Morguard Corporation Announces Second Quarter Results and Regular Dividend



    TORONTO, Aug. 8 /CNW/ - Morguard Corporation (TSX: MRC) announced
financial results for the three months ended June 30, 2008.

    
    HIGHLIGHTS

      -  Net operating income for the quarter ended June 30, 2008, was
         $36.8 million (2007 - $34.3 million).
      -  Morguard's share of continuing funds from operations was
         $24.5 million or $1.76 per common share (2007 - $16.0 million,
         $1.15 per common share).
      -  Net earnings for the three months ended June 30, 2008, was
         $8.6 million as compared to a net earnings of $5.4 million for the
         three months ended June 30, 2007.
      -  Morguard has taken up and paid for 993,291 common shares of Revenue
         Properties Company Limited ("RPCL") that were validly tendered under
         the offer originally announced by the Company on April 2, 2008.

    Further financial highlights are detailed in the table below;

    -------------------------------------------------------------------------

                                    Three months ended      Six months ended
                                               June 30               June 30
    -------------------------------------------------------------------------
    (In thousands of Canadian dollars,
     except per share amounts)         2008       2007       2008       2007
    -------------------------------------------------------------------------

    Net operating income          $  36,790  $  34,287  $  71,462  $  67,796
    Interest expense                (17,794)   (19,154)   (35,741)   (38,851)
    Property management and
     administration                 (14,155)   (13,723)   (27,102)   (25,877)
    Equity income from Morguard
     REIT - continuing operations     2,752      2,466     22,115      5,140
    Fees and other revenue           15,583     13,626     29,856     27,180
    Sale of products and land,
     net of cost                        399        465        752        924
    -------------------------------------------------------------------------
    Income before the under noted    23,575     17,967     61,342     36,312

    Amortization                    (15,217)   (19,456)   (31,019)   (39,592)
    Reversal of pension valuation
     allowance                            -          -     19,441          -
    Other income (expense)            1,862     (2,135)     3,705     (3,443)
    -------------------------------------------------------------------------
    Operating income (loss)          10,220     (3,624)    53,469     (6,723)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings                      8,649      5,437     37,573      3,287
    - per basic share                  0.62       0.39       2.70       0.24
    - per diluted share                0.61       0.38       2.67       0.23

    Continuing funds from
     operations                      26,486     16,452     51,413     32,452
    - per basic share             $    1.90  $    1.18  $    3.69  $    2.33
    - per diluted share           $    1.88  $    1.16  $    3.66  $    2.29

    Continuing funds from
     operations - Morguard's Share   24,498     15,956     47,547     31,033
    - per basic share             $    1.76  $    1.15  $    3.41  $    2.23
    - per diluted share           $    1.74  $    1.13  $    3.38  $    2.19
    -------------------------------------------------------------------------
    

    OFFER FOR RPCL COMMON SHARES

    On April 2, 2008, the Company announced its intention to make an
unsolicited take-over bid of RPCL by offering to purchase the common shares of
RPCL not already owned at a price of $12.00 cash per share or the option of
receiving 0.33 of a Morguard common share. At the expiry of the offer on
July 16, 2008, the Company announced that 739,821 common shares of RPCL had
been validly tendered under the terms of the offer and that the Company had
taken up and accepted for payment the same number of common shares. Also on
July 16, 2008, the Company announced it had extended the expiry time of its
bid until July 29, 2008.
    At the expiry of the extension on July 29, 2008, the Company announced
that an additional 253,470 common shares of RPCL had been validly tendered
under the terms of the extension and that the Company had taken up and
accepted for payment the same number of common shares. Morguard and its
affiliates now own 8,849,787 common shares of RPCL representing approximately
81.7% of the outstanding common shares. Also, on July 29, 2008, the Company
announced that it has further extended the expiry time of its bid until
August 12, 2008.

    REVIEW OF FINANCIAL RESULTS

    Net earnings for the three months ended June 30, 2008, were $8.6 million
as compared to net earnings of $5.4 million for the same period in 2007. The
increase in the net earnings of $3.2 million is primarily due to lower
amortization expense, lower interest expense and a non-recurring debt
transaction cost in 2007.

