Morguard Corporation Announces 2014 Third Quarter Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, Nov. 12, 2014 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) announced its financial results for the three months ended September 30, 2014.

HIGHLIGHTS

• Total revenue from real estate properties increased by 4.8% to $116.5 million compared to $111.2 million in 2013.
• Normalized net operating income ("Normalized NOI"), which excludes the impact of IFRIC 21 and land rent arbitration expense, increased by 6.6% to $61.5 million compared to $57.7 million for the same period in 2013.
• Normalized funds from operations ("Normalized FFO"), which excludes non-recurring items, increased by 5.3% to $48.4 million for the quarter ended September 30, 2014 compared to $45.9 million for the same period in 2013.
• Occupancy rates remained relatively steady as compared to September 30, 2013. Combined retail, office and industrial occupancy were 92.2% at September 30, 2014, compared to 93.0% at September 30, 2013. Combined multi-unit residential occupancy was 96.6% at September 30, 2014, compared to 96.1% at September 30, 2013.
• Occupancy commenced at one building (the "North Tower") at The Heathview, a twin-tower, 30 storey, 587 suite residential rental development in Toronto, Ontario.
• Strong leasing activity at the Company's two developments: (1) Performance Court, Ottawa, Ontario is now 83% leased and (2) The Heathview's North Tower is now 46% leased.  
• Morguard entered into a binding agreement to purchase from Morguard REIT the remaining 50% interest it does not already own in a mixed-use office and hotel property located at 350 Sparks Street and 361 Queen Street, Ottawa, Ontario for a purchase price of $37,692. The acquisition is anticipated to close in the fourth quarter of 2014.

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

FINANCIAL HIGHLIGHTS

NET INCOME

The Company's net income attributable to common shareholders for the three months ended September 30, 2014, was $61,109 ($4.90 per share) compared to $68,168 ($5.38 per share) for the same period in 2013. The decrease in net income of $7,059 for the three months ended September 30, 2014, was primarily due to a decrease in fair value gains of $6,542, a decrease in equity income from investments of $5,409, an increase in interest expense of $1,600, an increase in property management and corporate expenses of $1,369, and a decrease in net profit from sale of product and land of $634. These items were partially offset by an increase in net operating income of $4,290, an increase in management and advisory fees of $2,362, an increase in interest and other income of $876 and a decrease in income taxes of $1,055.

NET OPERATING INCOME

 

 

NET OPERATING INCOME

 

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 land rent arbitration expense. Normalized NOI for the three months ended September 30, 2014, increased by $3.8 million to $61.5 million compared to $57.7 million in 2013, representing an increase of 6.6%.  The increase was predominantly the result of the acquisition of the Canadian multi-unit residential property and the industrial development project completed in 2013 which increased NOI by $0.5 million and higher occupancy levels at a retail centre in Toronto, Ontario ($0.6 million) and from the Company's hotel portfolio.  The change in the foreign exchange rate increased Normalized NOI in 2014 by $1,252.

 

CONSOLIDATED FUNDS FROM OPERATIONS ("Consolidated FFO")

The Company's consolidated FFO includes funds available to non-controlling interests and was calculated as follows:

 

For the three months ended September 30, 2014, the Company recorded consolidated FFO of $48,356 ($3.87 per share), compared to $52,247 ($4.13 per share) in 2013. The decrease in consolidated FFO of $3,891, which reflects a 7.5% decrease, is mainly due to an increase in interest expense of $1,600, an increase in property management and corporate expenses of $1,369, a decrease in net profit from sale of product and land of $634, a decrease in other income of $1,199 (net of foreign exchange gain) and an increase in current taxes of $6,825. These items were partially offset by an increase in net operating income excluding the impact of IFRIC 21 of $3,809, an increase in management and advisory fees of $2,362 an increase in Morguard REIT's equity accounted FFO of $606 and an increase in interest and other income of $876. The change in foreign exchange rates had a positive impact on FFO of $670 ($0.05 per share).

Normalized funds from operations ("Normalized FFO"), for the three months ended September 30, 2013 excludes the realization of the current tax recovery of $6,317 recorded in the third quarter of 2013 relating to the land rent arbitration expense. Normalized FFO for the three months ended September 30, 2014 was $48,356 or $3.87 per share versus $45,930 or $3.63 per share for the same period in 2013, which represents an increase in Normalized FFO of $2,426 or 5.3%.  

Morguard's share of consolidated FFO for the Nine months ended September 30, 2014, totalled $109,854 or $8.76 per share, compared to $113,991 or $8.96 per share  in 2013, which represents a decrease of $4,137 or 3.6%.

FOURTH 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 December 31, 2014 to shareholders of record at the close of business on December 15, 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 September 30, 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 16,423 multi-unit residential suites, 1,056 hotel rooms and approximately 7.4 million square feet of commercial leasable space. Morguard Corporation also owns a 44.9% 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