HOLMDEL, NJ, Nov. 23, 2020 (GLOBE NEWSWIRE) -- Monmouth Real Estate Investment Corporation (NYSE:MNR) reported Net Loss Attributable to Common Shareholders of $48.6 million or $0.50 per diluted share for the fiscal year ended September 30, 2020 as compared to Net Income Attributable to Common Shareholders of $11.0 million or $0.12 per diluted share for the fiscal year ended September 30, 2019, representing a decrease of $0.62 per share. The decrease primarily resulted from the implementation of a new accounting rule which became effective for our fiscal yearend 2019 requiring that unrealized gains and losses resulting from our securities investments be reflected on our income statement. During the fiscal year ended September 30, 2020, we recognized unrealized losses of $77.4 million or $0.79 per diluted share as compared to unrealized losses of $24.7 million or $0.26 per diluted share during the prior fiscal year. Prior to the adoption of the rule, unrealized gains and losses were reflected as a change in our shareholders’ equity. Excluding all non-cash unrealized losses, our Net Income Attributable to Common Shareholders for the fiscal year 2020 would have been $28.8 million or $0.29 per diluted share as compared to $35.7 million or $0.38 per diluted share for the fiscal year ended September 30, 2019, representing a decrease of $0.09. For the fiscal year ended September 30, 2020, Funds from Operations (FFO), which exclude unrealized gains or losses from our securities portfolio, were $78.5 million or $0.80 per diluted share compared to $81.2 million or $0.87 per diluted share for the 2019 fiscal year, representing a decrease of $0.07 per share. For the fiscal year ended September 30, 2020, Adjusted Funds from Operations (AFFO), which also exclude unrealized and realized gains or losses from our securities portfolio, were $76.9 million or $0.78 per diluted share compared to $79.7 million or $0.85 per diluted share for the 2019 fiscal year, representing a decrease of $0.07 per share.
Net Loss Attributable to Common Shareholders for the three months ended September 30, 2020 was $3.9 million or $0.04 per diluted share as compared to Net Income Attributable to Common Shareholders $22.7 million or $0.24 per diluted share for the three months ended September 30, 2019, representing a decrease of $0.28 per share. Excluding all non-cash unrealized gains (losses), our Net Income Attributable to Common Shareholders for the three months ended September 30, 2020 would have been $6.4 million or $0.06 per diluted share, representing a decrease of $0.03 per share from the three months ended September 30, 2019. For the three months ended September 30, 2020, FFO were $19.2 million or $0.20 per diluted share as compared to $20.3 million or $0.21 per diluted share for the three months ended September 30, 2019, representing a decrease of $0.01 per share. For the three months ended September 30, 2020, AFFO were $18.2 million or $0.19 per diluted share compared to $20.1 million or $0.21 per diluted share for the three months ended September 30, 2019, representing a decrease of $0.02 per share.
The decrease in our annual and quarterly earnings was mostly due to a decrease in Dividend Income from our securities investments and an increase in our Preferred Dividend Expense. The decrease in our Dividend Income is because many REITs have reduced or eliminated their dividends in 2020 in response to financial pressures resulting from the COVID-19 pandemic. The increase in our Preferred Dividend Expense is due to the 5.0 million shares we sold of our 6.125% Series C Preferred Stock under the Preferred Stock ATM Program during the fiscal year at a weighted average price of $25.04 per share which generated aggregate net proceeds, after offering expenses, of $122.4 million. A portion of these proceeds were applied toward the $175.1 million in acquisitions of the five properties purchased during fiscal 2020. These five properties are expected to generate approximately $10.9 million in annual rental revenues. In addition, a portion of these proceeds will be applied to our current $338.4 million acquisition pipeline which comprises six properties that are expected to generate an additional $20.2 million in annual rental revenue when they come online. We expect the combination of the full run rate of our recent acquisitions, coupled with that of our acquisition pipeline and property expansions, to meaningfully grow our cash flow and earnings per share going forward.
