MISSISSAUGA, ON, Oct. 26, 2021 /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, 2021.
Third Quarter Highlights
The REIT is reporting third
quarter performance of:
- Net operating income ("NOI") of $37.1
million for the three months ended September 30, 2021, a decrease of $1.7 million (or 4.3%) compared to 2020, and
Proportionate NOI $32.6 million for
the three months ended September 30,
2021 a decrease of $1.1
million (or 3.2%) compared to 2020. The change in foreign
exchange rate decreased NOI and Proportionate NOI by $1.4 million and $1.1
million, respectively.
- Same Property Proportionate NOI in Canada decreased by $0.3 million (or 2.4%), and in the U.S. increased
by US$0.1 million (or 0.7%), compared
to 2020.
- Basic funds from operations ("FFO") of $16.2 million for the three months ended
September 30, 2021 compared to
$16.1 million over the same period in
2020.
- Basic FFO of $0.29 per Unit for
the three months ended September 30,
2021, compared to $0.29 per
Unit over the same period in 2020.
- FFO payout ratio for the three months ended September 30, 2021 of 60.9% compared to 61.1% in
2020.
- Net income of $86.7 million for
the three months ended September 30,
2021, compared to $53.5
million over the same period in 2020.
The REIT is reporting the following corporate and portfolio
highlights:
- The REIT's redevelopment property, 1643 Josephine Street,
New Orleans, Louisiana, reached
stabilized occupancy and is currently 90.4% occupied and 98.2%
leased. The repositioned asset further improves the overall quality
of the portfolio having an average monthly rent ("AMR") of
$1,822.
- As at October 26, 2021, the
REIT's collection of rental revenue in Canada and in the U.S. continues to be strong,
exceeding 99% on average throughout the first three quarters of
2021.
- As at September 30, 2021, AMR in
Canada increased by 3.3% compared
to September 30, 2020, while
occupancy decreased to 92.7% at September
30, 2021, compared to 96.4% at September 30, 2020.
- As at September 30, 2021, AMR in
the U.S. on a Same Property basis increased by 4.1% compared to
September 30, 2020, while occupancy
maintained optimum levels at 96.4% at September 30, 2021, compared to 93.3% at
September 30, 2020.
- As at September 30, 2021,
indebtedness to gross book value ratio was 40.2%, compared to 42.8%
as at December 31, 2020.
Financial and Operational Highlights
As
at
|
September
30,
|
December
31,
|
September
30,
|
(In thousands of
dollars, except as noted otherwise)
|
2021
|
2020
|
2020
|
Operational
Information
|
|
|
|
Number of
properties
|
43
|
43
|
43
|
Total
suites
|
13,275
|
13,275
|
13,275
|
|
|
|
|
Occupancy percentage
– Canada
|
92.7%
|
94.9%
|
96.4%
|
Occupancy percentage
– U.S.
|
96.1%
|
92.2%
|
93.3%
|
Average monthly rent
- Canada (in actual dollars)
|
$1,530
|
$1,500
|
$1,481
|
Average monthly rent
- U.S. (in actual U.S. dollars)
|
US$1,490
|
US$1,428
|
US$1,427
|
|
|
|
|
Summary of
Financial Information
|
|
|
|
Gross book
value
|
$3,262,415
|
$3,084,358
|
$3,177,215
|
Indebtedness
|
$1,311,062
|
$1,320,708
|
$1,358,370
|
|
|
|
|
Indebtedness to gross
book value ratio
|
40.2%
|
42.8%
|
42.8%
|
Weighted average
mortgage interest rate
|
3.45%
|
3.45%
|
3.45%
|
Weighted average term
to maturity on mortgages payable (years)
|
4.1
|
4.8
|
5.1
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.27
|
$1.27
|
$1.33
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.78
|
$0.79
|
$0.75
|
|
Three months
ended
|
Nine months
ended
|
|
September
30
|
September
30
|
(In thousands of
dollars, except per Unit amounts)
|
2021
|
2020
|
2021
|
2020
|
Summary of
Financial Information
|
|
|
|
|
Interest coverage
ratio
|
2.32
|
2.24
|
2.32
|
2.35
|
Indebtedness coverage
ratio
|
1.49
|
1.53
|
1.52
|
1.60
|
|
|
|
|
|
Revenue from real
estate properties
|
$61,955
|
$62,159
|
$182,091
|
$187,658
|
NOI
|
$37,142
|
$38,796
|
$89,699
|
$97,341
|
Proportionate
NOI
|
$32,641
|
$33,722
|
$96,858
|
$105,445
|
Same Property
Proportionate NOI
|
$32,433
|
$33,722
|
$96,860
|
$105,445
|
NOI margin -
IFRS
|
59.9%
|
62.4%
|
49.3%
|
51.9%
|
NOI margin -
Proportionate
|
51.7%
|
53.2%
|
52.4%
|
54.9%
|
Net income
|
$86,654
|
$53,472
|
$134,318
|
$169,896
|
|
|
|
|
|
FFO -
basic
|
$16,153
|
$16,085
|
$47,900
|
$53,516
|
FFO -
diluted
|
$17,129
|
$17,050
|
$50,778
|
$56,394
|
FFO per Unit -
basic
|
$0.29
|
$0.29
|
$0.85
|
$0.95
|
FFO per Unit -
diluted
|
$0.28
|
$0.28
|
$0.84
|
$0.94
|
Distributions per
Unit
|
