Morguard North American Residential REIT Announces 2018 Third Quarter Results and an Increase to Monthly Cash Distribution
Oct 30, 2018
MISSISSAUGA, ON, Oct. 30, 2018 /CNW/ - Morguard North American Residential REIT (the "REIT") (TSX: MRG.UN) today announced its financial results for the three and nine months ended September 30, 2018.
Third Quarter Highlights
The Board of Trustees has also announced it will increase the REIT's annual cash distribution by $0.02 per Unit (3.03%). The increase is expected to be effective for the November 2018 distribution, payable in December 2018. This will bring the distributions to $0.68 per Unit on an annualized basis from the current level of $0.66 per Unit.
The REIT is reporting third quarter performance of:
- Net operating income ("NOI") of $38.2 million for the three months ended September 30, 2018, an increase of $3.0 million, or 8.5% compared to 2017.
- Proportionate net operating income ("Proportionate NOI") of $31.9 million for the three months ended September 30, 2018, an increase of $1.2 million, or 4.1% compared to 2017.
- Net income of $25.0 million for the three months ended September 30, 2018, an increase of $17.1 million compared to 2017. The increase was primarily due to an increase in NOI and higher non-cash changes to fair value on real estate properties, partially offset by higher fair value loss on Class B LP Units compared to 2017.
- Basic funds from operations ("FFO") of $15.5 million for the three months ended September 30, 2018, an increase of $1.0 million, or 7.0% over the same period in 2017.
- Basic FFO of $0.30 per Unit for the three months ended September 30, 2018, a 3.4% increase as compared to the $0.29 per Unit in 2017.
- FFO payout ratio for the three months ended September 30, 2018 of 54.2%.
The REIT is reporting the following corporate highlights:
- As at September 30, 2018, the REIT's overall occupancy was 96.0%, higher compared to 93.9% as at September 30, 2017.
- As at September 30, 2018, the REIT's real estate properties were valued at $2.8 billion compared to $2.6 billion as at December 31, 2017.
- As at September 30, 2018, indebtedness to gross book value ratio of 48.9%, lower compared to 51.4% as at December 31, 2017.
Financial and Operational Highlights
|
As at (In thousands of dollars, except as noted otherwise) |
September 30, |
December 31, |
September 30, |
|
Operational Information |
|||
|
Number of properties |
47 |
46 |
46 |
|
Total suites |
13,430 |
13,314 |
13,314 |
|
Occupancy percentage |
96.0% |
94.4% |
93.9% |
|
Average monthly rent - Canada (in actual dollars) |
$1,358 |
$1,327 |
$1,320 |
|
Average monthly rent - U.S. (in actual U.S. dollars) |
US$1,231 |
US$1,203 |
US$1,202 |
|
Summary of Financial Information |
|||
|
Gross book value |
$2,865,815 |
$2,651,097 |
$2,575,375 |
|
Indebtedness |
$1,402,130 |
$1,363,228 |
$1,403,950 |
|
Indebtedness to gross book value ratio |
48.9% |
51.4% |
54.5% |
|
Weighted average mortgage interest rate |
3.5% |
3.5% |
3.5% |
|
Weighted average term to maturity on mortgages payable (years) |
6.1 |
6.2 |
6.2 |
|
Exchange rates - United States dollar to Canadian dollar |
$1.29 |
$1.25 |
$1.25 |
|
Exchange rates - Canadian dollar to United States dollar |
$0.77 |
$0.80 |
$0.80 |
|
Three months ended |
Nine months ended |
|||
|
September 30 |
September 30 |
|||
|
(In thousands of dollars, except per Unit amounts) |
2018 |
2017 |
2018 |
2017 |
|
Summary of Financial Information |
||||
|
Interest coverage ratio |
2.21 |
2.12 |
2.21 |
2.25 |
|
Indebtedness coverage ratio |
1.60 |
1.52 |
1.59 |
1.56 |
|
Revenue from real estate properties |
$61,172 |
$56,787 |
$179,239 |
$169,609 |
|
NOI |
$38,183 |
$35,202 |
$93,616 |
$87,284 |
|
Proportionate NOI |
$31,884 |
$30,641 |
$94,031 |
$89,693 |
|
Same Property Proportionate NOI |
$28,761 |
$27,220 |
$84,734 |
$82,576 |
|
NOI margin - IFRS |
62.4% |
62.0% |
52.2% |
51.5% |
|
NOI margin - Proportionate |
54.2% |
54.5% |
54.5% |
53.9% |
|
Net income |
$25,012 |
$7,907 |
$125,105 |
$71,932 |
|
FFO - basic |
$15,510 |
$14,489 |
$45,946 |
$46,071 |
|
FFO - diluted |
$16,490 |
$15,192 |
$48,798 |
$48,158 |
|
FFO per Unit - basic |
$0.30 |
$0.29 |
$0.90 |
$0.91 |
|
FFO per Unit - diluted |
$0.30 |
$0.28 |
$0.88 |
$0.88 |
|
Distributions per Unit |
$0.165 |
$0.16 |
$0.495 |
$0.48 |
|
FFO payout ratio |
54.2% |
56.2% |
54.9% |
52.9% |
|
Weighted average number of Units outstanding (in thousands): |
||||
|
Basic |
50,935 |
50,900 |
50,926 |
50,766 |
|
Diluted |
55,168 |
54,771 |
55,271 |
54,637 |
|
Average exchange rates - United States dollar to Canadian dollar |
$1.31 |
$1.25 |
$1.29 |
$1.31 |
|
Average exchange rates - Canadian dollar to United States dollar |
$0.77 |
$0.80 |
$0.78 |
$0.76 |
Net Income
Net income of $25.0 million for the three months ended September 30, 2018, increased by $17.1 million compared to $7.9 million in 2017. The increase in net income was primarily due to the following:
- An increase in net operating income of $3.0 million;
- An increase in interest expense of $1.6 million;
- An increase in trust expenses of $0.3 million;
- An increase in equity income from investment of $1.5 million;
- A decrease in foreign exchange loss of $0.4 million;
- An increase in other income of $0.7 million;
- An increase in net fair value gain on real estate properties of $23.3 million;
- An increase in fair value loss on Class B LP Units of $12.6 million; and
- A decrease in income taxes (current and deferred) of $2.6 million.
