Morguard North American Residential REIT Announces 2013 Second Quarter Results

TSX: MRG.UN

MISSISSAUGA, ON, July 31, 2013 /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, 2013.

All amounts in CAD thousands, except suites and per unit amounts, unless otherwise noted.

PORTFOLIO HIGHLIGHTS

• Between April 17, 2013 and May 22, 2013, the REIT acquired 12 multi-unit residential properties, comprised of 3,752 suites located in Colorado, Florida, North Carolina, Georgia and Texas for US$450,000 financed by the assumption of in-place mortgages of US$218,676 and newly arranged mortgages of US$57,660.
• On June 28, 2013, the REIT acquired from Morguard Corporation six multi-unit residential properties comprised of 1,690 suites located in Alabama and Florida for US$88,990 financed by the assumption of in-place mortgages of US$64,364.
• The REIT's property portfolio is now valued at $1.6 billion (139% increase over IPO) and is comprised of 12,850 suites (139% increase over IPO).
• FFO payout ratio for Q2 2013 was 83.3% (AFFO payout ratio - 93.8%)
• The REIT completed the refinancing of one Canadian property in the amount of $35,838 (maturing principal was $22,614) at an interest rate of 2.96% (maturing interest rate was 6.0%) for a term of 10 years.

 

FINANCIAL AND OPERATIONAL HIGHLIGHTS
As at		June 30, 2013			December 31, 2012				June 30, 2012
Operational information
Number of properties		44			20				17
Total suites		12,850			6,376				5,439
Occupancy percentage		95.5%			96.7%				98.4%
Monthly weighted average in-place rent		$1,041			$1,133				$1,134
Summary of Financial Information
Total gross book value		$1,642,905			$1,020,681				$740,332
Debt		$930,371			$432,020				$386,157
Debt to gross book value		57%			42%				52%
Weighted average interest rate on mortgage payable		4.2%			4.3%				4.4%
Weighted average term to maturity on mortgage payable (years)		4.8			4.7				4.3

 

 

FINANCIAL AND OPERATIONAL HIGHLIGHTS (cont'd)
(in thousands of dollars, except per unit amounts)	Three months ended June 30,				Six months ended June 30,
	2013	2012			2013	2012
Summary of Financial Information
Revenue from income producing properties	$34,716	$18,941			$59,563	$37,584
Net operating income	$18,152	$10,758			$30,781	$20,010
Interest coverage	1.75	2.25			1.84	2.18
Funds from Operations (FFO) - basic	$8,193	$5,268			$14,570	$9,499
Funds from Operations (FFO) - diluted	$8,897	$5,268			$15,396	$9,499
FFO per unit - basic and diluted	$0.18	$0.21			$0.34	$0.37
Adjusted Funds from Operations (AFFO) - basic	$7,395	$5,020			$13,371	$9,073
Adjusted Funds from Operations (AFFO) - diluted	$8,099	$5,020			$14,197	$9,073
AFFO per unit - basic and diluted	$0.16	$0.20			$0.31	$0.36
FFO payout ratio	83.33%	71.43%			88.24%	81.08%
AFFO payout ratio	93.75%	75.00%			96.77%	83.33%
Weighted average number of units outstanding during the period (000's)
- Basic	46,501	25,473			43,159	25,473
- Diluted	50,372	25,473			45,469	25,473

 

 

NET OPERATING INCOME
		Three months ended June 30,				Six months ended June 30,
(In thousands of dollars)		2013	2012			2013	2012
Revenue from income producing properties
Same property		$19,145	$18,941			$38,198	$37,584
Acquisitions		15,571	-			21,365	-
Total revenue from income producing properties		34,716	18,941			59,563	37,584
Property Operating Expenses
Same property
	Operating expenses	$4,784	$4,391			$9,179	$8,722
	Utilities	1,994	1,987			4,803	4,830
	Taxes	2,221	1,805			4,463	4,022
Same property		8,999	8,183			18,445	17,574
Acquisitions		7,565	-			10,337	-
Total property operating expenses		16,564	8,183			28,782	17,574
Net Operating Income
Same property		10,146	10,758			19,753	20,010
Acquisitions		8,006	-			11,028	-
Total Net Operating Income		$18,152	$10,758			$30,781	$20,010

 

Net operating income increased by $7.4 million during the three months ended June 30, 2013, to $18.2 million, compared to $10.8 million in 2012 and increased by $10.8 million for the six months ended June 30, 2013, to $30.8 million, compared to $20.0 million in 2012.  The increase was predominantly due to the U.S. acquisitions (24 properties acquired during the current year and three properties acquired during the third quarter of 2012), which increased NOI by $8.0 million for the three months ended and $11.0 million for the six months ended June 30, 2013.  The positive impact of the acquisitions was partially offset by a decrease in NOI for the Canadian properties due to an increase in realty taxes for non-recurring prior year tax rebates received in 2012 of $0.3 million and an increase in repairs and maintenance for the Canadian and the three U.S. properties that were acquired as part of the Initial Public Offering.

