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Press release from CNW Group

Morguard North American Residential REIT Announces 2013 Results

Thursday, February 27, 2014

Morguard North American Residential REIT Announces 2013 Results

17:15 EST Thursday, February 27, 2014

TSX: MRG.UN

MISSISSAUGA, ON, Feb. 27, 2014 /CNW/ - Morguard North American Residential REIT (the 'REIT") (TSX:  MRG.UN) today announced its financial results for the year ended December 31, 2013.

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

HIGHLIGHTS

  • On February 19, 2013 and June 28, 2013, the REIT acquired from Morguard Corporation ("Morguard") 12 multi-unit residential properties comprised of 2,722 suites located in Alabama, Florida and Louisiana for a purchase price of approximately $182.4 million partially funded by the assumption of the in-place mortgages of $125.8 million.
  • On March 15, 2013, the REIT completed the offering of $95.1 million for 8.3 million trust units sold at a price of $11.50 per trust unit and the issuance of $60.0 million principal amount of 4.65% convertible unsecured subordinated debentures maturing on March 30, 2018.  The proceeds of the offering, after underwriters' commission, were $149.6 million.
  • Between April 17, 2013 and May 22, 2013, the REIT acquired 12 multi-unit residential properties, comprised of 3,752 suites located in Colorado, Florida, North Carolina, Georgia and Texas for $463.2 million financed by the assumption of in-place mortgages of $225.2 million and newly arranged mortgages of $59.2 million.
  • Reflecting the significant activity that occurred during the first half of 2013, the REIT is reporting:
  • Consolidated net operating income of $73.5 million for the year ended December 31, 2013, an increase of $32.1 million over 2012.
  • Funds from Operations ("FFO") of $34.7 million for the year ended December 31, 2013, an increase of $14.9 million over 2012.
  • Adjusted Funds from Operations ("AFFO") of $0.70 per unit for the year ended December 31, 2013, a 15% increase as compared to the $0.61 value generated in 2012.
  • FFO payout ratio for the year was 77.9% (AFFO payout ratio - 85.7%).
         
FINANCIAL AND OPERATIONAL HIGHLIGHTS        
         
As at December 31 2013     2012
Operational information        
Number of properties 44     20
Total suites 12,850     6,376
Occupancy percentage 95.7%     96.7%
Monthly weighted average in-place rent - Canada $1,232     $1,202
Monthly weighted average in-place rent - US $974     $908
         
Summary of Financial Information        
Total gross book value $1,671,233     $1,020,681
Debt $938,508     $432,020
Debt to gross book value 56%     42%
Weighted average interest rate on mortgages payable 4.2%     4.3%
Weighted average term to maturity on mortgages payable (years) 4.3     4.7
         
FINANCIAL AND OPERATIONAL HIGHLIGHTS        
         
For the years ended December 31
(in thousands of dollars, except per unit amounts)
 2013     2012
Summary of Financial Information        
Revenue from income producing properties $142,939     $80,294
Net operating income ("NOI") $73,460     $41,340
Comparative net operating income $39,118     $39,177
Net operating margin 51%     51%
Interest coverage 1.85     2.11
         
Funds from Operations (FFO) - basic $34,657     $19,747
Funds from Operations (FFO) - diluted $36,889     $19,747
FFO per unit - basic and diluted $0.77     $0.64
         
Adjusted Funds from Operations (AFFO) - basic $31,392     $18,803
Adjusted Funds from Operations (AFFO) - diluted $33,624     $18,803
AFFO per unit - basic and diluted $0.70     $0.61
FFO payout ratio 77.92%     93.75%
AFFO payout ratio 85.71%     98.36%
Weighted average number of units outstanding during the
period (000's)
       
- Basic 44,847     30,949
- Diluted 47,944     30,949
             
NET OPERATING INCOME            
For the years ended December 31             
(In thousands of dollars)     2013     2012
Revenue from income producing properties            
Same property     $76,791     $75,617
Acquisitions     66,148     4,677
Total revenue from income producing properties     142,939     80,294
Property Operating Expenses            
Same property            
  Operating expenses     $19,491     $18,727
  Utilities     9,572     9,201
  Taxes     8,610     8,512
Same property     37,673     36,440
Acquisitions     31,806     2,514
Total property operating expenses     69,479     38,954
Net Operating Income            
Same property     $39,118     $39,177
Acquisitions     34,342     2,163
Total Net Operating Income     $73,460     $41,340
             

