MISSISSAUGA, ON, Nov. 12, 2015 /CNW/ – Morguard Corporation (“Morguard” or the “Company”) (TSX:MRC) today announced its financial results for the three and nine months ended September 30, 2015.
Third Quarter Highlights
Acquisition of a 100% interest in a garden-style property comprising 252 suites located in Cooper City, Florida, for $72.6 million. The Company intends to sell a 49% interest in this property to a third party.
Acquisition of a 59.13% interest in a 299 multi-suite residential building including 47,500 square feet of commercial area in Los Angeles, California, for $77.4 million.
Subsequent to September 30, 2015, the Company purchased 18,252,516 common shares of Temple Hotels Inc. (“Temple”) for cash consideration of $21.0 million increasing the Company’s ownership of common shares in Temple from 12.1% at September 30, 2015 to 29.9%.
On November 12, 2015, the Company entered into a purchase and sale agreement to acquire three hotel properties from a third party for a purchase price of approximately $33.5 million. The acquisition is expected to close on or about January 6, 2016.
The Company is reporting performance of:
- On December 31, 2014, the Company commenced consolidating its investment in Morguard REIT. The impact of this change on the Company’s 2015 statement of income is significant since Morguard REIT’s revenue and expenses are fully consolidated into the Company’s operating results.
- Total revenue from real estate properties increased by $86.3 million to $202.8 million compared to $116.5 million in 2014.
- Adjusted net operating income (“Adjusted NOI”), which excludes the realty taxes accounted for under IFRIC 21, increased by $50.8 million to $110.2 million compared to $59.4 million for the same period in 2014.
- Comparative NOI increased by $7.5 million or 12.6% to $66.4 million compared to $58.9 million for the same period in 2014.
- Funds from operations (“FFO”) â Morguard’s share decreased by $3.0 million to $39.8 million for the three months ended September 30, 2015, compared to $42.8 million for the same period in 2014. The decrease was impacted by a $5.1 million non-cash impairment provision for investment in publicly traded securities.
- Normalized FFO – Morguard’s share increased by 5.5% to $45.2 million, or $3.72 per common share for the three months ended September 30, 2015, compared to $42.8 million, or $3.43 per common share for the same period in 2014.
- The Company repurchased 156,478 of its common shares for total consideration of $22.3 million, representing an average price of $142.54 per common share.
- The Company acquired 640,623 units of Morguard REIT for $9.8 million, representing an average purchase price of $15.34 per unit. The Company’s ownership interest in Morguard REIT now stands at 48.8%.
- Shareholders’ equity per common share (excluding non-controlling interest) increased to $219.32 compared to $202.27 as at December 31, 2014.
All amounts in thousands of Canadian dollars, except for per common share amounts, unless otherwise noted.
Financial Highlights
|
Three months ended September 30 |
Nine months ended September 30 |
||||||
|
(in thousands of dollars) |
2015 |
2014 |
2015 |
2014 |
|||
|
Revenue from income producing properties |
$202,763 |
$116,533 |
$598,650 |
$351,292 |
|||
|
Management and advisory fees |
15,935 |
21,315 |
46,084 |
53,814 |
|||
|
Interest and other |
1,453 |
3,404 |
6,314 |
10,694 |
|||
|
Sales of product and land |
1,251 |
1,430 |
6,361 |
3,946 |
|||
|
Total revenue |
$221,402 |
$142,682 |
$657,409 |
$419,746 |
|||
|
Revenue from real estate properties |
$202,763 |
$116,533 |
$598,650 |
$351,292 |
|||
|
Property operating costs |
(86,685) |
(52,554) |
(281,579) |
(176,810) |
|||
|
Net operating income |
$116,078 |
$63,979 |
$317,071 |
$174,482 |
|||
|
Funds from operations |
$44,081 |
$48,356 |
$139,681 |
$126,794 |
|||
|
FFO per common share â basic and diluted |
$3.63 |
$3.87 |
$11.38 |
$10.11 |
|||
|
FFO – Morguard’s share |
$39,840 |
$42,811 |
$127,069 |
$109,854 |
|||
|
Per common share â basic and diluted |
$3.28 |
$3.43 |
$10.36 |
$8.76 |
|||
|
Net income attributable to common shareholders |
$35,822 |
$61,109 |
$68,501 |
$119,880 |
|||
|
Net income per common share â basic and diluted |
$2.95 |
$4.90 |
$5.58 |
$9.56 |
|||
Target Canada Update
