Good afternoon, ladies and gentlemen, and welcome to the Morguard North American Residential Real Estate Investment Trust Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question- and- answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, May 1st, 2020. I will now turn the conference over to Paul Miatello. Please go ahead.
Thank you very much, and welcome everybody, and thank you for joining our Q1 results conference call. Again, I'm Paul Miatello, Senior Vice President of the REIT. With us on the call today, we have Rai Sahi, Chairman and CEO of the REIT, Chris Newman, Chief Financial Officer, Angela Sahi, Vice President in charge of Canadian operations, and John Talano, Vice President in charge of U.S. operations. On behalf of all the management team, we hope everybody is safe and well, both you, your families, and your colleagues, and continue to be so. With that brief introduction, I'll now turn it over to Chris Newman, our Chief Financial Officer, for a brief overview on the first quarter results. Chris?
Thank you, Paul. As is customary, I'll provide a comment on the REIT's financial position and performance. I'll provide a brief operational and liquidity update as we continue to focus on our essential service of providing safe homes for our tenants and providing a safe work environment for our employees during this COVID-19 pandemic. In terms of our financial position, the REIT completed the first quarter of 2020 with total assets amounting to CAD 3.2 billion, compared to CAD 3 billion in December 2019. The increase is mainly due to the appreciation of the U.S. dollar since year-end. The REIT finished the first quarter of 2020 with CAD 20.8 million of cash on hand and CAD 1.6 million advanced through Morguard Corporation under its CAD 100 million revolving credit facility.
The REIT completed the first quarter of 2020 with CAD 1.4 billion of long-term debt obligations, and at March 31st, 2020, the REIT's overall weighted average term to maturity was 5.4 years, a decrease from 5.6 years at December 31st, 2019. Our weighted average interest rate increased slightly to 3.49% from 3.48% at December 31st, 2019. The REIT's debt-to-gross book value ratio improved slightly to 44% at March 31st, 2020 from 44.1% at December 31, 2019. The REIT's IFRS net asset value at just under CAD 27 per unit as at March 31st, 2020, compared to the current market price, a little over CAD 14, reflecting a compelling entry point for investors. Turning to the statement of income, net income was CAD 97.2 million for the three months ended March 31st, 2020, compared to CAD 3.7 million over the same period in 2019.
The increase was primarily due to an increase in the fair value on Class B LP units of CAD 108.5 million, caused by a CAD 5.10 unit price decrease resulting from the impact the global health crisis has had on our stock market during the first quarter of 2020. This was partially offset by a lower fair value gain on real estate properties relative to the gain recorded during Q1 2019. Net operating income was CAD 17.3 million for the three months ended March 31, 2020, an increase of CAD 0.5 million or 2.7% compared to 2019, comprising of an increase in same property NOI of CAD 0.8 million, partially offset by a net decrease from acquisitions and disposals of CAD 0.3 million. Same property proportionate NOI in Canada increased by CAD 1.1 million or 8.7%, and in the U.S. increased by $4.4 million, or 2.7% compared to 2019.
Canadian same property proportionate NOI benefited from a property tax refund of CAD 0.5 million. Excluding this refund, same property proportionate NOI in Canada increased by 2.9%. Interest expense decreased by CAD 5.2 million for the three months ended March 31, 2020 compared to 2019, primarily due to a non-cash decrease in the fair value on the convertible debentures conversion option. The REIT's first quarter performance has translated into basic FFO of CAD 18.1 million, an increase of CAD 2.9 million or 18.8% compared to 2019. On a per unit basis, FFO was CAD 0.32 per unit for the three months ended March 31, 2020, an increase of CAD 0.02 or 6.7% compared to the CAD 0.30 per unit in 2019. The increase in FFO was due to the following: An increase in same property NOI, partially offset by higher trust expense, had a CAD 0.02 per unit positive impact.
The successful property tax appeal had a $0.01 per unit positive impact. The issuance of units on August 28, 2019, which includes the dilution from additional units offset by interest income earned on proceeds advanced to the Morguard facility, net of the partial use of proceeds on December 9, 2019 to acquire the Marquee at Block 37, had a CAD 0.01 per unit negative impact. The REIT's FFO payout ratio was 54.3% for the period ended March 31st, 2020, a very conservative level, which allows for significant cash retention. Operationally, the REIT had a successful quarter with average monthly rents in Canada increasing to CAD 1,447 or 4.6%, reflecting the quality of our Canadian portfolio compared to 2019. During the first quarter, the Canadian portfolio turned over 2.2% of total suites in Canada and achieved 19.2% AMR growth on suite turnover.
While in the U.S., same property average monthly rents increased by 3.4%, having an average monthly rent of $1,354 at the end of the first quarter of 2020 compared to 2019. The REIT continues to report strong occupancy. With Canada finishing the first quarter of 2020 at 98.8% compared to 99.3% a year earlier, and same property occupancy in the U.S. improved to 95.8% at March 31st, 2020, compared to 95.3% at March 31st, 2019. During the quarter, the REIT's total CapEx amounted to CAD 6.1 million. That included common area projects, exterior building, and revenue-enhancing in-suite improvements. In addition, the REIT spent CAD 1.7 million of development capital at 1643 Josephine Street in New Orleans. Management expects to complete interior renovations and to commence initial lease-up towards the end of the second quarter of this year. Providing an operational and liquidity update.
During March 2020, the outbreak of COVID-19 has resulted in government enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods, and social distancing, have caused an economic slowdown and material disruption of business. Government has reacted with interventions intended to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time. It is not possible to reliably estimate the length and severity of these developments and the impact on the REIT's financial performance and financial position. The REIT recognizes the impact COVID-19 has on many of its tenants in North America and its stakeholders and is committed in taking measures to protect the health of its employees, tenants, and communities.