Our portfolio occupancy remained nearly full during the quarter and throughout the COVID-19 Pandemic at 99.4%. This represents a 50-basis point increase over the prior year period. Our rent collections throughout the COVID-19 Pandemic have been strong. From March 2020 through November 2020, our rent collections averaged 99.7% and we expect December and future months to be consistent with this trend. To date, Monmouth has received very limited requests for rent deferment. Thus far, we have agreed to defer a total of $438,000, representing less than 0.31% of our annual base rent. To date, we have already collected 71% of this amount. While the future effects of the COVID-19 pandemic are still uncertain, at this time we do not expect the impact to have a material adverse effect on our financial condition.
A summary of significant financial information for the three and twelve months ended September 30, 2020 and 2019 (in thousands, except per share amounts) is as follows:
| Three Months Ended September 30, | |||||
| 2020 | 2019 | ||||
| Rental Revenue | $ | 36,173 | $ | 33,846 | |
| Reimbursement Revenue | $ | 6,462 | $ | 5,824 | |
| Net Operating Income (NOI) (1) | $ | 36,016 | $ | 33,600 | |
| Total Expenses | $ | 21,584 | $ | 20,410 | |
| Dividend Income | $ | 1,458 | $ | 3,599 | |
| Unrealized Holding Gains (Losses) Arising During the Periods | $ | (10,280 | ) | $ | 13,988 |
| Net Income | $ | 3,088 | $ | 27,814 | |
| Net Income (Loss) Attributable to Common Shareholders | $ | (3,917 | ) | $ | 22,690 |
| Net Income (Loss) Attributable to Common Shareholders Per Diluted Common Share | $ | (0.04 | ) | $ | 0.24 |
| FFO (1) | $ | 19,223 | $ | 20,280 | |
| FFO per Diluted Common Share (1) | $ | 0.20 | $ | 0.21 | |
| AFFO (1) | $ | 18,167 | $ | 20,112 | |
| AFFO per Diluted Common Share (1) | $ | 0.19 | $ | 0.21 | |
| Dividends Declared per Common Share | $ | 0.17 | $ | 0.17 | |
| Weighted Avg. Diluted Common Shares Outstanding | 98,083 | 95,759 | |||
| Twelve Months Ended September 30, | ||||||
| 2020 | 2019 | |||||
| Rental Revenue | $ | 141,583 | $ | 132,524 | ||
| Reimbursement Revenue | $ | 26,234 | $ | 22,297 | ||
| Net Operating Income (NOI) (1) | $ | 140,736 | $ | 131,195 | ||
| Total Expenses | $ | 86,649 | $ | 78,597 | ||
| Dividend Income | $ | 10,445 | $ | 15,168 | ||
| Unrealized Holding Gains (Losses) Arising During the Periods | $ | (77,380 | ) | $ | (24,680 | ) |
| Net Income (Loss) | $ | (22,143 | ) | $ | 29,800 | |
| Net Income (Loss) Attributable to Common Shareholders | $ | (48,617 | ) | $ | 11,026 | |
| Net Income (Loss) Attributable to Common Shareholders Per Diluted Common Share | $ | (0.50 | ) | $ | 0.12 | |
| FFO (1) | $ | 78,483 | $ | 81,197 | ||
| FFO per Diluted Common Share (1) | $ | 0.80 | $ | 0.87 | ||
| AFFO (1) | $ | 76,939 | $ | 79,695 | ||
| AFFO per Diluted Common Share (1) | $ | 0.78 | $ | 0.85 | ||
| Dividends Declared per Common Share | $ | 0.68 | $ | 0.68 | ||
| Weighted Avg. Diluted Common Shares Outstanding | 98,164 | 93,485 | ||||
A summary of significant balance sheet information as of September 30, 2020 and 2019 is as follows (in thousands):
| September 30, 2020 | September 30, 2019 | |||
| Real Estate Investments | $ | 1,747,844 | $ | 1,616,934 |
| Securities Available for Sale at Fair Value | $ | 108,832 | $ | 185,250 |
| Total Assets | $ | 1,939,783 | $ | 1,871,948 |
| Fixed Rate Mortgage Notes Payable, net of Unamortized Debt Issuance Costs | $ | 799,507 | $ | 744,928 |
| Loans Payable | $ | 75,000 | $ | 95,000 |
| Total Shareholders’ Equity | $ | 1,037,605 | $ | 1,011,043 |
During the year, we accomplished the following:
Strong Growth Record and Solid Pipeline
- Acquired 1.2 million square feet of high-quality industrial space for $175.1 million, generating $10.9 million in annual rental revenue, comprising five brand new Class A, built-to-suit properties, all leased long-term to investment-grade tenants.
