MISSISSAUGA, ON, July 30,
2024 /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,
2024.
Highlights
The REIT is reporting second quarter performance of:
- Net operating income ("NOI") of $54.6
million for the three months ended June 30, 2024, an increase of $1.2 million, or 2.2% compared to 2023. The
change in foreign exchange rate increased NOI by $0.5 million.
- Same Property Proportionate NOI in Canada increased by $1.2 million (or 7.5%), and in the U.S. decreased
by US$0.4 million (or 1.8%), compared
to 2023.
- Net income of $50.6 million for
the three months ended June 30, 2024,
a decrease of $36.9 million, or 42.2%
compared to 2023, predominantly due to lower net fair value gain,
partially offset by a decrease in deferred income tax.
- Basic funds from operations ("FFO") of $22.7 million for the three months ended
June 30, 2024, a decrease of
$1.0 million, or 4.3% over the same
period in 2023.
- Basic FFO of $0.41 per Unit for
the three months ended June 30, 2024,
a 2.4% decrease as compared to $0.42
per Unit in 2023.
- FFO payout ratio for the three months ended June 30, 2024 of 44.6% compared to 42.5% in
2023.
The REIT is reporting the following corporate and portfolio
highlights:
- During the second quarter of 2024, the REIT completed the
financing of three Canadian multi-suite residential properties for
aggregate proceeds of $209.6 million
at a weighted average interest rate of 4.64% and for terms of 10.5
years. The maturing mortgages amounted to $91.4 million, had a weighted average interest
rate of 3.36%, resulting in net proceeds of $118.2 million, before financing costs.
- As at June 30, 2024, average
monthly rent ("AMR") in Canada
increased by 6.1% compared to June 30,
2023, while occupancy remained strong and stable at 98.0% at
June 30, 2024, compared to 98.4% at
June 30, 2023.
- As at June 30, 2024, AMR in the
U.S., increased by 2.6% compared to June 30,
2023, while occupancy was 93.3% at June 30, 2024, compared to 95.3% at June 30, 2023.
- As at June 30, 2024, indebtedness
to gross book value ratio of 39.3%, compared to 38.7% as at
December 31, 2023.
Financial and Operational Highlights
|
As at
|
June
30,
|
December 31,
|
June 30,
|
|
(In thousands of
dollars, except as otherwise noted)
|
2024
|
2023
|
2023
|
|
Operational
Information
|
|
|
|
|
Number of
properties
|
43
|
42
|
43
|
|
Total suites
|
13,089
|
13,089
|
13,089
|
|
|
|
|
|
Occupancy percentage –
Canada
|
98.0 %
|
98.7 %
|
98.4 %
|
|
Occupancy percentage –
U.S.
|
93.3 %
|
94.2 %
|
95.3 %
|
|
Average monthly rent -
Canada (in actual dollars)
|
$1,730
|
$1,674
|
$1,613
|
|
Average monthly rent -
U.S. (in actual U.S. dollars)
|
US$1,896
|
US$1,875
|
US$1,848
|
|
|
|
|
|
Summary of Financial
Information
|
|
|
|
|
Gross book
value(1)
|
$4,377,500
|
$4,095,931
|
$4,128,900
|
|
Indebtedness(1)
|
$1,720,043
|
$1,583,311
|
$1,583,989
|
|
|
|
|
|
Indebtedness to gross
book value ratio(1)
|
39.3 %
|
38.7 %
|
38.4 %
|
|
Weighted average
mortgage interest rate
|
3.87 %
|
3.72 %
|
3.65 %
|
|
Weighted average term
to maturity on mortgages payable (years)
|
