Morguard Corporation Announces 2006 Year End Results



    TSX: MRC

    TORONTO, March 26 /CNW/ -

    
    Financial Highlights

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                                                             Year Ended
                                                     ------------------------
    (in thousands of dollars except                     December    December
     per share amounts)                                 31, 2006    31, 2005
    -------------------------------------------------------------------------
    Revenue                                             $387,124    $379,247
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    Net operating income                                 174,876     185,461
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    EBITDA                                               182,809     181,008
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    Net Earnings from continuing operations               48,251      17,145
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    EPS - continuing operations                            $2.74       $0.97
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                                                     ------------------------

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    Net earnings                                          58,092      21,224
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                                                     ------------------------
    EPS                                                    $3.44       $1.25
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                                                     ------------------------

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    Total Assets                                      $2,000,186  $2,511,971
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                                                     ------------------------
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    Morguard's share of FFO
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    Funds from operations - recurring                    $55,701     $47,890
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    Funds from operations - non-recurring and
     discontinued                                         16,695       1,871
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    Funds from operations                                 72,396      49,761
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                                                     ------------------------
    FFO per share diluted - recurring                      $3.93       $3.34
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                                                     ------------------------
    FFO per share diluted                                  $5.11       $3.47
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                                                     ------------------------
    Note: Net operating income, EBITDA and funds from operations are not
          recognized performance measures under Canadian GAAP. EBITDA is
          defined as earnings before interest, taxes, depreciation,
          amortization and earnings from equity accounted investments.
          Management believes that in addition to net earnings, this measure
          is useful supplemental information to provide investors with an
          indication of income available prior to debt service, capital
          expenditures and income taxes. Investors should be cautioned,
          however, that these measures should not be construed as an
          alternative to net earnings determined in accordance with GAAP as
          an indicator of the Company.

    Corporate and Operating Highlights

    Morguard Corporation (the "Company") is focused on ownership, management
and development of commercial and multi-residential properties through three
core investments:
    -  Morguard Real Estate Investment Trust ("Morguard REIT")
    -  Morguard Residential Inc. ("Morguard Residential")
    -  Revenue Properties Company Limited ("RPCL")

    Through the Company's wholly-owned subsidiaries, Morguard Investments
Limited ("Morguard Investments") and Morguard Residential, the Company
provides real estate management services to Canadian institutional investors
and private individuals. Services include acquisitions, development,
dispositions, leasing, performance measurements, and asset and property
management.
    During 2006, consistent with the Company's business strategy, there were a
number of key developments:

    -  RPCL acquired Sizeler Property Investors, Inc. ("Sizeler") in a
       transaction valued at CDN$478 which contains a portfolio of 30
       properties with approximately 2.2 million square feet of gross
       leaseable retail area and 3,257 apartment suites in three U.S. states:
       Louisiana, Alabama and Florida.

    -  Morguard REIT acquired an undivided 50% interest in three Class A
       office properties in downtown Ottawa for $105 million. The properties
       are currently 99% leased with 79% leased to government tenants under
       long-term leases.

    -  The Company completed construction of a 329,000 square foot Class A
       office property at 131 Queen Street, Ottawa. This property is 93%
       leased to a government of Canada tenant on a 20 year lease.

    -  Morguard REIT disposed of 11 industrial properties with gross
       leaseable area of 876,000 square feet for gross proceeds of
       $72 million. The transaction is consistent with Morguard REIT's
       strategy to dispose of real estate properties where value has been
       maximized.

    -  As a result of the dilution in the Company's ownership of
       Morguard REIT down to 41.9%, the Company began accounting for its
       investment using the equity method of accounting during the fourth
       quarter of 2006.

    -  During 2006, the Company received five major industry awards.
       -  181 Queen Street, Ottawa, ON - National Office Building of the
          Year (BOMA)
       -  The Bramalea City Centre, Brampton, ON - ICSC Maple Leaf Award
       -  St. Laurent Centre, Ottawa, ON - ICSC Maple Leaf Award
       -  Cottonwood Mall - Chilliwack, BC - ICSC Maple Leaf Award
       -  The Colonnade, Toronto, ON - Best Suite Renovation

    -  The value of the Company's portfolio of owned and managed properties
       now approximates $7.8 billion.

