U.S. Markets closed

Monmouth Real Estate Reports Results For The Second Quarter Ended March 31, 2019

FREEHOLD, N.J., May 9, 2019 /PRNewswire/ -- Monmouth Real Estate Investment Corporation (MNR) reported Net Income Attributable to Common Shareholders of $23.8 million or $0.26 per diluted share for the three months ended March 31, 2019 as compared to Net Income Attributable to Common Shareholders of $7.4 million or $0.10 per diluted share for the three months ended March 31, 2018, representing a per share increase of 160%.  The large increase in our net income this quarter was primarily due to the implementation of a new accounting rule requiring that unrealized gains and losses resulting from our securities investments be reflected on our income statement.  During the second quarter of fiscal year 2019, we recognized $15.6 million of unrealized gains or $0.17 per diluted share.  Prior to the adoption of the rule unrealized gains and losses were reflected as a change in our shareholders' equity.  Core Funds from Operations (Core FFO), which excludes unrealized gains or losses from our securities portfolio, were $19.6 million or $0.21 per diluted share for the three months ended March 31, 2019 as compared to $16.8 million or $0.22 per diluted share for the three months ended March 31, 2018, representing a decrease in Core FFO per share of 4.5%.  Adjusted Funds from Operations (AFFO), which also excludes unrealized and realized gains or losses from our securities portfolio, for the three months ended March 31, 2019 were $19.2 million or $0.21 per diluted share versus $16.8 million or $0.22 per diluted share for the three months ended March 31, 2018, representing a decrease in AFFO per share of 4.5%.  These decreases in Core FFO and AFFO per share were attributable to the impact of our October equity offering of 9.2 million shares combined with additional share issuances pursuant to our DRIP/SIP program, as well as a modest increase in vacancies in our portfolio compared to a year ago. 

A summary of significant financial information for the three and six months ended March 31, 2019 and 2018 (in thousands, except per share amounts) is as follows:



Three Months Ended

March 31,



2019


2018

Rental Revenue

$

32,934

$

28,610

Reimbursement Revenue

$

6,372

$

5,734

Net Operating Income (NOI) (1)

$

32,545

$

28,366

Total Expenses

$

20,490

$

17,643

Dividend Income

$

3,515

$

2,888

Gain on Sale of Securities Transactions

$

-0-

$

11

Unrealized Holding Gains Arising During the Periods

$

15,568

$

-0-

Net Income

$

28,301

$

11,645

Net Income Attributable to Common Shareholders

$

23,821

$

7,397

Net Income Attributable to Common Shareholders Per Diluted Common Share

$

0.26

$

0.10

Core FFO (1)

$

19,588

$

16,830

Core FFO per Diluted Common Share (1)

$

0.21

$

0.22

AFFO (1)

$

19,172

$

16,847

AFFO per Diluted Common Share (1)

$

0.21

$

0.22

Dividends Declared per Common Share

$

0.17

$

0.17






Weighted Avg. Diluted Common Shares Outstanding


93,059


78,156













Six Months Ended

March 31,



2019


2018

Rental Revenue

$

65,551

$

56,302

Reimbursement Revenue

$

12,902

$

11,506

Lease Termination Income

$

-0-

$

210

Net Operating Income (NOI) (1)

$

64,864

$

55,808

Total Expenses

$

40,315

$

34,634

Dividend Income

$

7,882

$

5,752

Gain on Sale of Securities Transactions

$

-0-

$

111

Unrealized Holding Losses Arising During the Periods

$

(27,059)

$

-0-

Gain on Sale of Real Estate Investments   

$

-0-

$

5,388

Net Income

$

358

$

29,275

Net Income (Loss) Attributable to Common Shareholders

$

(8,543)

$

20,710

Net Income (Loss) Attributable to Common Shareholders Per Diluted Common Share

$

(0.09)

$

0.27

Core FFO (1)

$

41,017

$

33,763

Core FFO per Diluted Common Share (1)

$

0.45

$

0.44

AFFO (1)

$

40,194

$

33,319

AFFO per Diluted Common Share (1)

$

0.44

$

0.43

Dividends Declared per Common Share

$

0.34

$

0.34






Weighted Avg. Diluted Common Shares Outstanding


91,831


77,362






 

A summary of significant balance sheet information as of March 31, 2019 and September 30, 2018 (in thousands) is as follows:



March 31, 2019


September 30, 2018

Net Real Estate Investments

$

1,609,377

$

1,512,513

Securities Available for Sale at Fair Value

$

177,359

$

154,921

Total Assets

$

1,850,054

$

1,718,378

Fixed Rate Mortgage Notes Payable, net of Unamortized Debt Issuance Costs

$

754,123

$

711,546

Loans Payable

$

129,759

$

186,609

Total Shareholders' Equity

$

943,112

$

797,906

 

Michael P. Landy, President and CEO, commented on the results for the second quarter of fiscal 2019, "Our Core FFO and AFFO per share decreased by $0.01 or 4.5% from the prior year quarter and by $0.02 or 8.7% sequentially. The sequential decrease was primarily attributable to an $850,000 reduction in our dividend income and the timing impact of equity issuance over the past two quarters.  The year over year decrease was primarily attributable to the timing impact of equity issuance over the past year as well as a 30-basis point reduction in our overall occupancy rate to 98.9% versus the prior year period.  Going forward, we expect our recently completed building expansion as well as our substantially increased $245.9 million acquisition pipeline to positively contribute to our per share earnings in the ensuing quarters." 

