Morguard North American Residential REIT Announces 2013 Third Quarter Results and CFO Appointment

TSX: MRG.UN

MISSISSAUGA, ON, Oct. 30, 2013 /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, 2013.

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

HIGHLIGHTS

• Reflecting the significant activity that occurred during the first half of 2013, the REIT is reporting:
  • Consolidated net operating income of $21.9 million for the three months ended September 30, 2013, an increase of $11.4 million over the same quarter in 2012
  • Funds from Operations ("FFO") of $10.4 million for the three months ended September 30, 2013, an increase of $5.7 million from the corresponding quarter in 2012
  • Adjusted Funds from Operations ("AFFO") of $0.20 per unit in the three months ended September 30, 2013, a 25% increase as compared to the $0.16 value generated in the corresponding quarter in 2012
• Third quarter 2013 occupancy was 96.2%, up from Q2 of 2013 occupancy of 95.5%.
• New CFO added to the REIT's Executive team - Mr. Robert Wright has been appointed as the Trust's Chief Financial Officer.
• FFO payout ratio for Q3 2013 was 68.2% (AFFO payout ratio - 75.0%).

FINANCIAL AND OPERATIONAL HIGHLIGHTS
As at	September 30, 2013	December 31,  2012	September 30, 2012
Operational information
Number of properties	44	20	20
Total suites	12,850	6,376	6,376
Occupancy percentage	96.2%	96.7%	97.1%
Monthly weighted average in-place rent - Canada	$1,227	$1,202	$1,192
Monthly weighted average in-place rent - US	$947	$908	$891
Summary of Financial Information
Total gross book value	$1,637,057	$1,020,681	$955,756
Debt	$919,708	$432,020	$408,093
Debt to gross book value	56%	42%	43%
Weighted average interest rate on mortgages payable	4.2%	4.3%	4.3%
Weighted average term to maturity on mortgages payable (years)	4.5	4.7	4.6

 

 

FINANCIAL AND OPERATIONAL HIGHLIGHTS (cont'd)
(in thousands of dollars, except per unit amounts)	Three months ended  September 30,			Nine months ended  September 30,
	2013	2012		2013	2012
Summary of Financial Information
Revenue from income producing properties	$41,557	$20,737		$101,120	$58,321
Net operating income	$21,878	$10,439		$52,659	$30,449
Net operating margin	53%	50%		52%	52%
Interest coverage	1.77	1.97		1.81	2.10
Funds from Operations (FFO) - basic	$10,443	$4,699		$25,013	$14,197
Funds from Operations (FFO) - diluted	$11,146	$4,699		$26,542	$14,197
FFO per unit - basic and diluted	$0.22	$0.17		$0.56	$0.53
Adjusted Funds from Operations (AFFO) - basic	$9,409	$4,469		$22,779	$13,541
Adjusted Funds from Operations (AFFO) - diluted	$10,112	$4,469		$24,308	$13,541
AFFO per unit - basic and diluted	$0.20	$0.16		$0.51	$0.50
FFO payout ratio	68.18%	88.24%		80.36%	84.91%
AFFO payout ratio	75.00%	93.75%		86.54%	90.00%
Weighted average number of units outstanding during the period (000's)
- Basic	46,505	28,100		44,287	26,929
- Diluted	50,376	28,100		47,123	26,929

 

Appointment of Chief Financial Officer

Mr. Robert Wright has been appointed to succeed Mr. Paul Miatello as Chief Financial Officer effective October 29, 2013. Mr. Miatello has served as Chief Financial Officer since the REIT's initial public offering in April 2012 and will continue to serve as Chief Financial Officer of Morguard Corporation and as a Vice President of the REIT.  Mr. Miatello will serve as a resource to Mr. Wright to ensure a smooth transition.  Mr. Wright is a Chartered Accountant and has over 25 years of experience in finance, accounting and taxation matters including 12 years as Chief Financial Officer for various public entities.  Mr. Wright has also served as Vice President of Morguard Corporation since July 23, 2012 and Vice President of ClubLink Enterprises Limited since December 28, 2007.

