MISSISSAUGA, ON, Aug. 9, 2017 /CNW/ – Morguard Corporation (“Morguard” or the “Company”) (TSX:MRC) today announced its financial results for the three and six months ended June 30, 2017.
Second Quarter Reporting Highlights:
- Total revenue increased by $48.0 million to $275.7 million for the three months ended June 30, 2017, compared to $227.7 million for the same period in 2016.
- Net operating income (“NOI”) increased by $17.0 million, or 14.5%, to $134.7 million for the three months ended June 30, 2017, compared to $117.7 million for the same period in 2016, primarily due to the consolidation of Temple commencing on January 1, 2017.
- Funds from operations (“FFO”) decreased by $5.6 million to $53.4 million, or $4.49 per share, for the three months ended June 30, 2017, compared to $59.0 million, or $4.94 per share, for the same period in 2016, representing a 9.4% decrease.
- Normalized FFO increased by $7.5 million to $52.3 million for the three months ended June 30, 2017, compared to $44.8 million for the same period in 2016, representing a 16.8% increase.
- Shareholders’ equity per common share (excluding non-controlling interest) increased to $251.04 compared to $239.98 as at December 31, 2016.
- On April 6, 2017, the Company acquired an office property located in Oakville, Ontario for a purchase price of $7.1 million, including closing costs.
- On May 15, 2017, the Company acquired a newly-constructed property comprising 60 rental townhomes located in Toronto, Ontario, for a purchase price of $16.7 million, including closing costs.
- Redeemed the remaining $33.1 million Temple Series D convertible debentures on maturity at June 30, 2017.
Financial Highlights
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Three months ended |
Six months ended |
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|
(in thousands of dollars, except per common share) |
2017 |
2016 |
2017 |
2016 |
|
|
Revenue from real estate |
$194,422 |
$191,847 |
$390,940 |
$387,661 |
|
|
Revenue from hotel properties |
62,142 |
17,400 |
114,397 |
31,224 |
|
|
Management and advisory fees |
15,368 |
14,390 |
34,332 |
34,584 |
|
|
Interest and other income |
2,570 |
2,258 |
4,530 |
3,269 |
|
|
Sales of product and land |
1,198 |
1,784 |
2,440 |
3,059 |
|
|
Total revenues |
$275,700 |
$227,679 |
$546,639 |
$459,797 |
|
|
Revenue from real estate properties |
$194,422 |
$191,847 |
$390,940 |
$387,661 |
|
|
Revenue from hotel properties |
62,142 |
17,400 |
114,397 |
31,224 |
|
|
Property operating expenses |
(78,208) |
(78,490) |
(183,978) |
(183,410) |
|
|
Hotel operating expenses |
(43,619) |
(13,082) |
(85,529) |
(24,997) |
|
|
Net operating income |
$134,737 |
$117,675 |
$235,830 |
$210,478 |
|
|
Funds from operations |
$53,427 |
$58,992 |
$101,028 |
$106,670 |
|
|
FFO per common share â basic and diluted |
$4.49 |
$4.94 |
$8.48 |
$8.92 |
|
|
Normalized funds from operations |
$52,261 |
$44,751 |
$99,016 |
$91,923 |
|
|
Normalized FFO per common share â basic and diluted |
$4.39 |
$3.75 |
$8.31 |
$7.69 |
|
|
Net income attributable to common shareholders |
$151,526 |
$81,754 |
$167,268 |
$74,648 |
|
|
Net income per common share â basic and diluted |
$12.72 |
$6.85 |
$14.04 |
$6.25 |
|
Net Income
Net income for the three months ended June 30, 2017, was $179.6 million compared to net income of $93.2 million in 2016. The increase in net income of $86.4 million for the three months ended June 30, 2017, was primarily due to the following:
- An increase in net operating income of $17.0 million, primarily due to the consolidation of Temple;
- An increase in management and advisory fees of $1.0 million;
- An increase in interest expense of $8.5 million, primarily due to the consolidation of Temple;
- A decrease in property management and corporate expense of $0.6 million;
- An increase in amortization of hotel properties of $5.0 million, primarily due to the consolidation of Temple;
- An increase in net fair value gain of $167.8 million, primarily due to a decrease in capitalization rates for Canadian multi-suite residential properties;
- A decrease in equity income from investments of $55.3 million, primarily due to a fair value gain recognized at the Marquee at Block 37 during 2016;
- A decrease in other income of $22.1 million, primarily due to settlement proceeds received from Target Corporation during 2016; and
- An increase in income taxes (current and deferred) of $9.5 million.
