MISSISSAUGA, ON, July 26,
2022 /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,
2022.
Highlights
The REIT is reporting second quarter performance of:
- Net operating income ("NOI") of $42.5
million for the three months ended June 30, 2022, an increase of $5.1 million, or 13.6% compared to 2021. The
change in foreign exchange rate increased NOI by $1.7 million.
- Same Property Proportionate NOI in the U.S. increased by 16.0%,
and in Canada increased by 5.4%,
compared to 2021.
- Net income of $166.5 million for
the three months ended June 30, 2022,
an increase of $146.3 million,
compared to 2021. The increase in net income is predominantly due
to a higher non-cash fair value gain on real estate properties as
well as an increase in fair value gain on Class B LP Units,
partially offset by an increase in deferred income tax.
- Basic funds from operations ("FFO") of $19.8 million for the three months ended
June 30, 2022, an increase of
$3.7 million, or 23.0% over the same
period in 2021.
- Basic FFO of $0.35 per Unit for
the three months ended June 30, 2022,
a 20.7% increase as compared to the $0.29 in 2021.
- FFO payout ratio for the three months ended June 30, 2022 of 46.7% compared to 61.0% in
2021.
The REIT is reporting the following corporate and portfolio
highlights:
- On April 29, 2022, the REIT
completed the refinancing of a multi-suite residential property
located in West Palm Beach,
Florida, in the amount of $19.5
million (US$15.2 million) at
an interest rate of 3.89% and for a term of 10 years. The maturing
mortgage amounts to $11.7 million
(US$9.1 million), was open and
prepayable at no penalty before its scheduled maturity on
August 1, 2022, and had an interest
rate of 3.96%.
- On June 6, 2022, the REIT sold a
multi-suite residential property located in Atlanta, Georgia, comprising of 292 suites,
for net proceeds of $93.2 million
(US$74.2 million), including closing
costs and repaid the mortgage payable secured by the property in
the amount of $27.0 million
(US$21.5 million).
- During the second quarter, the REIT entered into agreements to
sell a property located in Slidell,
Louisiana, comprising 144 suites, and a property located in
Coconut Creek, Florida, comprising
340 suites, providing net proceeds of $114.9
million (US$89.2 million),
excluding closing costs and after the repayment of mortgage payable
secured by the property. The REIT expects to close the sale of
these properties during the third quarter.
- As at June 30, 2022, average
monthly rent ("AMR") in the U.S., on a Same Property basis,
increased by 13.0% compared to June 30,
2021, while occupancy was 96.5% at June 30, 2022, compared to 96.8% at June 30, 2021.
- As at June 30, 2022, AMR in
Canada increased by 3.0% compared
to June 30, 2021, while occupancy
improved to 95.2% at June 30, 2022,
compared to 91.8% at June 30,
2021.
- As at June 30, 2022, indebtedness
to gross book value ratio of 35.6%, lower compared to 40.2% as at
December 31, 2021.
- As at June 30, 2022, the REIT's
total assets were valued at $3.9
billion compared to $3.5
billion as at December 31,
2021.
Financial and Operational Highlights
As at
|
June 30,
|
December
31,
|
June 30,
|
(In thousands of dollars, except as otherwise
noted)
|
2022
|
2021
|
2021
|
Operational Information
|
|
|
|
Number of
properties
|
42
|
43
|
43
|
Total
suites
|
12,983
|
13,275
|
13,275
|
|
|
|
|
Occupancy percentage –
Canada
|
95.2 %
|
93.6 %
|
91.8 %
|
Occupancy percentage –
U.S.
|
96.4 %
|
96.3 %
|
95.9 %
|
Average monthly rent -
Canada (in actual dollars)
|
$1,565
|
$1,535
|
$1,520
|
Average monthly rent -
U.S. (in actual U.S. dollars)
|
US$1,636
|
US$1,525
|
US$1,438
|
|
|
|
|
Summary of Financial
Information
|
|
|
|
Gross book
value(1)
|
$3,856,408
|
$3,473,287
|
$3,101,841
|
Indebtedness(1)
|
$1,371,845
|
$1,395,438
|
$1,283,230
|
|
|
|
|
Indebtedness to gross
book value ratio(1)
|
35.6 %
|
40.2 %
|
41.4 %
|
Weighted average
mortgage interest rate
|
3.31 %
|
3.31 %
|
3.45 %
|
Weighted average term
to maturity on mortgages payable (years)
|
4.6
|
5.0
|
4.3
|
Exchange rates -
United States dollar to Canadian dollar
|
$1.29
|
$1.27
|
$1.24
|
Exchange rates -
Canadian dollar to United States dollar
|
$0.78
|
$0.79
|
$0.81
|
(1)
|
Represents a non-GAAP
financial measure/ratio that does not have any standardized meaning
prescribed by IFRS and is not necessarily comparable to similar
measures presented by other reporting issuers in similar or
different industries. This measure should be considered as
supplemental in nature and not as substitutes for related financial
information prepared in accordance with IFRS.
