Morguard North American Residential REIT Announces 2014 Third Quarter Results

MISSISSAUGA, ON, Nov. 5, 2014 /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, 2014. 

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

HIGHLIGHTS

The REIT is reporting same property quarterly performance of:

• Normalized net operating income (excluding the impact of IFRIC 21) of $22.6 million for the three months ended September 30, 2014, an increase of $0.7 million over the same period in 2013.
• Funds from Operations ("FFO") of $10.8 million for the three months ended September 30, 2014, an increase of $0.4 million over the same period in 2013.
• Adjusted Funds from Operations ("AFFO") of $0.17 per unit for the three months ended September 30, 2014, a 6% increase as compared to the $0.16 value generated in the third quarter of 2013.
• FFO payout ratio for the period was 65.2% (AFFO payout ratio – 88.2%)

FINANCIAL AND OPERATIONAL HIGHLIGHTS
As at	September 30, 2014	December 31, 2013	September 30, 2013
Operational Information
Number of properties	44	44	44
Total suites	12,850	12,850	12,850
Occupancy percentage	96.4%	95.7%	96.2%
Monthly weighted average in-place rent - Canada	$1,241	$1,232	$1,227
Monthly weighted average in-place rent - U.S. (in U.S. dollars)	US$938	US$916	US$915
Summary of Financial Information
Total gross book value	$1,772,163	$1,671,233	$1,637,057
Debt	$983,290	$938,508	$919,708
Debt to gross book value	55%	56%	56%
Weighted average interest rate on mortgages payable	4.1%	4.2%	4.2%
Weighted average term to maturity on mortgages payable (years)	4.9	4.3	4.5

FINANCIAL AND OPERATIONAL HIGHLIGHTS

	Three months ended September 30,		Nine months ended September 30,
(in thousands of dollars, except per unit amounts)	2014	2013	2014	2013
Summary of Financial Information
Revenue from income producing properties (IPP)	$43,828	$41,557	$129,679	$101,120
Normalized net operating income^(1)	$22,601	$21,878	$67,627	$52,659
Net operating income	$25,324	$24,268	$64,748	$55,020
Same property normalized net operating income^(1)	$22,601	$21,878	$39,051	$38,722
Net operating margin^(1)	52%	53%	52%	52%
Interest coverage^(1)	1.89	1.77	1.84	1.81
Funds from Operations (FFO) - basic	$10,808	$10,443	$33,034	$25,013
Funds from Operations (FFO) - diluted	$11,512	$11,146	$35,121	$26,542
FFO per unit – basic	$0.23	$0.22	$0.71	$0.56
FFO per unit – diluted	$0.23	$0.22	$0.70	$0.56
Adjusted Funds from Operations (AFFO) - basic	$7,895	$7,528	$23,889	$19,441
Adjusted Funds from Operations (AFFO) - diluted	$8,599	$8,231	$25,976	$20,970
AFFO per unit – basic and diluted	$0.17	$0.16	$0.51	$0.44
FFO payout ratio	65.22%	68.18%	63.38%	80.36%
AFFO payout ratio	88.24%	93.75%	88.24%	102.27%
Weighted average number of units outstanding during the period (000's)
- Basic	46,525	46,505	46,519	44,287
- Diluted	50,396	50,376	50,390	47,123

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

NET OPERATING INCOME

	2014						2013
For the three months ended September 30, (In thousands of dollars)	Reported NOI		IFRIC  21		Normalized NOI		Reported NOI		IFRIC 21		Normalized NOI
Revenue from income producing properties
Same property	$43,828		—		$43,828		$41,557		—		$41,557
Property Operating Expenses
Same property
Operating expenses	12,374		—		12,374		11,763		—		11,763
Utilities	3,912		—		3,912		3,521		—		3,521
Realty taxes	2,218		2,723		4,941		2,005		2,390		4,395
Same property	18,504		2,723		21,227		17,289		2,390		19,679
Net Operating Income
Same property	$25,324		($2,723)		$22,601		$24,268		($2,390)		$21,878

Normalized net operating income increased by $0.7 million during the three months ended September 30, 2014, to $22.6 million, compared to $21.9 million in 2013.  The increase was predominantly due to the change in the U.S. foreign exchange rate which increased NOI by $0.6 million and an increase of US$0.2 million in NOI for the U.S. properties. 

