Morguard Corporation Announces 2007 Results



    TSX: MRC

    TORONTO, March 26 /CNW/ -

    
    Financial Highlights

    -------------------------------------------------------------------------
                                                      Year ended December 31
    -------------------------------------------------------------------------
    (In thousands of Canadian dollars,                       2007       2006
     except per share amounts)
    -------------------------------------------------------------------------

    Net operating income                                 $140,865   $174,090
    Interest expense                                      (74,531)   (90,390)
    Property management and administration                (54,418)   (46,873)
    Equity income from Morguard REIT
     - continuing operations                               10,750      2,042
    Fees and other revenue                                 62,569     46,311
    Sale of products and land, net of cost                  1,895      6,454
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    Income before the under noted                          87,130     91,634
    Amortization                                          (76,784)   (60,411)
    Other income                                            2,802     20,794
    -------------------------------------------------------------------------
    Operating income                                     $ 13,148   $ 52,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings                                         $ 23,811     58,092
    - per basic share                                        1.71       4.16
    - per diluted share                                      1.69       3.44

    Continuing funds from operations                       92,523    102,192
    - per basic share                                    $   6.65   $   7.32
    - per diluted share                                  $   6.57   $   7.21

    Continuing funds from  operations -
     Morguard's Share                                      87,358     73,746
    - per basic share                                    $   6.27   $   5.29
    - per diluted share                                  $   6.20   $   5.20
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    The Company reports its financial results in accordance with Canadian
GAAP. However, net operating income, operating income, funds from operations
and funds from operations-Morguard's share are not recognized performance
measures under Canadian GAAP. These measures are commonly used by entities in
the real estate industry as useful metrics for measuring performance. However,
they do not have any standardized meaning prescribed by Canadian GAAP and are
not necessarily comparable to similar measures presented by other real estate
entities. These measures should be considered as supplemental in nature and
not a substitute for related financial information prepared in accordance with
Canadian GAAP.

    
    During 2007, Morguard Corporation remained focused on the ownership,
management and development of commercial and multi-residential properties
through three core investments:

    -   Morguard Real Estate Investment Trust (Morguard REIT)

    -   Morguard Residential (MRES)

    -   Revenue Properties Company Limited (RPCL)
    

    Through the Company's wholly-owned subsidiary, Morguard Investments
Limited ("Morguard Investments") and Morguard Residential, a division of the
Company, Morguard Corporation provides real estate management services to
Canadian institutional investors. Services include acquisitions, development,
dispositions, leasing, performance measurement and asset and property
management.

    REVIEW OF OPERATING RESULTS

    The significant changes to the Company's consolidated statement of income
for the year ended December 31, 2007 when compared to 2006 were primarily
caused by the change in accounting method applied to the Company's investment
in Morguard REIT as of October 1, 2006, and the acquisition of Sizeler
Properties Investors, Inc. ("Sizeler") that occurred on November 10, 2006.
Revenues and expenses generated by the assets acquired and liabilities assumed
in the Sizeler transaction have been included in the Company's consolidated
results commencing November 10, 2006.
    As a result of the dilution in the Company's ownership of Morguard REIT,
the Company began accounting for its investment using the equity method of
accounting with effect from October 1, 2006. Consequently, the statements of
earnings and cash flows of the Company consolidate the financial results of
Morguard REIT until September 30, 2006, and the earnings of Morguard REIT are
recorded in accordance with the equity method of accounting for the year ended
December 31, 2007.
    Revenues and expenses generated by the assets and liabilities acquired in
the Sizeler transaction have been included in the Company's consolidated
results for the year ended December 31, 2007. A decrease in the Company's net
earnings has resulted from $41.0 million of amortization being recorded during
2007 as a result of the Sizeler acquisition, $15.9 million of additional
interest expense offset by $39.8 million of additional net operating income.
    The table below illustrates the impact to the Company's consolidated
statements of earnings for the years ended December 31, 2007 and 2006, by
isolating the revenues, expenses, and equity income of Morguard REIT and
Sizeler. The column referred to as "Remaining Morguard" represents the
Company's revenues and expenses that were unaffected by the changes described
above.

    
    ---------------------------------------------------------------
    Years ended                                 2007
     December 31                 ---------------------------------
    (In thousands                 Remaining
     of dollars)                   Morguard    Sizeler      Total
    ---------------------------------------------------------------
    Income from
     properties                    $191,044   $ 65,020   $256,064
    Property operating              (89,996)   (25,203)  (115,199)
    ---------------------------------------------------------------
    Net operating income            101,048     39,817    140,865
    Fee and other revenue            62,569          -     62,569
    Sale of products & land           7,292          -      7,292
    Property management and
     administration                 (50,761)    (3,657)   (54,418)
    Cost of sales                    (5,398)         -   $ (5,398)
    ---------------------------------------------------------------
                                    114,750     36,160    150,910
    Interest                        (58,612)   (15,919)   (74,531)
    Equity income from
     Morguard REIT                   10,750          -     10,750
    ---------------------------------------------------------------
                                     66,888     20,241     87,129
    Amortization                    (35,794)   (40,989)   (76,783)
    Other income(expense)             2,730        (69)     2,661
    Net dilution gain                   141          -        141
    ---------------------------------------------------------------
    Earning (loss - before income
     taxes, non-controlling
     interest and discontinued
     operations                    $ 33,965   $(20,817)  $ 13,148
    ---------------------------------------------------------------
    ---------------------------------------------------------------