- Increased our gross leasable area (GLA) by 5.2% to 23.4 million square feet.
- Entered into commitments to acquire six new build-to-suit properties containing 2.4 million total square feet for a total cost of $338.4 million.
Strong Portfolio Performance
- Achieved a 99.4% occupancy rate, representing our fifth consecutive year with above 98% occupancy.
- Achieved 99.7% rent collection results throughout the COVID-19 Pandemic.
- Achieved 87% tenant retention through the renewal of four leases comprising 355,000 square feet for a weighted-average lease term of 4.2 years. These lease renewals resulted in an increase in the weighted-average lease rate of 12.0% on a U.S. GAAP straight-line basis and an increase of 4.4% on a cash basis.
- Achieved a weighted average lease maturity of 7.1 years as of the current fiscal yearend.
- Increased our annualized average base rent per occupied square foot by 3% to $6.36 from the prior year.
Solid Financial Results
- Increased our Gross Revenue by 4.9% to $178.3 million.
- Increased our Net Operating Income by 7.3% to $140.7 million.
- Maintained our Net Debt to Adjusted EBITDA at 6.0x for both the current and prior fiscal years and maintained our Net Debt to Undepreciated Book Capitalization at 38.5% as of the current fiscal yearend versus 39.0% as of the prior fiscal yearend.
- Reduced the weighted average interest rate on our fixed-rate mortgage debt to 3.98% from 4.03% in the prior fiscal yearend and reduced the weighted average interest rate on our total debt to 3.89% from 4.00% in the prior fiscal yearend.
- Maintained a conservative AFFO dividend payout ratio of 87%. With a weighted average lease maturity of over 7 years and in excess of 81% of our revenue secured by leases with tenants from companies, or subsidiaries of companies, that are considered Investment Grade, coupled with the weighted average debt maturity of our fixed-rate debt remaining in excess of 11 years, our dividend is well covered.
- Increased our unencumbered assets during the 2020 fiscal year, allowing us to replace our $200.0 million unsecured line of credit facility with a new $225.0 million unsecured line of credit facility and a new $75.0 million term loan, increasing our borrowing capacity, extending the term and reducing our borrowing rates.
- Reduced our General and Administrative expenses both in the aggregate and as a percentage of gross revenue and gross assets. G&A expense decreased by 1.6% from $9.1 million in fiscal 2019 to $8.9 million in fiscal 2020. G&A expense as a percentage of gross revenue decreased by 6% to 5.0% and G&A expense as a percentage of gross assets decreased by 7% to 40 basis points for fiscal 2020.
- Achieved $2.7 billion in total market capitalization as of September 30, 2020 representing an increase of $127.8 million over the prior year period.
Capital Market Activity
- Raised $26.4 million (including dividend reinvestments of $7.6 million) through our Dividend Reinvestment and Stock Purchase Plan, representing an 11% participation rate.
- Raised $122.4 million in net proceeds through our 6.125% Series C Perpetual Preferred Stock ATM Program, as well as an additional $35.0 million in net proceeds subsequent to the fiscal yearend.
