MISSISSAUGA, ON, Feb. 24, 2022 /CNW/ – Morguard Corporation (“Morguard” or the “Company”) (TSX: MRC) is pleased to announce its consolidated financial results for the year ended December 31, 2021.
Reporting Highlights
- Net income increased by $506.7 million to $256.6 million for the year ended December 31, 2021, compared to a net loss of $250.1 million for the same period in 2020.
- Normalized funds from operations (“Normalized FFO”) was $194.1 million, or $17.48 per common share, for the year ended December 31, 2021. This represents an increase of $12.9 million, or 7.1% compared to $181.2 million for the same period in 2020.
- Total revenue from real estate properties decreased by $35.6 million, or 4.0%, to $852.7 million for the year ended December 31, 2021, compared to $888.3 million for the same period in 2020.
- Total revenue from hotel properties increased by $25.9 million, or 26.4%, to $123.9 million for the year ended December 31, 2021, compared to $98.0 million for the same period in 2020.
- Net operating income (“NOI”) decreased by $3.2 million, or 0.7%, to $488.0 million for the year ended December 31, 2021, compared to $491.2 million for the same period in 2020, primarily due to lower NOI from the multi-suite residential portfolio due to higher vacancy, partially offset by higher NOI from the hotel portfolio. The change in foreign exchange rate decreased NOI by $11.0 million.
Operational and Balance Sheet Highlights
- The Company acquired the 40.9% interest not already owned in a mixed-use property, located in Los Angeles, California, comprising 299 residential suites and 52,000 square feet of commercial space for $101.6 million (US$80.1 million).
- The Company financed new and existing mortgages for additional net proceeds of $438.5 million at an average interest rate of 2.90%.
- The Company fully repaid $200.0 million of 4.085% Series D senior unsecured debentures on maturity.
- Morguard REIT issued $159.0 million of 5.25% convertible unsecured subordinated debentures, and fully repaid $175.0 million of 4.50% convertible unsecured subordinated debentures.
- The Company sold five hotels, two located in Yellowknife, Northwest Territories and three located in Fort McMurray, Alberta for gross proceeds of $28.5 million.
- Rent collections from all commercial asset classes have been strong with an average of approximately 97% collected since the second quarter of 2020.
- During the year, occupancy was strong and consistent across all commercial and residential asset classes, supporting the Company’s business objective of generating stable and increasing cash flow through its diversified portfolio of real estate assets.
- As at December 31, 2021 the Company’s total assets were $11.5 billion, compared to $11.1 billion at December 31, 2020.
Financial Highlights
|
For the years ending December 31 |
||
|
(in thousands of dollars) |
2021 |
2020 |
|
Revenue from real estate properties |
$852,692 |
$888,324 |
|
Revenue from hotel properties |
123,916 |
98,046 |
|
Management and advisory fees |
45,302 |
42,080 |
|
Interest and other income |
22,934 |
15,739 |
|
Total revenue |
$1,044,844 |
$1,044,189 |
|
Revenue from real estate properties |
$852,692 |
$888,324 |
|
Revenue from hotel properties |
123,916 |
98,046 |
|
Property operating expenses – excluding bad debt expense |
(384,975) |
(378,266) |
|
Property operating expenses – bad debt expenses |
(7,461) |
(27,192) |
|
Hotel operating expenses |
(96,172) |
(89,669) |
|
Net operating income |
$488,000 |
$491,243 |
|
Net income (loss) attributable to common shareholders |
$249,760 |
($98,918) |
|
Net income (loss) per common share â basic and diluted |
$22.50 |
($8.83) |
|
Funds from operations (“FFO”)(1) |
$187,920 |
$161,200 |
|
FFO per common share â basic and diluted(1) |
$16.93 |
$14.39 |
|
Normalized funds from operations(1) |
$194,077 |
$181,205 |
|
Normalized FFO per common share â basic and diluted(1) |
$17.48 |
$16.17 |
|
(1) |
Represents a non-GAAP financial measure/ratio that does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other reporting issuers in similar or different industries. This measure should be considered as supplemental in nature and not as substitutes for related financial information prepared in accordance with IFRS. |
Specified Financial Measures
The Company reports its financial results in accordance with International Financial Reporting Standards (“IFRS”). However, this earnings release also uses specified financial measures that are not defined by IFRS, which follow the disclosure requirements established by National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure for non-GAAP financial measures. Specified financial measures are categorized as non-GAAP financial measures, non-GAAP ratios, and other financial measures. Additional details on specified financial measures including supplementary financial measures, capital management measures and total segment measures are set out in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2021 and available on the Company’s profile on SEDAR at www.sedar.com.
