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Morguard North American Residential Real Estate Investment Trust

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Morguard North American Residential REIT Announces 2017 Second Quarter Results
Morguard North American Residential REIT Announces 2017 Second Quarter Results

Canada NewsWire

MISSISSAUGA, ON, Aug. 1, 2017 /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, 2017.

Second Quarter Highlights

On May 15, 2017, the REIT acquired a newly-constructed property comprising 60 rental townhomes located in Toronto, Ontario, for a purchase price of $16.7 million, including closing costs.

The REIT is reporting performance of:

  • Adjusted net operating income ("Adjusted NOI") of $31.0 million for the three months ended June 30, 2017, an increase of $2.8 million, or 10.1% compared to 2016.

  • Basic funds from operations ("FFO") of $16.3 million for the three months ended June 30, 2017, an increase of $2.4 million, or 17.4% over the same period in 2016.

  • Basic FFO of $0.32 per Unit for the three months ended June 30, 2017, a 6.7% increase as compared to the $0.30 per Unit for the second quarter of 2016.

  • FFO payout ratio for the three months ended June 30, 2017 of 49.9%.

  • During second quarter, the REIT completed $81.3 million (US$60.9 million) of refinancing secured by three residential properties located in Colorado, Georgia and Florida, at a weighted average interest rate of 3.84% and a weighted average term of 10 years.  The refinancing resulted in $26.6 million (US$20.0 million) of additional mortgage proceeds on the maturing loans which had a weighted average interest rate of 4.46%. The REIT has now completed financing arrangements on all mortgages scheduled to mature during 2017.

Financial and Operational Highlights

As at

June 30,

December 31,

June 30,

(In thousands of dollars, except as noted otherwise)

2017

2016

2016

Operational Information




Number of properties

47

46

46

Total suites

13,532

13,472

13,472

Occupancy percentage

95.7%

95.2%

95.6%

Average monthly rent - Canada (in actual dollars)

$1,308

$1,296

$1,279

Average monthly rent - U.S. (in actual U.S. dollars)

US$1,052

US$1,038

US$1,020

Summary of Financial Information




Gross book value

$2,354,943

$2,285,727

$2,151,617

Indebtedness

$1,172,213

$1,237,613

$1,196,995

Indebtedness to gross book value ratio

50%

54%

56%

Weighted average mortgage interest rate

 

3.5%

3.6%

3.7%

Weighted average term to maturity on mortgages payable (years)

6.1

5.7

5.3

Exchange rates - Canadian dollar to United States dollar

$0.77

$0.74

$0.77

Exchange rates - United States dollar to Canadian dollar

$1.30

$1.34

$1.29





      Three months ended

   Six months ended


      June 30

  June 30

(In thousands of dollars, except per Unit amounts)

2017

2016

2017

2016

Summary of Financial Information





Interest coverage ratio

2.38

2.00

2.32

1.99

Indebtedness coverage ratio

1.64

1.36

1.58

1.36

Revenue from income producing properties

$57,201

$53,586

$112,822

$107,940

NOI

$35,165

$31,988

$52,082

$48,260

Adjusted NOI

$31,021

$28,185

$60,447

$56,667

Same Property Adjusted NOI

$31,039

$28,185

$58,775

$55,545

Net operating margin

54%

53%

54%

52%

FFO - basic

$16,305

$13,891

$31,582

$27,910

FFO - diluted

$17,001

$14,587

$32,966

$29,300

FFO per Unit - basic

$0.32

$0.30

$0.62

$0.60

FFO per Unit - diluted

$0.31

$0.29

$0.60

$0.58

Distributions per Unit

$0.16

$0.15

$0.32

$0.30

FFO payout ratio

49.9%

50.2%

51.4%

50.0%

Weighted average number of Units outstanding (in thousands):





Basic

50,894

46,498

50,698

46,513

Diluted

54,765

50,369

54,569

50,384

Average exchange rates - Canadian dollar to United States dollar

$0.74

$0.78

$0.75

$0.75

Average exchange rates - United States dollar to Canadian dollar

$1.34

$1.29

$1.33

$1.33

 

Net Operating Income


      Three months ended

   Six months ended


      June 30

  June 30

(In thousands of dollars)

2017

2016

2017

2016

Revenue from income producing properties





Same Property

$57,201

$53,586

$109,736

$105,565

Acquisitions

3,086

2,375

Total revenue from income producing properties

57,201

53,586

112,822

107,940

Property operating expenses





Same Property






Operating costs                                                

14,891

14,748

28,563

28,532


Realty taxes                                            

2,674

2,477

21,389

20,554


Utilities

4,453

4,373

9,374

9,341

Same Property

22,018

21,598

59,326

58,427

Acquisitions

18

1,414

1,253

Total property operating expenses

22,036

21,598

60,740

59,680

NOI





Same Property

35,183

31,988

50,410

47,138

Acquisitions

(18)

1,672

1,122

Total NOI

35,165

31,988

52,082

48,260

Realty taxes accounted for under IFRIC 21

(4,144)

(3,803)

8,365

8,407

Adjusted NOI

$31,021

$28,185

$60,447

$56,667

 

For the three months ended June 30, 2017, consolidated Adjusted NOI increased by $2.8 million (or 10.1%) to $31.0 million, compared to $28.2 million in 2016.  The increase was due to higher Adjusted NOI in Canada and the U.S. of $1.1 million (or 9.7%) and US$0.7 million (or 5.7%), respectively, and the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $1.0 million.  The increase in Adjusted NOI (in local currency) was attributable to higher rental revenue and improved occupancy in Canada and the U.S. as well as lower overall operating expenses, as a decrease in operating expenses in Canada was offset by a slight increase in the U.S.