- Maintained the weighted-average debt maturity on our fixed-rate debt at 11.1 years.
Michael P. Landy, President and CEO, commented on the results for fiscal year 2020,
“During fiscal 2020, we grew our gross leasable area (GLA) by 5% through the acquisition of five brand-new Class A built-to-suit properties all leased long-term to investment-grade tenants, for an aggregate cost of $175.1 million. As of September 30, 2020, our property portfolio had a weighted-average building age of 9.8 years, and a weighted-average lease maturity of 7.1 years. We have assembled a high quality modern industrial portfolio that contains excess land to accommodate future growth. These are highly-automated industrial assets that are mission-critical to our tenants’ operations. The quality of our portfolio is evidenced by our current sector-leading 99.4% occupancy rate as well as our ability to achieve uninterrupted rent collections which averaged 99.7% throughout these challenging times.”
“We have renewed four of the five leases that were set to expire this fiscal year. These four lease renewals represent 87% of the 410,000 square feet expiring this year. These lease renewals have a weighted average lease term of 4.2 years, and a weighted average lease rate of $5.87 per square foot on a GAAP basis and $5.71 per square foot on a cash basis. This represents an increase of 12.0% on a GAAP basis and an increase of 4.4% on a cash basis. While it is still early in our new fiscal year, to date we have renewed four of the ten leases that are set to expire in fiscal 2021, representing 44% of the amount up for renewal. These lease renewals have a weighted average lease term of 3.2 years, and a weighted average lease rate of $4.46 per square foot on a GAAP basis and $4.38 per square foot on a cash basis. This represents an increase of 8.0% on a GAAP basis and an increase of 1.9% on a cash basis.”
“During the fiscal year, we raised $26.4 million in equity capital through our Dividend Reinvestment and Stock Purchase Plan. Of this amount, a total of $7.6 million in dividends were reinvested by our shareholders, representing an 11% participation rate. We also sold 5.0 million shares of our 6.125% Series C Preferred Stock through our ATM program generating net proceeds of $122.4 million. In addition, we replaced our $200.0 million unsecured line of credit with a new $225.0 million unsecured line of credit and a new $75.0 million Term Loan. This new facility provides us with increased borrowing capacity while reducing our borrowing rates and extending our term. Including the accordion feature, our new facility provides for up to $400.0 million in total borrowing capacity. Our line of credit has nothing borrowed at this time. Looking ahead, Monmouth is very well capitalized to continue to execute our growth strategy.”
“Our high-quality acquisition pipeline now comprises six brand new build-to-suit, industrial buildings that are currently being developed in Alabama (2), Georgia, Ohio, Tennessee and Vermont. All six highly-automated properties will be leased to investment-grade tenants. These six pipeline transactions total approximately 2.4 million square feet for an aggregate purchase price of $338.4 million with a weighted-average lease term of 15.3 years. Five of these acquisitions are scheduled to close during fiscal 2021 and one is scheduled to close during fiscal 2022. We have locked in financing for three of these six acquisitions with three, fully-amortizing mortgage loans totaling $139.5 million with a weighted average fixed interest rate of 2.99% and a weighted average term of 15.8 years.”
“Ecommerce demand has soared during the COVID-19 Pandemic. Our two largest tenants, FedEx and Amazon are experiencing record shipments. We are working with our tenants on several parking expansion projects in order to increase their home delivery capabilities. One of these parking expansions was completed earlier this month for $3.4 million, resulting in increased annualized rent of $349,000. While our reported results for fiscal year 2020 were negatively impacted by a reduction in Dividend Income from our securities investments, we expect our large acquisition pipeline and property expansions to positively contribute to per share earnings and cash flow going forward.”
Monmouth Real Estate Investment Corporation will host its Fourth Quarter and FY 2020 Financial Results Webcast and Conference Call on Tuesday, November 24, 2020 at 10:00 a.m. Eastern Time. Senior management will discuss the results, current market conditions and future outlook.