    -  The Company's mortgages have a weighted average interest rate of 5.86%
       as at December 31, 2006 (2005 - 6.06%).

    -  The Company continued its regular dividend program, paying $0.14 per
       share on a quarterly basis, distributing $7.7 million.

    Net Earnings from Continuing Operations

    Net earnings from continuing operations increased to $48.3 in 2006
compared to $17.1 million in 2005. The increase is primarily due to:

    -  Higher net operating income from developed and acquired real estate
       properties of approximately $14 million,

    -  Increased dilution gains recorded on the reduction of the Company's
       ownership in Morguard REIT of approximately $10 million,

    -  A non-cash recovery of current income taxes of $12.8 million,

    -  Reduced charges related to early bond extinguishments of approximately
       $9 million, offset by:
       -  Higher interest expense of approximately $5 million and
       -  Higher amortization expense of approximately $12 million.
    

    Interest charges in 2006 were higher than 2005 due to new debt incurred
on the acquisition and development of real estate properties. Amortization
charges were higher than 2005 mainly due to the acquisition of Sizeler.

    Funds from Operations

    The Company's consolidated FFO includes funds available to
non-controlling interests. To calculate Morguard's share of consolidated FFO,
the non-controlling interest of Morguard REIT and RPCL needs to be deducted
and any inter-company fees, eliminated on consolidation, added. The Company
believes that the analysis of FFO is more clearly presented when the
non-controlling interest attributable to Morguard REIT and RPCL is eliminated.
Morguard's share of consolidated FFO, detailed below, totals $72.4 million or
$5.11 per diluted share.
    The Company's share of consolidated FFO for the year ended December 31,
2006 of $72.6 million includes $16.7 million of non-recurring items and
discontinued operations (2005 - $1.89 million). The non-recurring items
included in Morguard's share of consolidated FFO for the year ended
December 31, 2006 include the non-cash recovery of current income taxes
previously discussed ($12.8 million) and $3.9 million related to discontinued
operations in Morguard REIT.


    
    -------------------------------------------------------------------------
    CONSOLIDATED FUNDS FROM CONTINUING OPERATIONS
    (in thousands of dollars except for per share amounts)
    MORGUARD'S SHARE
    -------------------------------------------------------------------------
    December 31                           2006      2005  Variance         %
    -------------------------------------------------------------------------
    Consolidated funds from
     continuing operations            $100,843   $68,775   $32,068     46.6%
    -------------------------------------------------------------------------
    Less:
    -------------------------------------------------------------------------
      Non controlling interest -
    Morguard REIT                       21,500    13,618     7,881     57.9%
    -------------------------------------------------------------------------
      Non controlling interest -
    Revenue Properties                   6,947     5,396     1,551     28.7%
    -------------------------------------------------------------------------
    Adjusted Consolidated funds from
     continuing operations -
     Morguard's Share                   72,396    49,761    22,635     45.5%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Per share amounts - basic            $5.19     $3.53     $1.65     46.8%
    -------------------------------------------------------------------------
    Per share amounts - diluted          $5.11     $3.47     $1.64     47.2%
    -------------------------------------------------------------------------

    Financial statements follow.


    MORGUARD CORPORATION
    CONSOLIDATED BALANCE SHEETS
    As at December 31
    -------------------------------------------------------------------------
                                                            2006        2005
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

