Morguard Corporation Announces Strong 2015 Results and Regular Eligible Dividend

MISSISSAUGA, ON, Feb. 26, 2016 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the year ended December 31, 2015.

Operational Highlights:

  • Acquisition of a garden-style property comprising 252 suites located in Cooper City, Florida for a purchase price of $73.9 million (US$56.0 million). 
  • Continued development of the Marquee at Block 37, Chicago, Illinois.  Block 37 is a 34-storey, 691 suite residential tower, being developed with an institutional partner.  The Company has committed $61.8 million (US$44.6 million) of equity to this development.
  • Acquisition of a 59.13% ownership interest in a 299 multi-suite residential building including 47,500 square feet of commercial area in Los Angeles, California, for $77.4 million (US$58.0 million).
  • Successful development of The Heathview, a 30-storey, twin-tower, multi-suite residential property located in Toronto, Ontario.
  • As at December 31, 2015, the Company owned a 38.9% interest in Temple Hotels Inc., a hotel investment company with a portfolio located across Canada.  Temple is publicly listed on the Toronto Stock Exchange under the symbol TPH.
  • Continued strong occupancy across each of the Company's reporting segments.  During the fourth quarter of 2015, the retail portfolio was adjusted to exclude development space 603,804 square feet of GLA) related to five stores formerly leased to Target Canada. This adjustment increased retail occupancy from 87.0% to 93.7%.
  • On February 3, 2015, the Company acquired a 60% ownership interest in Lincluden Investment Management Limited. Lincluden manages $3.3 billion of equities and fixed income instruments for institutional and private clients.

Reporting Highlights:

  • Funds from operations ("FFO") – Morguard's Share increased by $31.1 million to $183.1 million for the year ended December 31, 2015, compared to $152.0 million for the same period in 2014, representing a 20.4% increase.
  • On a per share basis, FFO – Morguard's Share increased to $14.96 for the year ended December 31, 2015, compared to $12.14 in 2014, representing an increase of 23.2%.
  • On December 31, 2014, the Company commenced consolidating its investment in Morguard REIT. The impact of this change on the Company's 2015 statement of income is significant since Morguard REIT's revenue and expenses are fully consolidated into the Company's operating results.
  • Total revenue increased by $317.3 million to $883.6 million compared to $566.3 million in 2014.
  • Comparative NOI increased by $23.7 million or 10.2% to $255.1 million compared to $231.4 million for the same period in 2014.
  • Completion of $405.8 million of new mortgage financings. The Company's weighted average interest rate as at December 31, 2015, was 3.91%, down from 4.17% a year earlier. 
  • The Company repurchased 368,051 of its common shares for total consideration of $53.7 million, representing an average price of $145.91 per common share.
  • The Company acquired 2,554,178 units of Morguard REIT for $41.1 million, representing an average purchase price of $16.11 per unit. As at December 31, 2015, the Company's ownership interest in Morguard REIT now stands at 50.4%.
  • Shareholders' equity per common share (excluding non-controlling interest) increased to $224.94 compared to $202.27 as at December 31, 2014.

Financial Highlights:

Years ended December 31,






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



2015


2014

Revenue from real estate properties



$808,595


$472,808

Management and advisory fees



59,536


73,440

Interest and other income



7,819


14,970

Sales of product and land



7,609


5,108

Total revenues



$883,559


$566,326







Revenue from real estate properties



$808,595


$472,808

Property operating expenses



(372,696)


(231,615)

Net operating income



$435,899


$241,193







Funds from operations



$199,734


$174,988

FFO per common share – basic and diluted



$16.32


$13.98







FFO - Morguard's Share



$183,139


$152,053

Per common share – basic and diluted



$14.96


$12.14







Net income attributable to common shareholders



$80,542


$136,703

Net income per common share – basic and diluted



$6.58


$10.92







Net Income

Net income for the year ended December 31, 2015, was $103.5 million compared to $137.3 million for the same period in 2014. The decrease in net income of $33.8 million for the year ended December 31, 2015, was primarily due to the following:

  • An increase in net operating income of $194.7 million primarily due the consolidation of Morguard REIT;
  • A decrease in management and advisory fees of $13.9 million primarily due to the elimination of fees as a result of the consolidation of Morguard REIT;
  • A decrease in interest and other income of $7.2 million;
  • An increase in interest expense of $43.4 million, primarily due to the consolidation of Morguard REIT;
  • A decrease in non-cash net fair value gains of $111.6 million;
  • A decrease in equity income of $46.7 million, primarily due to the consolidation of Morguard REIT which is no longer accounted for as an equity accounted investment;
  • A decrease in expense of $16.3 million from a loss on business combination recorded in 2014 due to the consolidation of Morguard REIT; and
  • An increase in income taxes (current and deferred) of $12.1 million.

