Morguard North American Residential REIT Announces 2016 Second Quarter Results

MISSISSAUGA, ON, Aug. 2, 2016 /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, 2016.

Second Quarter Highlights

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI") of $28.2 million for the three months ended June 30, 2016, an increase of $2.8 million, or 11.0% compared to 2015.

  • Basic funds from operations ("FFO") of $13.9 million for the three months ended June 30, 2016, an increase of $1.1 million, or 8.4% over the same period in 2015.

  • Basic FFO of $0.30 per Unit for the three months ended June 30, 2016, a 7.1% increase as compared to the $0.28 per Unit for 2015.

  • Basic adjusted funds from operations ("AFFO") of $0.24 per Unit for the three months ended June 30, 2016, a 14.3% increase as compared to the $0.21 per Unit generated over the same period in 2015.

  • FFO and AFFO payout ratios for the three months ended June 30, 2016 of 50.2% and 63.5%, respectively.

Financial and Operational Highlights

As at
(In thousands of dollars, except as noted otherwise)

June 30,
2016

December 31,
2015

June 30,
2015

Operational Information




Number of properties

46

45

44

Total suites

13,472

13,102

12,850

Occupancy percentage

95.6%

94.8%

95.8%

Average monthly rent - Canada (in actual dollars)

$1,279

$1,272

$1,258

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

US$1,020

US$1,002

US$961

Summary of Financial Information




Gross book value

$2,151,617

$2,160,015

$1,932,933

Indebtedness

$1,196,995

$1,186,131

$1,069,013

Indebtedness to gross book value ratio

56%

55%

55%

Weighted average mortgage interest rate

3.7%

3.8%

3.8%

Weighted average term to maturity on mortgages payable (years)

5.3

5.1

5.4

Exchange rates - Canadian dollar to United States dollar

$0.77

$0.72

$0.80

Exchange rates - United States dollar to Canadian dollar

$1.29

$1.38

$1.25

 

Financial and Operational Highlights (Continued)


Three months ended
June 30,

Six months ended
June 30,

(In thousands of dollars, except per Unit amounts)

2016

2015

2016

2015

Summary of Financial Information





Interest coverage ratio

2.00

1.97

1.99

1.99

Indebtedness coverage ratio

1.36

1.44

1.36

1.42

Revenue from income producing properties

$53,586

$47,530

$107,940

$95,217

NOI

$31,988

$28,730

$48,260

$43,727

Adjusted NOI

$28,185

$25,396

$56,667

$50,257

Same Property Adjusted NOI

$26,669

$25,396

$53,798

$50,257

Net operating margin

53%

53%

52%

53%

FFO - basic

$13,891

$12,812

$27,910

$25,060

FFO - diluted

$14,587

$13,508

$29,300

$26,444

FFO per Unit - basic

$0.30

$0.28

$0.60

$0.54

FFO per Unit - diluted

$0.29

$0.27

$0.58

$0.52

AFFO - basic

$10,985

$9,927

$21,956

$19,196

AFFO - diluted

$11,681

$10,623

$23,346

$20,580

AFFO per Unit - basic

$0.24

$0.21

$0.47

$0.41

AFFO per Unit - diluted

$0.23

$0.21

$0.46

$0.41

Distributions per Unit

$0.15

$0.15

$0.30

$0.30

FFO payout ratio

50.2%

54.5%

50.0%

55.7%

AFFO payout ratio

63.5%

70.3%

63.6%

72.7%

Weighted average number of Units outstanding (in thousands):





Basic

46,498

46,542

46,513

46,539

Diluted

50,369

50,413

50,384

50,410

Average exchange rates - Canadian dollar to United States dollar

$0.78

$0.81

$0.75

$0.81

Average exchange rates - United States dollar to Canadian dollar

$1.29

$1.23

$1.33

$1.24

 

Net Operating Income


Three months ended
June 30,

Six months ended
June 30,

(In thousands of dollars)

2016

2015

2016

2015

Revenue from income producing properties





Same Property

$50,473

$47,530

$102,186

$95,217

Acquisitions

3,113

5,754

Total revenue from income producing properties

53,586

47,530

107,940

95,217

Property operating expenses





Same Property






Operating costs

14,027

13,363

27,775

25,712


Realty taxes

2,143

1,743

19,097

17,231


Utilities

4,174

3,694

9,172

8,547

Same Property

20,344

18,800

56,044

51,490

Acquisitions

1,254

3,636

Total property operating expenses

21,598

18,800

59,680

51,490

NOI





Same Property

30,129

28,730

46,142

43,727

Acquisitions

1,859

2,118

Total NOI

31,988

28,730

48,260

43,727

Realty taxes accounted for under IFRIC 21

(3,803)

3,334

8,407

6,530

Adjusted NOI

$28,185

$25,396

$56,667

$50,257

 

For the three months ended June 30, 2016, consolidated Adjusted NOI increased by $2.8 million (or 11.0%) to $28.2 million, compared to $25.4 million in 2015.  The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $1.3 million (or 13.2%) and US$0.6 million (or 4.6%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $0.9 million.  The increase in Adjusted NOI was attributable to acquisitions completed subsequent to June 30, 2015 and an increase in Same Property Adjusted NOI in Canada driven by higher rental revenue and lower vacancy, partially offset by lower Same Property Adjusted NOI in the U.S. resulting from an increase in overall operating expenses which was partially offset by higher AMR, net of higher vacancy.

