Morguard Corporation Announces Third Quarter Results and Increase in Regular Dividend
Nov 7, 2008
MISSISSAUGA, ON, Nov. 7 /CNW/ - Morguard Corporation (TSX: MRC) announced
financial results for the three months ended September 30, 2008.HIGHLIGHTS
- Net operating income for the quarter ended September 30, 2008, was
$36.6 million (2007 - $35.6 million).
- Morguard's share of continuing funds from operations was
$25.9 million or $1.84 per common share (2007 - $22.2 million,
$1.57 per common share).
- Net earnings for the three months ended September 30, 2008, were
$9.7 million as compared to net earnings of $4.7 million for the
three months ended September 30, 2007.
- Acquired a 302 unit apartment property in Lake Worth, Florida
- Morguard has taken up and paid for additional 1,065,335 common shares
of Revenue Properties Company Limited ("RPCL") that were validly
tendered under the offer originally announced by the Company on
April 2, 2008.
- Morguard and its affiliates currently own 9,123,157 common shares of
RPCL representing approximately 88.4%.QUARTERLY DIVIDEND
The board of directors of Morguard Corporation announced today a
quarterly dividend in the amount of $0.15 per common share to be paid on
December 31, 2008 to shareholders of record at the close of business on
December 15, 2008. This represents an increase of approximately 7% on an
annualized basis and is the first dividend increase by Morguard since 2002.
Further financial highlights are detailed in the table below:-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
-------------------------------------------------------------------------
(In thousands of
Canadian dollars,
except per share amounts) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net operating income $36,622 $35,585 $108,084 $103,381
Interest expense (17,876) (17,799) (53,617) (56,650)
Property management and
administration (14,299) (12,723) (41,400) (38,600)
Equity income from
Morguard REIT -
continuing operations 4,062 2,187 26,177 7,327
Fees and other revenue 17,330 13,931 47,186 41,111
Sale of products and land,
net of cost 500 441 1,252 1,365
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Income before the under
noted 26,339 21,622 87,682 57,934
Amortization (15,275) (19,274) (46,294) (58,866)
Reversal of pension
valuation allowance - - 19,441 -
Other income (expense) 1,655 1,756 5,359 (1,687)
-------------------------------------------------------------------------
Operating income (loss) 12,719 4,104 66,188 (2,619)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings 9,741 4,654 47,314 7,941
- per basic share 0.70 0.33 3.39 0.57
- per diluted share 0.69 0.33 3.36 0.56
Continuing funds from
operations 26,782 24,068 78,147 56,519
- per basic share $1.92 $1.73 $5.60 $4.06
- per diluted share $1.90 $1.71 $5.56 $4.01
Continuing funds from
operations - Morguard's
Share 25,909 22,200 75,080 53,445
- per basic share $1.85 $1.59 $5.37 $3.84
- per diluted share $1.84 $1.57 $5.33 $3.79
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-------------------------------------------------------------------------OFFER FOR RPCL COMMON SHARES
On April 2, 2008, the Company submitted an offer for an unsolicited
take-over bid for the issued and outstanding common shares of RPCL that it did
not already own at an offer price of $12.00 cash per share or the option of
receiving 0.33 common shares of the Company for each 1 common share of RPCL.
Morguard owned 72.6% of the outstanding common shares of RPCL. At the expiry
of the Morguard offer on July 16, 2008, Morguard announced that 739,821 common
shares of RPCL had been validly tendered under the terms of the offer and that
Morguard had taken up and accepted for payment the same number of common
shares, Morguard extended the expiry time of its bid three times with final
extension ending on August 27, 2008, after which Morguard announced that an
additional 325,514 common shares of RPCL had been validly tendered under the
terms of the offer and that Morguard had taken up and accepted for payment the
same number of common shares.
Morguard and its affiliates currently own 9,123,157 common shares of RPCL
representing approximately 88.4%. Pursuant to Morguard's request, a meeting of
RPCL shareholders will be held on November 19, 2008, with the intent of
seeking approval of a going-private transaction. The management of RPCL has
completed and mailed an information circular to all holders of common shares
that are eligible to vote at the shareholder meeting.
