Morguard Real Estate Investment Trust Announces 2010 Results

MISSISSAUGA, ON, Feb. 28 /CNW/ - Morguard Real Estate Investment Trust ("Morguard REIT") (TSX: MRT.UN) today announced its financial results for the year ended December 31, 2010.

Morguard REIT's 2010 Financial Statements, and Management's Discussion and Analysis along with its 2009 Annual Report are available on Morguard REIT's website at www.morguardreit.com and have been filed with SEDAR at www.sedar.com.

HIGHLIGHTS FOR 2010

• On June 1, 2010, the Trust acquired a 50% co-ownership interest in a 300,000-square-foot retail shopping centre located in Grande Prairie, Alberta for a purchase price of $40.8 million plus other acquisition costs of $1.5 million.
• On July 30, 2010, the Trust, together with Morguard Corporation, acquired a 50% co-ownership interest in a 890,000-square-foot Class A office building complex together with 56.0 acres of development land, located in Montreal, Quebec for a total purchase price of $82.5 million plus other acquisition costs of $2.2 million.
• Overall portfolio occupancy levels were stable at 95%.

FINANCIAL HIGHLIGHTS

• Net operating income for 2010 increased to $123.7 million from $114.1 million for the same period in 2009.
• Net income totaled $29.3 million or $0.52 per unit compared to $32.4 million or $0.56 per unit for the same period in 2009.  In 2010, net income from continuing operations increased approximately by 3.0% over levels reported in 2009. The increase was mainly the result of increases in net operating income resulting from acquisitions made in late 2009 and during 2010, a significant reduction in issue costs offset somewhat by higher interest and amortization expense associated with acquisitions made by the Trust. In 2009, net income was significantly impacted by the expensing of $4.2 million of issue costs relating to the issuance of the $103.5 million of 6.50% convertible unsecured subordinated debentures partially offset by $3.1 million in gains on sale of real estate properties. 
• Recurring distributable income ("RDI") increased to $63.8 million or $1.12 per unit (basic) and $1.10 per unit (diluted) compared to $61.1 million or $1.07 per unit (basic) and $1.06 (diluted) for the same period in 2009.
• Funds from operations ("FFO") increased to $73.1 million or $1.29 per unit (basic) and $1.24 per unit (diluted) compared to $66.5 million or $1.16 per unit (basic) and $1.14 per unit (diluted)  for the same period in 2009.  In 2009, FFO was significantly impacted by $4.2 million of issue costs ($0.07 per unit, basic and diluted) relating to the issuance of the $103.5 million of 6.50% convertible unsecured subordinated debentures.

Net Income

[In thousands of dollars, except per-unit amounts]		2010	2009
Income from real estate properties		$     221,079	$     204,996
Property operating income		$     123,659	$     114,054
Net income for the year from continuing operations		$      29,016	$       28,177
Income for the year from discontinued operations		323	4,177
Net income for the year		$      29,339	$      32,354
Net income per unit (basic and diluted)
	Continuing operations	$       0.51	$         0.49
	Discontinued operations	0.01	0.07
		$       0.52	$         0.56

Distributable Income

Distributable income is net income after adjusting for the amortization of buildings and intangible assets, accretion and issue costs of convertible debentures and providing for any reserves, provisions and allowances established by the Board of Trustees ("Trustees") of the Trust plus any amount the Trustees, in their discretion, determine to be appropriate.

Recurring distributable income is distributable income excluding gain or loss on sale of real estate properties, unusual or non-recurring items and provisions for diminution in value of real estate properties.  Distributed income, which is income distributed to unitholders, is expressed as a percentage of RDI to arrive at a payout ratio.

The following table outlines the Trust's distributable income, recurring distributable income and payout ratios for the year ended December 31, 2010 and 2009.

(In thousands of dollars, except per-unit amounts and percentages)		2010		2009
Net income for the year	$	29,339	$	32,354
Add/(deduct)
Amortization - buildings		27,310		25,141
Amortization - intangibles		7,249		3,848
Amortization - above/(below) market-rate leases, net		(1,116)		(904)
Amortization - stepped rents		(251)		(676)
Accretion of convertible debentures		1,250		260
Issue costs - convertible debentures		—		4,195
Distributable income		63,781		64,218
Loss/(Gain) on sale of real estate properties		8		(3,141)
Recurring distributable income	$	63,789	$	61,077
Distributed income - regular	$	51,164	$	51,778
Payout ratio:  Recurring distributable income1		80.2%		84.8%
Recurring distributable income - per unit (basic)	$	1.12	$	1.07
Recurring distributable income - per unit (diluted)	$	1.10	$	1.06
Weighted average number of units - (in thousands) (basic)		56,848		57,577
Weighted average number of units - (in thousands) (diluted)		64,256		60,094

Funds from Operations

The real estate industry has adopted a measure of FFO to supplement net income as an operating performance measurement.  The Trust's calculation of FFO is consistent with the definition provided by the Real Property Association of Canada ("REALPac").

FFO is defined as net income adjusted for amortization of buildings, leasehold improvements, intangible items, deferred leasing costs, accretion of convertible debentures and any gain or loss on sale of real estate properties as well as any and any provisions against capital.  FFO per unit is calculated by dividing FFO attributable to unitholders by the weighted average number of units outstanding for the period.

FFO was calculated as follows:

	2010			2009
In thousands of dollars, except per-unit amounts)	Continuing Operations	Discontinued Operations	Total	Continuing Operations	Discontinued Operations	Total
Net income for the year	$   29,016	$       323	$  29,339	$     28,177	$      4,177	$  32,354
Add/(deduct) items not affecting cash:
Loss/(Gain) on sale of real estate properties	—	8	8	—	(3,141)	(3,141)
Amortization - buildings	27,274	36	27,310	24,867	274	25,141
Amortization - intangibles	7,249	—	7,249	3,848	—	3,848
Amortization - leasehold improvements	5,515	—	5,515	5,708	17	5,725
Amortization - deferred leasing costs	2,436	—	2,436	2,332	14	2,346
Accretion of convertible debentures	1,250	—	1,250	260	—	260
Funds from operations	$  72,740	$       367	$  73,107	$     65,192	$        1,341	$  66,533
Funds from operations per unit (basic)	$      1.28	$        0.01	$     1.29	$        1.14	$          0.02	$     1.16
Funds from operations per unit (diluted)	$      1.23	$        0.01	$      1.24	$        1.12	$          0.02	$     1.14

Readers are cautioned that although the terms "Operating Income", "Funds from Operations", "Distributable Income" and "Recurring Distributable Income" are commonly used to measure, compare and explain the operating and financial performance of Canadian real estate investment trusts 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.

Morguard is a closed-end real estate investment trust, which owns a diversified portfolio of 51 retail, office, and mixed-use properties in Canada with a book value of $1.3 billion and approximately 8.3 million square feet of leasable space.  For more information, visit the Trust's website at www.morguardreit.com.

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1} Payout ratio is calculated using regular distributions as a percentage of recurring distributable income