"We are pleased to report continued growth across multiple fronts. During the quarter we:

  • Increased our Gross Revenue by 15% over the prior year period to $42.8 million;
  • Increased our Net Operating income by 15% over the prior year period to $32.5 million;
  • Increased our gross leasable area (GLA) by 9% over the prior year period to 21.8 million square feet;
  • Completed a 155,000 square foot building expansion for a total cost of $8.6 million increasing the initial year annual rent by $821,000, representing an average annualized rent of $2.1 million and extending the lease term by 15 years from the date of completion;
  • Grew our acquisition pipeline to include five new build-to-suit properties containing approximately 1.9 million total square feet representing an aggregate cost of $245.9 million, with a weighted average lease term of 13.7 years;
  • Renewed seven and re-leased one of the twelve leases scheduled to expire in Fiscal 2019. These eight lease renewals comprising 1.2 million square feet resulted in a 2.4% weighted-average increase in GAAP rent, and have a weighted-average lease term of 7.2 years;
  • Maintained a high occupancy rate, currently at 98.9%;
  • Extended our weighted average lease maturity to 8.0 years from 7.8 years in the prior year period;
  • Extended our weighted average debt maturity to 11.6 years from 11.5 years in the prior year period;
  • Maintained our weighted average interest rate on our fixed-rate debt at 4.1%;
  • Reduced our Net Debt to Adjusted EBITDA to 6.4x from 6.7x in the prior quarter;
  • Raised $18.5 million (including dividend reinvestments of $4.0 million) from our Dividend Reinvestment and Stock Purchase Plan, representing a 25% participation rate; and
  • Raised $10.3 million in net proceeds from our Preferred Stock At-The-Market Sales Program as well as an additional $5.8 million in net proceeds subsequent to quarter end."

"Our acquisition pipeline grew substantially during the quarter to $245.9 million currently. We now have agreements to acquire five new build-to-suit properties comprising 1.9 million total square feet. These properties have a weighted-average lease term of 13.7 years, with FedEx representing 41% of the 1.9 million square feet and Amazon representing 32%. In keeping with our business model, all of these projects are leased to investment grade tenants."

"We have now renewed seven and re-leased one of the twelve leases scheduled to expire this fiscal year. These eight leases, comprising 1.2 million square feet, were executed at a 2.4% weighted-average increase in GAAP rents, and have a weighted-average lease term of 7.2 years. In addition, we retained our tenant, FedEx, in two of the markets with buildings that did not renew, by providing them with new large modern facilities pursuant to new 15-year lease agreements. Our overall weighted-average lease maturity increased over the prior year period to 8.0 years and our weighted-average debt maturity increased over the prior year period to 11.6 years. With approximately 80% of our rental revenue derived from investment grade tenants, we have put together a very high-quality industrial property portfolio that should continue to benefit from the opportunities presented by the digital economy and the evolving global supply chain."

Monmouth Real Estate Investment Corporation will host its Second Quarter FY 2019 Financial Results Webcast and Conference Call on Friday, May 10, 2019 at 10:00 a.m. Eastern Time.  Senior management will discuss the results, current market conditions and future outlook.

Our Second Quarter FY 2019 financial results being released herein will be available on our website at www.mreic.reit in the Investor Relations section, under Filings and Reports.

To participate in the Webcast, select the 2Q2019 Webcast and Earnings Call "Link to Webcast" on the homepage of our website at www.mreic.reit, in the Highlights section, which is located towards the bottom of the homepage.  Interested parties can also participate via conference call by calling toll free 1-877-510-5852 (domestically) or 1-412-902-4138 (internationally).

The replay of the conference call will be available at 12:00 p.m. Eastern Time on Friday, May 10, 2019.  It will be available until August 1, 2019, and can be accessed by dialing toll free 1-877-344-7529 (domestically) and 1-412-317-0088 (internationally) and entering the passcode 10128987.  A transcript of the call and the webcast replay will be available at our website on the Investor Relations homepage, www.mreic.reit.

Monmouth Real Estate Investment Corporation, founded in 1968, is one of the oldest public equity REITs in the world.  We specialize in single tenant, net-leased industrial properties, subject to long-term leases, primarily to investment-grade tenants.  Monmouth Real Estate is a fully integrated and self-managed real estate company, whose property portfolio consists of 113 properties containing a total of approximately 21.8 million rentable square feet, geographically diversified across 30 states.  In addition, we own a portfolio of REIT securities.

