Morguard Corporation Announces 2021 Second Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, Aug. 4, 2021 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) today announced its financial results for the three and six months ended June 30, 2021.

Morguard is pleased to report its financial and operating results for the three and six months ended June 30, 2021, that demonstrate the resilient nature of the Company's portfolio and also reflect the prudent actions taken by management and staff in our continued response to the ongoing COVID-19 pandemic.

Reporting Highlights

• Net income increased by $121.2 million to $16.2 million for the three months ended June 30, 2021, compared to a net loss of $105.0 million for the same period in 2020. The increase was primarily due to a decrease in net fair value loss of $155.1 million and an increase in equity income of $25.5 million, partially offset by a higher provision for hotel impairment of $28.1 million and an increase in deferred income tax expense of $30.0 million.
• Normalized FFO was $41.4 million, or $3.73 per common share, for the three months ended June 30, 2021. This represents a decrease of $1.0 million, or 2.4% compared to $42.4 million for the same period in 2020.
• Total revenue from real estate properties and hotels increased by $11.5 million, or 5.1% to $238.8 million for the three months ended June 30, 2021, compared to $227.3 million for the same period in 2020.
• Net operating income ("NOI") increased by $3.3 million, or 2.6%, to $134.5 million for the three months ended June 30, 2021, compared to $131.2 million for the same period in 2020, primarily due to higher NOI from the hotel portfolio due to increased revenue per available room ("RevPar") and a higher provision for the Canada Emergency Wage Subsidy ("CEWS") program. In addition, higher NOI from the retail, office and industrial portfolio was mainly caused by lower bad debt expense. The increase in NOI is partially offset by a decrease in multi-suite residential NOI due to higher vacancies. The change in foreign exchange rate decreased NOI by $6.1 million.

Operational and Balance Sheet Highlights

• Rent collections from all commercial asset classes have been strong with an average of approximately 96% collected since the second quarter of 2020.
• During the year, occupancy was consistent across all commercial and residential asset classes, supporting the Company's business objective of generating stable and increasing cash flow through its diversified portfolio of real estate assets.
• As at June 30, 2021 and December 31, 2020, the Company's total assets were $11.1 billion.
• On May 14, 2021, the Company fully repaid $200.0 million of 4.085% Series D senior unsecured debentures on maturity.

Financial Highlights

	Three months ended June 30		Six months ended June 30
(in thousands of dollars, except per common share)	2021	2020	2021	2020
Revenue from real estate properties	$208,691	$218,477	$420,055	$446,743
Revenue from hotel properties	30,116	8,831	52,264	56,636
Management and advisory fees	11,500	10,081	21,626	22,278
Interest and other income	3,459	3,516	6,783	7,558
Total revenue	$253,766	$240,905	$500,728	$533,215
Revenue from real estate properties	$208,691	$218,477	$420,055	$446,743
Revenue from hotel properties	30,116	8,831	52,264	56,636
Property operating expenses – excluding bad debt expense	(83,052)	(77,116)	(209,720)	(206,937)
Property operating expenses – bad debt expense	(1,006)	(8,127)	(3,286)	(9,240)
Hotel operating expenses	(20,204)	(10,891)	(38,294)	(53,427)
Net operating income	$134,545	$131,174	$221,019	$233,775
Net income (loss) attributable to common shareholders	$16,498	($65,396)	$31,653	($31,984)
Net income (loss) per common share – basic and diluted	$1.48	($5.81)	$2.85	($2.84)
Funds from operations	$46,880	$48,881	$91,231	$55,874
FFO per common share – basic and diluted	$4.22	$4.35	$8.22	$4.97
Normalized funds from operations	$41,369	$42,383	$84,593	$93,016
Normalized FFO per common share – basic and diluted	$3.73	$3.77	$7.62	$8.27

Rental Collection Summary
As at August 4, 2021, the Company's collection of rental revenues since January 1, 2020 is summarized below by asset class as follows:

	Q1	Q2	Q3	Q4	Q1	Q2	July	% Rental
Asset Class	2020	2020	2020	2020	2021	2021	2021	Revenue
Residential	99.8%	99.6%	99.4%	99.2%	99.1%	98.5%	96.0%	44.1%
Retail	98.3%	62.4%	85.6%	90.5%	91.6%	88.6%	87.3%	26.7%
Office	99.9%	92.8%	98.1%	97.7%	99.9%	98.5%	97.6%	27.8%
Industrial	100.0%	93.5%	96.9%	99.6%	99.5%	98.5%	96.2%	1.4%
Total	99.4%	86.6%	95.0%	96.2%	96.9%	95.7%	94.1%	100.0%

Liquidity
The Company has liquidity of approximately $346 million comprised of $140 million in cash and $206 million available under its revolving credit facilities. In addition, the Company has approximately $1,290 million of unencumbered income producing and hotel properties, and other investments which could be utilized for financing. To further enhance liquidity, the Company has narrowed down the scope of its capital expenditure program to ensure the availability of resources, allocating an amount that enables the Company to maintain the structural and overall safety of the properties. Management has also implemented various initiatives to reduce or defer operating expenses and is monitoring various government assistance programs in Canada and the U.S. structured to provide relief from personnel costs and commercial rent subsidies.

The Company has approximately $717 million of mortgages payable maturing during 2021 and 2022 having an aggregate loan-to-value ratio of 43% and a weighted-average interest rate of 3.73% which management expects to be able to refinance at similar or favourable terms. The Company expects to be able to issue new debt instruments and use current liquidity sufficient to permit the repayment of its 2021 and 2022 maturities.

