Morguard North American Residential REIT Announces 2014 Results

TSX: MRG.UN

MISSISSAUGA, ON, Feb. 18, 2015 /CNW/ - Morguard North American Residential REIT (the 'REIT") (TSX:  MRG.UN) today announced its financial results for the year ended December 31, 2014. 

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

HIGHLIGHTS

The REIT is reporting performance of:

• Normalized net operating income (excluding the impact of IFRIC 21) of $90.2 million for the year ended December 31, 2014, an increase of $16.8 million over 2013.
• Funds from Operations ("FFO") of $44.7 million for the year ended December 31, 2014, an increase of $10.1 million over 2013.
• FFO of $0.25 per unit for the three months ended December 31, 2014 ($0.22 per unit after excluding the one-time adjustment of $1.5 million for early debt extinguishments) compared to $0.21 per unit in the fourth quarter of 2013.
• Adjusted Funds from Operations ("AFFO") of $0.67 per unit for the year ended December 31, 2014, a 16% increase as compared to the $0.58 value generated in 2013.
• FFO payout ratio for 2014 was 62.50% (AFFO payout ratio – 89.55%)

FINANCIAL AND OPERATIONAL HIGHLIGHTS
As at December 31	2014	2013
Operational Information
Number of properties	44	44
Total suites	12,850	12,850
Occupancy percentage	96.0%	95.7%
Monthly weighted average in-place rent - Canada	$1,246	$1,232
Monthly weighted average in-place rent - U.S. (in U.S. dollars)	US$945	US$916
Summary of Financial Information
Total gross book value	$1,832,287	$1,671,233
Debt	$1,022,555	$938,508
Debt to gross book value	56%	56%
Weighted average interest rate on mortgages payable	3.9%	4.2%
Weighted average term to maturity on mortgages payable (years)	5.6	4.3

FINANCIAL AND OPERATIONAL HIGHLIGHTS (CONT'D)
For the years ended December 31
(in thousands of dollars, except per unit amounts)	2014	2013
Summary of Financial Information
Revenue from income producing properties (IPP)	$174,815	$142,939
Normalized net operating income (NOI)^(1)	$90,217	$73,460
Net operating income	$90,217	$78,846
Same property normalized net operating income^(1)	$52,399	$50,753
Net operating margin^(1)	52%	51%
Interest coverage^(1)	1.85	1.85
Funds from Operations (FFO) - basic	$44,726	$34,657
Funds from Operations (FFO) - diluted	$47,516	$36,889
FFO per unit – basic	$0.96	$0.77
FFO per unit – diluted	$0.94	$0.77
Adjusted Funds from Operations (AFFO) - basic	$31,031	$26,135
Adjusted Funds from Operations (AFFO) - diluted	$33,821	$28,367
AFFO per unit – basic and diluted	$0.67	$0.58
FFO payout ratio	62.50%	77.92%
AFFO payout ratio	89.55%	103.45%
Weighted average number of units outstanding during the year (000's)
-   Basic	46,522	44,847
-   Diluted	50,393	47,944

^{1 Excludes realty taxes accounted for under IFRIC 21.}

NET OPERATING INCOME
For the years ended December 31		2014						2013
(In thousands of dollars)		Reported NOI		IFRIC 21		Normalized NOI		Reported NOI		IFRIC 21				Normalized NOI
Revenue from income producing properties
Same property		$104,808		$—		$104,808		$101,049		$—				$101,049
Acquisitions		70,007		—		70,007		41,890		—				41,890
Total revenue from income producing properties		174,815		—		174,815		142,939		—				142,939
Property Operating Expenses
Same property
	Operating expenses	28,033		—		28,033		27,731		—				27,731
	Utilities	12,440		—		12,440		10,915		—				10,915
	Realty taxes	11,936		—		11,936		10,794		856				11,650
Same property		52,409		—		52,409		49,440		856				50,296
Acquisitions		32,189		—		32,189		14,653		4,530				19,183
Total property operating expenses		84,598		—		84,598		64,093		5,386				69,479
Net Operating Income
Same property		52,399		—		52,399		51,609		(856)				50,753
Acquisitions		37,818		—		37,818		27,237		(4,530)				22,707
Total Net Operating Income		$90,217		$—		$90,217		$78,846		($5,386)				$73,460

