Morguard North American Residential REIT Announces 2019 Second Quarter Results
MISSISSAUGA, ON, July 30, 2019 /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, 2019.
Highlights
The REIT is reporting second quarter performance of:
-- Net operating income ("NOI") of $39.0 million for the three months ended
June 30, 2019, an increase of $0.7 million, or 1.7% compared to 2018.
-- Same Property Proportionate NOI increased by $0.9 million (or 3.0%) to
$31.8 million, compared to 2018.
-- Basic funds from operations ("FFO") of $15.7 million for the three
months ended June 30, 2019, compared to $15.7 million over the same
period in 2018.
-- Basic FFO of $0.31 per Unit for the three months ended June 30, 2019,
compared to the $0.31 per Unit over the same period in 2018.
-- FFO payout ratio for the three months ended June 30, 2019 of 55.1%
compared to 53.6% in 2018.
-- Net income of $41.9 million for the three months ended June 30, 2019, an
increase of $22.2 million, compared to 2018.
The REIT is reporting the following corporate and portfolio highlights:
-- On April 30, 2019, the REIT sold a property located in Harahan,
Louisiana, comprising 48 suites, for gross proceeds of $4,428
(US$3,298), including closing costs, and the purchaser assumed the
mortgage secured by the property in the amount of $2,852 (US$2,125).
-- On May 22, 2019, the REIT acquired partial interests in three properties
controlled by the REIT located in Mississauga, Ontario, for a purchase
price of $8,014, including closing costs and the assumption of partial
interest of the mortgages secured by the properties.
-- As at June 30, 2019, average monthly rent ("AMR") in Canada increased by
4.0% compared to June 30, 2018, while occupancy remained strong and
stable at 98.8% at June 30, 2019, compared to 99.2% at June 30, 2018.
-- As at June 30, 2019, AMR in U.S. on a Same Property basis, increased by
3.0% compared to June 30, 2018, while occupancy improved to 95.2% at
June 30, 2019, compared to 94.1% at June 30, 2018.
-- As at June 30, 2019, and December 31, 2018, the REIT's real estate
properties were valued at $2.9 billion.
-- As at June 30, 2019, the REIT's indebtedness to gross book value ratio
was 46.1%, compared to 47.9% as at December 31, 2018.
Financial and Operational Highlights
As at
June 30,
December 31,
June 30,
(In thousands of dollars, except as noted otherwise) 2019 2018 2018
---
Operational Information
Number of properties 42 47 47
Total suites 12,587 13,430 13,430
Occupancy percentage - Canada 98.8% 99.1% 99.2%
Occupancy percentage - U.S. 95.2% 94.7% 93.7%
Average monthly rent - Canada (in actual dollars) $1,399 $1,373 $1,345
Average monthly rent - U.S. (in actual U.S. dollars)
US$1,319
US$1,236
US$1,221
Summary of Financial Information
Gross book value $2,952,777 $3,011,469 $2,857,537
Indebtedness $1,360,870 $1,442,607 $1,413,008
Indebtedness to gross book value ratio 46.1% 47.9% 49.4%
Weighted average mortgage interest rate 3.48% 3.49% 3.48%
Weighted average term to maturity on mortgages payable (years) 5.3 5.8 6.3
---
Exchange rates - United States dollar to Canadian dollar $1.31 $1.36 $1.32
Exchange rates - Canadian dollar to United States dollar $0.76 $0.73 $0.76
===
Three months ended Six months ended
June 30 June 30
(In thousands of
dollars, except
per Unit amounts) 2019 2018 2019 2018
---
Summary of
Financial
Information
Interest coverage
ratio 2.28 2.24 2.27 2.20
Indebtedness
coverage ratio 1.60 1.61 1.59 1.58
Revenue from real
estate properties $60,960 $59,973 $123,218 $118,067
NOI $38,989 $38,323 $55,826 $55,433
Proportionate NOI $31,929 $31,962 $63,849 $62,147
Same Property
Proportionate NOI $31,808 $30,879 $62,975 $59,934
NOI margin -IFRS 64.0% 63.9% 45.3% 47.0%
NOI margin -
Proportionate 54.4% 55.5% 53.8% 54.6%
Net income $41,912 $19,687 $45,638 $100,093
FFO -basic $15,697 $15,687 $30,943 $30,436
FFO -diluted $16,656 $16,646 $32,856 $32,308
FFO per Unit -
basic $0.31 $0.31 $0.61 $0.60
FFO per Unit -
diluted $0.31 $0.30 $0.60 $0.58
Distributions per
Unit $0.17 $0.165 $0.34 $0.33
FFO payout ratio 55.1% 53.6% 55.9% 55.2%
---
Weighted average
number of Units
outstanding (in
thousands):
Basic 50,958 50,926 50,954 50,922
Diluted 55,191 55,159 55,187 55,324
---
Average exchange
rates -United
States dollar to
Canadian dollar $1.34 $1.29 $1.33 $1.28
Average exchange
rates -Canadian
dollar to United
States dollar $0.75 $0.77 $0.75 $0.78
===
Net Income
Net income of $41.9 million for the three months ended June 30, 2019, increased by $22.2 million compared to $19.7 million in 2018. The increase in net income was primarily due to the following:
-- An increase in net operating income of $0.7 million;
-- A decrease in interest expense of $0.5 million;
-- An increase in equity income from investment of $1.4 million;
-- An increase in foreign exchange loss of $0.9 million;
-- A decrease in net fair value gain on real estate properties of $3.6
million;
-- An decrease in fair value loss on Class B LP Units of $22.4 million; and
-- A decrease in income taxes (current and deferred) of $1.7 million.