|
|
Three months
ended
|
Six
months ended
|
|
June
30
|
June
30
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
2022
|
2021
|
Summary of
Financial Information
|
|
|
|
|
Revenue from real
estate properties
|
$67,392
|
$59,814
|
$132,649
|
$120,136
|
NOI
|
$42,456
|
$37,373
|
$59,880
|
$52,557
|
Proportionate
NOI(1)
|
$37,101
|
$32,399
|
$72,228
|
$64,217
|
Same Property
Proportionate NOI(1)
|
$36,344
|
$31,757
|
$70,355
|
$62,960
|
NOI margin –
IFRS
|
63.0 %
|
62.5 %
|
45.1 %
|
43.7 %
|
NOI margin –
Proportionate(1)
|
54.1 %
|
53.3 %
|
53.5 %
|
52.7 %
|
Net income
|
$166,550
|
$20,269
|
$337,692
|
$47,664
|
|
|
|
|
|
FFO –
basic(1)
|
$19,833
|
$16,128
|
$38,140
|
$31,747
|
FFO –
diluted(1)
|
$20,792
|
$17,087
|
$40,042
|
$33,649
|
FFO per Unit –
basic(1)
|
$0.35
|
$0.29
|
$0.68
|
$0.56
|
FFO per Unit –
diluted(1)
|
$0.34
|
$0.28
|
$0.66
|
$0.56
|
Distributions per
Unit
|
$0.1749
|
$0.1749
|
$0.3498
|
$0.3498
|
FFO payout
ratio(1)
|
49.7 %
|
61.0 %
|
51.6 %
|
62.0 %
|
Weighted average
number of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,304
|
56,260
|
56,298
|
56,254
|
Diluted
|
60,537
|
60,493
|
60,531
|
60,487
|
Average exchange rates
- United States dollar to Canadian dollar
|
$1.28
|
$1.23
|
$1.27
|
$1.25
|
Average exchange rates
- Canadian dollar to United States dollar
|
$0.78
|
$0.81
|
$0.79
|
$0.80
|
(1)
|
Represents a non-GAAP
financial measure/ratio that does not have any standardized meaning
prescribed by IFRS and is not necessarily comparable to similar
measures presented by other reporting issuers in similar or
different industries. This measure should be considered as
supplemental in nature and not as substitutes for related financial
information prepared in accordance with IFRS.
|
Specified Financial Measures
The REIT reports
its financial results in accordance with International Financial
Reporting Standards ("IFRS"). However, this earnings release also
uses specified financial measures that are not defined by IFRS,
which follow the disclosure requirements established by National
Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure. Specified financial measures are categorized as
non-GAAP financial measures, non-GAAP ratios, and other financial
measures. Additional details on specified financial measures
including supplementary financial measures, capital management
measures and total segment measures are set out in the REIT's
Management's Discussion and Analysis for the three and six months
ended June 30, 2022 and available on
the REIT's profile on SEDAR at www.sedar.com.
The following Non-GAAP financial measures do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. These measures should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with IFRS. The
REIT's management uses these measures to aid in assessing the
REIT's underlying core performance and provides these additional
measures so that investors may do the same. Management believes
that the non-GAAP financial measures, which supplement the IFRS
measures, provide readers with a more comprehensive understanding
of management's perspective on the REIT's operating results and
performance.
A reconciliation of each non-GAAP financial measure referred to
in this earnings release is provided below.
Proportionate Share NOI ("Proportionate NOI") & Same
Property Proportionate NOI
Proportionate NOI and Same
Property Proportionate NOI are important measures in evaluating the
operating performance of the REIT's real estate properties and are
a key input in determining the fair value of the REIT's properties.