Certain statements included in this press release which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are based on our current expectations and involve various risks and uncertainties.  Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can provide no assurance those expectations will be achieved.  The risks and uncertainties that could cause actual results or events to differ materially from expectations are contained in our annual report on Form 10-K and described from time to time in our other filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Notes:

(1)  Non-U.S. GAAP Information:  FFO, as defined by the National Association of Real Estate Investment Trusts (NAREIT), represents net income attributable to common shareholders, as defined by accounting principles generally accepted in the United States of America (U.S. GAAP), excluding extraordinary items, as defined under U.S. GAAP, gains or losses from sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization.  With the adoption of ASU 2016-01, effective October 1, 2018, FFO includes unrealized gains and losses arising during the periods from our securities investments.  In addition, FFO includes gains and losses realized from sales of securities investments.  NAREIT created FFO as a non-GAAP supplemental measure of REIT operating performance.  We define Core Funds From Operations (Core FFO) as FFO, excluding Unrealized Holding Gains or Losses Arising During the Periods.  We define Adjusted Funds From Operations (AFFO) as Core FFO, excluding stock based compensation expense, depreciation of corporate office tenant improvements, amortization of deferred financing costs, lease termination income, net gain or loss on sale of securities transactions, effect of non-cash U.S. GAAP straight-line rent adjustments and subtracting recurring capital expenditures.  We define recurring capital expenditures as all capital expenditures that are recurring in nature, excluding capital expenditures related to expansions at our current locations or capital expenditures that are incurred in conjunction with obtaining a new lease or a lease renewal.  We believe that, as widely recognized measures of performance used by other real estate investment trusts (REITs), FFO, Core FFO and AFFO may be considered by investors as supplemental measures to compare our operating performance to those of other REITs.  FFO, Core FFO and AFFO exclude historical cost depreciation as an expense and may facilitate the comparison of REITs which have a different cost basis.  However, other REITs may use different methodologies to calculate FFO, Core FFO and AFFO and, accordingly, our FFO, Core FFO and AFFO may not be comparable to all other REITs.  The items excluded from FFO, Core FFO and AFFO are significant components in understanding our financial performance

FFO, Core FFO and AFFO are non-GAAP performance measures and (i) do not represent Cash Flow from Operations as defined by U.S. GAAP; (ii) should not be considered as an alternative to Net Income or Net Income Attributable to Common Shareholders as a measure of operating performance or to Cash Flows from Operating, Investing and Financing Activities; and (iii) are not an alternative to Cash Flows from Operating, Investing and Financing Activities as a measure of liquidity.  FFO, Core FFO and AFFO, as calculated by us, may not be comparable to similarly titled measures reported by other REITs.

The following is a reconciliation of the Company's U.S. GAAP Net Income (Loss) Attributable to Common Shareholders to the Company's FFO, Core FFO and AFFO for the three and six months ended March 31, 2019 and 2018 (in thousands):


 Three Months Ended


Six Months Ended


3/31/2019


3/31/2018


3/31/2019


3/31/2018

Net Income (Loss) Attributable to Common Shareholders

$23,821


$7,397


$(8,543)


$20,710

Plus: Depreciation Expense (excluding Corporate Office Capitalized Costs)

10,589


8,819


21,026


17,263

Plus: Amortization of Intangible Assets

505


397


1,005


741

Plus: Amortization of Capitalized Lease Costs

241


217


470


437

Less: Gain on Sale of Real Estate Investments

-0-


-0-


-0-


(5,388)

FFO Attributable to Common Shareholders

35,156


16,830


13,958


33,763

Less/Plus: Unrealized Holding (Gains) Losses Arising During the Periods

(15,568)


-0-


27,059


-0-

Core FFO Attributable to Common Shareholders

19,588


16,830


41,017


33,763

Plus: Depreciation of Corporate Office Capitalized Costs

167


39


208


79

Plus: Stock Compensation Expense

215


111


344


242

Plus: Amortization of Financing Costs

320


303


637


596

Less: Gain on Sale of Securities Transactions

-0-


(11)


-0-


(111)

Less: Lease Termination Income

-0-


-0-


-0-


(210)

Less: Recurring Capital Expenditures

(630)


(64)


(1,187)


(284)

Less: Effect of Non-cash U.S. GAAP Straight-line Rent Adjustment

(488)


(361)


(825)


(756)

AFFO Attributable to Common Shareholders

$19,172


$16,847


$40,194


$33,319

 

The following are the Cash Flows provided (used) by Operating, Investing and Financing Activities for the six months ended March 31, 2019 and 2018 (in thousands):


Six Months Ended


3/31/2019


3/31/2018





Operating Activities

$50,648


$42,838

Investing Activities

(173,458)


(161,056)

Financing Activities

129,844


120,462

 

Cision

View original content:http://www.prnewswire.com/news-releases/monmouth-real-estate-reports-results-for-the-second-quarter-ended-march-31-2019-300847678.html