For the six months ended June 30, 2016, consolidated Adjusted NOI increased by $6.4 million (or 12.8%) to $56.7 million, compared to $50.3 million in 2015.  The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $2.8 million (or 14.7%) and US$0.9 million (or 3.6%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $2.7 million.  The increase in Adjusted NOI was attributable to acquisitions completed subsequent to June 30, 2015 and an increase in Same Property Adjusted NOI in Canada driven by 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 which was partially offset by higher AMR, net of higher vacancy.

Funds from Operations


Three months ended
June 30,

Six months ended
June 30,

(In thousands of dollars, except per Unit amounts)

2016

2015

2016

2015

Net income (loss) attributable to unitholders

$5,262

$31,627

($19,183)

$21,488

Add/(deduct):





Realty taxes accounted for under IFRIC 21

(3,635)

(3,334)

8,039

6,530

Fair value loss (gain) on conversion option on the Debentures

104

(88)

228

(59)

Distributions on Class B LP Units recorded as interest expense

2,584

2,584

5,167

5,167

Foreign exchange loss (gain)

104

206

1,350

(1,064)

Fair value gain on income producing properties, net

(8,773)

(13,712)

(14,962)

(17,916)

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

179

92

490

(145)

Fair value loss (gain) on Class B LP Units

10,850

(13,951)

31,863

(4,133)

Deferred income tax provision

7,216

9,388

14,918

15,192

FFO – basic

13,891

12,812

27,910

25,060

Interest expense on the Debentures

696

696

1,390

1,384

FFO – diluted

$14,587

$13,508

$29,300

$26,444

FFO per Unit – basic

$0.30

$0.28

$0.60

$0.54

FFO per Unit – diluted

$0.29

$0.27

$0.58

$0.52

 

Basic FFO for the three months ended June 30, 2016, increased by $1.1 million, or 8.4%, to $13.9 million ($0.30 per Unit), compared to $12.8 million ($0.28 per Unit) in 2015.  The increase is mainly due to an increase in Adjusted NOI of $2.8 million, partially offset by an increase in interest expense of $1.1 million (excluding distributions on Class B LP Units and fair value adjustments), and an increase in trust expenses of $0.5 million.  The change in foreign exchange rates had a positive impact on FFO of $0.5 million, of which amount is predominantly included in the increase to Adjusted NOI and interest expense.

Basic FFO for the six months ended June 30, 2016, increased by $2.9 million, or 11.4%, to $27.9 million ($0.60 per Unit), compared to $25.0 million ($0.54 per Unit) in 2015.  The increase is mainly due to an increase in Adjusted NOI of $6.4 million, partially offset by an increase in interest expense of $2.3 million (excluding distributions on Class B LP Units and fair value adjustments), and an increase in trust expenses of $1.0 million.  The change in foreign exchange rates had a positive impact on FFO of $1.4 million, of which amount is predominantly included in the increase to Adjusted NOI and interest expense.

Adjusted Funds from Operations


Three months ended
June 30,

Six months ended
June 30,

(In thousands of dollars, except per Unit amounts)

2016

2015

2016

2015

FFO - basic

$13,891

$12,812

$27,910

$25,060

Add/(deduct):





Amortization of mark-to-market adjustment on mortgages

(1,570)

(1,622)

(3,296)

(3,353)

Amortization of deferred financing costs assumed on the Initial
Properties

93

110

192

219

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

(2)

(2)

(4)

(4)

Amortization of tenant incentive and cash flow hedge

52

56

97

112

Maintenance capital expenditures

(1,479)

(1,427)

(2,943)

(2,838)

AFFO – basic

10,985

9,927

21,956

19,196

Interest expense on the Debentures

696

696

1,390

1,384

AFFO – diluted

$11,681

$10,623

$23,346

$20,580

AFFO per Unit – basic

$0.24

$0.21

$0.47

$0.41

AFFO per Unit – diluted

$0.23

$0.21

$0.46

$0.41

 

Basic AFFO for the three months ended June 30, 2016, increased by $1.1 million or 10.7%, to $11.0 million ($0.24 per Unit), compared to $9.9 million ($0.21 per Unit) in 2015.  The increase was primarily driven by the increase in FFO.

 Basic AFFO for the six months ended June 30, 2016, increased by $2.8 million or 14.4%, to $22.0 million ($0.47 per Unit), compared to $19.2 million ($0.41 per Unit) in 2015.  The increase was primarily driven by the increase in FFO.

The REIT's unaudited condensed consolidated financial statements for the three and six months ended June 30, 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, Same Property 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 meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. 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 and six months ended June 30, 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, August 4, 2016 at 3:00 p.m. (ET) to discuss the financial results for the quarter ended June 30, 2016 and 2015.  To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID #45518343.

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 August 2, 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 June 30, 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

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890