Morguard North American Residential REIT Announces 2017 First Quarter Results

MISSISSAUGA, ON, May 2, 2017 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its financial results for the three months ended March 31, 2017.

First Quarter Highlights

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI") of $29.4 million for the three months ended March 31, 2017, an increase of $0.9 million, or 3.3% compared to 2016.

  • Basic funds from operations ("FFO") of $15.3 million for the three months ended March 31, 2017, an increase of $1.3 million, or 9.0% over the same period in 2016.

  • Basic FFO of $0.30 per Unit for the three months ended March 31, 2017 and 2016.

  • FFO payout ratio for the three months ended March 31, 2017 of 52.9%.

On January 9, 2017, the REIT completed an offering for 4,370,000 Units sold for a price of $13.75 per Unit for aggregate gross proceeds of $60.1 million

On February 1, 2017, the REIT repaid on maturity, four mortgages in the amount of $59.3 million (US$45.3 million) secured by four multi-suite residential properties located in Mobile, Alabama.

Financial and Operational Highlights

As at

March 31,

December 31,

March 31,

(In thousands of dollars, except as noted otherwise)

2017

2016

2016

Operational Information




Number of properties

46

46

46

Total suites

13,472

13,472

13,472

Occupancy percentage

95.6%

95.2%

95.0%

Average monthly rent - Canada (in actual dollars)

$1,301

$1,296

$1,273

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

US$1,043

US$1,038

US$1,011





Summary of Financial Information




Gross book value

$2,293,570

$2,285,727

$2,141,201

Indebtedness

$1,165,776

$1,237,613

$1,199,692

Indebtedness to gross book value ratio

51%

54%

56%

Weighted average mortgage interest rate

3.6%

3.6%

3.7%

Weighted average term to maturity on mortgages payable (years)

5.7

5.7

5.3

Exchange rates - Canadian dollar to United States dollar

$0.75

$0.74

$0.77

Exchange rates - United States dollar to Canadian dollar

$1.33

$1.34

$1.30

 

For the three months ended March 31


(In thousands of dollars, except per Unit amounts)

2017

2016

Summary of Financial Information



Interest coverage ratio

2.25

1.97

Indebtedness coverage ratio

1.53

1.36

Revenue from income producing properties

$55,621

$54,354

NOI

$16,917

$16,272

Adjusted NOI

$29,426

$28,482

Same Property Adjusted NOI

$28,659

$28,020

Net operating margin

53%

52%

FFO - basic

$15,277

$14,019

FFO - diluted

$15,965

$14,713

FFO per Unit - basic

$0.30

$0.30

FFO per Unit - diluted

$0.29

$0.29

Distributions per Unit

$0.16

$0.15

FFO payout ratio

52.9%

49.8%

Weighted average number of Units outstanding (in thousands):



Basic

50,499

46,528

Diluted

54,370

50,399

Average exchange rates - Canadian dollar to United States dollar

$0.76

$0.73

Average exchange rates - United States dollar to Canadian dollar

$1.32

$1.37

 

Net Operating Income

For the three months ended March 31


(In thousands of dollars)

2017

2016

Revenue from income producing properties



Same Property

$54,081

$53,419

Acquisitions

1,540

935

Total revenue from income producing properties

55,621

54,354

Property operating expenses



Same Property




Operating costs                                           

14,002

14,110


Realty taxes

18,903

18,411


Utilities

5,026

5,088

Same Property

37,931

37,609

Acquisitions

773

473

Total property operating expenses

38,704

38,082

NOI



Same Property

16,150

15,810

Acquisitions

767

462

Total NOI

16,917

16,272

Realty taxes accounted for under IFRIC 21

12,509

12,210

Adjusted NOI

$29,426

$28,482

 

For the three months ended March 31, 2017, consolidated Adjusted NOI increased by $0.9 million (or 3.3%) to $29.4 million, compared to $28.5 million in 2016.  The increase was due to a higher Adjusted NOI in Canada and the U.S. of $0.6 million (or 6.2%) and US$0.7 million (or 5.4%), respectively, partially offset by the change in the U.S. foreign exchange rate, which decreased Adjusted NOI by $0.4 million.  The increase in Adjusted NOI was attributable to an acquisition completed during the three months ended March 31, 2016 and an increase in Same Property NOI in Canada and the U.S. mainly driven by higher rental revenue, partially offset by an increase in overall operating expenses.

Funds from Operations

For the three months ended March 31


(In thousands of dollars, except per Unit amounts)

2017

2016

Net income (loss) attributable to unitholders

$2,028

($24,445)




Add (deduct):



Realty taxes accounted for under IFRIC 21

11,892

11,674

Fair value loss on conversion option on the Debentures

879

124

Distributions on Class B LP Units recorded as interest expense

2,756

2,583

Foreign exchange loss

190

1,246

Fair value gain on income producing properties, net

(23,351)

(6,189)

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

695

311

Fair value loss on Class B LP Units

20,324

21,013

Deferred income tax provision (recovery)

(136)

7,702

FFO – basic

$15,277

$14,019

Interest expense on the Debentures

688

694

FFO – diluted

$15,965

$14,713

FFO per Unit – basic

$0.30

$0.30

FFO per Unit – diluted

$0.29

$0.29

 

Basic FFO for the three months ended March 31, 2017, increased by $1.3 million, or 9.0%, to $15.3 million ($0.30 per Unit), compared to $14.0 million ($0.30 per Unit) in 2016.  The increase is mainly due to an increase in Adjusted NOI of $0.9 million, an increase in other income of $0.2 million and a decrease in interest expense of $0.3 million (excluding distributions on Class B LP Units and fair value loss on conversion option on the Debentures), partially offset by an increase in trust expenses of $0.1 million.  The change in foreign exchange rates had a negative impact on FFO of $0.4 million.

Excluding the impact of the offering, basic FFO per unit amounted to $0.32 per Unit for the three months ended March 31, 2017. The impact includes the dilution from additional Units of the offering offset by two months of interest savings on the repayment of mortgages on February 1, 2017.

Subsequent Event
The REIT entered into a binding agreement to acquire a newly-constructed property comprising 60 rental townhomes located in Toronto, Ontario, for a gross purchase price of $15.8 million. The acquisition is expected to close during the second quarter of 2017.

The REIT's unaudited condensed consolidated financial statements for the three months ended March 31, 2017, 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, 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, 2017 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 4, 2017 at 3:00 p.m. (ET) to discuss the financial results for the three months ended March 31, 2017 and 2016. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID # 2341221.

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 2, 2017) located in Alberta, Ontario, Colorado, Texas, Louisiana, Alabama, Georgia, Florida and North Carolina with an appraised value of approximately $2.2 billion as at March 31, 2017. 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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