Morguard North American Residential REIT Announces 2015 Results
Feb 17, 2016
MISSISSAUGA, ON, Feb. 17, 2016 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its results for the year ended December 31, 2015.
Highlights
The REIT is reporting performance of:
- Adjusted net operating income ("Adjusted NOI") of $103.7 million for the year ended December 31, 2015, an increase of $13.5 million, or 15.0% compared to 2014.
- Basic funds from operations ("FFO") of $51.1 million for the year ended December 31, 2015, an increase of $6.4 million, or 14.3% compared to 2014.
- Basic FFO of $1.10 per Unit for the year ended December 31, 2015, a 14.6% increase as compared to the $0.96 per Unit for 2014.
- Basic adjusted funds from operations ("AFFO") of $0.85 per Unit for the year ended December 31, 2015, a 26.9% increase as compared to the $0.67 per Unit generated over the same period in 2014.
- FFO and AFFO payout ratios for the year ended December 31, 2015 of 54.6% and 70.5%, respectively.
- Average monthly rent increased by 4.3% at December 31, 2015, compared to 2014. Occupancy decreased to 94.8% at December 31, 2015 from 96.0% at December 31, 2014.
- Acquisition of a 51% interest in a garden-style property comprising of 252 suites located in Cooper City, Florida (the "Monterra Acquisition"), for a gross purchase price of $73.9 million (US$56.0 million). The acquisition was funded by cash on hand and a mortgage of $41.3 million (US$29.6 million) at an interest rate of 3.86% for a term of seven years.
Financial and Operational Highlights
|
As at December 31, |
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|
(In thousands of dollars, except as noted otherwise) |
2015 |
2014 |
|
|
Operational Information |
|||
|
Number of properties |
45 |
44 |
|
|
Total suites |
13,102 |
12,850 |
|
|
Occupancy percentage |
94.8% |
96.0% |
|
|
Average Monthly Rent - Canada (in actual dollars) |
$1,272 |
$1,246 |
|
|
Average Monthly Rent - U.S. (in actual U.S. dollars) |
US$1,002 |
US$945 |
|
|
Summary of Financial Information |
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|
Gross book value |
$2,160,015 |
$1,832,287 |
|
|
Indebtedness |
$1,186,131 |
$1,022,555 |
|
|
Indebtedness to gross book value ratio |
55% |
56% |
|
|
Weighted average mortgage interest rate |
3.8% |
3.9% |
|
|
Weighted average term to maturity on mortgages payable (years) |
5.1 |
5.6 |
|
|
Exchange rates - Canadian dollar to United States dollar |
$0.72 |
$0.86 |
|
|
Exchange rates - United States dollar to Canadian dollar |
$1.38 |
$1.16 |
|
Financial and Operational Highlights (Continued)
|
For the years ended December 31, |
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|
(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
|
Summary of Financial Information |
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|
Interest coverage ratio |
1.96 |
1.85 |
|
Indebtedness coverage ratio |
1.33 |
1.33 |
|
Revenue from income producing properties |
$198,442 |
$174,815 |
|
NOI |
$104,182 |
$90,217 |
|
Adjusted NOI |
$103,710 |
$90,217 |
|
Net operating margin |
52% |
52% |
|
FFO - basic |
$51,112 |
$44,726 |
|
FFO - diluted |
$53,902 |
$47,516 |
|
FFO per Unit - basic |
$1.10 |
$0.96 |
|
FFO per Unit - diluted |
$1.07 |
$0.94 |
|
AFFO - basic |
$39,627 |
$31,031 |
|
AFFO - diluted |
$42,417 |
$33,821 |
|
AFFO per Unit - basic |
$0.85 |
$0.67 |
|
AFFO per Unit - diluted |
$0.84 |
$0.67 |
|
Distributions per Unit |
$0.60 |
$0.60 |
|
FFO payout ratio |
54.6% |
62.5% |
|
AFFO payout ratio |
70.5% |
89.6% |
|
Weighted average number of Units outstanding (in thousands): |
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|
Basic |
46,545 |
46,522 |
|
Diluted |
50,416 |
50,393 |
|
Average exchange rates - Canadian dollar to United States dollar |
$0.78 |
$0.91 |
|
Average exchange rates - United States dollar to Canadian dollar |
$1.28 |
$1.10 |
Net Operating Income
|
For the years ended December 31, |
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|
(In thousands of dollars) |
2015 |
2014 |
|
|
Revenue from income producing properties |
$198,442 |
$174,815 |
|
|
Property operating expenses |
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|
Operating costs |
55,068 |
48,824 |
|
|
Realty taxes |
22,162 |
20,014 |
|
|
Utilities |
17,030 |
15,760 |
|
|
Total property operating expenses |
94,260 |
84,598 |
|
|
NOI |
104,182 |
$90,217 |
|
|
Realty taxes accounted for under IFRIC 21 |
(472) |
- |
|
|
Adjusted NOI |
$103,710 |
$90,217 |
|
For the year ended December 31, 2015, consolidated Adjusted NOI increased by $13.5 million (or 15.0%) to $103.7 million, compared to $90.2 million in 2014. The increase was due to an increase in Adjusted NOI in Canada and the U.S. of $2.0 million (or 5.6%) and US$2.3 million (or 4.7%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $9.2 million. The increase in Adjusted NOI was due to higher rental revenue and lower overall operating expense in Canada and the Monterra Acquisition, partially offset by an increase in operating cost in the U.S.