Our Fourth Quarter and FY 2020 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 4Q and Fiscal Yearend 2020 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 Tuesday, November 24, 2020. It will be available until February 1, 2021, and can be accessed by dialing toll free 1-877-344-7529 (domestically) and 1-412-317-0088 (internationally) and entering the passcode 10147191. 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 119 properties containing a total of approximately 23.4 million rentable square feet, geographically diversified across 31 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. Included in the Nareit FFO White Paper - 2018 Restatement, is an option pertaining to assets incidental to our main business in the calculation of Nareit FFO to make an election to include or exclude mark-to-market changes in the value recognized on these marketable equity securities. In conjunction with the adoption of the FFO White Paper - 2018 Restatement, for all periods presented, we have elected to exclude unrealized gains and losses from our investments in marketable equity securities from our FFO calculation. Nareit created FFO as a non-GAAP supplemental measure of REIT operating performance. We define Adjusted Funds From Operations (AFFO) as FFO, excluding stock compensation expense, depreciation of corporate office capitalized costs, amortization of deferred financing costs, non-recurring severance expense, 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 REITs, FFO and AFFO may be considered by investors as supplemental measures to compare our operating performance to those of other REITs. 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 and AFFO and, accordingly, our FFO and AFFO may not be comparable to all other REITs. The items excluded from FFO and AFFO are significant components in understanding our financial performance.
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 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 and AFFO for the three and twelve months ended September 30, 2020 and 2019 (in thousands):
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| 9/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
| Net Income (Loss) Attributable to Common Shareholders | $ | (3,917 | ) | $ | 22,690 | $ | (48,617 | ) | $ | 11,026 | |||||
| Less/Plus: Unrealized Holding (Gains) Losses Arising During the Periods | 10,280 | (13,988 | ) | 77,380 | 24,680 | ||||||||||
| Plus: Depreciation Expense (excluding Corporate Office Capitalized Costs) | 11,963 | 10,826 | 46,437 | 42,518 | |||||||||||
| Plus: Amortization of Intangible Assets | 598 | 491 | 2,137 | 1,986 | |||||||||||
| Plus: Amortization of Capitalized Lease Costs | 299 | 261 | 1,146 | 987 | |||||||||||
| FFO Attributable to Common Shareholders | 19,223 | 20,280 | 78,483 | 81,197 | |||||||||||
| Plus: Depreciation of Corporate Office Capitalized Costs | 57 | 126 | 234 | 502 | |||||||||||
| Plus: Stock Compensation Expense | 84 | 210 | 452 | 784 | |||||||||||
| Plus: Amortization of Financing Costs | 329 | 297 | 1,413 | 1,253 | |||||||||||
| Plus: Non-recurring Severance Expense | -0- | -0- | 786 | -0- | |||||||||||
| Less: Effect of Non-cash U.S. GAAP Straight-line Rent Adjustment | (517 | ) | (574 | ) | (1,976 | ) | (1,926 | ) | |||||||
| Less: Recurring Capital Expenditures | (1,009 | ) | (227 | ) | (2,453 | ) | (2,115 | ) | |||||||
| AFFO Attributable to Common Shareholders | $ | 18,167 | $ | 20,112 | $ | 76,939 | $ | 79,695 | |||||||
The following are the Cash Flows provided by (used in) Operating, Investing and Financing Activities for the twelve months ended September 30, 2020 and 2019 (in thousands):
| Twelve Months Ended | |||||||
| 9/30/2020 | 9/30/2019 | ||||||
| Operating Activities | $ | 98,829 | $ | 100,748 | |||
| Investing Activities | (180,676 | ) | (213,634 | ) | |||
| Financing Activities | 85,185 | 123,741 | |||||
Contact: Becky Coleridge
732-577-9996