Morguard North American Residential REIT Announces 2019 First Quarter Results

MISSISSAUGA, ON, April 30, 2019 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its financial results for the three months ended March 31, 2019.

Highlights

  The REIT is reporting first quarter performance of:

• Net operating income ("NOI") of $16.8 million for the three months ended March 31, 2019, a decrease of $0.3 million (or 1.6%), compared to 2018.
  
  
• Same Property Proportionate NOI in Canada increased by $0.7 million (or 5.9%), and in the U.S. increased by US$0.4 million (or 3.1%), compared to 2018.
  
  
• Basic funds from operations ("FFO") of $15.2 million for the three months ended March 31, 2019, an increase of $0.5 million (or 3.4%), over the same period in 2018.
  
  
• Basic FFO of $0.30 per Unit for the three months ended March 31, 2019, a 3.4% increase compared to $0.29 in 2018.
  
  
• FFO payout ratio for the three months ended March 31, 2019 of 56.7% compared to 57.0% in 2018.
  
  
• Net income of $3.7 million for the three months ended March 31, 2019, a decreased of $76.7 million, compared to 2018.

The REIT is reporting the following corporate and portfolio highlights:

• During and subsequent to the three months ended March 31, 2019, the REIT sold five properties located in Louisiana, comprising 843 suites for net proceeds of $27.5 million, after the assumption and repayment of mortgages payable. The disposition of the five Louisiana properties, having an average age of 40 years, follows the sale of the REIT's Alabama properties in July 2017 and is consistent with management's strategy to dispose of non-core assets and to focus on opportunities to acquire properties located in urban centres and major suburban markets in Canada and the United States.
  
  
• As at March 31, 2019, average monthly rent ("AMR") in Canada increased by 3.5% compared to March 31, 2018, while occupancy remained strong and stable at 99.3% at March 31, 2019, compared to 99.2% at March 31, 2018.
  
  
• As at March 31, 2019, AMR in U.S. on a Same Property basis, increased by 3.1% compared to March 31, 2018, while overall occupancy improved to 95.3% at March 31, 2019, compared to 92.6% at March 31, 2018.
  
  
• As at March 31, 2019 and December 31, 2018, the REIT's real estate properties were valued at $2.9 billion.
  
  
• As at March 31, 2019, indebtedness to gross book value ratio of 46.5%, was lower compared to 47.9% as at December 31, 2018.

Financial and Operational Highlights  

	March 31,	December 31,	March 31,
(In thousands of dollars, except as noted otherwise)	2019	2018	2018
Operational Information
Number of properties	43	47	46
Total suites	12,635	13,430	13,314
Occupancy percentage – Canada	99.3%	99.1%	99.2%
Occupancy percentage – U.S	95.3%	94.7%	92.3%
Average monthly rent - Canada (in actual dollars)	$1,383	$1,373	$1,336
Average monthly rent - U.S. (in actual U.S. dollars)	US$1,306	US$1,236	US$1,211
Summary of Financial Information
Gross book value	$2,956,962	$3,011,469	$2,766,375
Indebtedness	$1,373,881	$1,442,607	$1,388,655
Indebtedness to gross book value ratio	46.5%	47.9%	50.2%
Weighted average mortgage interest rate	3.48%	3.49%	3.51%
Weighted average term to maturity on mortgages payable (years)	5.6	5.8	6.0
Exchange rates - United States dollar to Canadian dollar	$1.34	$1.36	$1.29
Exchange rates - Canadian dollar to United States dollar	$0.75	$0.73	$0.78

For the three months ended March 31
(In thousands of dollars, except per Unit amounts)	2019	2018
Summary of Financial Information
Interest coverage ratio	2.26	2.17
Indebtedness coverage ratio	1.58	1.54
Revenue from real estate properties	$62,258	$58,094
NOI	$16,837	$17,110
Proportionate NOI	$31,920	$30,185
Same Property Proportionate NOI	$31,265	$29,148
NOI margin – IFRS	27.0%	29.5%
NOI margin – Proportionate	53.2%	53.8%
Net income	$3,726	$80,406
FFO – basic	$15,246	$14,749
FFO – diluted	$16,200	$15,662
FFO per Unit – basic	$0.30	$0.29
FFO per Unit – diluted	$0.29	$0.28
Distributions per Unit	$0.17	$0.165
FFO payout ratio	56.7%	57.0%
Weighted average number of Units outstanding (in thousands):
Basic	50,950	50,918
Diluted	55,183	55,491
Average exchange rates - United States dollar to Canadian dollar	$1.33	$1.26
Average exchange rates - Canadian dollar to United States dollar	$0.75	$0.79

