MISSISSAUGA, ON, Jan. 24 /CNW/ - Morguard Corporation ("MRC") (TSX: MRC)
today announced the valuation of its investment properties for its
opening balance sheet as at January 1, 2010 in accordance with its
transition to International Financial Reporting Standards ("IFRS").
IFRS becomes effective as at January 1, 2010 and MRC's financial
statements for the quarter ending March 31, 2011 will be reported under
IFRS with comparable results commencing January 1, 2010.
MRC has adopted the fair value model under IFRS with the initial
increase in fair value on the transition date recorded in shareholders'
equity as at January 1, 2010 and subsequent changes being recorded in
the income statement on a quarterly basis in future periods.
The carrying value of MRC's income properties and properties under
development will increase by approximately $500 million to $2.1
billion. This $2.1 billion value compares to the historical cost
amount under Canadian GAAP of $1.6 billion as at January 1, 2010. The
IFRS and Canadian GAAP carrying values both include straight-line rent,
direct leasing costs, lease incentives and intangible liabilities
(below market leases).
The increase in the carrying value of MRC's investment properties by
approximately $500 million under IFRS results in an associated future
income tax liability increase as at January 1, 2010 of approximately
$60 million. The future income tax liability under IFRS has been
determined by tax effecting the increase in fair value at the capital
gains tax rate based on the presumption that the method of realization
will be through the sale of the property.
MRC accounts for its investment in Morguard Real Estate Investment Trust
("MRT") using the equity method. As a result of MRT adopting the fair
value method of accounting for its investment properties, MRC's
investment in MRT will increase by approximately $182 million, which
represents 45.5% of MRT's fair value increase in investment
properties. MRC will record a corresponding future income tax
liability of approximately $30 million for this increase in its
investment in MRT.
For its opening balance sheet at January 1, 2010, MRC had its Canadian
portfolio internally appraised by its appraisal division and the U.S.
portfolio was predominantly externally appraised by an independent
national U.S. real estate appraisal firm. MRC's appraisal division is
staffed with five accredited members of the Appraisal Institute of
Canada who collectively in 2010 valued over $8.5 billion of real estate
properties in Canada for institutional and corporate clients. Overall,
approximately 30% of MRC's portfolio was externally appraised.
All income-producing properties are appraised using a number of
approaches that typically include a discounted cash flow analysis, a
direct capitalization approach and a direct comparison approach. Using
the direct capitalization income approach as a reporting parameter,
individual properties were valued using capitalization rates in the
range of 5.8% to 9.5% applied to a stabilized net operating income
("NOI"), resulting in an overall weighted average capitalization rate
The table below provides further details of the average capitalization
rates by product type as at January 1, 2010:
As at January 1, 2010
Weighted Average Cap. Rate
Multi-unit residential - Canada
Retail - Canada
Office and Industrial
Multi-unit residential - U.S.
Retail - U.S.
Total Weighted Average
Other Impacts of Adoption of IFRS - Investment Property
As a result of the conversion to IFRS, MRC's debt to aggregate asset
ratio is expected to decrease to approximately 45.6% as at January 1,
2100 based on IFRS carrying values compared to MRC's stated leverage of
53.8% based on Canadian GAAP on January 1, 2010.
About Morguard Corporation
Morguard Corporation is a real estate company, which owns a diversified
portfolio of 101 retail, multi-unit residential, office and industrial
properties comprising 10,299 multi-unit residential suites and
approximately 6.9 million square feet of commercial leasable space.
Morguard provides advisory and management services to institutional and
other investors through Morguard Investments Limited and Morguard
Residential. For more information, visit the Company's website at www.morguard.com.
SOURCE Morguard Corporation
For further information:
|Morguard Corporation || || || |
|K. (Rai) Sahi || || ||Paul Miatello|
|Chief Executive Officer || || ||Chief Financial Officer|
|(905) 281-3800 || || ||(905) 281-3800|