Morguard Corporation Announces 2013 Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, March 6, 2014 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) announced its financial results for the year ended December 31, 2013.

HIGHLIGHTS

• Consolidated funds from operations increased by 14.0% to $170.3 million for the year ended December 31, 2013 compared to $149.4 million for the same period in 2012.  On a per share basis, consolidated FFO increased 15.5% to $13.43 per share from $11.63 per share for the same period in 2012
• Morguard acquired 18 properties in Canada and the US aggregating 3,989 multi-unit residential suites and 796 hotel suites for an aggregate purchase price of approximately $600.1 million
• As at December 31, 2013, real estate assets owned and managed were valued at $15.1 billion (2012 - $13.0 billion)
• Occupancy rates remained steady.  Combined retail, office and industrial occupancy was 93.7% at December 31, 2013, compared to 92.4% at December 31, 2012.  Combined multi-unit residential  occupancy was 95.6% at December 31, 2013, compared to 95.9% at December 31, 2012
• Morguard completed $498.6 million of mortgage financings which helped lower the overall, weighted average interest rate at December 13, 2013 to 4.47%, compared with 4.70% as at December 31, 2012
• Morguard completed one development during 2013, a 282,314 square foot refrigerated warehouse and distribution facility. As at December 31, 2013, Morguard has two properties under development aggregating 361,000 square feet of office GLA (Morguard's share - 180,500 square feet) and 596 multi-unit residential suites
• During 2013, Morguard was assigned an investment grade credit rating of BBB (low) with a Stable trend by DBRS and successfully completed a $135 million offering of senior unsecured debentures

All amounts in thousands of Canadian dollars, except for per share amounts, unless otherwise noted.

FINANCIAL HIGHLIGHTS

Year ended December 31,
(in thousands of dollars)		2013		2012
Revenue from income producing properties		$417,376		$315,590
Management and advisory fees		74,641		75,858
Interest and other		12,117		17,629
Sales of product and land		12,748		5,362
Total revenues		516,882		414,439
Revenue from income producing properties		417,376		315,590
Property operating costs and realty tax expense		(194,767)		(143,181)
Land lease arbitration expense		(25,091)		(1,420)
Net operating income		$197,518		$170,989
Consolidated funds from operations (FFO)		$170,296		$149,420
Consolidated FFO per share - basic and diluted		$13.43		$11.63
Net income attributable to common shareholders		$286,392		$389,443
Net income per share - basic and diluted		$22.58		$30.31

NET INCOME

The Company's net income attributable to common shareholders for the year ended December 31, 2013, was $286,392 ($22.58 per share) compared to $389,443 ($30.31 per share) in 2012. The decrease in net income of $103,051 for the year ended December 31, 2013, was primarily due to a decrease in fair value gains of $116,752, a decrease in management and advisory fees of $1,217, a decrease in interest and other income of $5,512, an increase in interest expense of $21,609, an increase in income taxes of $1,027 and a gain on the sale of marketable securities of $13,598 recorded in 2012. These items were partially offset by an increase in net operating income of $26,529, an increase in equity income from investments of $14,947, an increase in other income of $10,419, an increase in net sales of product and land of $2,056 and a decrease in property management and corporate expenses of $2,307.

NET OPERATING INCOME

Year ended December 31, (In thousands of dollars)		2013		2012
Net operating income - Canadian properties
Multi-unit residential - Canada		$55,768		$55,018
Retail - Canada		35,484		32,832
Office and industrial		40,591		40,556
Hotel		9,144		778
		140,987		129,184
Net operating income - U.S. properties in U.S. dollars
Multi-unit residential - U.S.		US 55,707		US 19,623
Retail - U.S.		US 23,437		US 23,619
		US 79,144		US 43,242
Exchange amount to Canadian dollars		2,478		(17)
Net operating income - U.S. properties in Canadian dollars		81,622		43,225
Net operating income before land rent arbitration expense		$222,609		$172,409
Land rent arbitration expense		(25,091)		(1,420)
Net operating income		$197,518		$170,989

Net operating income for the year ended December 31, 2013, increased by $26.5 million to $197.5 million compared to $171.0 million in 2012, representing an increase of 15.5%.  The increase was predominantly the result of the acquisitions of the hotel properties and U.S. multi-unit residential properties purchased in 2012 and 2013 which increased NOI by $45.0 million and a lease termination payment received in the amount of $2.3 million. This was partially offset by the increase in land lease arbitration expenses of $23.7 million as a result of an arbitration decision received during the second quarter of 2013 with respect to the land underlying a mixed-used property located in Toronto, Ontario.

