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Morguard Corporation Announces 2017 First Quarter Results and Regular Eligible Dividend

T.MRC | May 9, 2017

Canada NewsWire

MISSISSAUGA, ON, May 9, 2017

MISSISSAUGA, ON, May 9, 2017 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the three months ended March 31, 2017.

Reporting Highlights:

Total revenue increased by $38.8 million to $270.9 million compared to $232.1 million for the same period in 2016.
NOI increased by $8.3 million, or 8.9%, to $101.1 million compared to $92.8 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 $0.1 million to $47.6 million for the three months ended March 31, 2017, compared to $47.7 million for the same period in 2016, representing a 0.2% decrease.
On a per common share basis, FFO increased to $3.99 for the three months ended March 31, 2017, compared to $3.98 in 2016, representing an increase of 0.3%.
Shareholders' equity per common share (excluding non-controlling interest) increased to $240.77 compared to $239.98 as at December 31, 2016.
On January 16, 2017, the Company completed the financing of a multi-suite residential property located in Toronto, Ontario, in the amount of $168.4 million. The proceeds of the financing were used to repay the remaining construction financing facility balance of $93.0 million.
On February 1, 2017, the Company repaid on maturity, four mortgages in the amount of $59.3 million (US$45.3 million) secured by four multi-suite residential properties located in Mobile, Alabama.
Redeemed the remaining $150.0 million Morguard REIT 4.85% convertible debentures, of which $50.0 million was owned by the Company.
Redeemed the remaining $22.8 million Temple Series C convertible debentures on maturity.

Financial Highlights

For the three months ended March 31
(in thousands of dollars, except per common share)	2017	2016
Revenue from real estate	$196,518	$195,814
Revenue from hotel properties	52,255	13,824
Management and advisory fees	18,964	20,194
Interest and other income	1,960	1,011
Sales of product and land	1,242	1,275
Total revenues	$270,939	$232,118

Revenue from real estate properties	$196,518	$195,814
Revenue from hotel properties	52,255	13,824
Property operating expenses	(105,770)	(104,920)
Hotel operating expenses	(41,910)	(11,915)
Net operating income	$101,093	$92,803

Funds from operations	$47,601	$47,678
FFO per common share – basic and diluted	$3.99	$3.98

Normalized funds from operations	$46,755	$47,172
Per common share amounts – basic and diluted	$3.92	$3.94

Net income (loss) attributable to common shareholders	$15,742	($7,106)
Net income (loss) per common share – basic and diluted	$1.32	($0.59)

Net Income

Net income for the three months ended March 31, 2017, was $32.5 million compared to net income of $12.1 million in 2016. The increase in net income of $20.4 million for the three months ended March 31, 2017, was primarily due to the following:

An increase in net operating income of $8.3 million, primarily due to the consolidation of Temple;
A decrease in management and advisory fees of $1.2 million;
An increase in interest expense of $7.9 million, primarily due to the consolidation of Temple;
A decrease in property management and corporate expense of $0.7 million;
An increase in amortization of hotel properties of $4.8 million, primarily due to the consolidation of Temple;
An increase in non-cash net fair value gain of $31.6 million;
A decrease in non-cash equity loss of $3.1 million;
A decrease in other income (expense) of $6.4 million; and
An increase in income taxes (current and deferred) of $4.0 million.

Net Operating Income ("NOI")

NOI increased by $8.3 million, or 8.9%, during the three months ended March 31, 2017, to $101.1 million, compared to $92.8 million generated in 2016, and is further analyzed by asset type below.

For the three months ended March 31
(in thousands of dollars)	2017	2016
Multi-suite residential	$44,110	$41,418
Retail	32,611	35,165
Office	31,887	31,235
Industrial	1,604	1,767
Hotel	10,345	1,909
Adjusted NOI	120,557	111,494
IFRIC 21 adjustment – multi-suite residential	(15,632)	(14,914)
IFRIC 21 adjustment – retail	(3,832)	(3,777)
NOI	$101,093	$92,803

Adjusted NOI for the three months ended March 31, 2017, increased by $9.1 million to $120.6 million compared to $111.5 million in 2016 primarily due to the following:

An increase in the Canadian residential portfolio of $0.8 million primarily from rental rate growth and improved occupancy;
An increase of $0.3 million due to acquisition of 160 Chapel located in Ottawa, Ontario on February 1, 2016;
Additional NOI of $1.2 million generated from the lease-up of the Company's completed development property, The Heathview, a 587 suite rental development in Toronto, Ontario;
An increase in U.S. residential portfolio of US$0.9 million primarily from rental rate growth and improved occupancy;
A decrease of $2.6 million in Canadian and U.S. retail properties due to lower base rent and recoveries, higher vacancy at two properties and the sale of one U.S. property during first quarter in 2016;
An increase in the office portfolio of $0.7 million is due to an increase in lease cancellation fees of $0.9 million and $0.3 million due to improved occupancy, partially offset by a decrease of $0.4 million due to the sale of a property during the second quarter of 2016;
A decrease in the industrial portfolio by $0.2 million is due to increased vacancy at two industrial properties;
An increase in the hotel portfolio by $8.4 million is mainly due to the consolidation of Temple and the acquisition of three hotels near Toronto's Pearson International Airport in February 2016; and
A decrease of $1.1 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended March 31, 2017, the Company recorded FFO of $47.6 million ($3.99 per common share), compared to $47.7 million ($3.98 per common share) in 2016. The decrease in FFO of $0.1 million is mainly due to the following:

Higher Adjusted NOI of $9.1 million, primarily due to the consolidation of Temple;
Lower management and advisory fees of $1.2 million;
A decrease in equity-accounted FFO of $3.6 million;
An increase in interest expense of $7.9 million, primarily due to the consolidation of Temple;
Lower property management and corporate expense of $0.7 million;
A decrease in current taxes of $1.2 million;
A decrease in non-controlling interest share of Morguard Residential REIT of $1.1 million; and
Lower non-controlling interest's share of FFO of $1.2 million.

The change in foreign exchange rates had a negative impact on FFO of $0.5 million ($0.04 per common share).

Normalized FFO for the three months ended March 31, 2017, was $46.8 million, or $3.92 per common share, versus $47.2 million, or $3.94 per common share, for the same period in 2016, which represents a decrease of $0.4 million or 0.9%. Normalized FFO is computed as FFO adjusted for the impact of non-recurring items net of tax.

Subsequent Event

The Company entered into a binding agreement to acquire a newly-constructed property comprising 60 rental townhomes located in Toronto, Ontario, for a gross purchase price of $15.8 million. The acquisition is expected to close during the second quarter of 2017.

Second Quarter Dividend

The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2017 in the amount of $0.15 per common share will be paid on June 30, 2017, to shareholders of record at the close of business on June 15, 2017.

The Company's unaudited condensed consolidated financial statements for the three months ended March 31, 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 months ended March 31, 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 $21.6 billion. Morguard owns a diversified portfolio of 205 multi-suite residential, retail, office, industrial and hotel properties comprised of 18,287 residential suites, approximately 16.0 million square feet of commercial leasable space and 5,647 hotel rooms. Morguard also currently owns a 53.1% 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