Net Operating Income
NOI increased by $17.0 million, or 14.5%, during the three months ended June 30, 2017, to $134.7 million, compared to $117.7 million generated in 2016, and is further analyzed by asset type below.
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|
(in thousands of dollars) |
2017 |
2016 |
2017 |
2016 |
|
|
Multi-suite residential |
$46,505 |
$41,624 |
$90,615 |
$83,042 |
|
|
Retail |
32,110 |
34,844 |
64,721 |
70,009 |
|
|
Office |
29,751 |
29,284 |
61,638 |
60,519 |
|
|
Industrial |
1,619 |
1,760 |
3,223 |
3,527 |
|
|
Hotels |
18,523 |
4,318 |
28,868 |
6,227 |
|
|
Adjusted NOI |
128,508 |
111,830 |
249,065 |
223,324 |
|
|
IFRIC 21 adjustment â multi-suite residential |
4,986 |
4,644 |
(10,646) |
(10,270) |
|
|
IFRIC 21 adjustment â retail |
1,243 |
1,201 |
(2,589) |
(2,576) |
|
|
NOI |
$134,737 |
$117,675 |
$235,830 |
$210,478 |
|
Adjusted NOI for the three months ended June 30, 2017, increased by $16.7 million to $128.5 million compared to $111.8 million in 2016 primarily due to the following:
- An increase in the Canadian residential portfolio of $1.6 million primarily from rental rate growth and improved occupancy;
- Additional NOI of $1.4 million generated from The Heathview, a 587 suite luxury residential property located in Toronto, Ontario. During 2016, The Heathview was under initial lease up;
- An increase in the U.S. residential portfolio of US$0.6 million primarily from rental rate growth and improved occupancy;
- A decrease of $2.7 million in Canadian and U.S. retail properties due to lower base rent and recoveries, higher vacancy at two U.S. properties; and temporary vacancy at a property located in Toronto, Ontario;
- An increase in the office portfolio of $0.5 million is primarily due to improved occupancy at a property located in Ottawa, Ontario, partially offset by a decrease of $0.3 million due to the sale of a property during the second quarter of 2016;
- A decrease in the industrial portfolio by $0.1 million is due to increased vacancy at two industrial properties;
- An increase in the hotel portfolio by $14.2 million is mainly due to the consolidation of Temple and stronger average room rates, improved occupancy and reduced costs by the remainder of the portfolio; and
- An increase of $1.3 million due to the change in the U.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended June 30, 2017, the Company recorded FFO of $53.4 million ($4.49 per common share), compared to $59.0 million ($4.94 per common share) in 2016. The decrease in FFO of $5.6 million is mainly due to the following:
- Higher Adjusted NOI of $16.7 million, primarily due to the consolidation of Temple;
- Higher management and advisory fees of $1.0 million;
- An increase in equity-accounted FFO of $2.1 million;
- An increase in interest expense of $8.5 million, primarily due to the consolidation of Temple;
- Lower property management and corporate expense of $0.6 million;
- A decrease in current taxes of $1.6 million;
- Lower non-controlling interest’s share of FFO of $4.5 million;
- A decrease in non-controlling interest share of Morguard Residential REIT of $1.6 million; and
- A decrease as a result of Target settlement proceeds of $22.5 million recognized in 2016.
The change in foreign exchange rates had a positive impact on FFO of $0.4 million ($0.04 per common share).
