MISSISSAUGA, ON, May 13, 2014 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) announced its financial results for the three months ended March 31, 2014.
- Total revenues increased by 25.6% to $140.0 million compared to $111.4 million in 2013.
- Normalized net operating income ("Normalized NOI"), which excludes the impact of IFRIC 21 and the land rent arbitration expense, increased by 29.4% to $61.8 million compared to $47.8 million for the same period in 2013.
- Normalized funds from operations ("Normalized FFO"), which excludes non-recurring items, increased by 14.4% to $45.1 million for the quarter ended March 31, 2014 compared to $39.4 million for the same period in 2013.
- Net income decreased to $26.6 million in 2014 compared to $100.0 million in 2013.
- Occupancy rates remained steady as compared to March 31, 2013. Combined retail, office and industrial occupancy were 92.6% at March 31, 2014, compared to 92.8% at March 31, 2013. Combined multi-unit residential occupancy was 95.3% at March 31, 2014, compared to 95.6% at March 31, 2013.
- Occupancy commenced at Performance Court, a 21-storey, 361,000 square-foot office development in Ottawa, Ontario. During Q1 2014 Performance Court's anchor tenant, occupying approximately 23% of the building's GLA, took possession of its premises and commenced paying rent.
All amounts in thousands of Canadian dollars, except for per share amounts, unless otherwise noted.
|Three months ended March 31,|
|(in thousands of dollars)||2014||2013|
|Revenue from income producing properties||$118,203||$92,038|
|Management and advisory fees||16,197||16,227|
|Interest and other||4,307||1,958|
|Sales of product and land||1,285||1,224|
|Revenue from income producing properties||118,203||92,038|
|Property operating costs and realty tax expense||(70,081)||(52,161)|
|Land lease arbitration expense||(2,046)||(355)|
|Net operating income||46,076||39,522|
|IFRIC 21 and land rent arbitration expense||15,757||8,268|
|Normalized net operating income||$61,833||$47,790|
|Consolidated funds from operations (FFO)||$43,856||$50,338|
|Per share - basic and diluted||$3.49||$3.99|
|Per share - basic and diluted||$3.59||$3.12|
|Net income attributable to common shareholders||$26,630||$99,576|
|Per share - basic and diluted||$2.12||$7.88|
The Company's net income attributable to common shareholders for the three months ended March 31, 2014, was $26,630 ($2.12 per share), compared to $99,576 ($7.88 per share) in 2013. The decrease in net income of $72,946 for the three months ended March 31, 2014, was primarily due to a decrease in fair value gains of $35,268, an increase in interest expense of $6,142, an increase in management and corporate expenses of $1,108, a decrease in equity income from investments of $17,257, a decrease in other income of $19,094 and an increase in income taxes of $2,660. These items were partially offset by an increase in net operating income of $6,554 and an increase in interest and other income of $2,349.
NET OPERATING INCOME
|Three months ended March 31,||2014||2013|
|(In thousands of dollars)||NOI||Adjustments|| Normalized
|Net operating income - Canadian properties|
|Multi-unit residential - Canada||$12,550||$702||$13,252||$13,307||$165||$13,472|
|Retail - Canada||7,082||1,093||8,175||8,067||144||8,211|
|Office and industrial||13,656||251||13,907||9,625||46||9,671|
|Net operating income - U.S. properties in U.S. dollars|
|Multi-unit residential - U.S.||US 6,797||US 9,570||US 16,367||US 4,784||US 4,967||US 9,751|
|Retail - U.S.||US 3,171||US 2,853||US 6,024||US 2,983||US 2,881||US 5,864|
|US 9,968||US 12,423||US 22,391||US 7,767||US 7,848||US 15,615|
|Exchange amount to Canadian dollars||1.1037||1.1037||1.1037||1.0083||1.0083||1.0083|
|Net operating income - U.S. properties in Canadian dollars||11,002||13,711||24,713||7,832||7,913||15,745|
|Net operating income||$46,076||$15,757||$61,833||$39,522||$8,268||$47,790|
Normalized NOI adjusts for the impact of IFRIC 21 by recognizing realty taxes on a pro rated basis over the entire year or the period of ownership for the properties acquired during the year and excludes the land rent arbitration expense. Normalized NOI for the three months ended March 31, 2014, increased by $14.0 million to $61.8 million compared to $47.8 million in 2013, representing an increase of 29.4%. The increase was predominantly the result of the acquisitions of the Canadian multi-unit residential property, the five hotel properties and the 12 U.S. multi-unit residential properties purchased in 2013 and the industrial development project completed in 2013 which increased NOI by $9.9 million and the lease cancellation fee of $4.3 million received from an office tenant during the first quarter of 2014.
