Morguard Corporation Announces 2012 Third Quarter Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, Nov. 7, 2012 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the three months ended September 30, 2012.

HIGHLIGHTS

• Total revenues in Q3 2012 increased by 11% to $107.0 million compared to $96.4 million in 2011;
• Total net operating income in Q3 2012, increased by 8.1% to $43.5 million compared to $40.2 million in Q3 2011;
• Net income attributable to common shareholders in Q3 2012 totalled $119.4 million compared to $44.6 million in 2011; and
• Funds from operations for the three months ended September 30, 2012, was $37.5 million, or $2.93 per share, compared to $34.9 million, or $2.69 per share in 2011.
• On September 12, 2012, the Morguard North American Residential Real Estate Investment Trust completed the offering of $150.7 million for 12,720,000 trust units sold at a price of $11.85 per trust unit.

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

FINANCIAL HIGHLIGHTS

		Three months ended September 30		Nine months ended September 30
(In thousands of dollars, except for per share amounts)		2012	2011	2012	2011
Revenue from real estate properties		$78,867	$73,744	$232,172	$220,665
Management and advisory fees		21,491	17,382	56,079	50,886
Interest and other		5,290	3,919	13,526	10,186
Sales of product and land		1,337	1,378	3,871	4,468
Total revenues		106,985	96,423	305,648	286,205
Revenue from real estate properties		78,867	73,744	232,172	220,665
Property operating costs and realty tax expense		35,406	33,552	103,292	99,753
Net operating income		$43,461	$40,192	$128,880	$120,912
Funds from operations		$37,545	$34,902	$104,004	$95,650
Net income attributable to common shareholders		$119,449	$44,634	$262,385	$151,588
Income per share:
	Basic and diluted  - net income	$9.32	$3.44	$20.36	$11.69

NET INCOME

The Company's net income attributable to common shareholders for the three months ended September 30, 2012, was $119,449 ($9.32 per share) compared to $44,634 ($3.44 per share) for the same period in 2011. The increase in net income of $74,815 for the quarter ended September 30, 2012, was primarily due to an increase in fair value gains on real estate properties of $69,476, an increase in net operating income of $3,269, an increase in revenue from management and advisory fees of $4,109 an increase in interest and other income of $1,371, a fair value gain due to a decrease in the market price since June 2012 on the Residential REIT Units of $1,623 net of  the distributions of $1,663 to the Residential REIT Unitholders, an increase in the other income of $2,757 and a decrease in income taxes of $3,403. These items were partially offset by an increase in property management and corporate expense of $2,947 and a decrease in the equity income of $7,647 from MREIT.

NET OPERATING INCOME

	Three months ended September 30		Nine months ended September 30
(In thousands of dollars)	2012	2011	2012	2011
Net operating income - Canadian properties
Multi-unit residential - Canada	$13,288	$13,310	$41,079	$38,916
Retail - Canada	8,069	7,554	24,757	22,648
Office and industrial	10,924	10,046	30,931	31,040
	32,281	30,910	96,767	92,604
Net operating income - U.S. properties in U.S. dollars
Multi-unit residential - U.S.	US$ 5,193	US$ 4,132	US$ 14,056	US$ 12,929
Retail - U.S.	US$ 6,038	US$ 5,331	US$ 17,984	US$ 16,013
	US$ 11,231	US$ 9,463	US$ 32,040	US$ 28,942
Exchange amount to Canadian dollars	0.9954	0.9808	1.0023	0.9781
Net operating income - U.S. properties in Canadian dollars	11,180	9,282	32,113	28,308
Net operating income	$43,461	$40,192	$128,880	$120,912

Net operating income ("NOI") for the three months ended September 30, 2012, increased by $3.3 million to $43.5 million compared to $40.2 million in 2011, representing an increase of 8.1%.  The increase was predominantly the result of the following:

• Lower NOI in Canadian multi-unit residential properties primarily as a result of higher operating expenses  partially offset by higher rental rates;
  
• Higher NOI in Canadian retail properties predominantly due to higher rental rates and percentage rent achieved in 2012;
• Higher NOI in office and industrial primarily as a result of improved occupancy in industrial properties and vacancy tax rebates.
• Higher NOI in U.S. multi residential properties primarily as a result of acquisition of three new residential apartment buildings;
• Higher NOI in U.S. retail properties primarily as a result of acquisitions in late 2011 and lease cancellation fee;
• The change in the foreign exchange rate increased reported NOI by $0.2 million.

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:

		Three months ended September 30		Nine months ended September 30
(In thousands of dollars, except for per share amounts)		2012	2011	2012	2011
Net income attributable to common shareholders		$119,449	$44,634	$262,385	151,588
Items not affecting cash:
	Fair value gains on real estate properties	(77,239)	(7,763)	(148,974)	(65,006)
	Fair value (gain) loss on Residential REIT Units	(3,286)	-	6,867	-
	Non-Controlling interest's share of fair value gain on real  estate    property	(131)	-	142	-
	Future income taxes	2,604	9,414	8,409	31,547
	Depreciation on owner occupied property	26	26	78	78
	Equity income from Morguard REIT	(12,555)	(20,202)	(51,578)	(48,945)
	Morguard REIT's equity accounted FFO	9,094	8,793	27,077	26,381
	(Gain) loss on sale of property	(417)	-	(402)	7
Funds from operations		$37,545	$34,902	$104,004	$95,650
Funds from operations
	Per share amounts - basic and diluted	$2.93	$2.69	$8.07	$7.38

For the three months ended September 30, 2012, the Company recorded FFO of $37,545 ($2.93 per share) compared to $34,902 ($2.69 per share) in 2011.  The increase in FFO of $2,643 is mainly due to  an increase in NOI of $3,269, an increase in interest and other income of $1,371, an increase in management and advisory fees of $4,109, an increase in other income of $2,757 and an increase in Morguard REIT's equity accounted FFO of $301 partially offset by an increase in current tax of $3,407, an increase in property management and corporate expenses of $2,947 and distributions of $1,663 to the Residential REIT Unitholders. The change in foreign exchange rates had a positive impact on FFO of $30 or $0.002 per share.

MORGUARD NORTH AMERICAN RESIDENTIAL REAL ESTATE INVESTMENT TRUST

On September 12, 2012 the REIT completed the offering of $150.7 million for 12,720,000 trust units sold at a price of $11.85 per trust unit. The proceeds from the offering after underwriters' commission, was $146.7 million. Morguard acquired 4,220,000 of the trust units issued on September 12, 2012. At September 30, 2012 Morguard owned a 56.1% interest in the REIT.

FOURTH QUARTER DIVIDEND

The board of directors of Morguard Corporation announced today that the fourth quarterly, eligible dividend of 2012 in the amount of $0.15 per common share will be paid on December 31, 2012 to shareholders of record at the close of business on December 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 September 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 102 retail, multi-unit residential, office and industrial properties comprising 11,260 multi-unit residential suites and approximately 7.1 million square feet of commercial leasable space. Morguard Corporation also owns a 43.8% interest in Morguard Real Estate Investment Trust and a 56.1% 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