TSX: MRC
MISSISSAUGA, ON, March 6, 2015 /CNW/ – Morguard Corporation (“Morguard” or the “Company”) (TSX: MRC) announced its financial results for the year ended December 31, 2014.
HIGHLIGHTS
- Total revenue from real estate properties increased by 9.6% to $566 million compared to $517 million in 2013.
- Normalized net operating income (“Normalized NOI”), which excludes the impact of IFRIC 21 and land rent arbitration expense, increased by 12.0% to $250 million compared to $223 million for the same period in 2013.
- Consolidated funds from operations (“Consolidated FFO”), increased by 3.1% to $175 million for the year ended December 31, 2014 compared to $170 million for the same period in 2013.
- The Company refinanced $468 million of maturing mortgage debt, and in doing so, lowered its weighted average interest rate at December 31, 2014 to 4.17% (December 31, 2013 â 4.47%) and extended its weighted average term to maturity to 5.7 years (December 31, 2103 â 4.8 years).
- The Company repurchased 233,232 of its common shares for total consideration of $32 million, representing an average price of $137.88 per common share.
- Strong leasing activity at the Company’s two developments: (1) Performance Court, Ottawa, Ontario is now 95% leased (2) The Heathview’s North Tower is now 55% leased and (3) The Heathview’s South Tower commenced leasing in early 2015 and is 21% leased.
- On December 31, 2014, the Company commenced consolidating its investment in Morguard REIT. This accounting change had a significant impact on the Company’s year end balance sheet. The 2014 statement of income was only impacted through the recognition of a $16 million non-cash loss resulting from the consolidation.
All amounts in thousands of Canadian dollars, except for per share amounts, unless otherwise noted.
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FINANCIAL HIGHLIGHTS |
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Years ended December 31, |
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(in thousands of dollars) |
2014 |
2013 |
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Revenue from income producing properties |
$472,808 |
$417,376 |
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Management and advisory fees |
73,440 |
74,641 |
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Interest and other |
14,970 |
12,117 |
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Sales of product and land |
5,108 |
12,748 |
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Total revenues |
$566,326 |
$516,882 |
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Revenue from income producing properties |
$472,808 |
$417,376 |
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Property operating costs |
(223,431) |
(190,789) |
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Land lease arbitration expense |
(8,184) |
(25,091) |
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Net operating income |
$241,193 |
$201,496 |
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Consolidated funds from operations (FFO) |
$174,988 |
$169,782 |
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Consolidated FFO per share â basic and diluted |
$13.98 |
$13.39 |
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Net income attributable to common shareholders |
$136,703 |
$286,392 |
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Net income per share â basic and diluted |
$10.92 |
$22.58 |
NET INCOME
Net income attributable to Morguard shareholders for the year ended December 31, 2014, was $136.7 million ($10.92 per share), compared to $286.4 million ($22.58 per share) in 2013. The decrease in net income of $149.7 million for the year ended December 31, 2014, was primarily due to a decrease in equity income from investments of $43.4 million, a decrease in other income of $20.9 million, a decrease in net fair value gains of $82.9 million, a loss on business combination of $16.3 million, an increase in interest expense of $12.1 million and an increase in income taxes of $10.0 million. These items were partially offset by an increase in net operating income of $39.7 million.
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NET OPERATING INCOME |
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Years ended December 31 |
2014 |
2013 |
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(In thousands of dollars) |
NOI |
Adjustments |
Normalized |
NOI |
Adjustments |
Normalized |
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Net operating income – |
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Multi-unit residential |
$55,775 |
$1,064 |
$56,839 |
$52,505 |
$3,263 |
$55,768 |
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Retail |
28,760 |
6,956 |
35,716 |
14,157 |
21,327 |
35,484 |
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Office and industrial |
46,830 |
164 |
46,994 |
40,090 |
501 |
40,591 |
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Hotel |
9,240 |
– |
9,240 |
9,144 |
– |
9,144 |
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140,605 |
8,184 |
148,789 |
115,896 |
25,091 |
140,987 |
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Net operating income â U.S. |
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Multi-unit residential |
67,019 |
– |
67,019 |
59,496 |
(3,789) |
55,707 |
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Retail |
24,006 |
– |
24,006 |
23,437 |
– |
23,437 |
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91,025 |
– |
91,025 |
82,933 |
(3,789) |
79,144 |
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Exchange amount to Canadian dollars |
9,563 |
– |
9,563 |
2,667 |
(189) |
2,478 |
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Net operating income â U.S. properties in Canadian dollars |
100,588 |
– |
100,588 |
85,600 |
(3,978) |
81,622 |
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Net operating income |
$241,193 |
$8,184 |
$249,377 |
$201,496 |
($21,113) |
$222,609 |
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Normalized NOI for the year ended December 31, 2014, increased by $26.8 million to $249.4 million compared to $222.6 million in 2013, representing an increase of 12.0%. The increase was predominantly the result of the acquisition of 12 U.S. multi-unit residential properties in 2013 of $11.8 million, lease cancellation fees of $5.0 million, two acquisitions completed in Canada during 2013 of $4.8 million (a multi-unit residential property – $1.6 million and five hotel properties – $3.2 million), the completion of the Performance Court development project in 2014 of $1.5 million and an industrial development project completed in 2013 of $1.3 million. These items were partially offset by a decrease in NOI of $3.2 million at the Company’s hotel in Ottawa, Ontario as a result of the lessee terminating the lease during the fourth quarter of 2013. The change in the foreign exchange rate increased Normalized NOI in 2014 by $7.0 million.