Proportionate NOI represents NOI (an IFRS measure) adjusted for the
following: i) to exclude the impact of realty taxes accounted for
under International Financial Reporting Interpretations Committee
("IFRIC") Interpretation 21, Levies ("IFRIC 21"). Proportionate NOI
records realty taxes for all properties on a pro rata basis
over the entire fiscal year; ii) to exclude the non-controlling
interest share of NOI for those properties that are consolidated
under IFRS ("NCI Share"); and iii) to include equity-accounted
investments NOI at the REIT's ownership interest ("Equity
Interest").
Same Property Proportionate NOI is presented in this earnings
release because management considers this non-GAAP measure to be an
important measure of the REIT's operating performance, representing
Proportionate NOI for properties owned by the REIT continuously for
the current and comparable reporting period and does not take into
account the impact of the operating performance of property
acquisitions and dispositions as well as development properties
until reaching stabilized occupancy. In addition, Same Property
Proportionate NOI is presented in local currency and by country,
isolating any impact of foreign exchange fluctuations.
The following tables provide a reconciliation of Proportionate
Share NOI and Same Property Proportionate Share NOI to its closely
related financial statement measurement for the following
periods:
|
|
|
|
|
2022
|
|
|
|
|
2021
|
|
|
Non-GAAP
Adjustments
|
|
|
Non-GAAP
Adjustments
|
|
For the three months
ended
|
|
|
|
|
Proportionate
|
|
|
|
|
Proportionate
|
June
30
|
|
NCI
|
Equity
|
|
Basis
|
|
NCI
|
Equity
|
|
Basis
|
(In thousands of
dollars)
|
IFRS
|
Share
|
Interest
|
IFRIC
21
|
(Non-GAAP)
|
IFRS
|
Share
|
Interest
|
IFRIC 21
|
(Non-GAAP)
|
Revenue from
properties
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
$65,567
|
($3,742)
|
$4,926
|
$—
|
$66,751
|
$58,107
|
($3,216)
|
$4,184
|
$—
|
$59,075
|
Disposition/Development
|
1,825
|
—
|
—
|
—
|
1,825
|
1,707
|
—
|
—
|
—
|
1,707
|
Total revenue from
properties
|
67,392
|
(3,742)
|
4,926
|
—
|
68,576
|
59,814
|
(3,216)
|
4,184
|
—
|
60,782
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
24,058
|
(1,095)
|
1,579
|
5,865
|
30,407
|
21,626
|
(1,025)
|
1,051
|
5,666
|
27,318
|
Disposition/Development
|
878
|
—
|
—
|
190
|
1,068
|
815
|
—
|
—
|
250
|
1,065
|
Total property
operating expenses
|
24,936
|
(1,095)
|
1,579
|
6,055
|
31,475
|
22,441
|
(1,025)
|
1,051
|
5,916
|
28,383
|
NOI
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
41,509
|
(2,647)
|
3,347
|
(5,865)
|
36,344
|
36,481
|
(2,191)
|
3,133
|
(5,666)
|
31,757
|
Disposition/Development
|
947
|
—
|
—
|
(190)
|
757
|
892
|
—
|
—
|
(250)
|
642
|
Total
NOI
|
$42,456
|
($2,647)
|
$3,347
|
($6,055)
|
$37,101
|
$37,373
|
($2,191)
|
$3,133
|
($5,916)
|
$32,399
|
NOI
Margin
|
63.0 %
|
|
|
|
54.1 %
|
62.5 %
|
|
|
|
53.3 %
|
|
|
|
|
|
2022
|
|
|
|
|
2021
|
|
|
Non-GAAP
Adjustments
|
|
|
Non-GAAP
Adjustments
|
|
For the six months
ended
|
|
|
|
|
Proportionate
|
|
|
|
|
Proportionate
|
June
30
|
|
NCI
|
Equity
|
|
Basis
|
|
NCI
|
Equity
|
|
Basis
|
(In thousands of
dollars)
|
IFRS
|
Share
|
Interest
|
IFRIC
21
|
(Non-GAAP)
|
IFRS
|
Share
|
Interest
|
IFRIC 21
|
(Non-GAAP)
|
Revenue from
properties
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
128,476
|
($7,197)
|
$9,631
|
$—
|
$130,910
|
$116,886
|
($6,446)
|
$8,085
|
$—
|
$118,525
|
Disposition/Development
|
4,173
|
—
|
—
|
—
|
4,173
|
3,250
|
—
|
—
|
—
|
3,250
|
Total revenue from
properties
|
132,649
|
(7,197)
|
9,631
|
—
|
135,083
|
120,136
|
(6,446)
|
8,085
|
—
|
121,775
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
69,907
|
(4,660)
|
6,979
|
(11,671)
|
60,555
|