 

NET OPERATING INCOME
		Three months ended September 30,		Nine months ended September 30,
(In thousands of dollars)		2013	2012	2013	2012
Revenue from income producing properties
Same property		$19,375	$19,001	$57,573	$56,585
Acquisitions		22,182	1,736	43,547	1,736
Total revenue from income producing properties		41,557	20,737	101,120	58,321
Property Operating Expenses
Same property
	Operating expenses	$5,207	$4,995	$14,385	$13,718
	Utilities	2,307	2,236	7,110	7,068
	Taxes	2,051	2,234	6,514	6,253
Same property		9,565	9,465	28,009	27,039
Acquisitions		10,114	833	20,452	833
Total property operating expenses		19,679	10,298	48,461	27,872
Net Operating Income
Same property		$9,810	$9,536	$29,564	$29,546
Acquisitions		12,068	903	23,095	903
Total Net Operating Income		$21,878	$10,439	$52,659	$30,449

 

Consolidated net operating income increased by $11.4 million during the three months ended September 30, 2013, to $21.9 million, compared to $10.4 million in 2012 and increased by $22.2 million during the nine months ended September 30, 2013, to $52.7 million, compared to $30.4 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 $11.1 million for the three months ended and $22.2 million for the nine months ended September 30, 2013. The positive impact of the acquisitions was complemented by an increase in NOI for the Canadian properties, mainly due to higher rental rates as a result of the Ontario guideline rent increase of 2.5% during the year which was partially offset by an increase in operating expenses mainly due to higher repairs and maintenance.

 

FUNDS FROM OPERATIONS ("FFO")
	Three months ended September 30,		Nine months ended  September 30,
(In thousands of dollars, except per unit amounts)	2013	2012	2013	2012
Net income for the period attributable to the unitholders	$23,055	$37,966	$43,308	$134,738
Add (deduct):
Fair value gain on income producing properties	(6,721)	(47,181)	(3,507)	(84,404)
Non-controlling interests' share of fair value gain on   income producing properties	263	1,191	459	2,334
Fair value (gain) loss on Class B LP Units	(12,573)	9,817	(29,796)	30,313
Fair value gain on conversion option of Debentures	(7)	-	(7)	-
Distributions on Class B LP Units recorded as interest   expense	2,583	2,583	7,750	4,677
Deferred income tax provision (recovery)	3,843	323	6,806	(73,461)
Funds from operations	$10,443	$4,699	$25,013	$14,197
Interest expense on convertible debentures	703	-	1,529	-
Diluted FFO	$11,146	$4,699	$26,542	$14,197
FFO per unit - basic and diluted	$0.22	$0.17	$0.56	$0.53

 

FFO increased by $5.7 million or 122.2% during the three months ended September 30, 2013, to $10.4 million ($0.22 per unit) compared to $4.7 million ($0.17 per unit) in 2012 and increased by $10.8 million during the nine months ended September 30, 2013, to $25.0 million ($0.56 per unit) compared to $14.2 million ($0.53 per unit) in 2012. The increase in FFO is mainly attributable to the U.S. acquisitions which had a positive impact on NOI of $11.1 million for the three months ended and $22.2 million for the nine months ended September 30, 2013 and an increase in other income of $0.6 million and a decrease in current income taxes of $0.7 million for the nine months ended September 30, 2013.  These items were partially offset by an increase in interest expense of $4.4 million for the three months ended and $9.8 million for the nine months ended September 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 $1.1 million for the three months ended and $2.9 million for the nine months ended September 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 September 30,		Nine months ended September 30,
(In thousands of dollars, except per unit amounts)	2013	2012	2013	2012
Funds from Operations	$10,443	$4,699	$25,013	$14,197
Add (deduct):
Amortization of deferred financing costs assumed on   Initial Properties	367	385	1,099	1,074
Non-controlling interests' share of amortization of deferred   financing costs assumed on Initial Properties	(12)	(11)	(35)	(33)
Maintenance capital expenditures	(1,442)	(657)	(3,456)	(1,851)
Amortization of cash flow hedge	53	53	158	154
Adjusted funds from operations	9,409	4,469	22,779	13,541
Interest expense on convertible debentures	703	-	1,529	-
Diluted AFFO	$10,112	$4,469	$24,308	$13,541
AFFO per unit - basic and diluted	$0.20	$0.16	$0.51	$0.50

 

AFFO increased by $4.9 million during the three months ended September 30, 2013, to $9.4 million ($0.20 per unit) compared to $4.5 million ($0.16 per unit) in 2012 and increased by $9.2 million for the nine months ended September 30, 2013, to $22.8 million ($0.51 per unit) compared to $13.5 million ($0.50 per unit) in 2012.  The increase is mainly due to an increase in FFO of $5.7 million for the three months and $10.8 million for the nine months ended September 30, 2013, partially offset by an increase in maintenance capital expenditures of $0.8 million for the quarter and $1.6 million for the nine 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 October 30, 2013) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.6 billion at September 30, 2013. 

 

SOURCE Morguard North American Residential Real Estate Investment Trust