Consolidated net operating income increased by $32.1 million during the year ended December 31, 2013, to $73.5 million, compared to $41.3 million in 2012. The increase was predominantly due to the U.S. acquisitions (24 properties acquired during the current year and three properties acquired during the third quarter of 2012), which increased NOI by US$31.0 million in 2013 and the change in the U.S. foreign exchange rate which increased NOI by $1.3 million. The changes in the Canadian properties and for the remaining U.S. properties were not significant.

FUNDS FROM OPERATIONS ("FFO")            
For the years ended December 31              
(In thousands of dollars, except per unit amounts)     2013     2012
Net income for the year attributable to the unitholders     $56,381     $187,779
Add (deduct):            
Fair value gain on income producing properties     (7,962)     (125,394)
Non-controlling interests' share of fair value gain on income producing properties     649     3,638
Fair value (gain) loss on Class B LP Units     (30,830)     20,668
Fair value gain on conversion option of Debentures     (43)     -
Distributions on Class B LP Units recorded as interest expense     10,333     7,261
Foreign exchange gain     (2,399)     -
Deferred income tax provision (recovery)     8,528     (74,205)
Funds from operations     $34,657     $19,747
Interest expense on convertible debentures     2,232     -
Diluted FFO     $36,889     $19,747
FFO per unit - basic and diluted     $0.77     $0.64

FFO increased by $14.9 million in during the year ended December 31, 2013, to $34.7 million ($0.77 per unit) compared to $19.7 million ($0.64 per unit) in 2012. The increase in FFO is mainly attributable to the U.S. acquisitions which had a positive impact on NOI of US$31.0 million for the year ended December 31, 2013 and a decrease in current income taxes of $0.8 million.  These items were partially offset by an increase in interest expense of $13.9 million, due to the mortgages on the U.S. acquisitions and the convertible debentures issued during the first quarter of 2013, and an increase in trust expenses of $4.1 million, predominantly due to an increase in asset management fees on the acquisitions completed in 2013, an increase in professional fees for audit, tax and appraisal services and the asset management incentive distribution fee relating to the REIT exceeding the annual FFO threshold of $0.66 per unit. The change in foreign exchange rates had a positive impact on FFO of $0.7 million.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")            
For the years ended December 31              
(In thousands of dollars, except per unit amounts)     2013     2012
Funds from Operations     $34,657     $19,747
Add (deduct):            
Amortization of deferred financing costs assumed on Initial Properties     1,469     1,455
Non-controlling interests' share of amortization of deferred financing costs assumed
  on Initial Properties
    (47)     (45)
Maintenance capital expenditures     (4,898)     (2,557)
Amortization of cash flow hedge     211     203
Adjusted funds from operations     31,392     18,803
Interest expense on convertible debentures     2,232     -
Diluted AFFO     $33,624             $18,803
AFFO per unit - basic and diluted     $0.70        $0.61

AFFO increased by $12.6 million for the year ended December 31, 2013, to $31.4 million ($0.70 per unit) compared to $18.8 million ($0.61 per unit) in 2012.  The increase is mainly due to an increase in FFO of $14.9 million for the year ended December 31, 2013, partially offset by an increase in maintenance capital expenditures of $2.3 million for the year as a result of the U.S. acquisitions completed in 2013.

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 27, 2014) located in Ontario, Alberta, Alabama, Colorado, Florida, Georgia, Louisiana, North Carolina and Texas with an appraised value of approximately $1.7 billion at December 31, 2013. 

 

SOURCE Morguard North American Residential Real Estate Investment Trust

For further information:

Morguard Corporation
K. (Rai) Sahi
Chief Executive Officer
(905) 281-3800

Robert Wright
Chief Financial Officer
(905) 281-3800

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