Morguard Corporation Announces 2016 Third Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, Nov. 11, 2016 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the three and nine months ended September 30, 2016.

Reporting Highlights:

  • Funds from operations ("FFO") increased by $13.7 million to $53.5 million for the three months ended September 30, 2016, compared to $39.8 million for the same period in 2015, representing a 34.4% increase.

  • On a per common share basis, FFO increased to $4.49 for the three months ended September 30, 2016, compared to $3.28 in 2015, representing an increase of 36.9%.

  • Normalized FFO for the three months ended September 30, 2016, was $53.7 million, or $4.50 per common share, versus $44.7 million, or $3.67 per common share, for the same period in 2015, which represents an increase of $9.0 million or 20.2%.

  • Total revenue increased by $8.9 million to $230.3 million compared to $221.4 million for the same period in 2015.

  • Adjusted NOI increased by $3.8 million, or 3.5%, to $114.0 million compared to $110.2 million for the same period in 2015.

  • Shareholders' equity per common share (excluding non-controlling interest) increased to $234.12 compared to $224.94 as at December 31, 2015.

  • On September 30, 2016, the Company completed the refinancing of 10 multi-suite residential properties located in Louisiana and Florida in the amount of US$95.1 million at a weighted average interest rate of 3.47% and a weighted average term of 8.7 years.  The refinancing resulted in US$19.4 million of upfinancing mortgage proceeds on the maturing loans which had a weighted average contractual interest rate of 5.60%.

Financial Highlights


Three months ended
September 30

Nine months ended
September 30

(in thousands of dollars, except per common share)

2016

2015

2016

2015

Revenue from real estate properties

$212,278

$202,763

$631,163

$598,650

Management and advisory fees

15,262

15,935

49,846

46,084

Interest and other income

1,626

1,453

4,895

6,314

Sales of product and land

1,171

1,251

4,230

6,361

Total revenues

$230,337

$221,402

$690,134

$657,409






Revenue from real estate properties

$212,278

$202,763

$631,163

$598,650

Property operating expenses

(92,416)

(86,685)

(300,823)

(281,579)

Net operating income

$119,862

$116,078

$330,340

$317,071






Funds from operations

$53,545

$39,840

$160,215

$127,069

FFO per common share – basic and diluted

$4.49

$3.28

$13.41

$10.36

 

Net Income

Net income for the three months ended September 30, 2016, was $70.5 million compared to $51.6 million for the same period in 2015. The increase in net income of $18.9 million for the three months ended September 30, 2016, was primarily due to the following:

  • An increase in net operating income of $3.8 million;
  • A decrease in management and advisory fees of $0.7 million;
  • An increase in interest expense of $0.4 million;
  • An increase in property management and corporate expense of $3.9 million;
  • An increase in net fair value gain of $18.8 million;
  • An increase in equity income from investments of $1.8 million;
  • A decrease in other expense of $1.6 million; and
  • An increase in income taxes (current and deferred) of $2.0 million.

Net Operating Income ("NOI")

NOI increased by $3.8 million, or 3.3%, during the three months ended September 30, 2016, to $119.9 million, compared to $116.1 million generated in 2015, and is further analyzed by asset type below.


Three months ended
September 30

Nine months ended
September 30

(in thousands of dollars)

2016

2015

2016

2015

Multi-suite residential

$42,497

$39,076

$125,539

$110,114

Retail

34,416

35,527

104,425

108,561

Office

29,471

30,802

89,990

90,795

Industrial and hotels

7,573

4,749

17,327

12,579

Adjusted NOI

113,957

110,154

337,281

322,049

IFRIC 21 adjustment – multi-suite residential

4,685

4,308

(5,585)

(3,822)

IFRIC 21 adjustment – retail

1,220

1,616

(1,356)

(1,156)

NOI

$119,862

$116,078

$330,340

$317,071

 

Adjusted NOI for the three months ended September 30, 2016, increased by $3.8 million to $114.0 million compared to $110.2 million in 2015, representing an increase of 3.5%. Adjusted NOI increased by $3.8 million primarily due to the following:

  • An increase of $0.9 million due to rental rate growth in Canadian residential properties;
  • An increase of $1.7 million due to the Monterra and 160 Chapel acquisitions completed during and subsequent to the third quarter of 2015;
  • Additional NOI of $1.1 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 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 during and subsequent to the third quarter of 2015;
  • A decrease in the office portfolio of $1.3 million due to vacancy at a single tenant office property located in Alberta and a prior year lease cancellation payment received at a property located in Ottawa, Ontario;  
  • An increase in the industrial and hotel portfolio of $2.8 million primarily due to the acquisition of three hotels near Toronto's Pearson International Airport on February 1, 2016; and
  • A decrease of $0.3 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended September 30, 2016, the Company recorded FFO of $53.5 million ($4.49 per common share), compared to $39.8 million ($3.28 per common share) in 2015. The increase in FFO of $13.7 million is mainly due to the following:

  • Higher Adjusted NOI of $3.8 million;
  • An increase in equity-accounted FFO of $1.0 million;
  • Higher property management and corporate expense of $3.9 million;
  • An impairment provision on investment in publicly traded securities of $5.1 million recorded in the prior period;  
  • A decrease in current income tax expense of $5.6 million; and
  • Lower non-controlling interests share of FFO of $1.7 million.

The change in foreign exchange rates had a positive impact on FFO of $0.4 million ($0.03 per common share).

Normalized FFO for the three months ended September 30, 2016, was $53.7 million, or $4.50 per common share, versus $44.7 million, or $3.67 per common share, for the same period in 2015, which represents an increase of $9.0 million or 20.2%.

Subsequent Event

On November 7, 2016, the Company filed a base shelf prospectus. The base shelf prospectus is valid for a 25-month period, during which the Company may offer debt securities having an aggregate offering price of up to $400 million.

Fourth 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 December 30, 2016, to shareholders of record at the close of business on December 15, 2016.

The Company's unaudited financial statements for the three and nine months ended September 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 September 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, with total assets owned and under management valued at $19.9 billion. Morguard owns a diversified portfolio of 176 multi-suite residential, retail, office, industrial and hotel properties comprised of 18,286 residential suites, approximately 16.0 million square feet of commercial leasable space and 1,473 hotel rooms. Morguard also currently owns a 52.5% 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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