REVIEW OF FINANCIAL RESULTS
Net earnings for the three months ended September 30, 2008, were $9.7
million as compared to net earnings of $4.7 million for the same period in
2007. The increase of $5.1 million in net earnings was primarily due to
increased earnings in MIL of approximately $2.5 million as a result of higher
fee revenue, an increase in equity income from Morguard REIT in the amount of
$3.5 million and lower amortization expense of $4.0 million, offset by higher
taxes of $3.5 million and higher property management and administration
expenses $1.5 million.NET OPERATING INCOME
Three Nine
months ended months ended
September 30 September 30
--------------------------------------------------
(in thousands of
dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Property revenues $67,837 $64,130 $198,696 $191,554
Property operating expenses 31,215 28,545 90,612 88,173
-------------------------------------------------------------------------
Net operating income $36,622 $35,585 $108,084 $103,381
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-------------------------------------------------------------------------Net operating income is used by industry analysts, investors and
management to measure operating performance at the Company's properties. Net
operating income represents total property revenues less property operating
expenses and maintenance expenses. Accordingly, net operating income excludes
certain expenses included in the determination of net income such as property
management and other indirect operating expenses, interest expense and
amortization. Net operating income is not a recognized measure under Canadian
generally accepted accounting principles and accordingly the term does not
necessarily have a standardized meaning and may not be comparable to similarly
titled measures presented by other publicly traded entities.
Net operating income increased $1.0 million, or 2.8%, to $36.6 million
during the quarter ended September 30, 2008, as compared to $35.6 million in
2007. The increase in net operating income in 2008 results primarily from the
acquisition of a 50% interest in 350 Sparks Street, Ottawa (on December 28,
2007), the acquisition of the 20% interest in 131 Queen Street, Ottawa (on
October 1, 2007) and the acquisition of a 302 unit apartment community in Lake
Worth, Florida, which increased the NOI by $1.0 million. Net operating income
from RPCL's Canadian assets increased by $0.4 million mainly due to strong
leasing of one of its mixed-use properties located in Toronto. However, this
was partially offset by RPCL's U.S. assets as net operating income decreased
$1.1 million primarily due to lower non-cash revenue (amortization of
below-market leases) being recorded and $0.4 million of rental losses due to
Hurricane Gustav which impacted some of the Company's U.S. properties.
Morguard Residential, a division of the Company, improved its net operating
income by $0.4 million through higher occupancy and rents. Other Morguard
assets contributed approximately $0.3 million to the overall increase in NOI.
FUNDS FROM OPERATIONS - MORGUARD's SHARE
Funds from continuing operations ("FFO") for the three months ended
September 30, 2008, are detailed in the table below. The consolidated FFO
includes funds available to non-controlling interests. To determine Morguard's
share of consolidated FFO, the non-controlling interest of RPCL needs to be
deducted and any inter-company fees, eliminated on consolidation, added.-------------------------------------------------------------------------
Three Nine
months ended months ended
September 30 September 30
--------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Net earnings from
continuing operations $7,399 $3,808 $42,676 $(1,890)
Add (deduct) non-cash
items:
Non-controlling interest (430) (1,958) (690) (8,922)
Amortization 14,835 18,817 44,808 57,567
Future income taxes 1,254 (1,104) 14,176 (1,839)
Equity income from
Morguard REIT -
continuing operations (4,062) (2,187) (26,177) (7,327)
Morguard REIT's equity
accounted FFO 7,786 6,717 22,795 19,038
Gain on pension valuation
allowance - - (19,441) -
Dilution impact from
change in ownership
of subsidiaries - (25) - (108)
-------------------------------------------------------------------------
FFO - Consolidated $26,782 $24,068 $78,147 $56,519
Less: non-controlling
interest - RPCL 873 1,868 3,067 3,074
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FFO - Morguard's Share $25,909 $22,200 $75,080 $53,445
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-------------------------------------------------------------------------The Company uses Funds from Continuing Operations ("FFO") and Funds from
Operations - Morguard's Share in addition to net income to report operating
results. FFO is an industry standard for evaluating operating performance
defined as net income plus amortization and future income taxes, excludes
gains or losses from the sale of depreciable property and is not adjusted for
gains realized on the disposition of portfolio investments. FFO is not
indicative of funds available to meet the Company's cash requirements. The
Company computes FFO in accordance with the recently amended definitions of
the Real Property Association of Canada, formerly known as the Canadian
Institute of Public and Private Real Estate Companies. However, FFO is not a
recognized measure under Canadian generally accepted accounting principles and
accordingly the term does not necessarily have a standardized meaning and may
not be comparable to similarly titled measures presented by other publicly
traded entities.
FFO - Morguard's Share for the three months ended September 30, 2008, is
$25.9 million ($1.84 per common share) compared to $22.2 million ($1.57 per
common share) for the same period in 2007. The increase of $3.7 million or
16.7% is primarily a result of higher net earnings, increase in equity
accounted FFO from Morguard REIT of $1.1 million and, due to increase in
ownership from 72.6% to 84.4% in RPCL, a decrease in non controlling interest.THIRD QUARTER FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
ANALYSISThe Company's unaudited financial statements for the three months ended
September 30, 2008, along with the 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.
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.
For further information:
For further information: Morguard Corporation, K. (Rai) Sahi, Chief Executive Officer, (905) 281-3800; Paul Miatello, Chief Financial Officer, (905) 281-3800