Normalized net  operating  income  increased  by  $16.8 million  during  the  year  ended  December 31, 2014, to $90.2 million, compared to $73.5 million in 2013.  The increase was due to the U.S. acquisitions, which increased NOI by US$12.4 million in 2014, an increase of US$1.2 million in NOI for the remaining U.S. properties and the change in the U.S. foreign exchange rate which increased NOI by $3.9 million.  These items were partially offset by a decrease in NOI for the Canadian properties of $0.7 million.

FUNDS FROM OPERATIONS ("FFO")
For the years ended December 31
(In thousands of dollars, except per unit amounts)	2014		2013
Net income for the year attributable to the unitholders	$38,157		$56,381
Add (deduct):
Realty taxes accounted for under IFRIC 21	—		(5,386)
Fair value gain on income producing properties	(40,104)		(2,576)
Non-controlling interests' share of fair value gain on income producing properties	610		649
Fair value loss (gain) on Class B LP Units	10,506		(30,830)
Fair value gain on conversion option of debentures	(57)		(43)
Distributions on Class B LP Units recorded as interest expense	10,333		10,333
Foreign exchange gain	(830)		(2,399)
Deferred income tax provision	26,111		8,528
Funds from operations	$44,726		$34,657
Interest expense on convertible debentures	2,790		2,232
Diluted FFO	$47,516		$36,889
FFO per unit - basic	$0.96		$0.77
FFO per unit - diluted	$0.94		$0.77

FFO increased by $10.1 million during the year ended December 31, 2014, to $44.7 million ($0.96 per unit), compared to $34.7 million ($0.77 per unit) in 2013. The increase is mainly due an increase in normalized NOI of $16.8 million and increase in other income of $0.8 million, partially offset by an increase in interest expense of $5.2 million and an increase in trust expenses of $2.3 million.  The change in foreign exchange rates had a positive impact on FFO of $2.3 million.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")
For the years ended December 31
(In thousands of dollars, except per unit amounts)	2014		2013
Funds from Operations	$44,726		$34,657
Add (deduct):
Amortization of deferred financing costs assumed on Initial Properties	818		1,469
Non-controlling interests' share of amortization of deferred financing costs assumed on Initial Properties	(35)		(47)
Amortization of mark to market adjustments on mortgages	(7,457)		(5,257)
Maintenance capital expenditures	(5,722)		(4,898)
Gain from debt extinguishments	(1,517)		—
Amortization of cash flow hedge	218		211
Adjusted funds from operations	31,031		26,135
Interest expense on convertible debentures	2,790		2,232
Diluted AFFO	$33,821		$28,367
AFFO per unit - basic and diluted	$0.67		$0.58

AFFO increased by $4.9 million for the year ended December 31, 2014, to $31.0 million ($0.67 per unit) compared to $26.1 million ($0.58 per unit) in 2013.  The  increase is  mainly due  to an  increase in  FFO  of $10.1 million for the year ended December 31, 2014, partially offset by an increase in amortization of mark to market adjustments on mortgages of $2.2 million, the  gain  from  debt extinguishments of $1.5 million, an increase in maintenance capital expenditures of $0.8 million for the year as a result of the U.S. acquisitions completed in 2013 and a decrease in the amortization of deferred financing  costs  assumed  on  Initial  Properties  of  $0.6 million.

CONFERENCE CALL DETAILS

Morguard North American Residential Real  Estate  Investment  Trust  will  hold  a  conference  call  on  February 20, 2015 at 10:00 a.m. (ET) to discuss the financial results for the years ended December 31, 2014 and 2013. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID# 82762885.

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 February 17, 2015) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and  Texas  with  an  appraised  value  of  approximately  $1.8 billion  at  December 31, 2014.

SOURCE Morguard North American Residential Real Estate Investment Trust

Morguard Corporation, K. (Rai) Sahi, Chief Executive Officer, [phone]; Robert Wright, Chief Financial Officer, [phone]

Related Links

www.morguard.com