Morguard Corporation Announces 2010 Third Quarter Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, Nov. 2 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the three months ended September 30, 2010.

HIGHLIGHTS

• Funds from operations in Q3 2010 increased to $29.5 million, or $2.22 per share, compared to $28.1 million, or $2.00 per share in 2009;
• Net income in Q3 2010 totalled $10.1 million compared to $5.8 million in 2009;
• Total revenues for the three months ended September 30, 2010, were $86.7 million compared to $87.1 million for the same period in 2009;
• Net operating income in Q3 2010 was $37.4 million compared to $38.0 million in Q3 2009;
• On July 30, 2010, the Company and Morguard REIT, acquired an office property and excess land located in St. Laurent, Quebec for a purchase price of $165 million (100%).  The acquisition was funded by cash and a ten-year mortgage payable of $88 million (100%) at an interest rate of 5.48%.  The Company's ownership in the acquisition is a 50% interest;
• The Company repurchased and cancelled 331,250 common shares during the three months ended September 30, 2010 at a total cost of $14,058.

FINANCIAL HIGHLIGHTS

	Three months ended September 30			Nine months ended September 30
(in thousands of dollars)	2010	2009		2010	2009
Income from real estate properties	$70,145	$69,628		$206,853	$211,806
Management and advisory fee revenue	15,111	16,185		45,807	45,540
Sales of product and land	1,419	1,328		3,728	3,867
Total revenues	$86,675	$87,141		$256,388	$261,213
Income from real estate properties	$70,145	$69,628		$206,853	$211,806
Property operating expense	(32,783)	(31,637)		(95,326)	(97,981)
Net operating income	$37,362	$37,991		$111,527	$113,825
Funds from operations	$29,476	$28,125		$82,028	$84,216
Net income	$10,053	$5,828		$31,865	$17,380
Income per share
Basic - continuing operations	$0.76	$0.41		$2.32	$1.22
Diluted - continuing operations	$0.76	$0.41		$2.32	$1.22
Basic - net income	$0.76	$0.42		$2.33	$1.24
Diluted - net income	$0.76	$0.42		$2.33	$1.24

NET INCOME

Net income for the three months ended September 30, 2010, was $10.1 million ($0.76 per share) compared to $5.8 million ($0.42 per share) in 2009. The increase in net income of $4.2 million was primarily due to an increase in the equity accounted income from Morguard REIT of $1.3 million, an increase in the dividend and other income of $1.7 million and a decrease in income tax expense of $3.4 million partially offset by a decrease in management and advisory fees of $1.1 million and lower net operating income ("NOI") of $0.6 million.

NET OPERATING INCOME

	Three months ended September 30		Nine months ended September 30
(in thousands of dollars)	2010	2009	2010	2009
Net operating income - Canadian properties
Multi-unit residential	$12,451	$13,443	$37,040	$36,116
Retail	5,789	6,262	20,214	20,106
Office and industrial	9,797	8,905	27,331	26,295
	28,037	28,610	84,585	82,517
Net operating income - U.S. properties in U.S. dollars
Multi-unit residential	US 4,085	US 3,760	US  11,636	US 11,709
Retail	US 4,881	US 4,784	US  14,371	US 15,055
	US 8,966	US 8,544	US 26,007	US 26,764
Exchange amount to Canadian dollars	359	837	935	4,544
Net operating income - U.S. properties in Canadian dollars	9,325	9,381	26,942	31,308
Net operating income	$37,362	$37,991	$111,527	$113,825

Net operating income for the three months ended September 30, 2010, decreased to $37.4 million compared to $38.0 million in 2009, representing a decrease of 1.7%.   The decrease was primarily the result of the following:

• a payment received and recorded in 2009 in the amount of $1,029 related to the settlement of a contract to purchase natural gas for the Company's Canadian multi-unit residential properties;
• lower Retail NOI due to the sale of a 50% interest in Prairie Mall, Grande Prairie, Alberta, on May 31, 2010, in the amount of $639;
• a 6% decrease in the U.S. dollar foreign exchange rate, which decreased NOI by $478;

Offset by:

• higher NOI as a result of the acquisition of Place Innovation which occurred on July 30, 2010, in the amount of $1,111. 

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:

			Three months ended September 30			Nine months ended September 30
(in thousands of dollars)			2010	2009		2010	2009
Net earnings from continuing operations			$10,053	$5,754		$31,754	$17,116
Items not affecting cash:
Amortization			15,351	16,463		46,084	50,154
Future income taxes			(978)	2,011		(347)	3,791
Non-controlling interest			(43)	(25)		(118)	(25)
Equity income from Morguard REIT - continuing operations			(3,011)	(1,612)		(8,758)	(8,748)
Morguard REIT's equity accounted FFO - continuing operations operations			8,104	5,460		23,273	21,286
Gain on sale of property			-	-		(9,971)	(72)
Other			-	74		111	714
Funds from operations			$29,476	$28,125		$82,028	$84,216
Per share amount - basic			$2.22	$2.00		$6.01	$5.99
Per share amounts - diluted diluted			$2.22	$2.00		$6.01	$5.99

For the three months ended September 30, 2010, the Company recorded FFO of $29.5 million ($2.22 per diluted share) compared to $28.1 million ($2.00 per diluted share) in 2009.  The net effect of the change in foreign exchange rates decreased FFO by $131 ($0.01 per share).

FOURTH QUARTER DIVIDEND

The board of directors of Morguard Corporation announced today that the fourth quarterly, eligible dividend of 2010 in the amount of $0.15 per common share will be paid on December 31, 2010 to shareholders of record at the close of business on December 15, 2010.

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 unaudited financial statements for the three months ended June 30, 2010, 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 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.