 

FUNDS FROM OPERATIONS ("FFO")	Three months ended June 30,				Six months ended June 30,
(In thousands of dollars, except per unit amounts)	2013	2012			2013	2012
Net income for the period attributable to the unitholders	$24,192	$91,181			$20,253	$96,773
Add (deduct):
Fair value (gain) loss on income producing properties	(2,598)	(34,629)			3,214	(37,223)
Non-controlling interests' share of fair value gain on   income producing properties	131	1,001			196	1,143
Fair value (gain) loss on Class B LP Units	(18,600)	20,496			(17,223)	20,496
Distributions on Class B LP Units recorded as interest   expense	2,584	2,094			5,167	2,094
Deferred income tax provision (recovery)	2,484	(74,875)			2,963	(73,784)
Funds from operations	$8,193	$5,268			$14,570	$9,499
Interest expense on convertible debentures	704	-			826	-
Diluted FFO	$8,897	$5,268			$15,396	$9,499
FFO per unit - basic and diluted	$0.18	$0.21			$0.34	$0.37

 

FFO increased by $2.9 million or 55.5% during the three months ended June 30, 2013, to $8.2 million ($0.18 per unit) compared to $5.3 million ($0.21 per unit) in 2012 and increased by $5.1 million for the six months ended June 30, 2013, to $14.6 million ($0.34 per unit) compared to $9.5 million ($0.37 per unit) in 2012.  The increase in FFO is mainly attributable to the U.S. acquisitions which had a positive impact on NOI of $8.0 million for the three months ended and $11.0 million for the six months ended June 30, 2013.  The increase in NOI was partially offset by an increase in interest expense of $4.2 million for the three months ended and $5.4 million for the six months ended June 30, 2013 due to the mortgages on the U.S. acquisitions and the convertible debentures issued during the first quarter of 2013.  Trust expenses also increased by $0.9 million for the three months ended and $1.8 million for the six months ended June 30, 2013 predominantly due to an increase in asset management fee on the acquisitions completed in 2013.

 

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")
	Three months ended June 30,				Six months ended June 30,
(In thousands of dollars, except per unit amounts)	2013	2012			2013	2012
Funds from Operations	$8,193	$5,268			$14,570	$9,499
Add (deduct):
Amortization of deferred financing costs assumed on   Initial Properties	366	309			733	689
Non-controlling interests' share of amortization of deferred   financing costs assumed on Initial Properties	(10)	(11)			(23)	(22)
Maintenance capital expenditures	(1,207)	(597)			(2,014)	(1,194)
Amortization of cash flow hedge	53	51			105	101
Adjusted funds from operations	7,395	5,020			13,371	9,073
Interest expense on convertible debentures	704	-			826	-
Diluted AFFO	$8,099	$5,020			$14,197	$9,073
AFFO per unit - basic and diluted	$0.16	$0.20			$0.31	$0.36

 

AFFO increased by $2.4 million during the three months ended June 30, 2013, to $7.4 million ($0.16 per unit) compared to $5.0 million ($0.20 per unit) in 2012 and increased by $4.3 million for the six months ended June 30, 2013, to $13.4 million ($0.31 per unit) compared to $9.1 million ($0.36 per unit) in 2012 .  The increase is mainly due to an increase in FFO of $2.9 million for the three months and $5.1 million for the six months ended June 30, 2013, partially offset by an increase in maintenance capital expenditures of $0.6 million for the quarter and $0.8 million for the six months as a result of the U.S. acquisitions completed in 2013.

ABOUT MORGUARD NORTH AMERICAN RESIDENTIAL REIT
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario.  It trades on the Toronto Stock Exchange under the ticker symbol MRG.UN.  With a strategic focus on the acquisition of high-quality multi-unit 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 12,850 residential suites (as of July 31, 2013) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.6 billion at June 30, 2013. 

SOURCE: Morguard North American Residential Real Estate Investment Trust