	2014						2013
For the nine months ended September 30, (In thousands of dollars)	Reported NOI		IFRIC  21		Normalized NOI		Reported NOI		IFRIC 21		Normalized NOI
Revenue from income producing properties
Same property	$77,874		—		$77,874		$75,511		—		$75,511
Acquisitions	51,805		—		51,805		25,609		—		25,609
Total revenue from income producing properties	129,679		—		129,679		101,120		—		101,120
Property Operating Expenses
Same property
Operating expenses	20,752		—		20,752		20,302		—		20,302
Utilities	9,146		—		9,146		8,110		—		8,110
Realty taxes	9,813		(888)		8,925		8,749		(372)		8,377
Same property	39,711		(888)		38,823		37,161		(372)		36,789
Acquisitions	25,220		(1,991)		23,229		8,939		2,733		11,672
Total property operating expenses	64,931		(2,879)		62,052		46,100		2,361		48,461
Net Operating Income
Same property	38,163		888		39,051		38,350		372		38,722
Acquisitions	26,585		1,991		28,576		16,670		(2,733)		13,937
Total Net Operating Income	$64,748		$2,879		$67,627		$55,020		($2,361)		$52,659

Normalized net operating income increased by $15.0 million during the nine months ended September 30, 2014, to $67.6 million, compared to $52.7 million in 2013.  The increase was predominantly due to the U.S. acquisitions, which increased NOI by US$12.6 million in 2014, and the change in the U.S. foreign exchange rate which increased NOI by $2.8 million. 

FUNDS FROM OPERATIONS ("FFO")

	Three months ended September 30,		Nine months ended September 30,
(In thousands of dollars, except per unit amounts)	2014	2013	2014	2013
Net income for the period attributable to the unitholders	$16,102	$23,055	$27,638	$43,308
Add (deduct):
Realty taxes accounted for under IFRIC 21	(2,723)	(2,390)	2,879	(2,361)
Fair value gain on IPP	(6,580)	(4,331)	(37,761)	(1,146)
Non-controlling interests' share of fair value gain on IPP	102	263	514	459
Fair value (gain) loss on Class B LP Units	(4,306)	(12,573)	13,951	(29,796)
Fair value gain on conversion option of convertible debentures	(102)	(7)	(7)	(7)
Distributions on Class B LP Units recorded as interest expense	2,583	2,583	7,750	7,750
Foreign exchange gain	(576)	—	(361)	—
Deferred income tax provision	6,308	3,843	18,431	6,806
Funds from operations	$10,808	$10,443	$33,034	$25,013
Interest expense on convertible debentures	704	703	2,087	1,529
Diluted funds from operations	$11,512	$11,146	$35,121	$26,542
FFO per unit - basic	$0.23	$0.22	$0.71	$0.56
FFO per unit - diluted	$0.23	$0.22	$0.70	$0.56

FFO increased by $0.4 million during the three months ended September 30, 2014, to $10.8 million ($0.23 per unit), compared to $10.4 million ($0.22 per unit) in 2013. The increase is mainly due an increase in normalized NOI of $0.7 million, partially offset by an increase in trust expenses of $0.3 million. The change in foreign exchange rates had a positive impact on FFO of $0.4 million.

FFO increased by $8.0 million during the nine months ended September 30, 2014, to $33.0 million ($0.71 per unit), compared to $25.0 million ($0.56 per unit) in 2013. The increase is mainly due an increase in normalized NOI of $15.0 million, partially offset by an increase in interest expenses of $4.2 million, an increase in trust expenses of $2.0 million and a decrease in other income of $0.7 million. The change in foreign exchange rates had a positive impact on FFO of $1.6 million.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")

			Three months ended September 30,		Nine months ended September 30,
(In thousands of dollars, except per unit amounts)			2014	2013	2014	2013
Funds from Operations			$10,808	$10,443	$33,034	$25,013
Add (deduct):
Amortization of deferred financing costs assumed on Initial Public Offering ("IPO")			220	367	713	1,099
Non-controlling interests' share of amortization of deferred financing costs assumed on IPO			(9)	(12)	(33)	(35)
Amortization of mark to market adjustments on mortgages			(1,737)	(1,881)	(5,708)	(3,338)
Maintenance capital expenditures			(1,442)	(1,442)	(4,280)	(3,456)
Amortization of cash flow hedge			55	53	163	158
Adjusted funds from operations			7,895	7,528	23,889	19,441
Interest expense on convertible debentures			704	703	2,087	1,529
Diluted AFFO			$8,599	$8,231	$25,976	$20,970
AFFO per unit – basic and diluted			$0.17	$0.16	$0.51	$0.44

AFFO increased by $0.4 million for the three months ended September 30, 2014, to $7.9 million ($0.17 per unit) compared to $7.5 million ($0.16 per unit) in 2013.  The increase is mainly due to an increase in FFO of $0.4 million for the three months ended September 30, 2014.

AFFO increased by $4.4 million for the nine months ended September 30, 2014, to $23.9 million ($0.51 per unit) compared to $19.4 million ($0.44 per unit) in 2013.  The increase is mainly due to an increase in FFO of $8.0 million for the nine months ended September 30, 2014, partially offset by an increase in amortization of mark to market adjustments on mortgages of $2.4 million and an increase in maintenance capital expenditures of $0.8 million for the period as a result of the U.S. acquisitions completed in 2013.

CONFERENCE CALL DETAILS

Morguard North American Residential Real Estate Investment Trust will hold a conference call on Friday, November 7, 2014 at 10:00 a.m. (ET) to discuss the financial results for the quarters ended September 30, 2014 and 2013. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please quote conference ID# 25625373.

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 November 5, 2014) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and  Texas  with  an  appraised  value  of  approximately  $1.7 billion  at  September 30, 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