CONSOLIDATED FUNDS FROM OPERATIONS ("Consolidated FFO")
The Company's consolidated FFO includes funds available to non-controlling interests and was calculated as follows:
| Three months ended March 31,
(In thousands of dollars except for per share amounts)
|Net income attributable to common shareholders||$26,630||$99,576|
|Items not affecting cash:|
|Fair value gain on real estate properties||(11,940)||(34,310)|
|Fair value loss (gain) on Morguard Residential REIT Units, net||7,291||(5,261)|
|Fair value gain on Morguard REIT 2012 debentures||(475)||-|
|Fair value gain of conversion option of convertible debentures||77||-|
|Distribution to Morguard Residential REIT's external unitholders||3,577||2,833|
|Non-controlling interests' share of fair value gain on real estate properties||9||50|
|Deferred income taxes||5,285||855|
|Depreciation on hotel buildings||901||490|
|Depreciation on owner occupied property||26||26|
|Equity income from Morguard REIT||(16,127)||(32,524)|
|Morguard REIT's equity accounted FFO||11,296||10,690|
|Foreign exchange loss||3,595||-|
|Realty tax expense accounted for under IFRIC 21||13,711||7,913|
|Consolidated FFO per share amounts - basic and diluted||$3.49||$3.99|
|Consolidated FFO - Morguard's Share|
|Consolidated FFO (from above)||$43,856||$50,338|
|Less non-controlling interest: Morguard Residential REIT||(5,507)||(3,265)|
|Consolidated FFO - Morguard's share||$38,349||$47,073|
|Per share amounts - basic and diluted||$3.05||$3.73|
For the three months ended March 31, 2014, the Company recorded consolidated FFO of $43,856 ($3.49 per share), compared to $50,338 ($3.99 per share) in 2013. The decrease in consolidated FFO of $6,482, which reflects a 12.9% decrease, is mainly due to an increase in other expense of $15,499, net of the foreign exchange loss, an increase in interest expense of $6,322 and an increase in property management and corporate expenses of $1,108. These items were partially offset by an increase in net operating income excluding the impact of IFRIC 21 of $12,352, an increase in interest and other income of $2,349 and a decrease in current taxes of $1,770. The change in foreign exchange rates had a positive impact on FFO of $1,040.
Excluding the net of tax impact of the non-recurring items (the arbitration settlement received in 2013 of $14,850 and the increase in the land rent arbitration expense of $1,691 in 2014, Normalized FFO for the period ended March 31, 2014, would have been $45,100 or $3.59 per share versus $39,423 or $3.12 per share for the same period in 2013, which represents an increase in Normalized FFO of $5,677 or 14.4%.
Morguard's share of consolidated FFO totalled $38,349 or $3.05 per share, compared to $47,073 or $3.73 per share in 2013, which represents a decrease of $8,724 or 18.5%.
SECOND QUARTER DIVIDEND
The board of directors of Morguard Corporation announced today that the second quarterly, eligible dividend of 2014 in the amount of $0.15 per common share will be paid on June 30, 2014 to shareholders of record at the close of business on June 16, 2014.
Readers are cautioned that although the terms "Net Operating Income", "Normalized NOI", "Funds From Operations" and "Normalized FFO" 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 interim unaudited condensed financial statements for the three months ended March 31, 2014, 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, 1,056 hotel rooms and approximately 7.4 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
For further information:
K. (Rai) Sahi
Chief Executive Officer
Chief Financial Officer