The following Non-GAAP financial measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other reporting issuers in similar or different industries. These measures should be considered as supplemental in nature and not as substitutes for related financial information prepared in accordance with IFRS. The Company’s management uses these measures to aid in assessing the Company’s underlying core performance and provides these additional measures so that investors may do the same. Management believes that the non-GAAP financial measures described below, which supplement the IFRS measures, provide readers with a more comprehensive understanding of management’s perspective on the Company’s operating results and performance.
A reconciliation of each non-GAAP financial measure referred to in this earnings release is provided below.
Adjusted Net Operating Income (“Adjusted NOI”)
Adjusted NOI is an important measure in evaluating the operating performance of the Company’s real estate properties and is a key input in determining the fair value of the Company’s properties. Adjusted NOI represents NOI (an IFRS measure) adjusted to exclude the impact of realty taxes accounted for under IFRIC 21 as noted below.
NOI includes the impact of realty taxes accounted for under the International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 21, Levies (“IFRIC 21”). IFRIC 21 states that an entity recognizes a levy liability in accordance with the relevant legislation. The obligating event for realty taxes for the U.S. municipalities in which the REIT operates is ownership of the property on January 1 of each year for which the tax is imposed and, as a result, the REIT records the entire annual realty tax expense for its U.S. properties on January 1, except for U.S. properties acquired during the year in which the realty taxes are not recorded in the year of acquisition. Adjusted NOI records realty taxes for all properties on a pro rata basis over the entire fiscal year.
The following table provides a reconciliation of Adjusted NOI to its closely related financial statement measurement for the following periods:
|
Three months ended |
Year ended |
|||
|
December 31 |
December 31 |
|||
|
(in thousands of dollars) |
2021 |
2020 |
2021 |
2020 |
|
Multi-suite residential |
$52,059 |
$52,265 |
$204,143 |
$227,565 |
|
Retail |
31,447 |
28,586 |
116,741 |
116,201 |
|
Office |
32,391 |
33,053 |
131,675 |
131,836 |
|
Industrial |
1,911 |
1,981 |
7,459 |
7,264 |
|
Hotel |
2,839 |
233 |
27,744 |
8,377 |
|
Adjusted NOI |
120,647 |
116,118 |
487,762 |
491,243 |
|
IFRIC 21 adjustment – multi-suite residential |
9,537 |
9,711 |
238 |
â |
|
IFRIC 21 adjustment – retail |
1,352 |
1,371 |
â |
â |
|
NOI |
$131,536 |
$127,200 |
$488,000 |
$491,243 |
Funds From Operations and Normalized FFO
FFO (and FFO per common share) are non-GAAP financial measures widely used as a real estate industry standard that supplement net income (loss) and evaluates operating performance but is not indicative of funds available to meet the Company’s cash requirements. FFO can assist with comparisons of the operating performance of the Company’s real estate between periods and relative to other real estate entities. FFO is computed in accordance with the current definition of the Real Property Association of Canada (“REALPAC”) and is defined as net income (loss) attributable to common shareholders adjusted for: (i) deferred income taxes, (ii) unrealized changes in the fair value of real estate properties, (iii) realty taxes accounted for under IFRIC 21, (iv) internal leasing costs, (v) gains/losses from the sale of real estate or hotel property (including income tax on the sale of real estate or hotel property), (vi) transaction costs expensed as a result of a business combination, (vii) gains/losses on business combination, (viii) the non-controlling interest of Morguard North American Residential REIT, (ix) amortization of depreciable real estate assets (including right-of-use assets), * amortization of intangible assets, (xi) principal payments of lease liabilities, (xii) FFO adjustments for equity-accounted investments, (xiii) provision for impairment, (xiv) other fair value adjustments and non-cash items. The Company considers FFO to be a useful measure for reviewing its comparative operating and financial performance. FFO per common share is calculated as FFO divided by the weighted average number of common shares outstanding during the period.
Normalized FFO (and normalized FFO per common share) are computed as FFO excluding non-recurring items on a net of tax basis and other fair value adjustments. The Company believes it is useful to provide an analysis of Normalized FFO which excludes non-recurring items on a net of tax basis and other fair value adjustments excluded from REALPAC’s definition of FFO described above.