5.4
|
4.9
|
5.2
|
|
(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)
|
2024
|
2023
|
2024
|
2023
|
|
Summary of Financial
Information
|
|
|
|
|
|
Revenue from real
estate properties
|
$85,756
|
$83,326
|
$170,512
|
$162,974
|
|
NOI
|
$54,649
|
$53,494
|
$75,236
|
$72,802
|
|
Proportionate
NOI(1)
|
$46,401
|
$45,238
|
$91,304
|
$86,902
|
|
Same Property
Proportionate NOI(1)
|
$46,401
|
$45,238
|
$89,109
|
$85,793
|
|
NOI margin –
IFRS
|
63.7 %
|
64.2 %
|
44.1 %
|
44.7 %
|
|
NOI margin –
Proportionate(1)
|
54.4 %
|
54.6 %
|
53.8 %
|
53.6 %
|
|
Net income
|
$50,571
|
$87,515
|
$75,347
|
$121,764
|
|
|
|
|
|
|
FFO –
basic(1)
|
$22,685
|
$23,711
|
$45,219
|
$45,665
|
|
FFO –
diluted(1)
|
$23,525
|
$24,549
|
$46,899
|
$47,571
|
|
FFO per Unit –
basic(1)
|
$0.41
|
$0.42
|
$0.82
|
$0.81
|
|
FFO per Unit –
diluted(1)
|
$0.41
|
$0.42
|
$0.82
|
$0.80
|
|
Distributions per
Unit
|
$0.18501
|
$0.1800
|
$0.37002
|
$0.3600
|
|
FFO payout
ratio(1)
|
44.6 %
|
42.5 %
|
44.9 %
|
44.2 %
|
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
|
|
|
Basic
|
54,745
|
55,957
|
54,856
|
56,118
|
|
Diluted
|
57,064
|
58,276
|
57,175
|
59,485
|
|
(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, 2024 and
available on the REIT's profile on SEDAR+ at www.sedarplus.ca.
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 table provides a reconciliation of Proportionate
Share NOI and Same Property Proportionate Share NOI to its closely
related financial statement measurement for the following
periods:
|
|
|
|
|
2024
|
|
|
|
|
2023
|
|
|
Non-GAAP
Adjustments
|
|
|
Non-GAAP
Adjustment
|
|
|
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
|
$85,756
|
($4,468)
|
$4,011
|
$—
|
$85,299
|
$83,326
|
($4,334)
|
$3,853
|
$—
|
$82,845
|
|
Property operating
expenses
|
31,107
|
(1,400)
|
989
|
8,202
|
38,898
|
29,832
|
(1,275)
|
1,027
|
8,023
|
37,607
|
|
NOI
|
$54,649
|
($3,068)
|
$3,022
|
($8,202)
|
$46,401
|
$53,494
|
($3,059)
|
$2,826
|
($8,023)
|
$45,238
|
|
NOI
Margin
|
63.7 %
|
|
|
|
54.4 %
|
64.2 %
|
|
|
|
54.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024
|
|
|
|
|
2023
|
|
|
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
|
$165,669
|
($8,824)
|
$7,939
|
$—
|
$164,784
|
$160,528
|
($8,514)
|
$7,625
|
$—
|
$159,639
|
|
Acquisition
|
4,843
|
—
|
—
|
—
|
4,843
|
2,446
|
—
|
—
|
—
|
2,446
|
|
Total revenue from
properties
|
170,512
|
(8,824)
|
7,939
|
—
|
169,627
|
162,974
|
(8,514)
|
7,625
|
—
|
162,085
|
|
Property operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
91,798
|
(5,632)
|
4,711
|
(15,202)
|
75,675
|
89,305
|
(5,215)
|
5,055
|
(15,299)
|
73,846
|
|
Acquisition
|
3,478
|
—
|
—
|
(830)
|
2,648
|
867
|
—
|
—
|
470
|
1,337
|
|
Total property
operating expenses
|
95,276
|
(5,632)
|
4,711
|
(16,032)
|
78,323
|
90,172
|
(5,215)
|
5,055
|
(14,829)
|
75,183
|
|
NOI
|
|
|
|
|
|
|
|
|
|
|
|
Same
Property
|
73,871
|
(3,192)
|
3,228
|
15,202
|
89,109
|
71,223
|
(3,299)
|
2,570
|
15,299
|
85,793
|
|
Acquisition
|
1,365
|
—
|
—
|
830
|
2,195
|
1,579
|
—
|
—
|
(470)
|
1,109
|
|
Total
NOI
|
$75,236
|
($3,192)
|
$3,228
|
$16,032
