TSX: MRC
MISSISSAUGA, ON, Aug. 13, 2014 /CNW/ - Morguard Corporation ("Morguard"
or the "Company") (TSX: MRC) announced its financial results for the
three months ended June 30, 2014.
HIGHLIGHTS
-
Total revenue from real estate properties increased by 13.9% to $116.6
million compared to $102.3 million in 2013.
-
Normalized net operating income ("Normalized NOI"), which excludes the
impact of IFRIC 21 and land rent arbitration expense, increased by
11.4% to $62.0 million compared to $55.6 million for the same period in
2013.
-
Normalized funds from operations ("Normalized FFO"), which excludes
non-recurring items, increased by 5.8% to $44.1 million for the quarter
ended June 30, 2014 compared to $41.7 million for the same period in
2013.
-
Net income increased to $32.3 million in 2014 compared to $23.2 million
in 2013.
-
Occupancy rates increased as compared to June 30, 2013. Combined
retail, office and industrial occupancy were 92.9% at June 30, 2014,
compared to 92.7% at June 30, 2013. Combined multi-unit residential
occupancy was 96.1% at June 30, 2014, compared to 95.5% at June 30,
2013.
-
Strong leasing activity at the Company's two developments: (1)
Performance Court, Ottawa, Ontario is now 84% leased and tenant
occupancies commenced in Q1 2014 and (2) The Heathview, Toronto,
Ontario is now 32% leased (Phase 1) with tenant occupancies commencing
in Q3 2014.
All amounts in thousands of Canadian dollars, except for per share
amounts, unless otherwise noted.
FINANCIAL HIGHLIGHTS
|
|
Three months ended
June 30
|
Six months ended
June 30
|
|
(in thousands of dollars)
|
2014
|
2013
|
2014
|
2013
|
|
Revenue from income producing properties
|
$116,556
|
$102,324
|
$234,759
|
$194,012
|
|
Management and advisory fees
|
16,302
|
15,929
|
32,499
|
32,156
|
|
Interest and other
|
2,983
|
4,737
|
7,290
|
6,695
|
|
Sales of product and land
|
1,231
|
6,820
|
2,516
|
8,044
|
|
Total revenues
|
137,072
|
129,810
|
277,064
|
240,907
|
|
|
|
|
|
|
|
Revenue from income producing properties
|
116,556
|
102,324
|
234,759
|
194,012
|
|
Property operating costs and realty tax expense
|
(50,083)
|
(43,370)
|
(120,164)
|
(95,181)
|
|
Land lease arbitration expense
|
(2,046)
|
(20,158)
|
(4,092)
|
(20,513)
|
|
Net operating income
|
64,427
|
38,796
|
110,503
|
78,318
|
|
IFRIC 21 and land rent arbitration expense
|
(2,459)
|
16,807
|
13,298
|
25,075
|
|
Normalized net operating income
|
$61,968
|
$55,603
|
$123,801
|
$103,393
|
|
|
|
|
|
|
|
Consolidated funds from operations (FFO)
|
$35,380
|
$24,044
|
$79,292
|
$74,302
|
|
Per share - basic and diluted
|
$2.83
|
$1.89
|
$6.32
|
$5.83
|
|
|
|
|
|
|
|
Normalized FFO
|
$44,141
|
$41,719
|
$88,053
|
$79,373
|
|
Per share - basic and diluted
|
$3.53
|
$3.25
|
$7.02
|
$6.23
|
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
$32,141
|
$22,971
|
$58,771
|
$122,547
|
|
|
|
|
|
|
|
Per share - basic and diluted
|
$2.57
|
$1.81
|
$4.69
|
$9.62
|
NET INCOME
The Company's net income attributable to common shareholders for the
three months ended June 30, 2014, was $32,141 ($2.57 per share)
compared to $22,971 ($1.81 per share) for the same period in 2013. The
increase in net income of $9,170 for the three months ended June 30,
2014, was primarily due to an increase in net operating income of
$25,631 and an increase in fair value gains of $19,264. These items
were partially offset by an increase in interest expense of $2,767, an
increase in property management and corporate expenses of $2,257, an
increase in other expense of $4,528, a decrease in equity income from
investments of $7,619, a decrease in net profit from sale of product
and land of $2,007, a decrease in interest and other income of $1,754
and an increase in income taxes of $14,944.
