In This Article:
Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Morguard North American Residential Real Estate Investment Trust (MNARF) increased its total assets to $4.6 billion, up from $4.1 billion the previous year.
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The REIT successfully refinanced five Canadian properties, resulting in gross mortgage proceeds of $319 million at a favorable interest rate.
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The REIT increased its annual cash distribution by 2.7%, reflecting strong financial health.
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Average monthly rent in Canada increased by 5.9%, indicating strong demand and effective property management.
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The REIT's FFO payout ratio remains conservative at 45%, allowing for significant cash retention and financial flexibility.
Negative Points
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Net income decreased significantly to $99.4 million from $185.3 million the previous year, primarily due to non-cash items.
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The REIT's debt to gross book value ratio increased to 39.7%, indicating a rise in leverage.
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Net operating income in the US decreased by 4% due to higher operating expenses, despite AMR growth.
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Interest expenses increased by $7.8 million, driven by higher principal and interest rates.
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Occupancy rates in both Canada and the US saw slight declines, with Canada at 97.2% and the US at 93.8%.
Q & A Highlights
Q: How should we think about Average Monthly Rent (AMR) growth for 2025 in the US operations? A: John Telano, Senior Vice President, US Residential, stated that after a significant rise in rents over the past few years, the growth has normalized. They expect AMR growth to be in the 3% to 5% range, similar to pre-COVID levels, depending on the market.
Q: Can you provide some color on the vacancy in Mississauga and expectations for 2025? A: Ruth Grable, Assistant Vice President, Canadian Residential, explained that the vacancy was due to garage restoration programs and competition from new rental products. They expect to recover during the winter months and anticipate rent growth in the 20% to 23% range for 2025.
Q: Are you considering increasing your buyback plan or making a tender offer to address the trading discount to appraised value? A: Paul Matello, Senior Vice President, mentioned that the normal course issuer bid is active and they are evaluating all options, including enhanced buybacks. They are weighing these against growth opportunities in target markets.
Q: Is a tender offer being considered more seriously than before? A: Paul Matello confirmed that a tender offer is being discussed, especially considering the cross-border nature of the REIT. They are balancing the need to acquire assets and maintain cash in Canada, where most distributions and interest payments are in CAD.