$0.1749
|
$0.1749
|
$0.5247
|
$0.5247
|
FFO payout
ratio
|
60.9%
|
61.1%
|
61.6%
|
55.1%
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,271
|
56,227
|
56,260
|
56,217
|
Diluted
|
60,504
|
60,460
|
60,493
|
60,450
|
Average exchange
rates - United States dollar to Canadian dollar
|
$1.26
|
$1.33
|
$1.25
|
$1.35
|
Average exchange
rates - Canadian dollar to United States dollar
|
$0.79
|
$0.75
|
$0.80
|
$0.74
|
Operational and Liquidity Update
The following information as of October
26, 2021 provides an operating update on the REIT's
portfolio and liquidity position:
- As at October 26, 2021, the REIT
collected 98.4% of the third quarter rental revenue and
approximately 95.1% (94.6% in Canada / 95.4% in the U.S.) of October 2021 rental revenue which is materially
in line with historical collection rates.
- As at October 26, 2021, the
REIT's occupancy in Canada and in
the U.S. with the exception of certain properties in Canada directly impacted by university and
local business closures remains stable. Specifically, occupancy in
the Greater Toronto Area ("GTA")
has declined by approximately 400-500 basis points due to the above
noted reasons as well as management's focus on maintaining existing
rent levels at most properties within the GTA submarket. Further,
management believes the higher vacancy experienced in the GTA is
temporary and as the economy re-opens, the REIT's GTA suites which
comprise larger square foot floor plans at attractive rental rates
will continue to appeal to prospective tenants at or above existing
market rental rates.
- The REIT has liquidity of $105.0
million, comprised of approximately $20.5 million in cash and $84.5 million available under its revolving
credit facility with Morguard Corporation and has approximately
$47.5 million of unencumbered assets.
In addition, the REIT expects to close the CMHC-insured financing
of four properties providing additional net mortgage proceeds of
approximately $115.0 million. The
REIT has also narrowed down the scope of its capital expenditure
program to ensure the availability of resources, allocating an
amount that enables the REIT to maintain the structural and overall
safety of the properties.
Net Income
The REIT reported a net income of $86.7
million for the three months ended September 30, 2021, an increase of $33.2 million compared to net income of
$53.5 million over the same period in
2020. The increase in net income was primarily due to the
following:
- A decrease in net operating income of $1.7 million;
- A decrease in interest expense of $0.5
million;
- An increase in equity income from investments of $4.4 million;
- An increase in foreign exchange gain of $0.5 million;
- A decrease in other expense of $0.4
million;
- An increase in net fair value gain on real estate properties of
$55.2 million;
- An increase in fair value loss on Class B LP Units of
$6.5 million; and
- An increase in income taxes (current and deferred) of
$19.6 million.
Net Operating Income
Three months ended September 30,
2021
For the three months ended September 30,
2021, NOI from the REIT's properties decreased by
$1.7 million (or 4.3%) to
$37.1 million, compared to
$38.8 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $1.4 million. The decrease in NOI is due to a
decrease in Same Property NOI of $1.9
million (or 4.9%), partially offset by an increase in NOI
from the REIT's redevelopment property in Louisiana currently under initial lease-up of
$0.2 million. The Same Property
decrease of $1.9 million is due to a
decrease in Canada of $0.3 million (or 2.4%), a decrease in the U.S. of
US$0.2 million (or 0.9%) and the
change in foreign exchange rate which decreased NOI by $1.4 million.
For the three months ended September 30,
2021, Proportionate NOI from the REIT's properties decreased
by $1.1 million (or 3.2%) to
$32.6 million, compared to
$33.7 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $1.1 million. The decrease in Proportionate NOI
is due to a decrease in Same Property Proportionate NOI of
$1.3 million (or 3.8%), partially
offset by an increase in NOI from the REIT's redevelopment property
in Louisiana currently under
initial lease-up of $0.2 million. The
Same Property decrease of $1.3
million is due to a decrease in Canada of $0.3
million (or 2.4%), partially offset by an increase in the
U.S. of US$0.1 million (or 0.7%) and
the change in foreign exchange rate which decreased Proportionate
NOI by $1.1 million.
