Morguard Corporation Announces 2007 Results
Mar 26, 2008
TSX: MRC
TORONTO, March 26 /CNW/ -Financial Highlights
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Year ended December 31
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(In thousands of Canadian dollars, 2007 2006
except per share amounts)
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Net operating income $140,865 $174,090
Interest expense (74,531) (90,390)
Property management and administration (54,418) (46,873)
Equity income from Morguard REIT
- continuing operations 10,750 2,042
Fees and other revenue 62,569 46,311
Sale of products and land, net of cost 1,895 6,454
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Income before the under noted 87,130 91,634
Amortization (76,784) (60,411)
Other income 2,802 20,794
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Operating income $ 13,148 $ 52,017
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Net earnings $ 23,811 58,092
- per basic share 1.71 4.16
- per diluted share 1.69 3.44
Continuing funds from operations 92,523 102,192
- per basic share $ 6.65 $ 7.32
- per diluted share $ 6.57 $ 7.21
Continuing funds from operations -
Morguard's Share 87,358 73,746
- per basic share $ 6.27 $ 5.29
- per diluted share $ 6.20 $ 5.20
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-------------------------------------------------------------------------The Company reports its financial results in accordance with Canadian
GAAP. However, net operating income, operating income, funds from operations
and funds from operations-Morguard's share are not recognized performance
measures under Canadian GAAP. These measures are commonly used by entities in
the real estate industry as useful metrics for measuring performance. However,
they do not have any standardized meaning prescribed by Canadian GAAP and are
not necessarily comparable to similar measures presented by other real estate
entities. These measures should be considered as supplemental in nature and
not a substitute for related financial information prepared in accordance with
Canadian GAAP.During 2007, Morguard Corporation remained focused on the ownership,
management and development of commercial and multi-residential properties
through three core investments:
- Morguard Real Estate Investment Trust (Morguard REIT)
- Morguard Residential (MRES)
- Revenue Properties Company Limited (RPCL)Through the Company's wholly-owned subsidiary, Morguard Investments
Limited ("Morguard Investments") and Morguard Residential, a division of the
Company, Morguard Corporation provides real estate management services to
Canadian institutional investors. Services include acquisitions, development,
dispositions, leasing, performance measurement and asset and property
management.
REVIEW OF OPERATING RESULTS
The significant changes to the Company's consolidated statement of income
for the year ended December 31, 2007 when compared to 2006 were primarily
caused by the change in accounting method applied to the Company's investment
in Morguard REIT as of October 1, 2006, and the acquisition of Sizeler
Properties Investors, Inc. ("Sizeler") that occurred on November 10, 2006.
Revenues and expenses generated by the assets acquired and liabilities assumed
in the Sizeler transaction have been included in the Company's consolidated
results commencing November 10, 2006.
As a result of the dilution in the Company's ownership of Morguard REIT,
the Company began accounting for its investment using the equity method of
accounting with effect from October 1, 2006. Consequently, the statements of
earnings and cash flows of the Company consolidate the financial results of
Morguard REIT until September 30, 2006, and the earnings of Morguard REIT are
recorded in accordance with the equity method of accounting for the year ended
December 31, 2007.
Revenues and expenses generated by the assets and liabilities acquired in
the Sizeler transaction have been included in the Company's consolidated
results for the year ended December 31, 2007. A decrease in the Company's net
earnings has resulted from $41.0 million of amortization being recorded during
2007 as a result of the Sizeler acquisition, $15.9 million of additional
interest expense offset by $39.8 million of additional net operating income.