    ASSETS
    Real estate assets, net                           $1,626,060  $2,173,482
    Investment in Morguard Real Estate Investment
     Trust                                               218,133           -
    Other assets                                          54,007      71,769
    Amounts receivable                                    52,574      65,027
    Goodwill                                              24,488      24,488
    Cash and cash equivalents                             24,924      21,004
    Investments                                                -      26,985
    Assets held for sale                                       -     129,216
    -------------------------------------------------------------------------
    Total assets                                      $2,000,186   $2,511,971
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES, NON-CONTROLLING INTEREST AND
    SHAREHOLDERS' EQUITY
    Liabilities
    Mortgages payable                                   $846,207  $1,239,252
    Convertible debentures payable                             -     142,952
    Bank indebtedness                                    122,065     128,622
    Loans and notes payable                              296,618      22,313
    Accounts payable and accrued liabilities              95,926      83,503
    Future income tax liabilities                        117,677     121,002
    Construction financing on properties under
     development                                               -      33,027
    Liabilities related to assets held for sale                -      80,977
    -------------------------------------------------------------------------
    Total liabilities                                  1,478,493   1,851,648
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Non-controlling interest                              22,940     203,773
    -------------------------------------------------------------------------

    Shareholders' equity                                 498,753     456,550
    -------------------------------------------------------------------------
    Total liabilities, non-controlling interest and
     shareholders' equity                             $2,000,186  $2,511,971
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MORGUARD CORPORATION
    CONSOLIDATED STATEMENTS OF EARNINGS
    Years ended December 31

    -------------------------------------------------------------------------
    (in thousands of Canadian dollars, except
     per share amounts)                                     2006        2005
    -------------------------------------------------------------------------
    REVENUE
    Income from real estate properties                  $319,640    $336,398
    Fees and other revenue                                46,311      34,410
    Sales of products and land                            21,173       8,439
    -------------------------------------------------------------------------
                                                         387,124     379,247
    -------------------------------------------------------------------------

    EXPENSES
    Property operating                                   144,764     150,937
    Property management and administration                46,874      40,938
    Cost of sales                                         14,719       6,364
    Interest on mortgages and debentures                  81,425      90,292
    Interest on bank indebtedness and loans payable        3,835       4,116
    Equity income from Morguard REIT- continuing
     operations                                           (2,042)          -
    Amortization                                          60,589      54,311
    Amortization - deferred financing                      5,371       3,501
    -------------------------------------------------------------------------
    Earnings before other income (expense), income
     taxes and non-controlling interest                   31,589      28,788
    -------------------------------------------------------------------------

    OTHER INCOME (EXPENSE)
    Net gain on conversion, redemption and dilution
     of convertible debentures and dilution impact
     from change in ownership of subsidiaries             11,707       2,004
    Dividend income and other                              8,543       6,379
    Net gain on sale of assets and investments               544       4,048
    Cost of early extinguishment of mortgage bonds             -      (8,742)
    -------------------------------------------------------------------------
                                                          20,794       3,689
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    -------------------------------------------------------------------------
    Earnings before income taxes, non-controlling
     interest and discontinued operations                 52,383      32,477
    -------------------------------------------------------------------------
    Provision for (recovery of) income taxes
    Current                                                 (488)     10,131
    Future                                                (3,748)        682
    -------------------------------------------------------------------------
                                                          (4,236)     10,813
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    Non-controlling interest                              (8,368)     (4,519)
    -------------------------------------------------------------------------
    Net earnings from continuing operations               48,251      17,145
    Equity income from Morguard REIT - discontinued
     operations, net of tax                                9,693           -
    Net earnings from discontinued operations,
     net of tax                                              148       4,099
    -------------------------------------------------------------------------
    Net earnings for the year                            $58,092     $21,244
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
    Basic - continuing operations                          $3.46       $1.22
    Diluted - continuing operations                         2.74        0.97
    Basic - discontinued operations                         0.71        0.29
    Diluted - discontinued operations                       0.69        0.29
    Basic - net earnings                                    4.16        1.51
    Diluted - net earnings                                  3.44        1.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MORGUARD CORPORATION
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    Years ended December 31

    -------------------------------------------------------------------------
    (in thousands of Canadian dollars, except for
     per share amounts)                                     2006        2005
    -------------------------------------------------------------------------
    Share capital
    Balance, beginning of year                          $122,748    $121,754
    Issuance of common shares                              1,686       1,161
    Repurchase of common shares                           (3,323)       (167)
    -------------------------------------------------------------------------
    Balance, end of year                                 121,111     122,748
    -------------------------------------------------------------------------