65,063
|
(4,477)
|
6,260
|
(11,281)
|
55,565
|
Disposition/Development
|
2,862
|
—
|
—
|
(562)
|
2,300
|
2,516
|
—
|
—
|
(523)
|
1,993
|
Total property
operating expenses
|
72,769
|
(4,660)
|
6,979
|
(12,233)
|
62,855
|
67,579
|
(4,477)
|
6,260
|
(11,804)
|
57,558
|
NOI
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
58,569
|
(2,537)
|
2,652
|
11,671
|
70,355
|
51,823
|
(1,969)
|
1,825
|
11,281
|
62,960
|
Disposition/Development
|
1,311
|
—
|
—
|
562
|
1,873
|
734
|
—
|
—
|
523
|
1,257
|
Total
NOI
|
$59,880
|
($2,537)
|
$2,652
|
$12,233
|
$72,228
|
$52,557
|
($1,969)
|
$1,825
|
$11,804
|
$64,217
|
NOI
Margin
|
45.1 %
|
|
|
|
53.5 %
|
43.7 %
|
|
|
|
52.7 %
|
Funds From Operations
FFO (and FFO per Unit) is
a non-GAAP financial measure widely used as a real estate industry
standard that supplements net income and evaluates operating
performance but is not indicative of funds available to meet the
REIT's cash requirements. FFO can assist with comparisons of the
operating performance of the REIT's real estate between periods and
relative to other real estate entities. FFO is computed by the REIT
in accordance with the current definition of the Real Property
Association of Canada ("REALPAC")
and is defined as net income attributable to Unitholders adjusted
for fair value adjustments, distributions on the Class B LP Units,
realty taxes accounted for under IFRIC 21, deferred income taxes
(on the REIT's U.S. properties), gains/losses on the sale of real
estate properties (including income taxes on the sale of real
estate properties) and other non-cash items. The REIT considers FFO
to be a useful measure for reviewing its comparative operating and
financial performance. FFO per Unit is calculated as FFO divided by
the weighted average number of Units outstanding (including Class B
LP Units) during the period.
The following table provides a reconciliation of FFO to its
closely related financial statement measurement for the following
periods:
|
Three months ended
June 30
|
Six months ended
June 30
|
(In thousands of
dollars, except per Unit amounts)
|
2022
|
2021
|
2022
|
2021
|
Net income for the
period attributable to Unitholders
|
$162,601
|
$18,765
|
$325,031
|
$45,774
|
Add/(deduct):
|
|
|
|
|
Realty taxes accounted
for under IFRIC 21
|
(6,055)
|
(5,916)
|
12,233
|
11,804
|
Fair value loss (gain)
on conversion option on the convertible debentures
|
(3,297)
|
618
|
(1,147)
|
195
|
Distributions on Class
B LP Units recorded as interest expense
|
3,013
|
3,013
|
6,025
|
6,025
|
Foreign exchange loss
(gain)
|
(32)
|
15
|
(17)
|
38
|
Fair value gain on real
estate properties, net
|
(111,655)
|
(31,820)
|
(362,132)
|
(61,933)
|
Non-controlling
interests' share of fair value gain on real estate
properties
|
2,247
|
230
|
11,997
|
1,774
|
Fair value loss (gain)
on Class B LP Units
|
(55,631)
|
21,184
|
(22,907)
|
14,640
|
Deferred income tax
provision
|
28,642
|
10,039
|
69,057
|
13,430
|
FFO -
basic
|
$19,833
|
$16,128
|
$38,140
|
$31,747
|
Interest expense on the
convertible debentures
|
959
|
959
|
1,902
|
1,902
|
FFO -
diluted
|
$20,792
|
$17,087
|
$40,042
|
$33,649
|
FFO per Unit -
basic
|
$0.35
|
$0.29
|
$0.68
|
$0.56
|
FFO per Unit -
diluted
|
$0.34
|
$0.28
|
$0.66
|
$0.56
|
|
|
|
|
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
|
|
Basic
|
56,304
|
56,260
|
56,298
|
56,254
|
Diluted
|
60,537
|
60,493
|
60,531
|
60,487
|
Indebtedness and Gross Book Value
Indebtedness
(as defined in the REIT's Declaration of Trust) is a measure of the
amount of debt financing utilized by the REIT. Indebtedness is
presented in this earnings release because management considers
this non-GAAP financial measure to be an important measure of the
REIT's financial position.