During the second quarter of 2015, the Company successfully re-negotiated its Target leases with new tenants at Centerpoint Mall, Toronto, Ontario, Pine Centre, Prince George, British Columbia, Southdale Shopping Centre, Winnipeg, Manitoba, and Aurora Centre, Aurora, Ontario. The replacement of the Target stores with Lowes, Walmart and Canadian Tire significantly improve the tenant strength and will help to drive increased traffic to these centres. The Company successfully acquired the Target lease at The Centre at Circle and Eighth, Saskatoon, Saskatchewan, to maintain control of the space to improve the centre. The leases at Bramalea City Centre, Brampton, Ontario, East York Town Centre, Toronto, Ontario, Cambridge Centre, Cambridge, Ontario, Brandon Shoppers Mall, Brandon, Manitoba and Prairie Mall, Grand Prairie, Alberta, were disclaimed by Target. The Company is currently executing on re-merchandising the Target units into multi-unit space. The space vacated by Target equates to the early termination of 603,804 square feet and as a result, the Company’s retail occupancy has decreased to 86.5%. Adjusting for the vacant Target space, the Company’s Canadian retail occupancy rate would have otherwise increased to 93.3%. The Company ceased recording revenue on the disclaimed leases until all outstanding amounts under the Target U.S. guarantee have been received. This has resulted in a negative impact on the Company’s net operating income for the three and nine months ended September 30, 2015 of $1.5 million and $2.1 million respectively.
Net Income
Net income for the three months ended September 30, 2015, was $51.6 million compared to $61.3 million for the same period in 2014. The decrease in net income of $9.7 million for the three months ended September 30, 2015, was primarily due to the following:
- An increase in net operating income of $52.1 million, primarily due to the consolidation of Morguard REIT;
- A decrease in management and advisory fees of $5.4 million, primarily due to the elimination of fees as a result of the consolidation of Morguard REIT;
- An increase in interest expense of $11.4 million primarily due to the consolidation of Morguard REIT;
- A decrease in non-cash fair value gains of $19.1 million;
- A decrease in equity income from investments of $8.3 million, primarily due to the consolidation of Morguard REIT which is no longer accounted for as an equity accounted investment;
- An increase in income taxes (current and deferred) of $10.8 million; and
- An impairment provision recorded on an investment in publicly traded securities of $5.1 million.
Net Operating Income (“NOI”)
The consolidation of Morguard REIT significantly impacted the Company’s operating results for the three months ended September 30, 2015, compared to the same period in 2014. In order to enhance comparability and illustrate the impact Morguard REIT has had on the Company’s 2015 NOI, the NOI directly attributable to Morguard REIT has been isolated in the column titled “Morguard REIT”. The column titled “Morguard” represents the revenue and expenses for all properties that were included in the Company’s operating results for 2014 (the “Morguard Properties”).
|
Three months ended September 30, (in thousands of dollars) |
2015 |
2014 |
||||
|
Morguard |
Morguard |
Total |
Morguard |
|||
|
Multi-suite residential |
$39,076 |
$- |
$39,076 |
$32,488 |
||
|
Retail |
13,939 |
21,588 |
35,527 |
13,631 |
||
|
Office |
11,702 |
19,100 |
30,802 |
9,565 |
||
|
Industrial and hotels |
3,960 |
789 |
4,749 |
3,756 |
||
|
Adjusted NOI |
68,677 |
41,477 |
110,154 |
59,440 |
||
|
IFRIC 21 adjustment â multi-suite residential |
4,308 |
– |
4,308 |
3,445 |
||
|
IFRIC 21 adjustment â retail |
1,616 |
– |
1,616 |
1,094 |
||
|
NOI |
$74,601 |
$41,477 |
$116,078 |
$63,979 |
||
|
Nine months ended September 30, (in thousands of dollars) |
2015 |
2014 |
||||
|
Morguard |
Morguard |
Total |
Morguard |
|||
|
Multi-suite residential |
$110,114 |
$- |
$110,114 |
$96,410 |
||
|
Retail |
42,107 |
66,454 |
108,561 |
40,790 |
||
|
Office |
33,127 |
57,668 |
90,795 |
31,892 |
||
|
Industrial and hotels |
9,954 |
2,625 |
12,579 |
10,057 |
||
|
Adjusted NOI |
195,302 |
126,747 |
322,049 |
179,149 |
||
|
IFRIC 21 adjustment â multi-suite residential |
(3,822) |
– |
(3,822) |
(3,634) |
||
|
IFRIC 21 adjustment â retail |
(1,156) |
– |
(1,156) |
(1,033) |
||
|
NOI |
$190,324 |
$126,747 |
$317,071 |
$174,482 |
||
Adjusted NOI for the three months ended September 30, 2015, increased by $50.8 million to $110.2 million compared to $59.4 million in 2014, representing an increase of 85.5%. Excluding the impact of the Morguard REIT consolidation of $41.5 million, Adjusted NOI increased by $9.3 million primarily due to the following:
- An increase of $1.8 million (in local currency) primarily from rental rate growth on multi-suite residential properties located in Canada and the U.S., respectively;
- Additional Adjusted NOI of $0.8 million generated from the continued lease up of the Company’s completed development property, The Heathview, a 587 suite rental development in Toronto, Ontario, and $1.1 million generated from the ongoing lease commencements at Performance Court, the 21 story office development in Ottawa, Ontario, which was substantially completed during the first quarter of 2014; and
- An increase of $5.2 million due to the change in the U.S. dollar foreign exchange rate.