Net Operating Income

For the three months ended March 31, 2019, NOI from the REIT's properties decreased by $0.3 million (or 1.6%) to $16.8 million, compared to $17.1 million in 2018. The decrease in NOI is due to a decrease from the disposition of four Louisiana properties of $0.4 million, partially offset by an increase in Same Property NOI of $0.2 million (or 1.0%). The Same Property increase of $0.2 million is due to an increase in Canada of $0.7 million (or 5.8%), a decrease in the U.S. of US$0.8 million (or 21.8%) and the change in foreign exchange rate which increased NOI by $0.3 million.

For the three months ended March 31, 2019, Proportionate NOI from the REIT's properties increased by $1.7 million (or 5.7%) to $31.9 million, compared to $30.2 million in 2018. The increase in Proportionate NOI is due to an increase in Same Property Proportionate NOI of $2.1 million (or 7.3%), partially offset by a decrease from the disposition of four Louisiana properties of $0.4 million. The Same Property increase of $2.1 million is due to an increase in Canada of $0.7 million (or 5.9%), an increase in the U.S. of US$0.4 million (or 3.1%) and the change in foreign exchange rate which increased Proportionate NOI by $1.0 million.

Funds From Operations

Basic FFO for the three months ended March 31, 2019, increased by $0.5 million, or 3.4%, to $15.2 million ($0.30 per Unit), compared to $14.7 million ($0.29 per Unit) in 2018. The increase is mainly due to higher Proportionate NOI of $1.7 million, partially offset by an increase in interest expense of $0.9 million (excluding distributions on Class B LP Units and fair value adjustments on the conversion option on the convertible debentures) and an increase in trust expenses of $0.3 million. The increase in interest expense of $0.9 million includes lower amortization of mark-to-market adjustments of $0.2 million and a $0.5 million loss on extinguishment of mortgages payable in connection with the disposal of four Louisiana properties.

Basic FFO per Unit for the three months ended March 31, 2019, increased by $0.01 to $0.30 per Unit, compared to $0.29 per Unit in 2018. The loss on extinguishment of mortgage payable in connection with the disposal of four Louisiana properties had a $0.01 per Unit negative impact and the change in the foreign exchange rate had a $0.01 per Unit positive impact.

Net Income

Net income of $3.7 million for the three months ended March 31, 2019, decreased by $76.7 million compared to $80.4 million in 2018. The decrease in net income was primarily due to the following:

• A decrease in net operating income of $0.3 million;
• An increase in interest expense of $2.9 million;
• An increase in trust expenses of $0.3 million;
• A decrease in equity income from investment of $0.2 million;
• An increase in foreign exchange loss of $1.0 million;
• A decrease in net fair value gain on real estate properties of $43.6 million;
• An increase in fair value loss on Class B LP Units of $44.3 million; and
• A decrease in income taxes (current and deferred) of $15.9 million.

The REIT's unaudited condensed consolidated financial statements for the three months ended March 31, 2019, 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 condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, Proportionate NOI, Same Property NOI, Same Property Proportionate NOI, FFO, indebtedness, gross book value, indebtedness to gross book value ratio, interest coverage ratio, indebtedness coverage ratio and Proportionate Basis (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, 2019 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 2, 2019 at 3:00 p.m. (ET) to discuss the financial results for the three months ended March 31, 2019 and 2018. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546.  Please quote conference ID 72740994.

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 12,587 residential suites (as of April 30, 2019) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina, Virginia and Maryland with an appraised value of approximately $2.9 billion at March 31, 2019. For more information, visit the REIT's website at www.morguard.com.

SOURCE Morguard North American Residential Real Estate Investment Trust

Morguard North American Residential REIT: K. Rai Sahi, Chief Executive Officer, [phone]; Christopher A. Newman, Chief Financial Officer, [phone]