Net Operating Income
Three months ended June 30, 2019
For the three months ended June 30, 2019, NOI from the REIT's properties increased by $0.7 million (or 1.7%) to $39.0 million, compared to $38.3 million in 2018. The increase in NOI is due to an increase in Same Property NOI of $1.8 million (or 4.9%) and a decrease of $1.2 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT. The Same Property increase of $1.8 million is due to an increase in Canada of $0.2 million (or 1.7%), an increase in the U.S. of US$0.6 million (or 3.0%) and the change in foreign exchange rate which increased NOI by $1.0 million.
For the three months ended June 30, 2019, Proportionate NOI from the REIT's properties decreased by $0.1 million (or 0.1%) to $31.9 million, compared to $32.0 million in 2018. The decrease in Proportionate NOI is due to a decrease of $1.0 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT and an increase in Same Property Proportionate NOI of $0.9 million (or 3.0%). The Same Property increase of $0.9 million is due to an increase in Canada of $0.2 million (or 1.6%), an increase in the U.S. of US$0.1 million (or 0.4%) and the change in foreign exchange rate which increased Proportionate NOI by $0.6 million.
Six months ended June 30, 2019
For the six months ended June 30, 2019, NOI from the REIT's properties increased by $0.4 million (or 0.7%) to $55.8 million, compared to $55.4 million in 2018. The increase in NOI is due to an increase in Same Property NOI of $2.0 million (or 3.7%) and a decrease of $1.6 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT. The Same Property increase of $2.0 million is due to an increase in Canada of $0.9 million (or 3.7%), a decrease in the U.S. of US$0.2 million (or 1.1%) and the change in foreign exchange rate which increased NOI by $1.3 million.
For the six months ended June 30, 2019, Proportionate NOI from the REIT's properties increased by $1.7 million (or 2.7%) to $63.8 million, compared to $62.1 million in 2018. The increase in Proportionate NOI is due to an increase in Same Property Proportionate NOI of $3.0 million (or 5.1%) and a decrease of $1.3 million from the disposition of properties net of the acquisition of partial interests in three properties controlled by the REIT. The Same Property increase of $3.0 million is due to an increase in Canada of $0.9 million (or 3.7%), an increase in the U.S. of US$0.5 million (or 1.7%) and the change in foreign exchange rate which increased Proportionate NOI by $1.6 million.
Funds From Operations
Three months ended June 30, 2019
Basic FFO for the three months ended June 30, 2019 was $15.7 million ($0.31 per Unit), compared to $15.7 million ($0.31 per Unit) in 2018. An increase in other income of $0.1 million was offset by $0.1 million due to lower Proportionate NOI and increase in interest expense (excluding distributions on Class B LP Units and fair value adjustments on the conversion option on the convertible debentures). The increase in interest expense includes lower amortization of mark-to-market adjustments of $0.2 million and a $0.1 million loss on extinguishment of mortgage payable in connection with the disposal of five Louisiana properties.
Basic FFO per Unit for the three months ended June 30, 2019, was $0.31 per Unit, compared to $0.31 per Unit for the three months ended June 30, 2018. The change in the foreign exchange rate had a $0.01 per Unit positive impact and the disposal of the five Louisiana properties had a $0.01 per Unit negative impact.
Six months ended June 30, 2019
Basic FFO for the six months ended June 30, 2019, increased by $0.5 million, or 1.7%, to $30.9 million ($0.61 per Unit), compared to $30.4 million ($0.60 per Unit) in 2018. The increase is mainly due to higher Proportionate NOI of $1.7 million and an increase in other income of $0.1 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 $0.4 million and a $0.6 million loss on extinguishment of mortgage payable in connection with the disposal of five Louisiana properties.
Basic FFO per Unit for the six months ended June 30, 2019, increased by $0.01 to $0.61 per Unit, compared to $0.60 per Unit for the six months ended June 30, 2018. The change in the foreign exchange rate had a $0.02 per Unit positive impact and the disposal of the five Louisiana properties had a $0.02 per Unit negative impact.
The REIT's unaudited condensed consolidated financial statements for the three and six months ended June 30, 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 and six months ended June 30, 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, August 1, 2019 at 3:00 p.m. (ET) to discuss the financial results for the six months ended June 30, 2019 and 2018. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546. Please quote conference ID # 98673063.
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. The REIT's portfolio consists of 12,587 residential suites (as of July 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 June 30, 2019. For more information, visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate Investment Trust
