Morguard Corporation Announces 2013 First Quarter Results

TSX: MRC

MISSISSAUGA, ON, May 13, 2013 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) announced its financial results for the three months ended March 31, 2013.

HIGHLIGHTS

• Funds from operations increased by 10.5% to $47.1 million, or $3.73 per share, compared to $42.7 million, or $3.30 per share in 2012;
• Total revenues increased by 13.2% to $111.4 million compared to $98.5 million in 2012;
• Total net operating income increased by 13.5% to $47.3 million compared to $41.7 million in 2012;
• Net income attributable to common shareholders totalled $99.6 million compared to $51.7 million in 2012; the increase is predominantly due to higher fair value gains recorded on real estate properties in the amount of $21.6, an increase in income from equity accounted investments of $14.5 million and a decrease in income taxes of $6.3 million; and
• On March 15, 2013, Morguard North American Residential Real Estate Investment Trust (the "Morguard Residential REIT" or the "REIT") completed an offering which raised gross proceeds of $95.1 million for 8,270,000 trust units sold at a price of $11.50 per trust unit and $60 million aggregate principal amount of 4.65% convertible unsecured subordinated debentures due March 30, 2018 (the "debentures").

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

FINANCIAL HIGHLIGHTS

Three months ended March 31,
(In thousands of dollars)			2013		2012
Revenue from income producing properties			$86,214		$76,765
Management and advisory fees			16,227		16,499
Hotel operating revenue			5,824		-
Interest and other			1,958		3,901
Sales of product and land			1,224		1,324
Total revenues			111,447		98,489
Revenue from income producing properties			$86,214		$76,765
Property operating costs and realty tax expense			(38,878)		(35,051)
Net operating income			$47,336		$41,714
Funds from operations			$47,138		$42,671
Net income attributable to common shareholders			$99,649		$51,662
Income per share:
	Basic and diluted  - net income		$7.89		$4.00

NET INCOME

The Company's net income attributable to common shareholders for the three months ended March 31, 2013, was $99,649 ($7.89 per share) compared to $51,662 ($4.00 per share) for the same period in 2012. The increase in net income of $47,987 for the three months ended March 31, 2013, was primarily due to an increase in fair value gains on real estate properties of $21,571, an increase in net operating income of $5,622, an increase in income from equity accounted investments of $14,450 and a decrease in income taxes of $6,259.

NET OPERATING INCOME

Three months ended March 31, (In thousands of dollars)		2013		2012
Net operating income - Canadian properties
Multi-unit residential - Canada		$13,472		$13,248
Retail - Canada		8,211		8,057
Office and industrial		9,911		9,859
		31,594		31,164
Net operating income - U.S. properties in U.S. dollars
Multi-unit residential - U.S.		US 9,752		US 4,546
Retail - U.S.		US 5,864		US 5,994
		US 15,616		US 10,540
Exchange amount to Canadian dollars		126		10
Net operating income - U.S. properties in Canadian dollars		15,742		10,550
Net operating income		$47,336		$41,714

Net operating income ("NOI") for the three months ended March 31, 2013, increased by $5.6million to $47.3 million compared to $41.7 million in 2012, representing an increase of 13.5%.  The increase was predominantly the result of an increase in NOI for the U.S. multi residential properties primarily due to the acquisition of three properties in 2012 which accounted for $4.9 million of the increase.

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:…

Three months ended March 31
(In thousands of dollars except for per share amounts)				2013			2012
Net income attributable to common shareholders				$99,649			$51,662
Items not affecting cash:
	Fair value gains on real estate properties			(26,347)			(4,776)
	Fair value gain on Residential REIT Units			(5,261)			-
	Non-controlling interest's share of fair value gain on real estate properties			50			142
	Future income taxes			855			6,162
	Depreciation on owner occupied property			26			26
	Equity income from Morguard REIT			(32,524)			(19,348)
	Morguard REIT's equity accounted FFO			10,690			8,788
	Loss on sale of property			-			15
Funds from operations				$47,138			$42,671
Funds from operations
		Per share amounts - basic and diluted		$3.73			$3.30

For the three months ended March 31, 2013, the Company recorded FFO of $47,138 ($3.73 per share) compared to $42,671 ($3.30 per share) in 2012.  The increase in FFO of $4,467 is mainly due to an increase in NOI of $5,622, an increase in other income of $15,532 (predominantly due to an arbitration settlement of $14,850 received in 2013), an increase in Morguard REIT's equity accounted FFO of $1,902 and a decrease in current taxes of $952.  These items were partially offset by an increase in interest expense of $2,348, distributions of $2,833 to the Residential REIT's unitholders and a gain on sale of marketable securities of $13,598 recorded in 2012. The change in foreign exchange rates had a positive impact on FFO of $54.

MORGUARD NORTH AMERICAN RESIDENTIAL REAL ESTATE INVESTMENT TRUST
On March 15, 2013, the REIT completed an offering of 8,270,000 trust units at a price of $11.50 per unit, representing gross proceeds of $95.1 million and issued $60 million aggregate principal amount of 4.65% convertible unsecured subordinated debentures due March 30, 2018 (the "Debentures", collectively with the Units the "Offering").  The Debentures are convertible at the option of the holder, into trust units of the REIT at $15.50 per trust unit.   As part of the transaction, Morguard purchased 870,000 Units, at the offering price representing approximately $10 million and $5 million aggregate principal amount of the Debentures.   At March 31, 2013, Morguard owned a 48.8% effective interest in the REIT through ownership of Units and Class B LP Units.

The net proceeds from the Offering will be used to partially fund the REIT's April 19, 2013 acquisition of six multi-unit residential properties from an institutional fund sponsored by Pearlmark Real Estate Partners, L.L.C. for US$218,000 (excluding closing costs).   The six properties acquired are residential apartment and townhome complexes comprised of 1,793 suites located in Denver, Colorado, Tampa, Florida, Cary, North Carolina and Atlanta, Georgia.  In connection with the purchase of four of the six properties, the REIT assumed in-place mortgage financing of US$81,800 with a weighted average interest rate of 4.86% with a weighted average term to maturity of 4.6 years.  For the remaining two properties, the REIT, at closing, entered into first mortgage financing arrangements in an aggregate amount of US$58,700 with a weighted average interest rate of 3.51% for terms of 10 years.

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 interim unaudited condensed financial statements for the three months ended March 31, 2013, 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 103 retail, multi-unit residential, office and industrial properties comprising of 12,110 multi-unit residential suites and approximately 7.1 million square feet of commercial leasable space. Morguard Corporation also owns a 42.9% interest in Morguard Real Estate Investment Trust and a 48.8% 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