    -------------------------------------------------------------------------
    Years ended                                      2006
     December 31                 --------------------------------------------
    (In thousands                 Remaining              Morguard
     of dollars)                   Morguard    Sizeler       REIT     Total
    -------------------------------------------------------------------------
    Income from
     properties                    $176,525   $ 11,546   $130,194   $318,265
    Property operating              (82,942)    (4,510)   (56,723)   144,175)
    -------------------------------------------------------------------------
    Net operating income             93,583      7,036     73,471    174,090
    Fee and other revenue            46,311          -          -     46,311
    Sale of products & land          21,173          -          -     21,173
    Property management and
     administration                 (42,769)    (1,164)    (2,940)   (46,873)
    Cost of sales                   (14,719)         -          -    (14,719)
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                                    103,579      5,872     70,531    179,982
    Interest                        (50,119)    (3,967)   (36,304)   (90,390)
    Equity income from
     Morguard REIT                        -          -      2,042      2,042
    -------------------------------------------------------------------------
                                     53,460      1,905     36,269     91,634
    Amortization                    (31,108)    (7,924)   (21,379)   (60,411)
    Other income(expense)             9,095          -         (8)     9,087
    Net dilution gain                11,707          -          -     11,707
    -------------------------------------------------------------------------
    Earning (loss - before income
     taxes, non-controlling
     interest and discontinued
     operations                    $ 43,154   $ (6,019)  $ 14,882   $ 52,017
    -------------------------------------------------------------------------
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    Net Earnings from Continuing Operations

    Net earnings from continuing operations decreased in 2007 to $10.5 million
compared to $47.9 million in 2006. In addition to the items discussed above,
the decrease is primarily due to:

    -   In 2006, the Company recorded a dilution gain on the reduction of the
        Company's ownership in Morguard REIT in the amount of $11.7 million,

    -   In 2006, the Company recorded a non-recurring recovery of income
        taxes in the amount of $12.8 million,

    -   In 2007, the Company recorded non-recurring costs in the amount of
        $5.9 million related to RPCL's refinancing program, and

    -   In 2007, non-controlling interest increased net earnings by
        $9.6 million (2006: decreased net earnings by $8.4 million) resulting
        in a year over year increase to net earnings of $18.0 million.
    

    FUNDS FROM OPERATIONS - MORGUARD's SHARE

    Funds from continuing operations ("FFO") for the year ended December 31,
2007 are detailed in the table below. The consolidated FFO includes funds
available to non-controlling interests. To determine Morguard's share of
consolidated FFO, the non-controlling interest of Morguard REIT (2006 only)
and RPCL needs to be deducted and any inter-company fees eliminated on
consolidation added.

    
    -------------------------------------------------------------------------
    FUNDS FROM CONTINUING OPERATIONS - Morguard's Share
    (in thousands of dollars except for per share amounts)

                                                        ---------------------
    Years ended December 31                                  2007       2006
    -------------------------------------------------------------------------
    Net earnings from continuing operations              $ 10,461   $ 47,893
    Add (deduct):
    Non controlling interest                               (9,630)     8,368
    Amortization                                           74,977     59,310
    Future income taxes                                       651     (3,748)
    Equity income from Morguard REIT
     continuing operations                                (10,750)    (2,042)
    Morguard REIT's equity accounted FFO                   25,800      4,662
    Net gain on sale of assets and investment                   -       (544)
    Provision for diminution in value                       1,155          -
    Net gain on redemption and dilution impact
     from change in ownership of Subsidiaries                (141)   (11,707)
    -------------------------------------------------------------------------
    FFO - Consolidated                                   $ 92,523   $102,192
    LESS: Non-controlling interest - REIT                       -     21,499
          Non-controlling interest - RPCL                   5,165      6,947
    -------------------------------------------------------------------------
    FFO - Morguard's Share                               $ 87,358   $ 73,746
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    Morguard's share of FFO for the year ended December 31, 2007 were
$87.4 million ($6.27 per common share) compared to $73.7 million ($5.29 per
common share) for the year ended December 31, 2006. The increase reflects
contributions from the Company's properties as well increased earnings
reported by Morguard Investments resulting primarily from the growth of its
portfolio of managed properties.
    The Company's audited financial statements for the year ended December
31, 2007, along with the Management's Discussion and Analysis will be
available on the Company's website at www.morguard.com and have been filed
with SEDAR at www.sedar.com.





For further information:

For further information: Morguard Corporation, K. (Rai) Sahi, Chief
Executive Officer, (905) 281-5888; Paul Miatello, Chief Financial Officer,
(905) 281-5943


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