NET OPERATING INCOME
|
Three months ended June 30,
|
2014
|
2013
|
|
(In thousands of dollars)
|
NOI
|
Adjustments
|
Normalized
NOI
|
NOI
|
Adjustments
|
Normalized
NOI
|
|
Net operating income - Canadian properties
|
|
|
|
|
|
|
|
Multi-unit residential - Canada
|
$14,355
|
$266
|
$14,621
|
$11,965
|
$2,621
|
$14,586
|
|
Retail - Canada
|
7,445
|
1,739
|
9,184
|
(7,130)
|
17,134
|
10,004
|
|
Office and industrial
|
10,332
|
41
|
10,373
|
9,611
|
403
|
10,014
|
|
Hotel
|
2,643
|
-
|
2,643
|
1,185
|
-
|
1,185
|
|
|
34,775
|
2,046
|
36,821
|
15,631
|
20,158
|
35,789
|
|
Net operating income - U.S. properties in U.S. dollars
|
|
|
|
|
|
|
|
Multi-unit residential - U.S.
|
20,194
|
(3,203)
|
16,991
|
15,784
|
(2,333)
|
13,451
|
|
Retail - U.S.
|
7,018
|
(943)
|
6,075
|
6,856
|
(944)
|
5,912
|
|
|
27,212
|
(4,146)
|
23,066
|
22,640
|
(3,277)
|
19,363
|
|
Exchange amount to Canadian dollars
|
2,440
|
(359)
|
2,081
|
525
|
(74)
|
451
|
|
Net operating income - U.S. properties in Canadian dollars
|
29,652
|
(4,505)
|
25,147
|
23,165
|
(3,351)
|
19,814
|
|
Net operating income
|
$64,427
|
($2,459)
|
$61,968
|
$38,796
|
$16,807
|
$55,603
|
|
Six months ended June 30,
|
2014
|
2013
|
|
(In thousands of dollars)
|
NOI
|
Adjustments
|
Normalized
NOI
|
NOI
|
Adjustments
|
Normalized
NOI
|
|
Net operating income - Canadian properties
|
|
|
|
|
|
|
|
Multi-unit residential - Canada
|
$27,343
|
$532
|
$27,875
|
$25,391
|
$2,667
|
$28,058
|
|
Retail - Canada
|
13,881
|
3,478
|
17,359
|
779
|
17,436
|
18,215
|
|
Office and industrial
|
24,197
|
82
|
24,279
|
19,275
|
410
|
19,685
|
|
Hotel
|
4,429
|
-
|
4,429
|
1,876
|
-
|
1,876
|
|
|
69,850
|
4,092
|
73,942
|
47,321
|
20,513
|
67,834
|
|
Net operating income - U.S. properties in U.S. dollars
|
|
|
|
|
|
|
|
Multi-unit residential - U.S.
|
26,991
|
6,367
|
33,358
|
20,568
|
2,634
|
23,202
|
|
Retail - U.S.
|
10,189
|
1,910
|
12,099
|
9,839
|
1,937
|
11,776
|
|
|
37,180
|
8,277
|
45,457
|
30,407
|
4,571
|
34,978
|
|
Exchange amount to Canadian dollars
|
3,473
|
929
|
4,402
|
590
|
(9)
|
581
|
|
Net operating income - U.S. properties in Canadian dollars
|
40,653
|
9,206
|
49,859
|
30,997
|
4,562
|
35,559
|
|
Net operating income
|
$110,503
|
$13,298
|
$123,801
|
$78,318
|
$25,075
|
$103,393
|
Normalized NOI adjusts for the impact of IFRIC 21 by recognizing realty
taxes on a pro rated basis over the entire year or the period of
ownership for the properties acquired during the year and excludes land
rent arbitration expense. Normalized NOI for the three months ended
June 30, 2014, increased by $6.4 million to $62.0 million compared to
$55.6 million in 2013, representing an increase of 11.4%. The increase
was predominantly the result of the acquisitions of the Canadian
multi-unit residential property, the five hotel properties and the 12
U.S. multi-unit residential properties purchased in 2013 and the
industrial development project completed in 2013 which increased NOI by
$10.9 million.