Funds from Operations
For the three months ended September 30, 2015, the Company recorded FFO of $44.1 million ($3.63 per common share), compared to $48.4 million ($3.87 per common share) in 2014. The decrease in FFO of $4.3 million is mainly due to the following:
- Lower management and advisory fees of $5.4 million;
- Lower interest and other income of $2.0 million;
- Increase in current taxes of $4.8 million;
- Amortization of the mortgage mark-to-market adjustment of $3.1 million which was recorded on acquisition of Morguard REIT;
- An impairment provision recorded on an investment in publicly traded securities of $5.1 million; and
- Higher Adjusted NOI of $9.3 million from the Morguard Properties.
The change in foreign exchange rates had a positive impact on FFO of $2.5 million ($0.21 per common share).
FFO – Morguard’s Share
|
Three months ended |
Nine months ended |
|||
|
(in thousands of dollars, except for per common share amounts) |
2015 |
2014 |
2015 |
2014 |
|
Funds from operations |
$44,081 |
$48,356 |
$139,681 |
$126,794 |
|
Less: non-controlling interest: Morguard Residential REIT |
(4,241) |
(5,545) |
(12,612) |
(16,940) |
|
FFO – Morguard’s share |
$39,840 |
$42,811 |
$127,069 |
$109,854 |
|
Per common share amounts â basic and diluted |
$3.28 |
$3.43 |
$10.36 |
$8.76 |
The Company’s FFO includes funds available to the non-controlling interests of Morguard North American Residential REIT. FFO – Morguard’s share removes the non-controlling interest portion. FFO – Morguard’s share for the three months ended September 30, 2015, totalled $39.8 million or $3.28 per common share, compared to $42.8 million or $3.43 per common share in 2014.
Normalized FFO â Morguard’s share includes a number of non-recurring items that significantly impact the result. The significant non-recurring items are an impairment provision for investment in publicly traded securities of $5.1 million and an unrealized loss of $0.2 million from investment in convertible debentures in 2015. Normalized FFO – Morguard’s share for the three months ended September 30, 2015 would have been $45.2 million or $3.72 per common share versus $42.8 million or $3.43 per common share for the same period in 2014, which represents an increase of $2.4 million or 5.5%.
Fourth Quarter Dividend
The Board of Directors of Morguard Corporation announced that the fourth quarterly, eligible dividend of 2015 in the amount of $0.15 per common share will be paid on December 31, 2015, to shareholders of record at the close of business on December 15, 2015.
The Company’s unaudited financial statements for the three months ended September 30, 2015, 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.
Non-IFRS Measures
The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, Adjusted NOI, Comparative NOI, FFO, FFO â Morguard’s share and Normalized FFO â Morguard’s share (collectively, the “non-IFRS measures”) as well as other measures discussed elsewhere in this press release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. The Company uses these measures to better assess the Company’s underlying performance and financial position and provide these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the Company’s Management’s Discussion and Analysis for the period ended September 30, 2015 available on the Company’s profile on SEDAR at www.sedar.com.
About Morguard Corporation
Morguard Corporation is a real estate company, which owns a diversified portfolio of 172 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,225 residential suites, approximately 16.2 million square feet of commercial leasable space and 1,056 hotel rooms. Morguard Corporation also owns a 48.8% 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