In March, Morguard initiated its crisis management plan with a team mandated to maintain a safe environment for our residents, employees, and stakeholders, coordinating efforts across our portfolio, standardizing communications, and responding as circumstances demand. We are actively monitoring the ongoing developments with regards to COVID-19 and are committed to ensuring a healthy and safe environment, adjusting our service model as necessary. During the first quarter, the Ontario government, as well as U.S. regions where the REIT operates, announced temporary measures to pause evictions. The REIT is committed to working with residents on a case-by-case basis on rent deferral arrangements. To provide an update, the REIT's occupancy remains stable in Canada and the U.S. Currently, the REIT has collected approximately 95.3% of April rental revenue, which is materially in line with historical collection rates.
The REIT has implemented a rent deferral program to our residential tenants who are financially constrained due to the impact of COVID-19. In addition, commencing with April rental payments, the REIT has waived the collection of recent rental increases and late fees for existing tenants and will suspend the collection of further rental increases during this period of crisis. Currently, less than 2.5% of tenants have requested deferral payment plans. The REIT has liquidity of CAD 125 million, comprised of CAD 25 million of cash and CAD 100 million available under its revolving credit facility with Morguard Corporation. As well, the REIT expects approximately CAD 15 million of additional CMHC-insured refinancing proceeds to be funded in May 2020, representing the REIT's only mortgage scheduled to mature in 2020.
In addition, the REIT's CAD 85.5 million convertible debentures do not mature until March 31st, 2023, and the REIT has approximately CAD 42.8 million of unencumbered assets. 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 our properties. I will now turn the call back over to the moderator who will open up the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a pre-recorded prompt acknowledging your request. Should you wish to withdraw your question, please press star followed by two. If you are on a speakerphone, please lift the handset before pressing any keys. Your first question comes from Yash Sankpal from Laurentian Bank. Please go ahead.
Good afternoon.
Hi, Yash.
Are you seeing any rental pressure on your new leasing?
We can start with, if you want to start with John in the U.S. to address that question.
Sure.
Sure. I would say the difficulty over the last 30 days has really been more about traffic than rates. They've certainly slowed as our foot traffic has come to a halt, and we're focused now on virtual traffic, including virtual tours, as well as setting up no contact, so socially distant tours as well. We've really moved to using all of our leasing tools that are technology-based.
Angela, I believe a lot of the similar statements can be said about Canada.
Exactly. We're doing exactly the same in Canada. We're using online leasing tools and socially distancing and allowing people to enter the unit kind of separately without employees or staff around. We are finding a little bit of a slowdown in terms of people wanting to come in. I think that some of these new virtual tours and things like that should help.
Right. Let's say, where do you think your rent levels will be by year-end? Do you think they will be higher than what you have right now, or you think there will be a decline based on what you know so far?
I think as the U.S. goes-
Go ahead.
I would say it's still too early to tell. We have several regions where we can absolutely push rent. In other regions, we have not. It all depends. We have stopped our increases, our renewals temporarily. As far as today goes, we could continue to resume with increases based on today. May is really going to be the telling month in terms of how many folks are having difficulties, and that'll affect occupancy and rate as well. So far it's been strong.
Okay. One last question about your occupancy. Based on what you know now and your basic forecasting, do you think your occupancy will be above or below the current occupancy levels by year-end?
Well, I think in Canada it'll be relatively stable, maybe a little bit lower just because traffic is not picking up because of the self-quarantine. When the businesses open up, we should expect a little bit more traffic into our buildings. Canada's a little bit easier, and Angela, I think you'd probably agree with that.
Yeah, I agree with that.
A little more dynamic on the U.S. side. Maybe John can add some insight on the U.S. side.
Yeah, I would say, to give you some perspective, our move-outs are actually down 9% when I compare to this time last year, and our renewals are also up 12%. We have a lot more turnover in the U.S., it generally is around 50%, but folks are not moving out as they would. I would suspect that we will see a dip, but based on the information we have today, we're doing really well.
Okay. That's it for me. Thank you.
Thank you, Yash.
Thank you. As a reminder, if you do have any questions, please press star followed by one. At this time, we do have a question from Lorne Kalmar from TD Securities. Please go ahead.
Hey, thanks. Good afternoon.
Hi, Lorne.
Just on the structure of the deferral program, can you give maybe a little more color on that?
Yeah. Generally speaking, we're deferring April and May's rent. We're allowing an option to defer 50% of that and to repay over a time period throughout the duration of the year, commencing in August.
Okay. That's for the U.S. and Canada?
John, yeah, in the U.S. as well. Same thing.
Yeah. It's very similar. Obviously, we get folks to pay everything they can upfront, and then we work towards the shortest period. It's good to know we only have 100 deferrals to date for the U.S. specifically. It is not as significant as some other landlords are seeing. On a relative basis, it's a very small number.
Okay, perfect. I know this is obviously very, very early days, but what's the expectation for May collections? Will it be in line with what you guys achieved in April?
Yeah. It's highly dependent on the duration of the economic slowdown and material disruption for businesses as well as the various government assistance programs offered to businesses and our tenants. It's hard to say when the businesses reopen. When that happens, we really can't tell. As of May, it's a little bit too early to comment on it just because it is the first of May. So, we really can't speak too much about what has happened in May so far.
Yeah. I figured as much, but I figured I'd try my luck. Okay. On that note, I'll turn it back. Thanks so much.
Thank you.
Thank you. There are no further questions at this time. You may proceed.
Okay. Thank you very much. On behalf of the entire management team, we wish everybody well. Stay safe, and hopefully we commence the road back to normalcy. We hope that you'll join us for the Q2 conference call. In the meantime, stay safe. Thanks, everybody.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. We ask that you please disconnect your lines.