CONSOLIDATED FUNDS FROM OPERATIONS ("Consolidated FFO")
The Company's consolidated FFO includes funds available to
non-controlling interests and was calculated as follows:
|
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
(In thousands of dollars except for per share amounts)
|
2014
|
2013
|
2014
|
2013
|
|
Net income attributable to common shareholders
|
$32,141
|
$22,971
|
$58,771
|
$122,547
|
|
Items not affecting cash:
|
|
|
|
|
|
Fair value (gain) loss on real estate properties
|
(19,369)
|
38,052
|
(31,309)
|
3,742
|
|
Fair value loss (gain) on Morguard Residential REIT Units, net
|
15,450
|
(22,892)
|
22,741
|
(28,153)
|
|
Fair value gain on Morguard REIT 2012 debentures
|
(205)
|
-
|
(680)
|
-
|
|
Fair value loss of conversion option of convertible debentures
|
18
|
-
|
95
|
-
|
|
Distribution to Morguard Residential REIT's external unitholders
|
3,577
|
3,575
|
7,154
|
6,408
|
Non-controlling interests' share of fair value gain on real
estate properties
|
(97)
|
(115)
|
(87)
|
(194)
|
|
Deferred income taxes
|
12,534
|
(5,381)
|
17,819
|
(4,526)
|
|
Depreciation on hotel buildings
|
912
|
527
|
1,813
|
1,017
|
|
Depreciation on owner occupied property
|
26
|
26
|
52
|
52
|
|
Equity income from Morguard REIT
|
(15,300)
|
(22,197)
|
(31,427)
|
(54,722)
|
|
Morguard REIT's equity accounted FFO
|
12,390
|
10,553
|
23,685
|
21,243
|
|
Transaction costs incurred on business combination
|
-
|
1,829
|
-
|
1,829
|
|
Foreign exchange (gain) loss
|
(2,535)
|
-
|
1,060
|
-
|
|
Internal leasing costs
|
343
|
447
|
399
|
497
|
|
Realty tax expense accounted for under IFRIC 21
|
(4,505)
|
(3,351)
|
9,206
|
4,562
|
|
Consolidated FFO
|
$35,380
|
$24,044
|
$79,292
|
$74,302
|
|
Consolidated FFO per share amounts - basic and diluted
|
$2.83
|
$1.89
|
$6.32
|
$5.83
|
|
Consolidated FFO - Morguard's Share
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated FFO (from above)
|
$35,380
|
$24,044
|
$79,292
|
$74,302
|
|
Less non-controlling interest: Morguard Residential REIT
|
(5,888)
|
(4,195)
|
(11,396)
|
(7,460)
|
|
Consolidated FFO - Morguard's share
|
$29,492
|
$19,849
|
$67,896
|
$66,842
|
|
Per share amounts - basic and diluted
|
$2.36
|
$1.56
|
$5.41
|
$5.25
|
For the three months ended June 30, 2014, the Company recorded
consolidated FFO of $35,380 ($2.83 per share) compared to $24,044
($1.89 per share) in 2013. The increase in consolidated FFO of $11,336,
which reflects a 47.2% increase, is mainly due to an increase in net
operating income excluding the impact of IFRIC 21 of $24,477 and a
decrease in current taxes of $2,971. These items were partially offset
by a decrease in interest and other income of $1,754, an increase in
interest expense of $2,767, an increase in property management and
corporate expenses of $2,257, an increase in other expense of $7,063
(net of the foreign exchange gain) and a decrease in net profit from
sale of product and land of $2,007. The change in foreign exchange
rates had a positive impact on FFO of $924 ($0.07 per share).
Normalized funds from operations ("Normalized FFO"), for the three
months ended June 30, 2014 excludes the net of tax impact of the
non-recurring items (i) impairment of investment in 2014 of $8,761 (ii)
the arbitration settlement received in 2013 of $592 and (iii) the
increase in the land rent arbitration expense of $18,112 in 2013.
Normalized FFO for the three months ended June 30, 2014, would have
been $44,141 or $3.53 per share versus $41,719 or $3.28 per share for
the same period in 2013, which represents an increase in Normalized FFO
of $2,422 or 5.8%.
Morguard's share of consolidated FFO for the six months ended June 30,
2014, totalled $67,896 or $5.41 per share, compared to $66,842 or $5.25
per share in 2013, which represents a increase of $1,054 or 1.6%.
THIRD QUARTER DIVIDEND
The board of directors of Morguard Corporation announced today that the
third quarterly, eligible dividend of 2014 in the amount of $0.15 per
common share will be paid on September 30, 2014 to shareholders of
record at the close of business on September 15, 2014.
Readers are cautioned that although the terms "Net Operating Income",
"Normalized NOI", "Funds From Operations" and "Normalized FFO" 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 June 30, 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 123 multi-unit residential, retail, hotel, office and
industrial properties comprising of 16,099 multi-unit residential
suites, 1,056 hotel rooms and approximately 7.4 million square feet of
commercial leasable space. Morguard Corporation also owns a 44.8%
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