Same property NOI for the year ended December 31, 2013 increased by $5.3 million to $174.4 million compared to $169.1 million in 2012, representing an increase of 3.2%.

CONSOLIDATED FUNDS FROM OPERATIONS ("Consolidated FFO")
The Company's consolidated FFO includes funds available to non-controlling interests and was calculated as follows:

Year ended December 31, (In thousands of dollars except for per share amounts)				2013			2012
Net income attributable to common shareholders				$286,392			$389,443
Items not affecting cash:
		Fair value gains on real estate properties		(77,401)			(230,174)
		Fair value (gain) on Morguard Residential REIT Units, net		(44,829)			(1,281)
		Fair value gain on Morguard REIT 2012 debentures		(825)			-
		Fair value gain of conversion option of Convertible Debentures		(43)			-
		Distribution to Morguard Residential REIT's external unitholders		13,559			5,164
		Non-controlling interests' share of fair value gain on real estate properties		1,004			4,377
		Deferred income taxes		35,082			21,163
		Depreciation on hotel buildings		1,399			-
		Depreciation on owner occupied property		104			104
Equity income from Morguard REIT				(92,534)			(77,929)
Morguard REIT's equity accounted FFO				44,068			37,927
Transaction costs incurred on business combination				1,829			1,043
Foreign exchange loss				2,234			-
Loss (gain) on sale of property				257			(417)
Consolidated FFO				$170,296			$149,420
	Consolidated FFO per share amounts - basic and diluted			$13.43			$11.63
	Consolidated FFO - Morguard's Share
	FFO (from above)			$170,296			$149,420
	Less non-controlling interest:
	Morguard Residential REIT			(17,223)			(5,287)
	Consolidated FFO - Morguard's share			$153,073			$144,133
	Per share amounts - basic and diluted			$12.07			$11.22

For the year ended December 31, 2013 the Company recorded consolidated FFO of $170,296 ($13.43 per share) compared to $149,420 ($11.63 per share) in 2012. The increase in consolidated FFO of $20,876, which reflects a 14.0% increase is mainly due to an increase in NOI of $26,529, an increase in net sales of product and land of $2,056, a decrease in property management and corporate expenses of $2,307, an increase in other income excluding foreign exchange losses of $12,653, an increase in Morguard REIT's equity accounted FFO of $6,141 and a decrease in current taxes of $12,892.  These items were partially offset by a decrease in management and advisory fees of $1,217, a decrease in interest and other income of $5,512, a gain on the sale of marketable securities in 2012 of $13,598 recorded in 2012 and an increase in interest expense of $21,609. The change in foreign exchange rates had a positive impact on FFO of $1,037.

Excluding the net of tax impact of the non-recurring items (i) the arbitration settlement received in 2013 of $15,442 (ii) the increase in the land rent arbitration expense of $25,091 and (iii) the gain on the sale of the marketable securities of $13,598 recorded in 2012, the FFO for the year ended December 31, 2013 would have been $177,410 or $13.99 per share versus $135,757 or $10.57 per share for the same period in 2012, which represents an increase in FFO of $41,653 or 30.7%.

Morguard's share of consolidated FFO totaled $153,073 or $12.07 per share compared to $144,133 or $11.22 per share in 2012, which represents an increase of $8,940 or 6.2%.

FIRST QUARTER DIVIDEND

The board of directors of Morguard Corporation announced today that the fourth quarterly, eligible dividend of 2014 in the amount of $0.15 per common share will be paid on March 31, 2014 to shareholders of record at the close of business on March 14, 2014.

Readers are cautioned that although the terms "Net Operating Income", and "Funds From Operations" are commonly used to measure, compare and explain the operating and financial performance of Canadian real estate companies and such terms are defined in the Management's Discussion and Analysis, such terms are not recognized terms under Canadian generally accepted accounting principles.  Such terms do not necessarily have a standardized meaning and may not be comparable to similarly titled measures presented by the other publicly traded entities.

The Company's audited financial statements for the year ended December 31, 2013, 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.

Morguard Corporation is a real estate company, which owns a diversified portfolio of 123 multi-unit residential, retail, hotel, office and industrial properties comprising of 16,099 multi-unit residential suites, 1,220 hotel rooms and approximately 7.3 million square feet of commercial leasable space. Morguard Corporation also owns a 44.5% interest in Morguard Real Estate Investment Trust and a 48.7% 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

Morguard Corporation

K. (Rai) Sahi 
Chief Executive Officer 
[phone]

Paul Miatello
Chief Financial Officer
[phone]