Morguard North American Residential REIT Announces 2016 First Quarter Results

MISSISSAUGA, ON, May 3, 2016 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its financial results for the three months ended March 31, 2016.

First Quarter Highlights

Acquisition of a 370 suite residential property in Ottawa, Ontario, for $67.0 million.  The acquisition was funded by cash on hand and a mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI") of $28.5 million for the three months ended March 31, 2016, an increase of $3.6 million, or 14.6% compared to 2015.
  • Basic funds from operations ("FFO") of $14.0 million for the three months ended March 31, 2016, an increase of $1.8 million, or 14.5% over the same period in 2015.
  • Basic FFO of $0.30 per Unit for the three months ended March 31, 2016, a 15.4% increase as compared to the $0.26 per Unit for 2015.
  • Basic adjusted funds from operations ("AFFO") of $0.24 per Unit for the three months ended March 31, 2016, a 20.0% increase as compared to the $0.20 per Unit generated over the same period in 2015.
  • FFO and AFFO payout ratios for the three months ended March 31, 2016 of 49.8% and 63.6%, respectively.

 

Financial and Operational Highlights

As at

March 31,

December 31,

March 31,

(In thousands of dollars, except as noted otherwise)

2016

2015

2015

Operational Information




Number of properties

46

45

44

Total suites

13,472

13,102

12,850

Occupancy percentage

95.0%

94.8%

95.8%

Average monthly rent - Canada (in actual dollars)

$1,273

$1,272

$1,250

Average monthly rent - U.S. (in actual U.S. dollars)

US$1,011

US$1,002  

US$952  

Summary of Financial Information




Gross book value

$2,141,201

$2,160,015

$1,931,755

Indebtedness

$1,199,692

$1,186,131

$1,082,562

Indebtedness to gross book value ratio

56%

55%

56%

Weighted average mortgage interest rate

3.7%

3.8%

3.9%

Weighted average term to maturity on mortgages payable (years)

5.3

5.1

5.6

Exchange rates - Canadian dollar to United States dollar

$0.77

$0.72

$0.79

Exchange rates - United States dollar to Canadian dollar

$1.30

$1.38

$1.27

 

Financial and Operational Highlights (Continued)

For the three months ended March 31,


(In thousands of dollars, except per Unit amounts)

2016

2015

Summary of Financial Information



Interest coverage ratio

1.97

2.02

Indebtedness coverage ratio

1.36

1.40

Revenue from income producing properties

$54,354

$47,687

NOI

$16,272

$14,997

Adjusted NOI

$28,482

$24,861

Same Property Adjusted NOI

$27,128

$24,861

Net operating margin

52%

52%

FFO - basic

$14,019

$12,248

FFO - diluted

$14,713

$12,936

FFO per Unit - basic

$0.30

$0.26

FFO per Unit - diluted

$0.29

$0.26

AFFO - basic

$10,971

$9,269

AFFO - diluted

$11,665

$9,957

AFFO per Unit - basic

$0.24

$0.20

AFFO per Unit - diluted

$0.23

$0.20

Distributions per Unit

$0.15

$0.15

FFO payout ratio

49.8%

57.0%

AFFO payout ratio

63.6%

75.3%

Weighted average number of Units outstanding (in thousands):



Basic

46,528

46,536

Diluted

50,399

50,407

Average exchange rates - Canadian dollar to United States dollar

$0.73

$0.81

Average exchange rates - United States dollar to Canadian dollar

$1.37

$1.24

 

Net Operating Income

For the three months ended March 31,


(In thousands of dollars)

2016

2015

Revenue from income producing properties



Same Property

$51,713

$47,687

Acquisitions

2,641

Total revenue from income producing properties

54,354

47,687

Property operating expenses



Same Property




Operating costs

13,747

12,349


Realty taxes

16,956

15,488


Utilities

4,998

4,853

Same Property

35,701

32,690

Acquisitions

2,381

Total property operating expenses

38,082

32,690

NOI



Same Property

16,012

14,997

Acquisitions

260

Total NOI

16,272

14,997

Realty taxes accounted for under IFRIC 21

12,210

9,864

Adjusted NOI

$28,482

$24,861

 

