Morguard North American Residential REIT Announces 2016 Second Quarter Results
Aug 2, 2016
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 |
June 30, |
December 31, |
June 30, |
|
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 |
Six months ended |
|||
|
(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 |
Six months ended |
||||
|
(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 |
Six months ended |
|||
|
(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 |
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 |
Six months ended |
|||
|
(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 |
93 |
110 |
192 |
219 |
|
Non-controlling interests' share of amortization of deferred |
(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