Funds from Operations ("FFO")
|
For the years ended December 31, |
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|
(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
|
Net income attributable to unitholders |
$38,784 |
$38,157 |
|
Add (deduct): |
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|
Realty taxes accounted for under IFRIC 21 |
(241) |
- |
|
Fair value gain on conversion option on the Debentures |
(53) |
(57) |
|
Distributions on Class B LP Units recorded as interest expense |
10,333 |
10,333 |
|
Foreign exchange gain |
(2,882) |
(830) |
|
Fair value gain on income producing properties, net |
(38,804) |
(40,104) |
|
Non-controlling interests' share of fair value gain on income producing properties |
(413) |
610 |
|
Fair value loss on Class B LP Units |
11,195 |
10,506 |
|
Deferred income tax provision |
33,193 |
26,111 |
|
FFO - basic |
$51,112 |
$44,726 |
|
Interest expense on the Debentures |
2,790 |
2,790 |
|
FFO - diluted |
$53,902 |
$47,516 |
|
FFO per Unit - basic |
$1.10 |
$0.96 |
|
FFO per Unit - diluted |
$1.07 |
$0.94 |
Basic FFO for the year ended December 31, 2015, increased by $6.4 million, or 14.3%, to $51.1 million ($1.10 per Unit), compared to $44.7 million ($0.96 per Unit) in 2014. The increase is mainly due to an increase in Adjusted NOI of $13.5 million, partially offset by an increase in interest expense of $3.0 million (excluding distributions on Class B LP Units and fair value adjustments), an increase in trust expenses of $1.7 million and a decrease in other income resulting from the 2014 gain on early extinguishment of mortgage payable of $1.5 million. The change in foreign exchange rates had a positive impact on FFO of $4.9 million, an amount that is predominantly included in the increase to NOI and interest expense.
Adjusted Funds from Operations ("AFFO")
|
For the years ended December 31, |
||
|
(In thousands of dollars, except per Unit amounts) |
2015 |
2014 |
|
FFO - basic |
$51,112 |
$44,726 |
|
Add (deduct): |
||
|
Amortization of mark-to-market adjustments on mortgages |
(6,740) |
(7,457) |
|
Amortization of deferred financing costs assumed on the Initial Properties |
440 |
818 |
|
Non-controlling interests' share of amortization of deferred financing costs assumed on the Initial Properties |
(8) |
(35) |
|
Gain from early extinguishment of mortgages payable |
- |
(1,517) |
|
Amortization of tenant incentive and cash flow hedge |
565 |
218 |
|
Maintenance capital expenditures |
(5,742) |
(5,722) |
|
AFFO – basic |
39,627 |
31,031 |
|
Interest expense on the Debentures |
2,790 |
2,790 |
|
AFFO – diluted |
$42,417 |
$33,821 |
|
AFFO per Unit – basic |
$0.85 |
$0.67 |
|
AFFO per Unit – diluted |
$0.84 |
$0.67 |
Basic AFFO for the year ended December 31, 2015, increased by $8.6 million or 27.7%, to $39.6 million ($0.85 per Unit), compared to $31.0 million ($0.67 per Unit) in 2014. The increase was primarily driven by the increase in FFO and the 2014 deduction included in AFFO from the gain on early extinguishment of mortgages payable of $1.5 million.
Subsequent Events
On January 26, 2016, the REIT repurchased 70,400 Units under its NCIB for cash consideration of $0.7 million at a weighted average price of $10.45 per Unit.
On February 1, 2016, the REIT acquired a multi-suite residential property comprising 370 suites located in Ottawa, Ontario, from a third party for a gross purchase price of approximately $67.0 million. The acquisition was partially financed by a new mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.
The REIT's audited consolidated financial statements for the year ended December 31, 2015, 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, 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 year ended December 31, 2015 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, February 18, 2016 at 3:00 p.m. (ET) to discuss the financial results for the year ended December 31, 2015 and 2014. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID # 34555610.
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 February 16, 2016) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $2.0 billion as at December 31, 2015. 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