CONSOLIDATED FUNDS FROM OPERATIONS
For the year ended December 31, 2014, the Company recorded Consolidated FFO of $175.0 million ($13.98 per share), compared to $169.8 million ($13.39 per share) in 2013. The increase in Consolidated FFO of $5.2 million is mainly due to an increase in net operating income excluding the impact of IFRIC 21 of $43.7 million, an increase in interest and other income of $2.9 million, an increase in Morguard REIT’s equity-accounted FFO of $3.7 million and a decrease in current taxes of $0.9 million. These items were partially offset by an increase in interest expense of $12.1 million, a net loss of $7.9 million incurred on the disposition of the marketable securities, a non-recurring arbitration settlement received in 2013 of $15.4 million, an increase in property management and corporate expense of $3.5 million, a decrease in equity income of $1.9 million and a decrease in management and advisory fees of $1.2 million. The change in foreign exchange rates had a positive impact on Consolidated FFO of $4.1 million ($0.32 per share).
Consolidated FFO includes a number of non-recurring items that significantly impact the result. The significant non-recurring items are (i) loss on sale of marketable securities of $7.9 million in 2014; (ii) the arbitration settlement received in 2013 of $15.4 million and (iii) the increase in the land rent arbitration expense of $16.9 million recorded in 2013. Consolidated FFO for the year ended December 31, 2014 would have been $181.9 million, or $14.52 per share, versus $170.9 million, or $13.47, per share for the same period in 2013, which represents an increase of $11.0 million, or 6.4%.
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Consolidated Funds From Operations – Morguard’s Share |
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Years ended December 31 |
2014 |
2013 |
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(In thousands of dollars, except for per share amounts) |
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Consolidated FFO |
$174,988 |
$169,782 |
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Less non-controlling interest: Morguard Residential REIT |
(22,935) |
(17,324) |
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Consolidated Funds From Operations – Morguard’s share |
$152,053 |
$152,458 |
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Per share amounts â basic and diluted |
$12.14 |
$12.02 |
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The Company’s Consolidated FFO includes funds available to the non-controlling interests of Morguard North American Residential REIT. Morguard’s share of Consolidated FFO removes the non-controlling interest.
Morguard’s share of Consolidated FFO for the year ended December 31, 2014, totalled $152.1 million or $12.14 per share, compared to $152.5 million or $12.02 per share in 2013, which represents a decrease of $0.4 million.
FIRST QUARTER DIVIDEND
The board of directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2015 in the amount of $0.15 per common share will be paid on March 31, 2015, to shareholders of record at the close of business on March 16, 2015.
NORMAL COURSE ISSUER BID
Morguard has obtained approval from the Toronto Stock Exchange (“TSX”) to amend its normal course issuer bid (“NCIB”) announced September 15, 2014.
In addition to purchases made through the facilities of the TSX, the Company and its designated broker may make purchases on alternative Canadian trading platforms. Daily purchases will be limited to 1,000 common shares, subject to the Company’s ability to rely upon the block purchase exception under the TSX rules. All purchases will be made at market prices and otherwise in accordance with the rules of the TSX and all common shares purchased under the NCIB will be cancelled. Pursuant to the NCIB, which commenced on September 22, 2014, and expires on September 21, 2015, the Company purchased 138,432 common shares.
Readers are cautioned that although the terms “Normalized Net Operating Income”, and “Consolidated 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 audited financial statements for the year ended December 31, 2014, 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 170 multi-unit residential, retail, office, industrial and hotel properties comprising of 16,423 multi-unit residential suites, approximately 16.5 million square feet of commercial leasable space and 1,056 hotel rooms. Morguard Corporation also currently owns a 46.8% interest in Morguard Real Estate Investment Trust and a 48.7% effective interest in Morguard North American Residential Real Estate Investment Trust. Morguard also provides advisory and management services to institutional and other investors. For more information, visit the Company’s website at www.morguard.com.
SOURCE Morguard Corporation
