Morguard North American Residential REIT Announces 2017 Results

MISSISSAUGA, ON, Feb. 14, 2018

Highlights

The REIT is reporting annual performance of:

• Net operating income ("NOI") of $122.7 million for the year ended December 31, 2017, an increase of $7.4 million, or 6.5% compared to 2016.
  
  
• Proportionate net operating income ("Proportionate NOI") of $119.0 million for the year ended December 31, 2017, an increase of $6.4 million, or 5.6% compared to 2016.
  
  
• Net income of $173.1 million for the year ended December 31, 2017, compared to $32.0 million for the year ended December 31, 2016. The increase was primarily due to a higher fair value gain on income producing properties and a lower fair value loss on Class B LP Units compared to 2016, as well as a one-time deferred tax recovery recorded in 2017 resulting from a change in the U.S. federal tax rate.
  
  
• Basic funds from operations ("FFO") of $59.7 million for the year ended December 31, 2017, an increase of $2.1 million, or 3.7% over the same period in 2016.
  
  
• Basic FFO of $1.18 per Unit for the year ended December 31, 2017, a 4.8% decrease as compared to the $1.24 in 2016.
  
  
• Indebtedness to Gross Book Value ratio improved from 54% in 2016 to 51% as at December 31, 2017.
  
  
• FFO payout ratio for the year ended December 31, 2017 of 54.7%.

The REIT is reporting the following corporate and portfolio highlights for 2017:

• On October 31, 2017, the REIT announced an increase to its monthly cash distributions to $0.055 per Unit, representing $0.66 per Unit on an annualized basis. The increase became effective for the November 2017 distribution, and was paid on December 15, 2017 to unitholders of record as at November 30, 2017 and represents a 3.1% increase from the REIT's $0.64 per Unit annualized distribution.
  
  
• On August 17, 2017, the REIT acquired a 50% interest in a property comprising 492 suites located in Rockville, Maryland, in which the REIT had a net investment of $40.1 million (US$31.7 million). The purchase price of the property was $166.7 million (US$131.8 million), including closing costs and was partially funded by a mortgage in the amount of $89.7 million (US$71.0 million) at an interest rate of 3.55% for a term of 10 years.
  
  
• On July 12, 2017, the REIT sold four U.S. properties located in Mobile, Alabama, comprising 1,329 suites, for net proceeds of $88.7 million (US$69.3 million).
  
  
• On July 10, 2017, the REIT acquired a property comprising 515 suites and approximately 20,000 square feet of commercial area located in Chicago, Illinois, for a purchase price of $292.7 million (US$227.1 million), including closing costs. The acquisition was partially financed by a new mortgage of $157.9 million (US$122.5 million) at an interest rate of 3.49% for a term of eight years. On October 2, 2017, the REIT sold a 49% interest in the property to an institutional partner for $63.4 million (US$50.7 million).
  
  
• On July 6, 2017, the REIT acquired a property comprising 104 suites and approximately 33,000 square feet of commercial area located in Falls Church, Virginia, for a purchase price of $56.5 million (US$43.7 million), including closing costs.
  
  
• On May 15, 2017, the REIT acquired a newly constructed property comprising 60 rental townhomes located in Toronto, Ontario, for a purchase price of $16.8 million, including closing costs (the "Downsview Park Acquisition"). The property was acquired before leasing had commenced and the lease-up of suites was completed in early 2018.
  
  
• On January 9, 2017, the REIT completed an offering for 4,370,000 Units sold for a price of $13.75 per Unit for aggregate gross proceeds of $60.1 million.

Financial and Operational Highlights

As at December 31
(In thousands of dollars, except as noted otherwise) ARIVA.DE Börsen-Geflüster Kurse MORGUARD NA RESIDENTIAL REIT UNITS 11,72 $ +4,41%	2017	2016
Operational Information
Number of properties	46	46
Total suites	13,314	13,472
Occupancy percentage	94.4%	95.2%
Average monthly rent - Canada (in actual dollars)	$1,327	$1,294
Average monthly rent - U.S. (in actual U.S. dollars)	US$1,203	US$1,028
Summary of Financial Information
Gross book value	$2,651,097	$2,285,727
Indebtedness	$1,363,228	$1,237,613
Indebtedness to gross book value ratio	51%	54%
Weighted average mortgage interest rate	3.5%	3.6%
Weighted average term to maturity on mortgages payable (years)	6.2	5.7
Exchange rates - United States dollar to Canadian dollar	$1.25	$1.34

Financial and Operational Highlights (Continued)

For the years ended December 31
(In thousands of dollars, except per Unit amounts)	2017	2016
Summary of Financial Information
Interest coverage ratio	2.19	2.04
Indebtedness coverage ratio	1.54	1.39
Revenue from income producing properties	$226,495	$218,472
NOI	$122,736	$115,294
Proportionate NOI	$118,970	$112,620
Same Property Proportionate NOI	$105,603	$103,111
NOI margin - IFRS	54.2%	52.8%
NOI margin - Proportionate	53.7%	52.8%
Net income	$173,131	$31,978
FFO - basic	$59,725	$57,591
FFO - diluted	$62,515	$60,381
FFO per Unit - basic	$1.18	$1.24
FFO per Unit - diluted	$1.14	$1.20
Distributions per Unit	$0.64	$0.61
FFO payout ratio	54.7%	49.0%
Weighted average number of Units outstanding (in thousands):
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