Gross book value (as defined in the REIT's Declaration of Trust)
is a measure of the value of the REIT's assets. Gross book value is
presented in this earnings release because management considers
this non-GAAP financial measure to be an important measure of the
REIT's asset base and financial position.
The following table provides a reconciliation of gross book
value and indebtedness as defined in the REIT's Declaration of
Trust from their IFRS financial statement presentation:
As at
|
June
30,
|
December 31,
|
(In thousands of
dollars)
|
2022
|
2021
|
Total Assets / Gross
book value
|
$3,856,408
|
$3,473,287
|
Mortgage
payable
|
$1,265,892
|
$1,288,555
|
Add: deferred financing
costs
|
11,240
|
12,318
|
|
1,277,132
|
1,300,873
|
Convertible debentures,
face value
|
85,500
|
85,500
|
Lease
liability
|
9,213
|
9,065
|
Indebtedness
|
$1,371,845
|
$1,395,438
|
Indebtedness / Gross
book value
|
35.6 %
|
40.2 %
|
Non-GAAP Ratios
Non-GAAP ratios do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. These measures should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with IFRS. The
REIT's management uses these measures to aid in assessing the
REIT's underlying core performance and provides these additional
measures so that investors may do the same. Management believes
that the non-GAAP ratios described below, provide readers with a
more comprehensive understanding of management's perspective on the
REIT's operating results and performance.
The following discussion describes the non-GAAP ratios the REIT
uses in evaluating its operating results.
Proportionate NOI Margin
Proportionate NOI
margin is calculated as Proportionate NOI divided by revenue (on a
Proportionate Basis) and is an important measure in evaluating the
operating performance (including the level of operating expenses)
of the REIT's real estate properties. Proportionate NOI margin is
presented in this earnings release because management considers
this non-GAAP ratio to be an important measure of the REIT's
operating performance and financial position.
FFO Payout Ratio
FFO payout ratio compares
distributions declared (including Class B LP Units) to FFO.
Distributions declared (including Class B LP Units) is calculated
based on the monthly distribution per Unit multiplied by the
weighted average number of Units outstanding (including Class B LP
Units) during the period and is an important metric in assessing
the sustainability of retained cash flow to fund capital
expenditures and distributions. FFO payout ratio is presented in
this earnings release because management considers this non-GAAP
ratio to be an important measure of the REIT's operating
performance and financial position.
Indebtedness to Gross Book Value
Ratio
Indebtedness to gross book value ratio is a
compliance measure in the REIT's Declaration of Trust and
establishes the limit for financial leverage of the REIT.
Indebtedness to gross book value ratio is presented in this
earnings release because management considers this non-GAAP ratio
to be an important measure of the REIT's financial position.
Subsequent Events
On July
1, 2022, the REIT completed the refinancing of a multi-suite
residential property located in Palm
Beach County, Florida, in the amount of $59.9 million (US$46.5
million) at an interest rate of 4.19% and for a term of 10
years. The maturing mortgage amounts to $30.2 million (US$23.5
million), was open and prepayable at no penalty before its
scheduled maturity on October 1,
2022, and had an interest rate of 3.78%.
The REIT entered into a binding agreement to acquire a
multi-suite residential property comprising 350 suites located in
Chicago, Illinois, for a purchase
price of $171.4 million (US$133.0 million), excluding closing costs. The
acquisition is expected to close during the third quarter of
2022.
The REIT's condensed consolidated financial statements for the
three and six months ended June 30,
2022, 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.
Conference Call Details
Morguard North American
Residential Real Estate Investment Trust will hold a conference
call on Thursday, July 28, 2022 at 3:00 p.m. (ET) to discuss the financial
results for the three and six months ended June 30, 2022 and 2021. To participate in the
conference call, please dial 416-764-8688 or
1-888-390-0546. Please quote conference ID 39294741.
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. The REIT's portfolio is comprised of 12,983 residential
suites (as of July 26, 2022) located
in Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $3.6 billion at
June 30, 2022. For more information,
visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential REIT