The table below illustrates the impact to the Company's consolidated
statements of earnings for the years ended December 31, 2007 and 2006, by
isolating the revenues, expenses, and equity income of Morguard REIT and
Sizeler. The column referred to as "Remaining Morguard" represents the
Company's revenues and expenses that were unaffected by the changes described
above.---------------------------------------------------------------
Years ended 2007
December 31 ---------------------------------
(In thousands Remaining
of dollars) Morguard Sizeler Total
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Income from
properties $191,044 $ 65,020 $256,064
Property operating (89,996) (25,203) (115,199)
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Net operating income 101,048 39,817 140,865
Fee and other revenue 62,569 - 62,569
Sale of products & land 7,292 - 7,292
Property management and
administration (50,761) (3,657) (54,418)
Cost of sales (5,398) - $ (5,398)
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114,750 36,160 150,910
Interest (58,612) (15,919) (74,531)
Equity income from
Morguard REIT 10,750 - 10,750
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66,888 20,241 87,129
Amortization (35,794) (40,989) (76,783)
Other income(expense) 2,730 (69) 2,661
Net dilution gain 141 - 141
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Earning (loss - before income
taxes, non-controlling
interest and discontinued
operations $ 33,965 $(20,817) $ 13,148
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Years ended 2006
December 31 --------------------------------------------
(In thousands Remaining Morguard
of dollars) Morguard Sizeler REIT Total
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Income from
properties $176,525 $ 11,546 $130,194 $318,265
Property operating (82,942) (4,510) (56,723) 144,175)
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Net operating income 93,583 7,036 73,471 174,090
Fee and other revenue 46,311 - - 46,311
Sale of products & land 21,173 - - 21,173
Property management and
administration (42,769) (1,164) (2,940) (46,873)
Cost of sales (14,719) - - (14,719)
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103,579 5,872 70,531 179,982
Interest (50,119) (3,967) (36,304) (90,390)
Equity income from
Morguard REIT - - 2,042 2,042
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53,460 1,905 36,269 91,634
Amortization (31,108) (7,924) (21,379) (60,411)
Other income(expense) 9,095 - (8) 9,087
Net dilution gain 11,707 - - 11,707
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Earning (loss - before income
taxes, non-controlling
interest and discontinued
operations $ 43,154 $ (6,019) $ 14,882 $ 52,017
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Net Earnings from Continuing Operations
Net earnings from continuing operations decreased in 2007 to $10.5 million
compared to $47.9 million in 2006. In addition to the items discussed above,
the decrease is primarily due to:
- In 2006, the Company recorded a dilution gain on the reduction of the
Company's ownership in Morguard REIT in the amount of $11.7 million,
- In 2006, the Company recorded a non-recurring recovery of income
taxes in the amount of $12.8 million,
- In 2007, the Company recorded non-recurring costs in the amount of
$5.9 million related to RPCL's refinancing program, and
- In 2007, non-controlling interest increased net earnings by
$9.6 million (2006: decreased net earnings by $8.4 million) resulting
in a year over year increase to net earnings of $18.0 million.FUNDS FROM OPERATIONS - MORGUARD's SHARE
Funds from continuing operations ("FFO") for the year ended December 31,
2007 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 Morguard REIT (2006 only)
and RPCL needs to be deducted and any inter-company fees eliminated on
consolidation added.-------------------------------------------------------------------------
FUNDS FROM CONTINUING OPERATIONS - Morguard's Share
(in thousands of dollars except for per share amounts)
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Years ended December 31 2007 2006
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Net earnings from continuing operations $ 10,461 $ 47,893
Add (deduct):
Non controlling interest (9,630) 8,368
Amortization 74,977 59,310
Future income taxes 651 (3,748)
Equity income from Morguard REIT
continuing operations (10,750) (2,042)
Morguard REIT's equity accounted FFO 25,800 4,662
Net gain on sale of assets and investment - (544)
Provision for diminution in value 1,155 -
Net gain on redemption and dilution impact
from change in ownership of Subsidiaries (141) (11,707)
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FFO - Consolidated $ 92,523 $102,192
LESS: Non-controlling interest - REIT - 21,499
Non-controlling interest - RPCL 5,165 6,947
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FFO - Morguard's Share $ 87,358 $ 73,746
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-------------------------------------------------------------------------Morguard's share of FFO for the year ended December 31, 2007 were
$87.4 million ($6.27 per common share) compared to $73.7 million ($5.29 per
common share) for the year ended December 31, 2006. The increase reflects
contributions from the Company's properties as well increased earnings
reported by Morguard Investments resulting primarily from the growth of its
portfolio of managed properties.
The Company's audited financial statements for the year ended December
31, 2007, along with the Management's Discussion and Analysis will be
available on the Company's website at www.morguard.com and have been filed
with SEDAR at www.sedar.com.
For further information:
For further information: Morguard Corporation, K. (Rai) Sahi, Chief Executive Officer, (905) 281-5888; Paul Miatello, Chief Financial Officer, (905) 281-5943