|
$91,304
|
$72,802
|
($3,299)
|
$2,570
|
$14,829
|
$86,902
|
|
NOI
Margin
|
44.1 %
|
|
|
|
53.8 %
|
44.7 %
|
|
|
|
53.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
2024
|
2023
|
2024
|
2023
|
|
Net income for the
period attributable to Unitholders
|
$48,316
|
$81,227
|
$74,047
|
$110,722
|
|
Add/(deduct):
|
|
|
|
|
|
Realty taxes accounted
for under IFRIC 21
|
(8,202)
|
(8,023)
|
16,032
|
14,829
|
|
Fair value gain on
conversion option on the convertible debentures
|
(975)
|
(249)
|
(1,127)
|
(538)
|
|
Distributions on Class
B LP Units recorded as interest expense
|
3,186
|
3,100
|
6,372
|
6,200
|
|
Foreign exchange
loss
|
4
|
23
|
6
|
24
|
|
Fair value gain on real
estate properties, net
|
(18,998)
|
(62,171)
|
(73,718)
|
(132,857)
|
|
Non-controlling
interests' share of fair value gain on real estate
properties
|
416
|
4,368
|
518
|
9,990
|
|
Fair value loss (gain)
on Class B LP Units
|
(8,095)
|
(9,473)
|
12,228
|
11,195
|
|
Deferred income tax
expense
|
7,033
|
14,909
|
10,861
|
26,100
|
|
FFO -
basic
|
$22,685
|
$23,711
|
$45,219
|
$45,665
|
|
Interest expense on the
convertible debentures
|
840
|
838
|
1,680
|
1,906
|
|
FFO -
diluted
|
$23,525
|
$24,549
|
$46,899
|
$47,571
|
|
FFO per Unit -
basic
|
$0.41
|
$0.42
|
$0.82
|
$0.81
|
|
FFO per Unit -
diluted
|
$0.41
|
$0.42
|
$0.82
|
$0.80
|
|
|
|
|
|
|
Weighted average number
of Units outstanding (in thousands):
|
|
|
|
|
|
Basic
|
54,745
|
55,957
|
54,856
|
56,118
|
|
Diluted
|
57,064
|
58,276
|
57,175
|
59,485
|
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)
|
2024
|
2023
|
|
Total Assets / Gross
book value
|
$4,377,500
|
$4,095,931
|
|
Mortgage
payable
|
$1,627,631
|
$1,495,362
|
|
Add: Deferred financing
costs
|
17,829
|
13,628
|
|
Mark-to-market adjustment
|
1,982
|
2,262
|
|
1,647,442
|
1,511,252
|
|
Convertible debentures,
face value
|
56,000
|
56,000
|
|
Lease
liabilities
|
16,601
|
16,059
|
|
Indebtedness
|
$1,720,043
|
$1,583,311
|
|
Indebtedness / Gross
book value
|
39.3 %
|
38.7 %
|
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.
The REIT's condensed consolidated financial statements for the
three and six months ended June 30,
2024, 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.sedarplus.ca.
Conference Call Details
Morguard North American Residential Real Estate Investment Trust
will hold a conference call on Thursday,
August 1, 2024 at 3:00 p.m.
(ET) to discuss the financial results for the three and
six months ended June 30, 2024 and
2023. To participate in the conference call, please
dial 416-764-8688 or 1-888-390-0546. Please quote
conference ID 67540525.
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 13,089 residential
suites and 239,500 square feet of commercial area (as of
July 30, 2024) located in
Alberta, Ontario, Colorado, Texas, Louisiana, Illinois, Georgia, Florida, North
Carolina, Virginia and
Maryland with an appraised value
of approximately $4.1 billion at
June 30, 2024. For more information,
visit the REIT's website at www.morguard.com.
SOURCE Morguard North American Residential Real Estate
Investment Trust