The following tables provide a reconciliation of FFO and Normalized FFO to its closely related financial statement measurement for the following periods:
|
Three months ended |
Year ended |
|||
|
December 31 |
December 31 |
|||
|
(in thousands of dollars) |
2021 |
2020 |
2021 |
2020 |
|
Multi-suite residential |
$52,059 |
$52,265 |
$204,143 |
$227,565 |
|
Retail |
31,447 |
28,586 |
116,741 |
116,201 |
|
Office |
32,391 |
33,053 |
131,675 |
131,836 |
|
Industrial |
1,911 |
1,981 |
7,459 |
7,264 |
|
Hotel |
2,839 |
233 |
27,744 |
8,377 |
|
Adjusted NOI |
120,647 |
116,118 |
487,762 |
491,243 |
|
Other Revenue |
||||
|
Management and advisory fees |
13,252 |
10,460 |
45,302 |
42,080 |
|
Interest and other income |
4,420 |
4,540 |
22,934 |
15,739 |
|
Equity-accounted FFO |
656 |
1,303 |
(191) |
5,145 |
|
18,328 |
16,303 |
68,045 |
62,964 |
|
|
Expenses and Other |
||||
|
Interest |
(54,190) |
(57,677) |
(220,312) |
(236,721) |
|
Principal repayment of lease liabilities |
(379) |
(438) |
(1,756) |
(1,722) |
|
Property management and corporate |
(20,022) |
(19,996) |
(80,201) |
(59,607) |
|
Internal leasing costs |
1,183 |
1,416 |
3,502 |
3,795 |
|
Amortization of capital assets |
896 |
(842) |
(1,593) |
(3,467) |
|
Current income taxes |
(14,498) |
1,816 |
(21,488) |
(3,890) |
|
Non-controlling interests’ share of FFO |
(14,131) |
(13,936) |
(55,244) |
(56,985) |
|
Unrealized changes in the fair value of financial instruments |
5,808 |
18,808 |
6,006 |
(33,637) |
|
Other income (expense) |
230 |
650 |
3,199 |
(773) |
|
FFO |
$43,872 |
$62,222 |
$187,920 |
$161,200 |
|
FFO per common share amounts â basic and diluted |
$3.95 |
$5.60 |
$16.93 |
$14.39 |
|
Weighted average number of common shares outstanding (in thousands): |
||||
|
Basic and diluted |
11,101 |
11,115 |
11,101 |
11,205 |
|
Three months ended |
Year ended |
|||
|
December 31 |
December 31 |
|||
|
(in thousands of dollars) |
2021 |
2020 |
2021 |
2020 |
|
FFO (from above) |
$43,872 |
$62,222 |
$187,920 |
$161,200 |
|
Add/(deduct): |
||||
|
Unrealized changes in the fair value of financial instruments |
(5,808) |
(18,808) |
(6,006) |
33,637 |
|
SARs plan increase (decrease) in compensation expense |
641 |
1,832 |
3,971 |
(12,161) |
|
Sears settlement, net of non-controlling interest |
â |
â |
(1,238) |
â |
|
Lease cancellation fee and other |
(730) |
(924) |
(3,258) |
(1,582) |
|
Tax effect of above adjustments |
(99) |
111 |
(247) |
111 |
|
Current tax on redemption of Class C LP units |
12,935 |
â |
12,935 |
â |
|
Normalized FFO |
$50,811 |
$44,433 |
$194,077 |
$181,205 |
|
Per common share amounts â basic and diluted |
$4.58 |
$4.00 |
$17.48 |
$16.17 |
First Quarter Dividend
The Board of Directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2022 in the amount of $0.15 per common share will be paid on March 31, 2022, to shareholders of record at the close of business on March 15, 2022.
Subsequent Event
On February 1, 2022, the Company completed the refinancing of two multi-suite residential properties located in Mississauga, Ontario, in the amount of $47.5 million at an interest rate of 2.85% for a term of ten years. The maturing mortgages amounted to $19.8 million and had an interest rate of 2.99%.
The Company’s audited financial statements for the year ended December 31, 2021, 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.
About Morguard Corporation
Morguard Corporation is a real estate company, with total assets owned and under management valued at $19.6 billion. As at February 24, 2022, Morguard owns a diversified portfolio of 197 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,752 residential suites, approximately 16.8 million square feet of commercial leasable space and 5,058 hotel rooms. Morguard also currently owns a 60.9% interest in Morguard Real Estate Investment Trust and a 44.7% 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
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