MISSISSAUGA, ON, Nov. 4, 2021 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) today announced its financial results for the three and nine months ended September 30, 2021.
Morguard is pleased to report its financial and operating results for the three and nine months ended September 30, 2021, that demonstrate the resilient nature of the Company's portfolio and also reflect the prudent actions taken by management and staff in our continued response to the ongoing COVID-19 pandemic.
Reporting Highlights
- Net income increased by $146.4 million to $108.8 million for the three months ended September 30, 2021, compared to a net loss of $37.6 million for the same period in 2020. The increase was primarily due to an increase in net fair value gain of $189.5 million, partially offset by an increase in deferred income tax expense of $46.5 million and an increase in impairment on hotel properties of $9.6 million.
- Normalized FFO was $58.7 million, or $5.29 per common share, for the three months ended September 30, 2021. This represents an increase of $14.9 million, or 34.1% compared to $43.8 million for the same period in 2020.
- Total revenue from real estate properties and hotels increased by $10.8 million, or 4.5% to $249.3 million for the three months ended September 30, 2021, compared to $238.5 million for the same period in 2020.
- Net operating income ("NOI") increased by $5.2 million, or 4.0%, to $135.4 million for the three months ended September 30, 2021, compared to $130.3 million for the same period in 2020, primarily due to higher NOI from the hotel portfolio due to increased revenue per available room ("RevPar") and many hotels being temporarily closed during 2020. In addition, higher NOI from the retail, office and industrial portfolio was mainly caused by lower bad debt expense. The increase in NOI was partially offset by a decrease in multi-suite residential NOI due to higher vacancies. The change in foreign exchange rate decreased NOI by $2.6 million.
Operational and Balance Sheet Highlights
- 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 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 September 30, 2021 the Company's total assets were $11.2 billion, compared to $11.1 billion at December 31, 2020.
- During the quarter, the Company sold four hotels, one located in Yellowknife, Northwest Territories and three located in Fort McMurray, Alberta for gross proceeds of $21.5 million.
- On September 29, 2021, the Company sold an unenclosed retail property located in London, Ontario, for gross proceeds of $15.0 million.
Financial Highlights
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
(in thousands of dollars, except per common share)
|
2021
|
2020
|
2021
|
2020
|
|
Revenue from real estate properties
|
$210,557
|
$216,706
|
$630,612
|
$663,449
|
|
Revenue from hotel properties
|
38,723
|
21,780
|
90,987
|
78,416
|
|
Management and advisory fees
|
10,424
|
9,342
|
32,050
|
31,620
|
|
Interest and other income
|
11,731
|
3,641
|
18,514
|
11,199
|
|
Total revenue
|
$271,435
|
$251,469
|
$772,163
|
$784,684
|
|
|
|
|
|
|
Revenue from real estate properties
|
$210,557
|
$216,706
|
$630,612
|
$663,449
|
|
Revenue from hotel properties
|
38,723
|
21,780
|
90,987
|
78,416
|
|
Property operating expenses – excluding bad debt expense
|
(85,718)
|
(82,819)
|
(295,392)
|
(289,598)
|
|
Property operating expenses – bad debt expense
|
(329)
|
(8,554)
|
(3,661)
|
(17,952)
|
|
Hotel operating expenses
|
(27,788)
|
(16,845)
|
(66,082)
|
(70,272)
|
|
Net operating income
|
$135,445
|
$130,268
|
$356,464
|
$364,043
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
$102,626
|
($4,606)
|
$134,279
|
($36,590)
|
|
Net income (loss) per common share – basic and diluted
|
$9.25
|
($0.42)
|
$12.10
|
($3.26)
|
|
|
|
|
|
|
Funds from operations
|
$52,817
|
$43,104
|
$144,048
|
$98,978
|
|
FFO per common share – basic and diluted
|
$4.76
|
$3.84
|
$12.98
|
$8.81
|
|
|
|
|
|
|
Normalized funds from operations
|
$58,673
|
$43,756
|
$143,266
|
$136,772
|
|
Normalized FFO per common share – basic and diluted
|
$5.29
|
$3.91
|
$12.91
|
$12.17
|
Rental Collection Summary
As at November 4, 2021, the Company's collection of rental revenues since January 1, 2020 is summarized below by asset class as follows:
