Morguard Corporation Announces 2011 Third Quarter Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, Nov. 8, 2011 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the three months ended September 30, 2011.

These results are, and all future results will be, reported under International Financial Reporting Standards (IFRS) and historical results have been restated to IFRS for comparison purposes.  Reconciliations between IFRS and Canadian Generally Accepted Accounting Principles have been included in the Company's unaudited interim consolidated financial statements for the period ended September 30, 2011.

HIGHLIGHTS

• Funds from operations for the three months ended September 30, 2011, increased by 17.5% to $34.4 million, or $2.66 per share, compared to $29.3 million, or $2.21 per share in 2010;
• Total revenues in Q3 2011 increased by 6.2% to $96.6 million compared to $90.9 million in 2010;
• Total net operating income in Q3 2011 increased by 4.1% to $40.0 million compared to $38.4 million in Q3 2010;
• Net income attributable to common shareholders in Q3 2011 totalled $44.6 million compared to $71.5 million in 2010; the decrease is predominantly due to lower fair value gains recorded on real estate properties in the amount of $28.4 million (pre-tax).

FINANCIAL HIGHLIGHTS

			Three months ended September 30				Nine months ended September 30
(in thousands of dollars)			2011		2010		2011		2010
Revenue from real estate properties			$73,698		$71,970		$220,327		$211,957
Management and advisory fees			17,483		15,161		51,469		46,745
Interest and other			4,026		2,377		9,888		6,565
Sales of product and land			1,378		1,419		4,468		3,728
Total revenues			$96,585		$90,927		$286,152		$268,995
Revenue from real estate properties			$73,698		$71,970		$220,327		$211,957
Property operating expense			(33,714)		(33,572)		(99,700)		(97,591)
Net operating income			$39,984		$38,398		$120,627		$114,366
Funds from operations			$34,432		$29,313		$95,180		$81,453
Net income attributable to common shareholders			$44,634		$71,532		$151,588		$134,093
Funds from operations, per share
	Basic and diluted		$2.66		$2.21		$7.34		$5.96

NET INCOME

Net income attributable to the shareholders for the three months ended September 30, 2011, was $44.6 million ($3.44 per share) compared to $71.5 million ($5.39 per share) in 2010. The decrease in net income of $26.9 million for the three months ended September 30, 2011, was primarily due to a decrease in fair value gains on real estate properties of $28.4 million and a decrease in the equity income from Morguard REIT of $7.4 million; these items were partially offset by an increase in net operating income of $1.6 million, an increase in management and advisory fees of $2.3 million, an increase in interest and other income of $1.6 million, a decrease in property management and corporate expenses of $0.7 million and a decrease in income taxes of $1.4 million.

NET OPERATING INCOME

			Three months ended September 30				Nine months ended September 30
(in thousands of dollars)			2011		2010		2011		2010
Net operating income - Canadian properties
	Multi-unit residential - Canada		$13,232		$12,382		$38,635		$36,812
	Retail - Canada		7,548		7,007		22,647		24,021
	Office and industrial		10,065		9,835		31,212		27,342
			30,845		29,224		92,494		88,175
Net operating income - U.S. properties in U.S. dollars
	Multi-unit residential - U.S.		US 3,987		US 4,080		US 12,757		US 11,641
	Retail - U.S.		US 5,331		US 4,745		US 16,006		US13,642
			US 9,318		US 8,825		US 28,763		US 25,283
Exchange amount to Canadian dollars			(179)		349		(630)		908
Net operating income - U.S. properties in Canadian dollars			9,139		9,174		28,133		26,191
Net operating income			$39,984		$38,398		$120,627		$114,366

Net operating income ("NOI") for the three months ended September 30, 2011, increased by $1.6 million to $39.9 million compared to $38.4 million in 2010, representing an increase of 4.1%.  The increase was predominantly the result of the following:

• Higher NOI in Canadian multi-unit residential properties primarily as a result of higher rental rates and lower utility expenses;
• Higher NOI in Canadian retail properties primarily as a result of an increase in revenue at the Bramalea City Centre due to completion of the centre's redevelopment project;
• Higher NOI in office and industrial primarily as a result of the acquisition of 50% interest in Place Innovation, St. Laurent, Quebec on July 30, 2010, which increased NOI by $0.7 million; partially offset by a decrease in occupancy at two office properties and one industrial property due to tenants not renewing their leases; and
• Higher NOI in U.S. retail properties primarily as a result of the acquisition of Boynton Town Center, on February 28, 2011, which increased NOI by US$1,186. The change in the foreign exchange rate decreased reported NOI by $0.3 million.

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:

			Three months ended September 30				Nine months ended September 30
(In thousands of dollars, except for per share amounts)			2011		2010		2011		2010
Net income attributable to common shareholders			$44,634		$71,532		$151,588		$134,093
Items not affecting cash:
	Fair value gains on real estate properties		(7,763)		(36,155)		(65,006)		(48,797)
	Non-controlling interest's share of fair value loss on real estate property		(470)		-		(470)		-
	Future income taxes		9,414		13,323		31,547		25,605
	Depreciation on owner occupied property		26		26		78		78
	Equity income from Morguard REIT		(20,202)		(27,561)		(48,945)		(53,041)
	Morguard REIT's equity accounted FFO		8,793		8,148		26,381		23,304
	Loss on sale of property		-		-		7		211
Funds from operations			$34,432		$29,313		$95,180		$81,453
Funds from operations    Per share amounts - basic and diluted			$2.66		$2.21		$7.34		$5.96

For the three months ended September 30, 2011, the Company recorded FFO of $34.4 million ($2.66 per share) compared to $29.3 million ($2.21 per share) in 2010, representing an increase of $5.1 million or 17.5%.  FFO increased primarily due to an increase in NOI of $1.6 million, an increase in management and advisory fee revenue of $2.3 million, an increase in interest and other income of $1.6 million, an increase in Morguard REIT's equity accounted FFO of $0.6 million and a decrease in property management and corporate expense of $0.7 million; partially offset by an increase in current income taxes of $2.5 million.

FOURTH QUARTER DIVIDEND

The board of directors of Morguard Corporation announced today that the fourth quarterly, eligible dividend of 2011 in the amount of $0.15 per common share will be paid on December 30, 2011 to shareholders of record at the close of business on December 15, 2011.

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 interim unaudited financial statements for the three months ended September 30, 2011, along with Management's Discussion and Analysis are available on the Company's website at www.morguard.com and have been filed with SEDAR at www.sedar.com .

Morguard Corporation is a real estate company, which owns a diversified portfolio of 100 retail, multi-unit residential, office and industrial properties comprising 10,317 multi-unit residential suites and approximately 7.1 million square feet of commercial leasable space. Morguard Corporation also owns a 45% interest in Morguard Real Estate Investment Trust. 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.