For the three months ended March 31, 2016, consolidated Adjusted NOI increased by $3.6 million (or 14.6%) to $28.5 million, compared to $24.9 million in 2015.  The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $1.4 million (or 16.3%) and US$0.4 million (or 2.8%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $1.8 million.  The increase in Adjusted NOI was attributable to acquisitions completed subsequent to March 31, 2015 and an increase in Same Property Adjusted NOI in Canada resulting from higher rental revenue, lower vacancy and lower overall operating expenses, partially offset by lower Same Property Adjusted NOI in the U.S. resulting from an increase in overall operating expenses, partially offset by higher AMR, net of higher vacancy.

Funds from Operations

For the three months ended March 31,


(In thousands of dollars, except per Unit amounts)

2016

2015

Net loss attributable to unitholders

($24,445)

($10,139)

Add (deduct):



Realty taxes accounted for under IFRIC 21

11,674

9,864

Fair value loss on conversion option on the Debentures

124

29

Distributions on Class B LP Units recorded as interest expense

2,583

2,583

Foreign exchange loss (gain)

1,246

(1,270)

Fair value gain on income producing properties, net

(6,189)

(4,204)

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

311

(237)

Fair value loss on Class B LP Units

21,013

9,818

Deferred income tax provision

7,702

5,804

FFO – basic

$14,019

$12,248

Interest expense on the Debentures

694

688

FFO – diluted

$14,713

$12,936

FFO per Unit – basic

$0.30

$0.26

FFO per Unit – diluted

$0.29

$0.26

 

Basic FFO for the three months ended March 31, 2016, increased by $1.8 million, or 14.5%, to $14.0 million ($0.30 per Unit), compared to $12.2 million ($0.26 per Unit) in 2015.  The increase is mainly due to an increase in Adjusted NOI of $3.6 million, partially offset by an increase in interest expense of $1.2 million (excluding distributions on Class B LP Units and fair value adjustments), an increase in trust expenses of $0.5 million.  The change in foreign exchange rates had a positive impact on FFO of $0.9 million, an amount that is predominantly included in the increase to NOI and interest expense.

Adjusted Funds from Operations

For the three months ended March 31,


(In thousands of dollars, except per Unit amounts)

2016

2015

FFO - basic

$14,019

$12,248

Add (deduct):



Amortization of mark-to-market adjustments on mortgages

(1,726)

(1,731)

Amortization of deferred financing costs assumed on the Initial Properties

99

109

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

assumed on the Initial Properties

(2)

(2)

Amortization of tenant incentive and cash flow hedge

45

56

Maintenance capital expenditures

(1,464)

(1,411)

AFFO – basic

10,971

9,269

Interest expense on the Debentures

694

688

AFFO – diluted

$11,665

$9,957

AFFO per Unit – basic

$0.24

$0.20

AFFO per Unit – diluted

$0.23

$0.20

 

Basic AFFO for the three months ended March 31, 2016, increased by $1.7 million or 18.4%, to $11.0 million ($0.24 per Unit), compared to $9.3 million ($0.20 per Unit) in 2015, which was primarily driven by the increase in FFO.

The REIT's unaudited condensed consolidated financial statements for the three months ended March 31, 2016, 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, Same Property 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 three months ended March 31, 2016 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, May 5, 2016 at 3:00 p.m. (ET) to discuss the financial results for the quarter ended March 31, 2016 and 2015.  To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID #84011051.

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 May 3, 2016) located in Alberta, Ontario, Colorado, Texas, Louisiana, Alabama, Georgia, Florida and North Carolina with an appraised value of approximately $2.1 billion as at March 31, 2016. 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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