Nine months ended September 30,
2021
For the nine months ended September 30,
2021, NOI from the REIT's properties decreased by
$7.6 million (or 7.9%) to
$89.7 million, compared to
$97.3 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $4.7 million. The decrease in NOI is
predominantly due to a decrease in Same Property NOI of
$7.6 million (or 7.8%) due to a
decrease in Canada of $2.6 million (or 6.3%), a decrease in the U.S. of
US$0.3 million (or 0.6%) and the
change in foreign exchange rate which decreased NOI by $4.7 million.
For the nine months ended September 30,
2021, Proportionate NOI from the REIT's properties decreased
by $8.6 million (or 8.1%) to
$96.9 million, compared to
$105.4 million in 2020, of which a
change in the foreign exchange rate decreased NOI by $5.1 million. The decrease in Proportionate NOI
is predominantly due to a decrease in Same Property Proportionate
NOI of $8.6 million (or 8.1%) due to
a decrease in Canada of
$2.6 million (or 6.3%), a decrease in
the U.S. of US$0.9 million (or 1.8%)
and the change in foreign exchange rate which decreased
Proportionate NOI by $5.1
million.
Funds From Operations
Three months ended September 30,
2021
Basic FFO for the three months ended September 30, 2021, increased by $0.1 million (or 0.4%) to $16.2 million ($0.29 per Unit), compared to $16.1 million ($0.29 per Unit) in 2020. The increase is mainly
due to a decrease in interest expense (excluding distributions on
Class B LP Units and fair value adjustments on the conversion
option on the convertible debentures) and a decrease in other
expense, primarily due to a non-recurring write-off during 2020,
partially offset by lower Proportionate NOI of $1.1 million.
Basic FFO per Unit for the three months ended September 30, 2021, was $0.29 per Unit, consistent compared to
$0.29 per Unit in 2020 due to the
following factors:
i)
|
On a Same Property
Proportionate Basis, in local currency, a slight decrease in NOI
offset a decrease in interest expense resulting in a $nil per Unit
impact, and a change in the foreign exchange rate had a $0.01 per
Unit negative impact; and
|
ii)
|
a decrease in other
expense was largely a result of a non-recurring write-off during
2020 had a $0.01 per Unit positive impact.
|
Nine months ended September 30,
2021
Basic FFO for the nine months ended September 30, 2021, decreased by $5.6 million (or 10.5%) to $47.9 million ($0.85 per Unit), compared to $53.5 million ($0.95 per Unit) in 2020. The decrease is mainly
due to lower Proportionate NOI of $8.6
million and a decrease in other income of $0.8 million, primarily from a wage subsidy
received during 2020, net of an increase in interest expense on the
Morguard Facility and the non-recurring write-off during 2020 noted
above, were partially offset by a decrease in trust expenses and
interest expense (excluding distributions on Class B LP Units and
fair value adjustments on the conversion option on the convertible
debentures). Basic FFO for the nine months ended September 30, 2020, includes $0.5 million from a successful property tax
appeal, net of consulting fees.
Basic FFO per Unit for the nine months ended September 30, 2021, decreased by $0.10 to $0.85 per
Unit, compared to $0.95 per Unit in
2020 due to the following factors:
i)
|
On a Same Property
Proportionate Basis, in local currency, a decrease in NOI from
increased vacancy, partly offset by a decrease in interest expense
and trust expenses had a $0.035 per Unit negative impact, of which
a successful property tax appeal in 2020 impacted FFO per Unit by
$0.01, and a change in the foreign exchange rate had a $0.06 per
Unit negative impact; and
|
ii)
|
a decrease in other
income due to a wage subsidy received during 2020, partially offset
by a non-recurring write-off during 2020 had a $0.005 per Unit
negative impact.
|
The REIT's unaudited condensed consolidated financial statements
for the three and nine months ended September 30, 2021, 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 condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards ("IFRS"). The following measures, NOI, Proportionate NOI,
Same Property NOI, Same Property Proportionate NOI, FFO,
indebtedness, gross book value, indebtedness to gross book value
ratio, interest coverage ratio, indebtedness coverage ratio and
Proportionate Basis (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 nine months
ended September 30, 2021 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,
October 28, 2021 at 3:00 p.m.
(ET) to discuss the financial results for the nine
months ended September 30,
2021 and 2020. To participate in the conference call, please
dial 416-764-8688 or 1-888-390-0546. Please quote
conference ID 78390176.
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 13,275 residential suites (as
of October 26, 2021) located in
Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $3.2 billion at
September 30, 2021. For more
information, visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust