Morguard Corporation Announces 2016 First Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, May 10, 2016 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the three months ended March 31, 2016.

Operational Highlights:

  • Acquisition of a multi-suite residential property comprising 370 suites located in Ottawa, Ontario, for $67.0 million. The acquisition was funded by cash on hand and a mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.
  • Acquisition of three hotels comprising of 417 rooms located in Toronto, Ontario, for a gross purchase price of $33.5 million. The acquisition was financed by cash on hand and a $20.0 million credit facility having a term of three years.
  • Completion of $92.3 million of new mortgage financings. The Company's weighted average interest rate as at March 31, 2016, was 3.88%, a decrease from 3.91% as at December 31, 2015.
  • The Company repurchased 47,600 of its common shares for total consideration of $6.2 million, representing an average price of $130.02 per common share.

Reporting Highlights:

  • Funds from operations ("FFO") increased by $10.2 million to $47.7 million for the three months ended March 31, 2016, compared to $37.5 million for the same period in 2015, representing a 27.1% increase.
  • On a per share basis, FFO increased to $3.98 for the three months ended March 31, 2016, compared to $3.04 in 2015, representing an increase of 30.9%.
  • Total revenue increased by $13.6 million to $232.1 million compared to $218.5 million for the same period in 2015.
  • Comparative NOI increased by $4.1 million or 4.0% to $106.6 million compared to $102.5 million for the same period in 2015.
  • The Company acquired 420,929 units of Morguard REIT for $5.3 million representing an average purchase price of $12.60 per unit. As at March 31, 2016, the Company's ownership interest in Morguard REIT now stands at 51.1%
  • Shareholders' equity per common share (excluding non-controlling interest) decreased to $219.24 compared to $224.94 as at December 31, 2015.

Financial Highlights:

Three months ended March 31,



(in thousands of dollars, except per common share amounts)


2016

2015

Revenue from real estate properties



$209,638

$198,938

Management and advisory fees



20,194

14,085

Interest and other income



1,011

1,852

Sales of product and land



1,275

3,672

Total revenues



$232,118

$218,547






Revenue from real estate properties



$209,638

$198,938

Property operating expenses



(116,835)

(109,301)

Net operating income



$92,803

$89,637






Funds from operations



$47,678

$37,508

 FFO per common share – basic and diluted



$3.98

$3.04

 

Net Income

Net income for the three months ended March 31, 2016, was $12.1 million compared to net income of $4.5 million in 2015. The increase in net income of $7.6 million for the three months ended March 31, 2016, was primarily due to the following:

  • An increase in net operating income of $3.2 million;
  • An increase in management and advisory fees of $6.1 million;
  • An increase in property management and corporate expense of $3.9 million;
  • An increase in non-cash net fair value gains of $10.4 million;
  • A decrease in equity income of $13.4 million;
  • An increase in other income (expense) of $11.7 million; and
  • An increase in income taxes (current and deferred) of $2.3 million.

Net Operating Income ("NOI")

NOI increased by $3.2 million, or 3.5%, during the three months ended March 31, 2016, to $92.8 million, compared to $89.6 million generated in 2015, and is further analyzed by asset type below.

Three months ended March 31,

(in thousands of dollars)


2016

 

2015

Multi-suite residential


$41,418

$34,881

Retail


35,165

37,211

Office


31,235

29,890

Industrial and hotels


3,676

3,606

Adjusted NOI


111,494

105,588

IFRIC 21 adjustment – multi-suite residential

(14,914)

(12,307)

IFRIC 21 adjustment – retail

(3,777)

(3,644)

NOI


$92,803

$89,637

 

Adjusted NOI for the period ended March 31, 2016, increased by $5.9 million to $111.5 million compared to $105.6 million in 2015, representing an increase of 5.6%. Adjusted NOI increased by $5.9 million primarily due to the following:

  • An increase of $1.8 million due to rental rate growth in Canadian residential properties;
  • An increase of $1.4 million due to the Monterra and 160 Chapel acquisitions completed subsequent to March 31, 2015;
  • Additional NOI of $0.9 million generated from the continued lease up of the Company's completed development property, The Heathview, a 587 suite rental development in Toronto, Ontario;
  • A decrease of $1.1 million due to disclaimed Target leases and a decrease in Canadian retail properties of $1.2 million due to increased vacancy and non-recoverable costs in the retail portfolio;
  • An increase of $3.1 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended March 31, 2016, the Company recorded FFO of $47.7 million ($3.98 per common share), compared to $37.5 million ($3.04 per common share) in 2015. The increase in FFO of $10.2 million is mainly due to the following:

  • Higher Adjusted NOI of $5.9 million;
  • Higher management and advisory fees of $6.1 million;
  • An impairment provision on investment in publicly traded securities $6.1 million recorded during three months ended March 31, 2015;
  • Higher property management and corporate expense of $3.9 million; and
  • An increase in current taxes of $4.3 million.

The change in foreign exchange rates had a positive impact on FFO of $1.4 million ($0.12 per common share).

Subsequent Events

Effective April 1, 2016, pursuant to an asset management and assignment agreement, Morguard commenced providing asset management services to Temple Hotels Inc. ("Temple").  Under the assignment agreement, Morguard agreed to assume the existing asset management agreement with Temple and all of the duties and obligations of the asset manager. Temple owns a portfolio of income-producing hotel properties. As of March 31, 2016, the hotel portfolio of the Company consists of 29 hotel properties comprising 3,870 rooms. Temple also has two 50% equity investment hotel properties located in Ontario, comprising 299 rooms. As at March 31, 2016, Morguard owned a 38.9% interest in Temple through its ownership of 30,237,889 common shares.

During April 2016, the Company repurchased 9,871 common shares under its NCIB for cash consideration of $1.5 million at a weighted average price of $149.02 per common share.

Second Quarter Dividend

The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2016 in the amount of $0.15 per common share will be paid on June 30, 2016, to shareholders of record at the close of business on June 15, 2016.

The Company's unaudited financial statements for the three months ended March 31, 2016, along with the 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 definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. 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 period ending March 31, 2016 and available on the Company's profile on SEDAR at www.sedar.com.

About Morguard Corporation

Morguard Corporation is a real estate company, which owns a diversified portfolio of 176 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,595 residential suites, approximately 16.2 million square feet of commercial leasable space and 1,473 hotel rooms. Morguard Corporation also currently owns a 51.1% interest in Morguard Real Estate Investment Trust ("Morguard REIT" or "MRT") and a 48.8% effective interest in Morguard North American Residential Real Estate Investment Trust ("Morguard Residential REIT" or "MRG"). 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

For further information: Morguard Corporation, K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Paul Miatello, Chief Financial Officer, T 905-281-3800

RELATED LINKS
http://www.morguard.com

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