Net Operating Income ("NOI")

The consolidation of Morguard REIT significantly impacted the Company's operating results for the year ended December 31, 2015, compared to the same period in 2014. In order to enhance comparability and illustrate the impact Morguard REIT has had on the Company's 2015 NOI, the NOI directly attributable to Morguard REIT has been isolated in the column titled "Morguard REIT". The column titled "Morguard" represents the revenue and expenses for all properties that were included in the Company's operating results for 2014 (the "Morguard Properties").

 For the years ended December 31,

(in thousands of dollars)




2015


2014



Morguard


Morguard

 REIT


 Total


 

Morguard

Multi-suite residential


$149,303


$-


$149,303


$129,843

Retail


56,633


91,252


147,885


55,280

Office


45,010


76,897


121,907


43,025

Industrial and hotels


12,928


3,404


16,332


13,045

Adjusted NOI


$263,874


$171,553


$435,427


$241,193

IFRIC 21 adjustment – multi-suite residential


472


-


472


-

NOI


$264,346


$171,553


$435,899


$241,193

NOI for the year ended December 31, 2015, increased by $194.7 million to $435.9 million compared to $241.2 million in 2014, representing an increase of 80.7%. Excluding the impact of the Morguard REIT consolidation of $171.5 million, NOI increased by $23.2 million primarily due to the following:

  • An increase of $23.7 million in Comparable NOI, of which $16.1 million was due to the change in the U.S. dollar foreign exchange rate;
  • An increase of $3.2 million due to acquisitions completed during the year;
  • Additional NOI of $4.2 million generated from the continued lease up of the Company's completed development properties, The Heathview, a 587 suite rental development in Toronto, Ontario and Performance Court, a 21-storey office property in Ottawa;
  • A decrease of $1.2 million due to disclaimed Target leases; and
  • A decrease of $3.1 million due to a lease cancellation fee recorded in 2014, net of the re-leasing of the surrendered space.

Funds from Operations

For the year ended December 31, 2015, the Company recorded FFO of $199.7 million ($16.32 per common share), compared to $175.0 million ($13.98 per common share) in 2014. The increase in FFO of $24.7 million is mainly due to the following:

  • Higher Adjusted NOI of $22.7 million from the Morguard Properties;
  • Amortization of the mortgage mark-to-market adjustment of $12.7 million which was recorded on acquisition of Morguard REIT;
  • Decrease in current taxes of $6.7 million;
  • Higher impairment provision recorded on investments in publicly traded securities of $2.7 million;
  • Lower interest and other income of $7.2 million; and
  • Lower management and advisory fees of $13.9 million.

The change in foreign exchange rates had a positive impact on FFO of $11.0 million ($0.91 per common share).

FFO - Morguard's Share

For the years ended December 31,






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



2015


2014

FFO



$199,734


$174,988

Less: non-controlling interest: Morguard Residential REIT



(16,595)


(22,935)

FFO - Morguard's Share



$183,139


$152,053

Per common share amounts – basic and diluted



$14.96


$12.14







The Company's FFO includes funds available to the non-controlling interests of Morguard North American Residential REIT. FFO - Morguard's Share removes the non-controlling interest portion. FFO - Morguard's Share for the year ended December 31, 2015, totaled $183.1 million or $14.96 per common share, compared to $152.1 million or $12.14 per common share in 2014.

Subsequent Events

On February 1, 2016, the Company acquired three hotel properties located in Toronto, Ontario, for a purchase price of $33.5 million. The acquisition was partially financed by a $20.0 million credit facility for a term of 3 years.

On February 1, 2016, the Company acquired a multi-suite residential property located in Ottawa, Ontario, for a purchase price of approximately $67.0 million. The acquisition was partially financed by a new mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.

During February 2016, the Company repurchased 37,500 common shares under its NCIB for cash consideration of $4,810 at a weighted average price of $128.27 per common share.

First Quarter Dividend

The Board of Directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2016 in the amount of $0.15 per common share will be paid on March 31, 2016, to shareholders of record at the close of business on March 15, 2016.

The Company's audited financial statements for the year ended December 31, 2015, 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 consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, Adjusted NOI, Comparative NOI, FFO, FFO – Morguard's Share and Normalized FFO – Morguard's Share (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 year ended December 31, 2015 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 177 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,472 residential suites, approximately 16.3 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 and a 48.8% effective interest in Morguard North American Residential Real Estate Investment Trust.  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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