Morguard Corporation Announces 2012 Second Quarter Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, Aug. 9, 2012 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the three months ended June 30, 2012.

HIGHLIGHTS

• On April 18, 2012, the Company completed an initial public offering ("IPO") of trust units of Morguard  North American  Residential Real Estate Trust (the "Morguard Residential REIT");
• Total revenues in Q2 2012 increased by 5.0% to $100.6 million compared to $95.8 million in 2011;
• Total net operating income in Q2 2012, increased by 6.9% to $43.9 million compared to $41.1 million in Q2 2011;
• Net income attributable to common shareholders in Q2 2012 totalled $91.3 million compared to $49.7 million in 2011; and
• Funds from operations for the three months ended June 30, 2012, decreased by 14.1% to $23.8 million, or $1.84 per share, compared to $27.7 million, or $2.14 per share in 2011.  The Funds from operations decreased primarily due to an increase in current tax of $7.5 million.  This was due to the real estate transaction with the Morguard Residential REIT and an overall increase in taxable income in 2012 compared to 2011.

MORGUARD NORTH AMERICAN RESIDENTIAL REAL ESTATE INVESTMENT TRUST
On April 18, 2012, the Company completed an IPO of trust units of the Morguard Residential REIT.  The offering raised gross proceeds of $75 million.  A total of 7,500,000 trust units were sold at a price of $10.00 per trust unit.  On April 24, 2012, the underwriters exercised in full their over-allotment option to purchase 750,000 additional trust units at a price of $10.00 per trust unit, which increased the total gross proceeds of the offering to $82.5 million.  The net proceeds received by Morguard (net of underwriters' commission) was $77.6 million.   The Company retained an effective interest in Morguard Residential REIT of 67.6%.  Upon completion of the IPO, the Company sold to subsidiaries of Morguard Residential REIT, 14 multi-unit residential rental properties located in Canada and 3 multi-unit residential properties located in the United States (the "Initial Properties"), that had a total IFRS net book value of $680.5 million at March 31, 2012 and Morguard Residential REIT has assumed mortgages and obligations totalling $358.3 million that are secured by the Initial Properties.

All amounts in thousands of Canadian dollars, except per share amounts, unless otherwise noted.

FINANCIAL HIGHLIGHTS

	Three months ended June 30		Six months ended June 30
(In thousands of dollars, except for per share amounts)	2012	2011	2012	2011
Revenue from real estate properties	$77,003	$74,130	$153,305	$146,921
Management and advisory fees	18,089	17,029	34,588	33,504
Interest and other	4,280	3,189	8,263	6,267
Sales of product and land	1,210	1,424	2,534	3,090
Total revenues	100,582	95,772	198,690	189,782
Revenue from real estate properties	77,003	74,130	153,305	146,921
Property operating costs and realty tax expense	33,044	32,994	67,886	66,201
Net operating income	$43,959	$41,136	$85,419	$80,720
Funds from operations	$23,788	$27,695	$66,460	$60,748
Net income attributable to common shareholders	$91,274	$49,721	$142,936	$106,954
Income per share:
Basic and diluted  - net income	$7.08	$3.83	$11.06	$8.25

NET INCOME
Net income attributable to shareholders for the three months ended June 30, 2012, was $91.3 million ($7.08 per share) compared to $49.7 million ($3.83 per share) in 2011. The increase in net income of $41.6 million was primarily due to an increase in fair value gains on real estate properties of $45.7 million, an increase in net operating income of $2.8 million, an increase in revenue from management and advisory fees of $1.1 million, an increase in interest and other income of $1.1 million, an increase in equity income from Morguard REIT of $1.4 million, a decrease in income taxes of $1.9 million and a decrease in interest expense of $1.0 million. These items were partially offset by an increase in property management and corporate expense of $1.6 million and a fair value loss on the Residential REIT Units of $11.2 million, which includes the distributions of $1.0 million to the Residential REIT Unitholders.