Net Operating Income
Three months ended September 30, 2018
For the three months ended September 30, 2018, NOI from the REIT's properties increased by $3.0 million (or 8.5%) to $38.2 million, compared to $35.2 million in 2017. The increase in NOI is due to an increase in Same Property NOI of $1.9 million (or 6.0%) and an increase from acquisitions net of disposition of properties of $1.1 million. The Same Property increase of $1.9 million is due to an increase in Canada of $0.4 million (or 3.5%), an increase in the U.S. of US$0.5 million (or 3.3%) and the change in foreign exchange rate which increased NOI by $1.0 million.
For the three months ended September 30, 2018, Proportionate NOI from the REIT's properties increased by $1.2 million (or 4.1%) to $31.9 million, compared to $30.7 million in 2017. The increase in Proportionate NOI is due to an increase in Same Property Proportionate NOI of $1.5 million (or 5.7%) and a decrease from acquisitions net of the disposal of properties of $0.3 million. The Same Property increase of $1.5 million is due to an increase in Canada of $0.4 million (or 3.4%), an increase in the U.S. of US$0.4 million (or 3.6%) and the change in foreign exchange rate which increased Proportionate NOI by $0.7 million.
Nine months ended September 30, 2018
For the nine months ended September 30, 2018, NOI from the REIT's properties increased by $6.3 million (or 7.3%) to $93.6 million, compared to $87.3 million in 2017. The increase in NOI is due to an increase in Same Property NOI of $2.5 million (or 3.1%) and an increase from acquisitions net of dispositions of properties of $3.8 million. The Same Property increase of $2.5 million is due to an increase in Canada of $2.0 million (or 5.7%), an increase in the U.S. of US$0.8 million (or 2.2%) and the change in foreign exchange rate which decreased NOI by $0.3 million.
For the nine months ended September 30, 2018, Proportionate NOI from the REIT's properties increased by $4.3 million (or 4.8%) to $94.0 million, compared to $89.7 million in 2017. The increase in Proportionate NOI is due to an increase in Same Property Proportionate NOI of $2.1 million (or 2.6%) and an increase from acquisitions net of the disposal of properties of $2.2 million. The Same Property increase of $2.1 million is due to an increase in Canada of $1.9 million (or 5.6%), an increase in the U.S. of US$0.8 million (or 2.2%) and the change in foreign exchange rate which decreased Proportionate NOI by $0.6 million.
Funds From Operations
Three months ended September 30, 2018
Basic FFO for the three months ended September 30, 2018, increased by $1.0 million, or 7.0%, to $15.5 million ($0.30 per Unit), compared to $14.5 million ($0.29 per Unit) in 2017. The increase is mainly due to higher Proportionate NOI of $1.2 million and an increase in other income of $0.7 million, partially offset by an increase in interest expense of $0.6 million (calculated on a Proportionate Basis and excludes 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.
Basic FFO per Unit for the three months ended September 30, 2018, increased by $0.01 to $0.30 per Unit, compared to $0.29 per Unit for the three months ended September 30, 2017. The change in the foreign exchange rate had a $0.01 per Unit positive impact.
Nine months ended September 30, 2018
Basic FFO for the nine months ended September 30, 2018, decreased by $0.2 million, or 0.3%, to $45.9 million ($0.90 per Unit), compared to $46.1 million ($0.91 per Unit) in 2017. The decrease is mainly due to an increase in interest expense of $4.2 million (calculated on a Proportionate Basis and excludes 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 $0.7 million, partially offset by higher Proportionate NOI of $4.3 million and an increase in other income of $0.4 million.
Basic FFO per Unit for the nine months ended September 30, 2018, decreased by $0.01 to $0.90 per Unit, compared to $0.91 per Unit for the nine months ended September 30, 2017. The change in the foreign exchange rate had a $0.01 per Unit negative impact.
The REIT's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2018, 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.
Distribution Increase
The Board of Trustees has also announced it will increase the REIT's annual cash distribution by $0.02 per Unit (3.03%). The increase is expected to be effective for the November 2018 distribution, payable in December 2018. This will bring the distributions to $0.68 per Unit on an annualized basis from the current level of $0.66 per Unit.
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 nine months ended September 30, 2018 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, November 1, 2018 at 3:00 p.m. (ET) to discuss the financial results for the nine months ended September 30, 2018 and 2017. To participate in the conference call, please dial 416-764-8688 or 1-888-390-0546. Please quote conference ID # 50668969.
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 13,430 residential suites (as of October 30, 2018) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina, Virginia and Maryland with an appraised value of approximately $2.6 billion at September 30, 2018. 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