    
    NET OPERATING INCOME

    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
                                               June 30               June 30
                                  -------------------------------------------
    (in thousands of dollars)          2008       2007       2008       2007
    -------------------------------------------------------------------------
    Property revenues             $  65,758  $  63,003  $ 130,859  $ 127,424
    Property operating expenses      28,968     28,716     59,397     59,628
    -------------------------------------------------------------------------
    Net operating income          $  36,790  $  34,287  $  71,462  $  67,796
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net operating income is used by industry analysts, investors and
    management to measure operating performance at the Company's properties.
    Net operating income represents total property revenues less property
    operating expenses and maintenance expenses. Accordingly, net operating
    income excludes certain expenses included in the determination of net
    income such as property management and other indirect operating expenses,
    interest expense and amortization. Net operating income is not a
    recognized measure under Canadian generally accepted accounting
    principles and accordingly the term does not necessarily have a
    standardized meaning and may not be comparable to similarly titled
    measures presented by other publicly traded entities.
    

    Net operating income ("NOI") increased $2.5 million, or 7.3%, to
$36.8 million during the three months ended June 30, 2008, as compared to
$34.3 million in 2007. The increase in net operating income in 2008 results
primarily from the acquisition of a 50% interest in 350 Sparks Street, Ottawa,
and the acquisition on October 1, 2007 of a 20% interest in 131 Queen Street,
Ottawa which increased NOI by $1.1 million. Net operating income from RPCL's
Canadian assets increased by $0.9 million mainly due to strong leasing of one
of its mixed-used properties located in Toronto. However, this was partially
offset by RPCL's U.S. assets as net operating income decreased $0.5 million
primarily due to the change in foreign exchange rates. The Morguard
Residential division improved its net operating income by $0.8 million through
higher occupancy and rents. Other Morguard properties contributed
approximately $0.2 million to the overall increase in NOI.

    FUNDS FROM OPERATIONS - MORGUARD's SHARE

    Funds from continuing operations ("FFO") for the three months ended
June 30, 2008, 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 RPCL needs to be deducted
and any inter-company fees, eliminated on consolidation added.

    
    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
                                               June 30               June 30
                                  -------------------------------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Net earnings from continuing
     operations                   $   6,158  $  (2,942) $  35,277  $  (5,698)
    Add (deduct) non-cash items:
    Non - controlling interest          (33)    (3,577)      (260)    (6,964)
    Amortization                     14,727     19,146     30,021     38,750
    Future income taxes               1,141        138     12,922       (735)
    Equity income from Morguard
     REIT - continuing operations
     Conti continuing operations     (2,752)    (2,466)   (22,115)    (5,140)
    Morguard REIT's equity
     accounted FFO                    7,245      6,212     15,009     12,322
    Gain on pension valuation
     allowance                            -          -    (19,441)         -
    Dilution impact from change
     in ownership of subsidiaries         -        (59)         -        (83)
    -------------------------------------------------------------------------
    FFO - Consolidated            $  26,486  $  16,452  $  51,413  $  32,452
    Less: non-controlling
     interest - RPCL                  1,989        496      3,866      1,419
    -------------------------------------------------------------------------
    FFO - Morguard's Share        $  24,498  $  15,956  $  47,547  $  31,033
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company uses Funds from Operations ("FFO") and Funds from Operations
    - Morguard's Share in addition to net income to report operating results.
    FFO is an industry standard for evaluating operating performance defined
    as net income plus amortization and future income taxes, excludes gains
    or losses from the sale of depreciable property and is not adjusted for
    gains realized on the disposition of portfolio investments. FFO is not
    indicative of funds available to meet the Company's cash requirements.
    The Company computes FFO in accordance with the recently amended
    definitions of the Real Property Association of Canada, formerly known as
    the Canadian Institute of Public and Private Real Estate Companies.
    However, FFO is not a recognized measure under Canadian generally
    accepted accounting principles and accordingly the term does not
    necessarily have a standardized meaning and may not be comparable to
    similarly titled measures presented by other publicly traded entities.
    

    FFO - Morguard's Share for the three months ended June 30, 2008 is
$24.5 million ($1.76 per common share) compared to $16.0 million ($1.15 per
common share) for the same period in 2007. The increase of $8.5 million or
53.5% is primarily a result of the RPCL refinancing program, including
non-recurring transaction costs and early extinguishment costs of $3.4 million
in 2007, and an increase in equity accounted FFO from Morguard REIT of $1.0
million.

    THIRD QUARTER DIVIDEND

    The board of directors of Morguard Corporation announced today the third
quarterly dividend of 2008 in the amount of $0.14 per common share will be
paid on September 30, 2008 to shareholders of record at the close of business
on September 16, 2008.

    SECOND QUARTER FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
    ANALYSIS

    The Company's unaudited financial statements for the three months ended
June 30, 2008, along with the Management's Discussion and Analysis are
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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