Morguard Corporation Announces 2010 First Quarter Results

TSX: MRC

MISSISSAUGA, ON, May 4 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the three months ended March 31, 2010.

HIGHLIGHTS

-   Total revenues for the three months ended March 31, 2010, decreased
        to $82.6 million from $88.0 million for the same period in 2009;

    -   Net operating income ("NOI") in Q1 2010 decreased to $35.3 million
        compared to $38.2 million in 2009, primarily due to a weaker
        U.S. dollar;

    -   Net income for the three months ended March 31, 2010, totalled
        $4.5 million compared to net income of $4.8 million for the three
        months ended March 31, 2009; and

    -   Funds from continuing operations for the three months ended
        March 31, 2010, decreased to $23.8 million or $1.72 per share
        compared to $27.4 million or $1.95 per share for the same period
        in 2009.

FINANCIAL HIGHLIGHTS

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    Three months ended March 31,
    (in thousands of dollars)                               2010        2009
    -------------------------------------------------------------------------
    Income from real estate properties                   $67,254     $72,060
    Management and advisory fees                          14,147      14,725
    Sales of product and land                              1,210       1,246
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    Total revenues                                       $82,611     $88,031
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    Income from real estate properties                   $67,254     $72,060
    Property operating expense                           (31,973)    (33,902)
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    Net operating income                                 $35,281     $38,158
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    Funds from continuing operations                     $23,827     $27,389
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    Net income                                            $4,464      $4,829
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    Income per share:
      Basic and diluted - continuing operations            $0.32       $0.34
      Basic and diluted - net income                       $0.32       $0.34

NET INCOME

Net income for the three months ended March 31, 2010, was $4.5 million ($0.32 per share) compared to $4.8 million ($0.34 per share) in 2009.

NET OPERATING INCOME

Three months ended March 31
    (in thousands of dollars)                               2010        2009
    -------------------------------------------------------------------------
    Net operating income - Canadian properties
      Multi-unit residential                             $11,222     $10,607
      Retail                                               6,572       6,954
      Office and industrial                                8,778       9,040
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                                                          26,572      26,601
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    Net operating income - U.S. properties in
     U.S. dollars
      Multi-unit residential                            US 3,779    US 4,102
      Retail                                            US 4,594    US 5,184
    -------------------------------------------------------------------------
                                                        US 8,373    US 9,286
    Exchange amount to Canadian dollars                      336       2,271
    -------------------------------------------------------------------------
    Net operating income - U.S. properties in
     Canadian dollars                                      8,709      11,557
    -------------------------------------------------------------------------
    Net operating income                                 $35,281     $38,158
    -------------------------------------------------------------------------

Net operating income for the three months ended March 31, 2010, decreased by $2.9 million to $35.2 million compared to $38.2 million in 2009. The decrease was mainly due to the change in the U.S. dollar foreign exchange rate, which decreased reported NOI by approximately $1.9 million. Net operating income also decreased as a result of higher operating costs and rent adjustments in the U.S. multi-unit residential and retail portfolio and higher vacancies in some of the Canadian and U.S. retail properties.

FUNDS FROM OPERATIONS

The real estate industry has adopted a measure of funds from operations ("FFO") to supplement net income as an operating performance measurement. The Company'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, deferred leasing costs, intangible items and any gain or loss on sale of real estate properties and any provisions against capital. FFO per share is calculated by dividing FFO attributable to shareholders by the weighted average number of shares outstanding for the period.

Funds from Operations

Funds from operations ("FFO") is calculated as follows:

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    (in thousands of dollars except
     for per share amounts)                                 2010        2009
    -------------------------------------------------------------------------
    Net income for the year from continuing operations    $4,402      $4,747
    Items not affecting cash:
      Amortization                                        15,767      17,271
      Future income taxes                                   (890)        529
      Non-controlling interest                               (33)          -
      Equity income from Morguard REIT - continuing
       operations                                         (3,008)     (3,164)
      Morguard REIT's equity accounted FFO - continuing
       operations                                          7,589       7,556
      Provision for impairment of real estate properties       -         450
    -------------------------------------------------------------------------
    Funds from continuing operations                     $23,827     $27,389
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    Morguard REIT's equity accounted FFO from
     discontinued operations                                 100         150
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    Funds from operations                                $23,927     $27,539
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    Funds from continuing operations:
      Per share amounts - basic and diluted                $1.72       $1.95
    -------------------------------------------------------------------------

For the three months ended March 31, 2010, the Company recorded FFO from continuing operations of $23.8 million ($1.72 per diluted share) compared to $27.4 million ($1.95 per diluted share) in 2009. The decrease of $3.6 million, or 13.0%, in FFO from continuing operations was primarily the result of lower net operating income from real estate properties in the amount of $2.9 million, lower management and advisory fees in the amount of $0.6 million, an increase in non-cash compensation expense of $1.1 million related to Company's stock appreciation rights plan and an increase in the current income tax provision of $1.5 million, offset by a decrease in interest expense of $1.1 million and an increase in dividend and other income of $1.0 million. The net effect of the change in foreign exchange rates decreased FFO by $743 ($0.05 per share).

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 March 31, 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 10,294 multi-unit residential suites approximately 6.4 million square feet of commercial leasable space. For more information, visit the Company's website at www.morguard.com.