NET OPERATING INCOME
	Three months ended June 30		Six months ended June 30
(In thousands of dollars)	2012	2011	2012	2011
Net operating income - Canadian properties
Multi-unit residential - Canada	$14,805	$13,260	$27,798	$25,610
Retail - Canada	8,631	7,976	16,688	15,094
Office and industrial	10,148	10,226	20,007	20,994
	33,584	31,462	64,493	61,698
Net operating income - U.S. properties in U.S. dollars
Multi-unit residential - U.S.	US$ 4,316	US$ 4,388	US$ 8,862	US$ 8,797
Retail - U.S.	US$ 5,952	US$5,606	US$ 11,945	US$10,682
	US$ 10,268	US$ 9,994	US$ 20,807	US$ 19,479
Exchange amount to Canadian dollars	1.0104	0.9680	1.0057	0.9765
Net operating income - U.S. properties in Canadian dollars	10,375	9,674	20,926	19,022
Net operating income	$43,959	$41,136	$85,419	$80,720

Net operating income ("NOI") for the three months ended June 30, 2012, increased by $2.8 million to $43.9 million compared to $41.1 million in 2011, representing an increase of 6.9%.  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 vacancy;
• Higher NOI in Canadian retail properties predominantly due to an increase in occupancy;
• Lower NOI in office and industrial primarily as a result of a decrease in occupancy at two office properties and higher legal cost relating to leases.
• Lower NOI in U.S. multi residential properties primarily as a result of a decrease in occupancy;
• Higher NOI in U.S. retail properties primarily as a result of increase in occupancy and higher rental rates at an unenclosed retail centre in Louisiana;
• The change in the foreign exchange rate increased reported NOI by $0.4 million.

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:

	Three months ended June 30		Six months ended June 30
(In thousands of dollars, except for per share amounts)	2012	2011	2012	2011
Net income attributable to common shareholders	$91,274	$49,721	142,936	106,954
Items not affecting cash:
Fair value gains on real estate properties	(67,101)	(21,379)	(71,735)	(57,243)
Fair value loss on Residential REIT Units	10,153	-	10,153	-
Non-Controlling interest's share of fair value gain on real  estate property	273	-	273	-
Future income taxes	(357)	9,035	5,805	22,133
Depreciation on owner occupied property	26	26	52	52
Equity income from Morguard REIT	(19,675)	(18,305)	(39,023)	(28,743)
Morguard REIT's equity accounted FFO	9,195	8,673	17,984	17,588
Loss on sale of property	-	(76)	15	7
Funds from operations	$23,788	$27,695	$66,460	$60,748
Funds from operations    Per share amounts - basic and diluted	$1.84	$2.14	$5.14	$4.69

For the three months ended June 30, 2012, the Company recorded FFO of $23.8 million ($1.84 per share) compared to $27.7 million ($2.14 per share) in 2011, representing a decrease of $3.9 million or 14.1%.  FFO decreased primarily due to an increase in current tax of $7.5 million, an increase in property management and corporate expenses of $1.6 million and distributions of $1.0 million to the Residential REIT Unitholders; partially offset by an increase in NOI of $2.8 million, an increase in interest and other income of $1.1 million, an increase in management and advisory fees of $1.1 million, an increase in Morguard REIT's equity accounted FFO of $0.5 million, a decrease in interest expense of $1.0 million. The change in foreign exchange rates had a positive impact on FFO of $0.1 million, or $0.011 per share.

THIRD QUARTER DIVIDEND

The board of directors of Morguard Corporation announced today that the third quarterly, eligible dividend of 2012 in the amount of $0.15 per common share will be paid on September 28, 2012 to shareholders of record at the close of business on September 14, 2012.

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 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 June 30, 2012, along with the Management's Discussion and Analysis will be available on the Company's website at www.morguard.com and will be 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 10,512 multi-unit residential suites and approximately 7.1 million square feet of commercial leasable space. Morguard Corporation also owns a 45.2% interest in Morguard Real Estate Investment Trust and a 67.6% effective interest in Morguard North American Residential 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.

 

SOURCE: Morguard Corporation