Net Operating Income
NOI increase by $3.3 million, or 2.6%, during the three months ended June 30, 2021, to $134.5 million, compared to $131.2 million generated in 2020, and is further analyzed by asset type below.

	Three months ended June 30		Six months ended June 30
(in thousands of dollars)	2021	2020	2021	2020
Multi-suite residential	$51,277	$62,117	$102,026	$120,749
Retail	27,912	27,067	56,134	60,901
Office	32,787	32,102	66,306	66,862
Industrial	1,715	1,616	3,496	3,572
Hotels	9,912	(2,060)	13,970	3,209
Adjusted NOI	123,603	120,842	241,932	255,293
IFRIC 21 adjustment – multi-suite residential	9,643	8,901	(18,216)	(18,755)
IFRIC 21 adjustment – retail	1,299	1,431	(2,697)	(2,763)
NOI	$134,545	$131,174	$221,019	$233,775

Adjusted NOI for the three months ended June 30, 2021, increase by $2.8 million, or 2.3% to $123.6 million, compared to $120.8 million in 2020, primarily due to the following:

• A decrease in the Canadian residential portfolio of $4.4 million, primarily due to increased vacancy as a result of lower leasing traffic resulting from social distancing restrictions and current economic conditions;
• A decrease in U.S. residential portfolio of US$1.9 million, primarily from vacancy and rental concessions at three properties located in Chicago, Illinois;
• An increase in the Canadian retail portfolio of $1.7 million, mainly due to a decrease in bad debt expense of $6.5 million when compared to the same period in 2020, partially offset by a decrease of $5.3 million due to a higher proportion of tenants converting to percentage rent leases resulting in lower recoveries of operating expenses and lower basic rent;
• An increase in the office portfolio of $0.7 million, primarily due to an increase of $0.6 million in lease cancellation fees received, as a decrease in bad debt expense of $1.3 million was partially offset by a decrease of $1.2 million due to lower parking revenue and higher vacancy;
• An increase in the hotel portfolio of $12.0 million, primarily due to an increase of $10.2 million which was still impacted by existing economic conditions experienced in all provinces as a result of the COVID-19 pandemic that lead to prior period closures. In addition, three hotels designated under the Government Authorized Accommodation (GAA) program generated an increase in RevPar as well as an increase of $0.9 million due to the sale of two hotel properties during the third and fourth quarters of 2020; and
• A decrease of $5.3 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended June 30, 2021, the Company recorded FFO of $46.9 million ($4.22 per common share), compared to $48.9 million ($4.35 per common share) in 2020. The decrease in FFO of $2.0 million is mainly due to the following: 

• An increase in Adjusted NOI of $2.8 million; primarily due to higher NOI from the hotel portfolio due to increased RevPar and many hotels being temporarily closed during 2020, and a higher provision for CEWS. In addition, higher NOI from the retail, office and industrial portfolio was mainly caused by lower bad debt expense. The increase in Adjusted NOI was partially offset by a decrease in multi-suite residential NOI due to higher vacancies;
• A decrease in management and advisory fees of $1.4 million;
• A decrease in equity-accounted FFO of $1.5 million, primarily due to the Company's investment in Lumina Hollywood, which is under initial lease-up;
• A decrease in interest of $3.7 million mainly due to lower interest on mortgages payable and lower interest on the Debentures;
• An increase in property management and corporate expenses of $8.9 million, primarily due to an increase in non-cash compensation expense related to the Company's Stock Appreciation Rights plan of $4.2 million and a decrease in a provision for CEWS of $4.8 million;
• An increase in current income taxes of $1.8 million; and
• A decrease in the non-controlling interests' share of FFO of $1.3 million;

The change in foreign exchange rate had a negative impact on FFO of $2.0 million ($0.18 per common share).

The Company believes it is useful to provide an analysis of Normalized FFO which excludes non-recurring items on a net of tax basis and other fair value adjustments. Normalized FFO for the three months ended June 30, 2021, was $41.4 million, or $3.73 per common share, versus $42.4 million, or $3.77 per common share, for the same period in 2020, which represents a decrease of $1.0 million, or 2.4%. 

Third Quarter Dividend
The Board of Directors of Morguard Corporation announced that the third quarterly, eligible dividend of 2021 in the amount of $0.15 per common share will be paid on September 30, 2021, to shareholders of record at the close of business on September 15, 2021.

The Company's unaudited condensed consolidated financial statements for the six months ended June 30, 2021, along with Management's Discussion and Analysis will be available on the Company's website at www.morguard.com and will be filed with SEDAR at www.sedar.com.

Non-IFRS Measures
The Company's condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, Adjusted NOI, Comparative NOI, FFO and Normalized FFO (collectively, the "non-IFRS measures") as well as other measures discussed elsewhere in this press release, do not have a standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. The Company uses these measures to better assess the Company's underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the Company's Management's Discussion and Analysis for the three months ended June 30, 2021 and available on the Company's profile on SEDAR at www.sedar.com.

About Morguard Corporation
Morguard Corporation is a real estate company, with total assets owned and under management valued at $19.2 billion. As at August 4, 2021, Morguard owns a diversified portfolio of 200 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,752 residential suites, approximately 16.9 million square feet of commercial leasable space and 5,288 hotel rooms. Morguard also currently owns a 60.9% interest in Morguard Real Estate Investment Trust and a 44.7% effective interest in Morguard North American Residential Real Estate Investment Trust. Morguard also provides advisory and management services to institutional and other investors. For more information, visit the Company's website at www.morguard.com.

SOURCE Morguard Corporation

Morguard Corporation, K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Paul Miatello, Chief Financial Officer, Senior Vice President, T 905-281-3800

Related Links

http://www.morguard.com