Morguard Corporation Announces 2016 Second Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, Aug. 10, 2016 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the three and six months ended June 30, 2016.

Reporting Highlights:

  • Funds from operations ("FFO") increased by $9.3 million to $59.0 million for the three months ended June 30, 2016, compared to $49.7 million for the same period in 2015, representing a 18.7% increase.
  • On a per common share basis, FFO increased to $4.94 for the three months ended June 30, 2016, compared to $4.05 in 2015, representing an increase of 22.0%.
  • Normalized FFO for the three months ended June 30, 2016, was $44.8 million, or $3.75 per common share, versus $49.1 million, or $4.00 per common share, for the same period in 2015, which represents a decrease of $4.3 million or 8.8%.
  • Total revenue increased by $10.2 million to $227.7 million compared to $217.5 million for the same period in 2015.
  • Comparative NOI increased by $3.4 million, or 3.3%, to $107.7 million compared to $104.3 million for the same period in 2015.
  • Shareholders' equity per common share (excluding non-controlling interest) increased to $226.38 compared to $224.94 as at December 31, 2015.

Financial Highlights



Three months ended
June 30

Six months ended
June 30

(in thousands of dollars, except per common share)


2016

2015

2016

2015

Revenue from real estate properties


$209,247

$196,949

$418,885

$395,887

Management and advisory fees


14,390

16,064

34,584

30,149

Interest and other income


2,258

3,009

3,269

4,861

Sales of product and land


1,784

1,438

3,059

5,110

Total revenues


$227,679

$217,460

$459,797

$436,007







Revenue from real estate properties


$209,247

$196,949

$418,885

$395,887

Property operating expenses


(91,572)

(85,593)

(208,407)

(194,894)

Net operating income


$117,675

$111,356

$210,478

$200,993







Funds from operations


$58,992

$49,703

$106,670

$87,210

FFO per common share – basic and diluted


$4.94

$4.05

$8.92

$7.08

 

Net Income

Net income for the three months ended June 30, 2016, was $93.2 million compared to $31.0 million for the same period in 2015. The increase in net income of $62.2 million for the three months ended June 30, 2016, was primarily due to the following:

  • An increase in net operating income of $6.3 million;
  • A decrease in management and advisory fees of $1.7 million;
  • An increase in interest expense of $1.3 million;
  • An increase in property management and corporate expense of $3.6 million;
  • A decrease in net fair value loss of $4.0 million;
  • An increase in equity income from investments of $63.7 million;
  • An increase in other income (expense) of $24.1 million; and
  • An increase in income taxes (current and deferred) of $28.5 million.

Target Settlement
On January 15, 2015, Target Corporation ("Target U.S.") the U.S. parent of Target Canada Corporation ("Target Canada"), announced plans to discontinue its Canadian operations through its indirect wholly owned subsidiary, Target Canada. At the time of this announcement the Company had ten locations under lease with Target Canada. During 2015, Target Canada disclaimed leases at five properties owned by the Company and ceased paying rent at these locations. Nine of the ten leases were guaranteed through an indemnity arrangement with Target U.S. for the remaining term of each lease.  Additionally, four of the leases were assigned to new tenants who assumed the payments of the rental obligations, thereunder, as of the closing date of the respective assignments, and one was repurchased by the Company for repositioning.

During the quarter, the Company entered into a binding agreement with Target U.S., concluding the terms of settlement related to the guarantees for the five leases that were disclaimed by Target Canada pursuant to the Companies' Creditors Arrangement Act. Other income (expense) includes $22.5 million in settlement proceeds relating to the release of Target U.S. from the indemnity agreements.

Net Operating Income ("NOI")

NOI increased by $6.3 million, or 5.7%, during the three months ended June 30, 2016, to $117.7 million, compared to $111.4 million generated in 2015, and is further analyzed by asset type below.



Three months ended
June 30

Six months ended
June 30

(in thousands of dollars)


2016

2015

2016

2015

Multi-suite residential


$41,624

$36,156

$83,042

$71,035

Retail


34,844

35,824

70,009

73,037

Office


29,284

30,103

60,519

59,993

Industrial and hotels


6,078

4,224

9,754

7,830

Adjusted NOI


111,830

106,307

223,324

211,895

IFRIC 21 adjustment – multi-suite residential


4,644

4,177

(10,270)

(8,130)

IFRIC 21 adjustment – retail


1,201

872

(2,576)

(2,772)

NOI


$117,675

$111,356

$210,478

$200,993

 

Adjusted NOI for the three months ended June 30, 2016, increased by $5.5 million to $111.8 million compared to $106.3 million in 2015, representing an increase of 5.2%. Adjusted NOI increased by $5.5 million primarily due to the following:

  • An increase of $1.3 million due to rental rate growth in Canadian residential properties;
  • An increase of $1.5 million due to the Monterra and 160 Chapel acquisitions completed subsequent to June 30, 2015;
  • Additional NOI of $1.4 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 $1.2 million in Canadian and U.S. retail properties due to increased vacancy and non-recoverable costs, as well as vacant space resulting from the disclaimed Target leases and the disposition of two U.S. properties subsequent to March 31, 2015;
  • An increase in the industrial and hotel portfolio of $1.9 million primarily due to the acquisition of three hotels near Toronto's Pearson International Airport on February 1, 2016; and
  • An increase of $1.3 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended June 30, 2016, the Company recorded FFO of $59.0 million ($4.94 per common share), compared to $49.7 million ($4.05 per common share) in 2015. The increase in FFO of $9.3 million is mainly due to the following:

  • Higher Adjusted NOI of $5.5 million;
  • Target lease settlement proceeds of $22.5 million;
  • Lower management and advisory fees of $1.7 million;
  • An increase in interest expense of $1.3 million;
  • Higher property management and corporate expense of $3.6 million;
  • Higher non-controlling interests share of FFO of $4.0 million; and
  • An increase in current income tax expense of $6.8 million.

The change in foreign exchange rates had a positive impact on FFO of $0.06 million ($0.01 per common share).

Normalized FFO for the three months ended June 30, 2016, was $44.8 million, or $3.75 per common share, versus $49.1 million, or $4.00 per common share, for the same period in 2015, which represents a decrease of $4.3 million or 8.8%.

Subsequent Event

During July 2016, the Company purchased 450,000 units of Morguard REIT for cash consideration of $6.9 million at a weighted average price of $15.24 per unit.

Third Quarter Dividend

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

The Company's unaudited financial statements for the three and six months ended June 30, 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 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 period ending June 30, 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 175 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,595 residential suites, approximately 16.0 million square feet of commercial leasable space and 1,473 hotel rooms. Morguard Corporation also currently owns a 51.9% interest in Morguard Real Estate Investment Trust ("Morguard REIT" or "MRT") and a 48.7% 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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