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
Q3
|
October
|
% Rental
|
|
Asset Class
|
2020
|
2020
|
2020
|
2020
|
2021
|
2021
|
2021
|
2021
|
Revenue
|
|
Residential
|
99.8%
|
99.6%
|
99.4%
|
99.2%
|
99.1%
|
99.3%
|
98.2%
|
96.0%
|
44.5%
|
|
Retail
|
98.3%
|
62.4%
|
85.6%
|
90.5%
|
91.6%
|
93.2%
|
93.4%
|
91.1%
|
26.4%
|
|
Office
|
99.9%
|
92.8%
|
98.1%
|
97.7%
|
99.9%
|
99.0%
|
99.0%
|
97.8%
|
27.7%
|
|
Industrial
|
100.0%
|
93.5%
|
96.9%
|
99.6%
|
99.5%
|
99.2%
|
98.5%
|
89.4%
|
1.4%
|
|
Total
|
99.4%
|
86.6%
|
95.0%
|
96.2%
|
96.9%
|
97.5%
|
97.1%
|
95.1%
|
100.0%
|
Liquidity
The Company has liquidity of approximately $476 million comprised of $129 million in cash and $347 million available under its revolving credit facilities. In addition, the Company has approximately $1.1 billion of unencumbered income producing and hotel properties, and other investments which could be utilized for financing. To further enhance liquidity, the Company has narrowed down the scope of its capital expenditure program to ensure the availability of resources, allocating an amount that enables the Company to maintain the structural and overall safety of the properties. Management has also implemented various initiatives to reduce or defer operating expenses and is monitoring various government assistance programs in Canada and the U.S. structured to provide relief from personnel costs and commercial rent subsidies.
The Company has approximately $639 million of mortgages payable maturing during 2021 and 2022 having an aggregate loan-to-value ratio of 43% and a weighted-average interest rate of 3.73% which management expects to be able to refinance at similar or favourable terms. In addition, the Company has $200 million of senior unsecured debentures maturing in September 2022 and $115 million of MRT convertible debentures maturing in December 2021. The Company expects to be able to issue new debt instruments and use current liquidity sufficient to permit the repayment of its 2021 and 2022 maturities.
Net Operating Income
NOI increase by $5.2 million, or 4.0%, during the three months ended September 30, 2021, to $135.4 million, compared to $130.3 million generated in 2020, and is further analyzed by asset type below.
|
Three months ended
September 30
|
Nine months ended
September 30
|
|
(in thousands of dollars)
|
2021
|
2020
|
2021
|
2020
|
|
Multi-suite residential
|
$50,058
|
$54,551
|
$152,084
|
$175,300
|
|
Retail
|
29,160
|
26,714
|
85,294
|
87,615
|
|
Office
|
32,978
|
31,921
|
99,284
|
98,783
|
|
Industrial
|
2,052
|
1,711
|
5,548
|
5,283
|
|
Hotels
|
10,935
|
4,935
|
24,905
|
8,144
|
|
Adjusted NOI
|
125,183
|
119,832
|
367,115
|
375,125
|
|
IFRIC 21 adjustment – multi-suite residential
|
8,917
|
9,044
|
(9,299)
|
(9,711)
|
|
IFRIC 21 adjustment – retail
|
1,345
|
1,392
|
(1,352)
|
(1,371)
|
|
NOI
|
$135,445
|
$130,268
|
$356,464
|
$364,043
|
Adjusted NOI for the three months ended September 30, 2021, increase by $5.4 million, or 4.5% to $125.2 million, compared to $119.8 million in 2020, primarily due to the following:
- A decrease in the Canadian residential portfolio of $1.9 million, primarily due to increased vacancy as a result of lower leasing traffic resulting from social distancing restrictions and current economic conditions;
- A decrease in U.S. residential portfolio of US$0.7 million, primarily due to a decrease of US$2.1 million mainly due to higher vacancy and rental concessions at three properties located in Chicago, Illinois, partially offset by an increase of US$1.4 million mainly due to lower vacancy and higher average rental rates mainly at properties located in Florida;
- An increase in the Canadian retail portfolio of $2.4 million, mainly due to a decrease in bad debt expense of $6.2 million when compared to the same period in 2020, partially offset by a decrease of $3.2 million due to a higher proportion of tenants converting to percentage rent leases resulting in lower recoveries of operating expenses and lower basic rent;
- An increase in the office portfolio of $1.1 million, primarily due to an increase of $0.4 million in lease cancellation fees received, a decrease in bad debt expense of $1.5 million, partially offset by a decrease of $0.8 million due to lower recovery of operating expenses and higher vacancy;