For the six months ended June 30, 2017, consolidated Adjusted NOI increased by $3.8 million (or 6.7%) to $60.5 million, compared to $56.7 million in 2016.  The increase was due to higher Adjusted NOI in Canada and the U.S. of $1.7 million (or 8.0%) and US$1.5 million (or 5.5%), respectively, partially offset by the change in the U.S. foreign exchange rate, which increased Adjusted NOI by $0.6 million.  The increase in Adjusted NOI was attributable to the full period impact of the 160 Chapel acquisition completed during the three months ended March 31, 2016 and an increase in Same Property NOI in Canada and the U.S.  The increase in Same Property NOI was mainly driven by higher rental revenue and improved occupancy, partially offset by higher realty taxes.

Funds from Operations


      Three months ended

   Six months ended


      June 30

   June 30

(In thousands of dollars, except per Unit amounts)

2017

2016

2017

2016

Net income (loss) for the period attributable to unitholders

$59,351

$5,262

$61,379

($19,183)

Add/(deduct):





Realty taxes accounted for under IFRIC 21

(3,935)

(3,635)

7,957

8,039

Fair value loss on conversion option on the Debentures

511

104

1,390

228

Distributions on Class B LP Units recorded as interest expense

2,756

2,584

5,512

5,167

Foreign exchange loss

599

104

789

1,350

Fair value gain on income producing properties, net

(61,778)

(8,773)

(85,129)

(14,962)

Non-controlling interests' share of fair value gain on income producing properties

1,590

179

2,285

490

Fair value loss on Class B LP Units

9,472

10,850

29,796

31,863

Deferred income tax provision

7,739

7,216

7,603

14,918

FFO – basic

$16,305

$13,891

$31,582

$27,910

Interest expense on the Debentures

696

696

1,384

1,390

FFO – diluted

$17,001

$14,587

$32,966

$29,300

FFO per Unit – basic

$0.32

$0.30

$0.62

$0.60

FFO per Unit – diluted

$0.31

$0.29

$0.60

$0.58

 

Basic FFO for the three months ended June 30, 2017, increased by $2.4 million, or 17.4%, to $16.3 million ($0.32 per Unit), compared to $13.9 million ($0.30 per Unit) in 2016. The increase is mainly due to higher Adjusted NOI of $2.8 million and a decrease in interest expense of $0.1 million (excluding distributions on Class B LP Units and fair value adjustments), partially offset by an increase in trust expenses of $0.5 million. The change in foreign exchange rates had a positive impact on FFO of $0.4 million.

Basic FFO for the six months ended June 30, 2017, increased by $3.7 million, or 13.2%, to $31.6 million ($0.62 per Unit), compared to $27.9 million ($0.60 per Unit) in 2016. The increase is mainly due to higher Adjusted NOI of $3.8 million and a decrease in interest expense of $0.4 million (excluding distributions on Class B LP Units and fair value adjustments), partially offset by an increase in trust expenses of $0.6 million. The change in foreign exchange rates had a positive impact on FFO of $0.1 million.

Excluding the impact of the offering, basic FFO per unit amounted to $0.33 and $0.65 per Unit for the three and six months ended June 30, 2017, respectively. The impact includes the dilution from additional Units of the January 9, 2017 offering offset by interest savings on the repayment of mortgages on February 1, 2017.

Subsequent Events

On July 6, 2017, the REIT acquired a property comprising 104 suites and 32,000 square feet of commercial area located in Falls Church, Virginia, for a purchase price of $55.7 million (US$43.0 million), excluding closing costs. The property is subject to a long-term land lease, with a fixed price land purchase option available in 12.25 years. The acquisition was partially financed by a new mortgage of $30.6 million (US$23.7 million) at an interest rate of 4.05% for a term of 12.25 years.

On July 10, 2017, the REIT acquired a property comprising 515 suites and 18,000 square feet of commercial area located in Chicago, Illinois, for a purchase price of $286.8 million (US$222.5 million), excluding closing costs.  The acquisition was partially financed by a new mortgage of $157.9 million (US$122.5 million) at an interest rate of 3.49% for a term of eight years.

The REIT entered into a binding agreement to acquire a property comprising 492 suites located in Rockville, Maryland, for a purchase price of US$129.0 million, excluding closing costs. The acquisition is expected to close during the third quarter of 2017.

On July 12, 2017, the REIT sold four U.S properties located in Mobile, Alabama, comprising 1,329 suites, for gross proceeds of $89.7 million (US$70.1 million).

The REIT's unaudited condensed consolidated financial statements for the three and six months ended    June 30, 2017, 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, FFO, 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 three and six months ended June 30, 2017 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 3, 2017 at 3:00 p.m. (ET) to discuss the financial results for the quarter ended June 30, 2017 and 2016. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. Please quote conference ID # 47320330.

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 12,822 residential suites (as of August 1, 2017) located in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North Carolina and Virginia with an appraised value of approximately $2.3 billion at June 30, 2017.  For more information, visit the REIT's website at www.morguard.com.

SOURCE Morguard North American Residential Real Estate Investment Trust

View original content: http://www.newswire.ca/en/releases/archive/August2017/01/c3057.html

Morguard North American Residential REIT: K. Rai Sahi, Chief Executive Officer, (905) 281-3800; Robert Wright, Chief Financial Officer, (905) 281-3800Copyright CNW Group 2017

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