Normalized FFO for the three months ended June 30, 2017, was $52.3 million, or $4.39 per common share, versus $44.8 million, or $3.75 per common share, for the same period in 2016, which represents an increase of $7.5 million or 16.8%. Normalized FFO is computed as FFO adjusted for the impact of non-recurring items net of tax.
Financing Activity
- On June 1, 2017, the Company completed the refinancing of a multi-suite residential property located in Atlanta, Georgia, in the amount of $29.1 million (US$21.5 million) at an interest rate of 3.84% for a term of 10 years.
- On June 1, 2017, the Company completed the refinancing of a multi-suite residential property located in Aurora, Colorado, in the amount of $28.8 million (US$21.4 million) at an interest rate of 3.84% for a term of 10 years.
- On June 27, 2017, the Company completed the financing of two hotel properties in the amount of $15.6 million. The loan bears interest at either prime plus 2.50% or bankers’ acceptance plus 3.50% for a term of 2 years.
- On June 28, 2017, the company completed the refinancing of a retail property located in Ottawa, Ontario, for $15.0 million at an interest rate of 2.73% for a term of 5 years.
- On June 30, 2017, the Company completed the refinancing of a multi-suite residential property located in Bradenton, Florida, in the amount of $23.4 million (US$18.0 million) at an interest rate of 3.83% for a term of 10 years.
Subsequent Events
On July 6, 2017, the Company acquired a property comprising 104 suites and 32,000 square feet of commercial area located in Falls Church, Virginia, for a purchase price of $55.7 million (US$43.0 million), excluding closing costs. The property is subject to a long-term land lease, with a fixed price land purchase option available in 12.25 years. The acquisition was partially financed by a new mortgage of $30.6 million (US$23.7 million) at an interest rate of 4.05% for a term of 12.25 years.
On July 10, 2017, the Company acquired a property comprising 515 suites and 18,000 square feet of commercial area located in Chicago, Illinois, for a purchase price of $286.8 million (US$222.5 million), excluding closing costs. The acquisition was partially financed by a new mortgage of $157.9 million (US$122.5 million) at an interest rate of 3.49% for a term of eight years.
On July 12, 2017, the Company sold four U.S properties located in Mobile, Alabama, comprising 1,329 suites, for gross proceeds of $89.7 million (US$70.1 million).
On August 3, 2017, the Company acquired an office property consisting of 203,500 square feet located in Markham, Ontario, for a purchase price of $66.5 million excluding closing costs.
The Company entered into a binding agreement to acquire a residential property comprising 492 suites located in Rockville, Maryland, for a purchase price of US$129.0 million, excluding closing costs. The acquisition is expected to close during the third quarter of 2017.
The Company entered into a binding agreement to acquire an office property consisting of 74,500 square feet located in Oakville, Ontario, for a purchase price of $18.5 million excluding closing costs. The acquisition is expected to close during the third quarter of 2017.
Third Quarter Dividend
The Board of Directors of Morguard Corporation announced that the third quarterly, eligible dividend of 2017 in the amount of $0.15 per common share will be paid on September 29, 2017, to shareholders of record at the close of business on September 15, 2017.
The Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2017, along with 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 and Normalized FFO (collectively, the “non-IFRS measures”) as well as other measures discussed elsewhere in this press release, do not have a standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. The Company uses these measures to better assess the Company’s underlying performance and financial position and provides 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 three and six months ended June 30, 2017 and available on the Company’s profile on SEDAR at www.sedar.com.
About Morguard Corporation
Morguard Corporation is a real estate company, with total assets owned and under management valued at $21.9 billion. Morguard owns a diversified portfolio of 206 multi-suite residential, retail, office, industrial and hotel properties comprised of 16,888 residential suites, approximately 16.1 million square feet of commercial leasable space and 5,647 hotel rooms. Morguard also currently owns a 53.7% interest in Morguard Real Estate Investment Trust (“Morguard REIT” or “MRT”), a 47.0% effective interest in Morguard North American Residential Real Estate Investment Trust (“Morguard Residential REIT” or “MRG”) and a 55.9% effective interest in Temple Hotels Inc. (“Temple”). 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
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