- An increase in the hotel portfolio of $6.0 million, primarily due to an increase of $9.4 million mainly due to increased RevPar as the easing of pandemic restrictions positively impacted travel demand compared to hotel closures during 2020. In addition, three hotels designated under the Government Authorized Accommodation ("GAA") program provided an increase in RevPar, which was partially offset by a decrease of $2.6 million due to a provision for Canada Emergency Wage Subsidy ("CEWS"); and
- A decrease of $2.1 million due to the change in the U.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended September 30, 2021, the Company recorded FFO of $52.8 million ($4.76 per common share), compared to $43.1 million ($3.84 per common share) in 2020. The increase in FFO of $9.7 million is mainly due to the following:
- An increase in Adjusted NOI of $5.4 million;
- An increase in management and advisory fees of $1.1 million;
- An increase in interest and other income of $8.1 million, primarily due to a one-time special cash dividend from one of the Company's investments in marketable securities;
- A decrease in equity-accounted FFO of $1.0 million;
- A decrease in interest expense of $3.8 million mainly due to lower interest on mortgages payable and lower interest on the unsecured debentures;
- An increase in property management and corporate expenses of $2.5 million, primarily due to an increase in non-cash compensation expense related to the Company's Stock Appreciation Rights plan and a decrease in a provision for CEWS;
- An increase in current income taxes of $1.2 million; and
- A decrease in unrealized changes in the fair value of financial instruments of $3.3 million.
The change in foreign exchange rate had a negative impact on FFO of $0.9 million ($0.08 per common share).
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. Normalized FFO for the three months ended September 30, 2021, was $58.7 million, or $5.29 per common share, versus $43.8 million, or $3.91 per common share, for the same period in 2020, which represents an increase of $14.9 million, or 34.1%.
Subsequent Events
On October 27, 2021, the Company acquired the 40.9% interest not already owned in Lumina Hollywood, a mixed-use residential property comprising 299 suites and 52,000 square feet of commercial space located in Los Angeles, California, for a purchase price of US$79.4 million, excluding closing costs. Concurrent with the acquisition, the Company closed the mortgage financing in the amount of US$119 million (at the Company's 100% interest), with a fixed term of three years and a floating interest rate of LIBOR plus 2.50%.
On October 28, 2021, the Company entered into a binding commitment letter for the CMHC-insured refinancing on four residential properties, located in Toronto and Mississauga, Ontario, providing gross mortgage proceeds of up to $194.2 million and for a weighted average term of 10.5 years. The Company expects to close the refinancing on November 10, 2021, providing net mortgage proceeds of approximately $120 million before financing costs.
Fourth Quarter Dividend
The Board of Directors of Morguard Corporation announced that the fourth quarterly, eligible dividend of 2021 in the amount of $0.15 per common share will be paid on December 31, 2021, to shareholders of record at the close of business on December 15, 2021.
The Company's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 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.
Non-IFRS Measures
The Company's condensed 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 news 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 nine months ended September 30, 2021 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 $19.4 billion. As at November 4, 2021, Morguard owns a diversified portfolio of 198 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,752 residential suites, approximately 16.9 million square feet of commercial leasable space and 5,138 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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