027

Net operating income

$28,730

$25,662

$43,727

$39,424

Net operating margin(1)

53%

53%

53%

52%

Interest coverage(1)

1.97

1.85

1.99

1.81






Funds from Operations (FFO) - basic

$12,812

$11,485

$25,060

$22,227

Funds from Operations (FFO) - diluted

$13,508

$12,180

$26,444

$23,610

FFO per unit – basic

$0.28

$0.25

$0.54

$0.48

FFO per unit – diluted

$0.27

$0.24

$0.52

$0.47






Adjusted Funds from Operations (AFFO) - basic

$9,927

$8,403

$19,196

$15,995

Adjusted Funds from Operations (AFFO) - diluted

$10,623

$9,098

$20,580

$17,378

AFFO per unit – basic and diluted

$0.21

$0.18

$0.41

$0.34

 

FFO payout ratio

53.57%

60.00%

55.56%

62.50%

AFFO payout ratio

71.43%

83.33%

73.17%

88.24%

 

Weighted average number of units outstanding during the period (000's)



- Basic

46,542

46,519

46,539

46,517

- Diluted

50,413

50,390

50,410

50,388

1  Excludes realty taxes accounted for under IFRIC 21.

Net Operating Income




Three months ended

June 30

Six months ended

June 30

(in thousands of dollars)

2015

2014

2015

2014

Revenue from income producing properties

$47,530

$43,090

$95,217

$85,851

Property Operating Expenses






Operating expenses

13,363

11,972

25,712

23,316


Utilities

3,694

3,352

8,547

7,744


Realty taxes

1,743

2,104

17,231

15,367

Total property operating expenses

18,800

17,428

51,490

46,427

Net Operating Income

28,730

25,662

43,727

39,424

Realty taxes accounted for under IFRIC 21

(3,334)

(2,767)

6,530

5,603

Adjusted Net Operating Income

$25,396

$22,895

$50,257

$45,027

Adjusted net operating income increased by $2.5 million, or 10.9%, during the three months ended

June 30, 2015, to $25.4 million, compared to $22.9 million in 2014. The increase was mainly due to higher rental revenue due to rental increases in Canada and U.S. of $0.3 million and US$0.6 million, respectively, and the change in the U.S. foreign exchange rate which increased Adjusted NOI by $1.8 million.

Adjusted net operating income for the six months ended June 30, 2015, increased by $5.2 million, or 11.6% to $50.3 million, compared to $45.0 million in 2014. The increase was due to higher rental revenue due to rental increases in Canada and U.S. of $0.5 million and US$1.7 million, respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $3.6 million. The higher rental revenue was partially offset by an increase in utilities of $0.3 million and US$0.1 million in Canada and U.S., respectively.

Funds from Operations ("FFO")




Three months ended
June 30

Six months ended
June 30

(In thousands of dollars, except per unit amounts)

2015

2014

2015

2014

Net income for the period attributable to the unitholders

$31,627

$2,424

$21,488

$11,536

Add (deduct):





Realty taxes accounted for under IFRIC 21

(3,334)

(2,767)

6,530

5,603

Net fair value gain on IPP

(13,712)

(9,927)

(17,916)

(31,181)

Non-controlling interests' share of fair value gain (loss) on IPP

92

46

(145)

412

Fair value (gain) loss on Class B LP Units

(13,951)

12,401

(4,133)

18,257

Fair value (gain) loss on conversion option on debentures

(88)

18

(59)

95

Distributions on Class B LP Units recorded as interest expense

2,584

2,584

5,167

5,167

Foreign exchange loss (gain)

206

246

(1,064)

215

Deferred income tax provision

9,388

6,460

15,192

12,123

Funds From Operations

$12,812

$11,485

$25,060

$22,227

Interest expense on convertible debentures

696

695

1,384

1,383

Diluted Funds From Operations

$13,508

$12,180

$26,444

$23,610

FFO per unit - basic

$0.28

$0.25

$0.54

$0.48

FFO per unit - diluted

$0.27

$0.24

$0.52

$0.47

FFO for the three months ended June 30, 2015, increased by $1.3 million, or 11.6%, to $12.8 million ($0.28 per Unit), compared to $11.5 million ($0.25 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $2.5 million, partially offset by an increase in interest expense of $0.9 million, and an increase in trust expenses of $0.3 million. The change in foreign exchange rates had a positive impact on FFO of $1.0 million.

FFO for the six months ended June 30, 2015, increased by $2.8 million, or 12.7%, to $25.1 million ($0.54 per Unit), compared to $22.2 million ($0.48 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $5.2 million, partially offset by an increase in interest expense of $1.6 million, and an increase in trust expenses of $0.8 million.  The change in foreign exchange rates had a positive impact on FFO of $2.1 million.

Adjusted Funds from Operations ("AFFO")




Three months ended

Six months ended

June 30

June 30

(In thousands of dollars, except per unit amounts)

2015

2014

2015

2014

Funds From Operations

$12,812

$11,485

$25,060

$22,227

Add (deduct):





Amortization of deferred financing costs assumed on Initial Properties

110

244

219

493

Non-controlling interests' share of amortization of deferred financing costs assumed on Initial Properties

(2)

(12)

(4)

(24)

Amortization of mark to market adjustments on mortgages

(1,622)

(1,941)

(3,353)

(3,971)

Maintenance capital expenditures

(1,427)

(1,427)

(2,838)

(2,838)

Amortization of cash flow hedge

56

54

112

108

Adjusted Funds From Operations

$9,927

$8,403

$19,196

$15,995

Interest expense on convertible debentures

696

695

1,384

1,383

Diluted AFFO

$10,623

$9,098

$20,580

$17,378

AFFO per unit – basic and diluted

$0.21

$0.18

$0.41

$0.34

AFFO increased by $1.5 million for the three months ended June 30, 2015, to $9.9 million ($0.21 per unit) compared to $8.4 million ($0.18 per unit) in 2014. The increase is mainly due to an increase in FFO of $1.3 million for the three months ended June 30, 2015 and the decrease in amortization of mark to market adjustments on mortgages of $0.3 million.

AFFO increased by $3.2 million for the six months ended June 30, 2015, to $19.2 million ($0.41 per unit) compared to $16.0 million ($0.34 per unit) in 2014. The increase is mainly due to an increase in FFO  of  $2.8 million for the six months ended June 30, 2015 and the decrease in amortization of mark to market adjustments on mortgages of $0.6 million.

Conference Call Details
Morguard North American Residential Real Estate Investment Trust will hold a conference call on Friday, August 7, 2015 at 11:00 a.m. (ET) to discuss the financial results for the quarters ended June 30, 2015 and 2014. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID# 77143068.

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 August 4, 2015) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.9 billion at June 30, 2015.

SOURCE Morguard North American Residential Real Estate Investment Trust

For further information: Morguard Corporation: 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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