    Retained earnings
    Balance, beginning of year                           333,802     320,805
    Net earnings for the year                             58,092      21,244
    Dividends                                             (7,794)     (7,903)
    Excess of purchase price of common shares over
     average carrying value                               (8,669)       (344)
    -------------------------------------------------------------------------
    Balance, end of year                                 375,431     333,802
    -------------------------------------------------------------------------

    Cumulative translation adjustment
    Balance, beginning of year                                 -           -
    Current adjustment                                     2,211           -
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    Balance, end of year                                   2,211           -
    -------------------------------------------------------------------------

    Shareholders' equity                                $498,753    $456,550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MORGUARD CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    Years ended December 31

    -------------------------------------------------------------------------
    (in thousands of Canadian dollars)                      2006        2005
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net Earnings from continuing operations              $48,251     $17,145
    Items not affecting cash:
      Non-controlling interest                             8,368       4,519
      Amortization                                        59,488      54,311
      Amortization - deferred financing                    5,371       3,501
      Equity income from Morguard REIT - continuing
       operations                                         (2,042)          -
      Net gain on sale of assets and investments            (544)     (4,048)
      Net gain on conversion, redemption and
       dilution of convertible debentures and
       dilution impact from change in ownership
       of subsidiaries                                   (11,707)     (2,004)
      Accretion convertible debentures                       744       1,238
      Stepped rent - adjustment for straight line
       method                                             (3,180)     (4,514)
      Future income taxes                                 (3,748)        682
    Cost of early extinguishment of mortgage bonds             -       8,742
    Other                                                     45        (167)
    Distribution from Morguard REIT                        5,574           -
    Deferred leasing cost additions                       (5,979)     (7,305)
    Net change in operating assets and liabilities        (7,643)       6309
    -------------------------------------------------------------------------
    Cash provided by operating activities                 92,998      78,409
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Investment in shares of Sizeler and others          (361,079)    (20,134)
    Additions to real estate properties and capital
     assets                                              (49,231)   (143,386)
    Proceeds from sale of real estate assets and
     investments                                           9,593      12,519
    Additional investment in subsidiaries                 (4,506)          -
    Decrease to cash caused by equity accounting
     Morguard REIT                                          (562)          -
    Repayment of vendor take back mortgages                    -       4,400
    -------------------------------------------------------------------------
    Cash used in investing activities                   (405,785)   (146,601)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Net proceeds from loans payable                      285,456           -
    Net proceeds (repayments) of bank indebtedness        53,728       5,899
    Proceeds from mortgages                              180,222     304,604
    Repayment of mortgages and notes payable            (106,952)   (235,696)
    Net proceeds (repayment) from construction
     financing on properties under development           (33,027)     10,819
    Financing costs and swap settlements                 (12,876)    (13,666)
    Redemption of convertible debentures                  (5,119)    (25,382)
    Cost of early extinguishment of mortgage bonds
     payable                                                   -      (8,246)
    Proceeds on issue of common shares                     1,624         895
    Proceeds on issue of subsidiary common shares             28         322
    Shares purchased for cancellation                    (11,992)       (511)
    Dividends paid                                        (7,733)     (7,636)
    Distribution to subsidiary
     unitholders/shareholders                            (16,382)    (21,663)
    Buy back of subsidiary's common shares               (12,505)     (2,399)
    (Increase) decrease in restricted cash                  (230)        491
    -------------------------------------------------------------------------
    Cash provided by financing activities                314,242       7,831
    -------------------------------------------------------------------------
    Net decrease in cash and cash equivalents
     during the year                                       1,455     (60,361)
    Cash provided by discontinued operations               1,626      70,023
    Net effect of foreign currency translation on
     cash balance                                            839        (223)
    Cash and cash equivalents, beginning of year          21,004      11,565
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year               $24,924     $21,004
    -------------------------------------------------------------------------
    

    %SEDAR: 00004260E




For further information:

For further information: Mr. Donald Turple, Chief Financial Officer, 55
City Centre Drive, Ste 1000, Mississauga, Ontario, L5B 1M3, Phone: (905)
281-3800, dturple@morguard.com


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