Earnings Call: Q4 2019

Feb 14, 2020

Earnings release

Good afternoon, ladies and gentlemen, and welcome to the Moorguard North American Residential Real Estate Investment Trust Fourth Quarter Results Conference Call. At this time, all lines are in a listen only mode. Following the presentations, we will conduct a question and answer session. Also note that this call is being recorded on Friday, February 14, 2020. And I would like to turn the conference over to Mr. Paul Mutello. Please go ahead, sir. Thank you very much, and welcome, everybody, and thank you for joining us for the REIT's Q4 2019 results conference call. I'll just do a quick roll call of who's with us today. So we have Ray Saughey, Chief Executive Officer Chris Newman, Chief Financial Officer Angela Sahi, Senior Vice President in charge of Canadian Operations John Twentmo is on the phone, Senior Vice President in charge of U. S. Operations and Beverly Flynn, Senior Vice President. I am Paul Miatello, Senior Vice President of The REIT. And as is usual, I will turn the call over to Chris Newman, Chief Financial Officer, who will give us an overview of results of the REIT for the Q4 and for the year ended December 31, 2019, and then we'll open up the floor for questions. So over to Chris. Okay. Thank you, Paul. In terms of our financial position, the recompleted 2019 with total assets amounted to 3,000,000,000 dollars unchanged compared to the end of 2018. During the first half of twenty nineteen, the REIT sold the 5 Louisiana properties comprising 8 43 suites for net proceeds of $27,300,000 The disposition of the 5 Louisiana properties, which had an average age of 40 years, follows the sale of the REITs Alabama properties in July 2017 and is consistent with management strategy to dispose of non core assets and to focus on opportunities to acquire properties located in urban centers and major suburban markets in Canada and the U. S. During the Q3 of 2019, the REIT also completed an offering of 5,200,000 units sold for a price of $19.75 per unit for net proceeds of $99,600,000 And on December 9, 2019, the REIT acquired a 50% interest in the Marquis at Block 37, a property located in Chicago for a net investment of $68,800,000 The property is a 38 story apartment building located in the heart of downtown Chicago and features 6 90 suites and extensive best in class amenities. The REIT completed 2019 with $17,700,000 of cash on hand and $20,000,000 of advance to Morguard Corporation under its $100,000,000 revolving credit facility. The REIT completed 2019 with 1 $300,000,000 of long term debt obligations. On October 1, 2019, the REIT completed the refinancing of 3 Texas properties, resulting in additional mortgage proceeds of $7,700,000 The new loans have terms of 10 years and a weighted average interest rate of 3.24 percent. The maturing loans had a weighted average interest rate of 3.21%. As at December 31, 2019, the REIT's overall weighted average term to maturity was 5.6 years, a decrease from 5.8 years at December 31, 2018, and the REIT's weighted average interest rate also decreased to 3.48% from 3.49% during the year. The REIT continues to make progress on reducing its overall leverage. The REIT's debt to gross book value ratio improved to 44.1% at December 31, 2019 from 47.9% at December 31, 2018. And effective for the November 2019 distribution, the REIT increased its annual cash distribution by $0.02 per unit, an increase of nearly 3%. MRG had an IFRS net asset value of just under $26 per unit as at December 31, 2019, compared to the current market price of just over $20 per unit, still reflecting a compelling entry point for investors. And turning to the statement of income. Net income of $80,100,000 for the year ended December 31, 2019, compared to 174 $700,000 over the same period in 2018. The decrease in net income was primarily due to the following non cash items: a lower fair value gain on real estate properties, which was partially offset by a lower fair value loss on Class B LP units and a decrease in deferred income taxes. Net operating income of $132,900,000 for the year ended December 31, 2019, an increase of $1,200,000 or 0.9% compared to 2018. And on a same property basis, same property proportionate NOI in Canada increased by $1,400,000 or 2.8 percent and in the U. S. Increased by $1,700,000 or 3.1 percent compared to 2018. Interest expense decreased by $300,000 for the year ended December 31, 2019 compared to 2018, which was primarily due to the disposal of the 5 Louisiana properties during the first half of twenty nineteen. The REIT's 2019 performance has translated into basic FFO of $64,200,000 an increase of $3,100,000 or 5% compared to 2018. On a per unit basis, FFO was $1.22 per unit for the year ended December 31, 2019, an increase of $0.02 or 1.7 percent compared to $1.20 per unit in 2018. The increase in FFO per unit was primarily impacted by the following. The change in foreign exchange rate had a $0.02 per unit positive impact. The disposal of the 5 Louisiana properties had a $0.035 per unit negative impact and the dilution from additional units of the unit offering offset by approximately 4 months of interest income earned on proceeds advanced on the Morguard facility, including the partial use of proceeds to acquire the Marquis at Lot 37 had a $0.02 per unit negative impact. And the REIT's FFO payout ratio was 56.1% for the year ended December 31, 2019, a very conservative level, which allows for significant cash retention. Operationally, the REIT had a successful year with average monthly rents in Canada increasing to $14.32 reflecting the quality of our Canadian portfolio, which translates into an overall 4.3% increase in rent levels compared to 2018. During the year, the Canadian portfolio turned over 15% of total suites in Canada and achieved 17.7% AMR growth on suite turnover. While in the U. S. Same property AMR increased by 3.7%, having an average monthly rent of US1345 dollars at the end of 2019, compared to US1297 dollars at the end of 2018. The REIT continues to report strong occupancy with Canada finishing 2019 at 98.8% compared to 99.1% a year earlier. Same property occupancy in the U. S. Of 94.6% continues to be stable at December 31, 2019, compared to 95% at the end of 2018. During the year, the REIT's total CapEx amounted to $30,600,000 that included common area projects and revenue enhancing in suite improvements and energy initiative projects. In addition, the REIT incurred $7,000,000 towards the REIT development property in New Orleans. Management expects the project to be complete in the first half of twenty twenty. And now I'll turn it back over to the moderator who will open up the lines for questions. Thank And at this time, we have no questions registered. So please proceed. Thank you everybody for your attendance today. I think all the year end disclosures must have been sufficient and adequate. There aren't any questions. But thank you for your attendance today, and we'll speak to you again at the Q1 conference call. Thank you. Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourselves a good weekend.