MISSISSAUGA, ON, Aug. 3, 2022 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) is pleased to announce its consolidated financial results for the three and six months ended June 30, 2022.
Reporting Highlights
- Net income increased by $231.9 million to $248.1 million for the three months ended June 30, 2022, compared to $16.2 million for the same period in 2021.
- Normalized funds from operations ("Normalized FFO") was $52.4 million, or $4.72 per common share, for the three months ended June 30, 2022. This represents an increase of $11.0 million, or 26.7%, compared to $41.4 million for the same period in 2021.
- Total revenue from real estate properties increased by $15.3 million, or 7.3%, to $224.0 million for the three months ended June 30, 2022, compared to $208.7 million for the same period in 2021.
- Total revenue from hotel properties increased by $15.4 million, or 51.1%, to $45.5 million for the three months ended June 30, 2022, compared to $30.1 million for the same period in 2021.
- Net operating income ("NOI") increased by $7.2 million, or 5.3%, to $141.7 million for the three months ended June 30, 2022, compared to $134.5 million for the same period in 2021, primarily due to an increase in average market rent ("AMR") and lower vacancy at multi-suite residential properties.
Operational and Balance Sheet Highlights
- On June 6, 2022, the Company sold a multi-suite residential property located in Atlanta, Georgia, comprising 292 suites, for net proceeds of $93.2 million (US$74.2 million), including closing costs and repaid the mortgage payable secured by the property in the amount of $27.0 million (US$21.5 million).
- On June 30, 2022, the Company acquired an office property consisting of 163,580 square feet located in Ottawa, Ontario, for a purchase price of $65.9 million, including closing costs.
- During the quarter, the Company sold four hotels for gross proceeds of $40.1 million. At closing, the Company repaid three first mortgage loans totalling $26.1 million that were secured by the hotels.
- During the quarter, the Company entered into a binding agreement to sell a multi-suite residential property located in Slidell, Louisiana, for gross proceeds of $34.2 million (US$26.6 million). The Company expects to close the sale of the property during the third quarter, at which time the mortgage payable secured by the property in the amount of $9.9 million (US$7.7 million) will be repaid.
- During the quarter, the Company entered into a conditional agreement to sell a multi-suite residential property located in Coconut Creek, Florida, comprising 340 suites, for gross proceeds of $118.6 million (US$92.0 million). The Company expects to close the sale of the property during the third quarter, at which time the mortgage payable secured by the property in the amount of $26.6 million (US$20.7 million) will be repaid.
- During the quarter, 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 June 30, 2022 the Company's total assets were $12.1 billion, compared to $11.5 billion at December 31, 2021.
Financial Highlights
|
Three months ended
|
Six months ended
|
|
June 30
|
June 30
|
|
(in thousands of dollars)
|
2022
|
2021
|
2022
|
2021
|
|
Revenue from real estate properties
|
$224,003
|
$208,691
|
$446,596
|
$420,055
|
|
Revenue from hotel properties
|
45,516
|
30,116
|
73,567
|
52,264
|
|
Management and advisory fees
|
10,161
|
11,500
|
20,423
|
21,626
|
|
Interest and other income
|
3,089
|
3,459
|
7,120
|
6,783
|
|
Total revenue
|
$282,769
|
$253,766
|
$547,706
|
$500,728
|
|
|
|
|
|
|
Revenue from real estate properties
|
$224,003
|
$208,691
|
$446,596
|
$420,055
|
|
Revenue from hotel properties
|
45,516
|
30,116
|
73,567
|
52,264
|
|
Property operating expenses
|
(92,519)
|
(84,058)
|
(235,269)
|
(213,006)
|
|
Hotel operating expenses
|
(35,264)
|
(20,204)
|
(63,067)
|
(38,294)
|
|
Net operating income
|
$141,736
|
$134,545
|
$221,827
|
$221,019
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
$232,708
|
$16,498
|
$438,977
|
$31,653
|
|
Net income per common share – basic and diluted
|
$20.96
|
$1.48
|
$39.55
|
$2.85
|
|
|
|
|
|
|
Funds from operations(1)
|
$40,980
|
$46,880
|
$82,847
|
$91,231
|
|
FFO per common share – basic and diluted(1)
|
$3.69
|
$4.22
|
$7.46
|
$8.22
|
|
|
|
|
|
|
Normalized funds from operations(1)
|
$52,394
|
$41,369
|
$95,265
|
$84,593
|
|
Normalized FFO per common share – basic and diluted(1)
|
$4.72
|
$3.73
|
$8.58
|
$7.62
|
|
(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 three and six months ended June 30, 2022 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
|
Six months ended
|
|
June 30
|
June 30
|
|
(in thousands of dollars)
|
2022
|
2021
|
2022
|
2021
|
|
Multi-suite residential
|
$57,864
|
$51,277
|
$112,643
|
$102,026
|
|
Retail
|
28,838
|
27,912
|
56,236
|
56,134
|
|
Office
|
30,962
|
32,787
|
62,094
|
66,306
|
|
Industrial
|
2,111
|
1,715
|
4,231
|
3,496
|
|
Hotel
|
10,252
|
9,912
|
10,500
|
13,970
|
|
Adjusted NOI
|
130,027
|
123,603
|
245,704
|
241,932
|
|
IFRIC 21 adjustment - multi-suite residential
|
10,414
|
9,643
|
(21,318)
|
(18,216)
|
|
IFRIC 21 adjustment - retail
|
1,295
|
1,299
|
(2,559)
|
(2,697)
|
|
NOI
|
$141,736
|
$134,545
|
$221,827
|
$221,019
|
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
|
Six months ended
|
|
June 30
|
June 30
|
|
(in thousands of dollars)
|
2022
|
2021
|
2022
|
2021
|
|
Multi-suite residential
|
$57,864
|
$51,277
|
$112,643
|
$102,026
|
|
Retail
|
28,838
|
27,912
|
56,236
|
56,134
|
|
Office
|
30,962
|
32,787
|
62,094
|
66,306
|
|
Industrial
|
2,111
|
1,715
|
4,231
|
3,496
|
|
Hotel
|
10,252
|
9,912
|
10,500
|
13,970
|
|
Adjusted NOI
|
130,027
|
123,603
|
245,704
|
241,932
|
|
Other Revenue
|
|
|
|
|
|
Management and advisory fees
|
10,161
|
11,500
|
20,423
|
21,626
|
|
Interest and other income
|
3,089
|
3,459
|
7,120
|
6,783
|
|
Equity-accounted FFO
|
1,364
|
(322)
|
2,526
|
(1,104)
|
|
14,614
|
14,637
|
30,069
|
27,305
|
|
Expenses and Other
|
|
|
|
|
|
Interest
|
(55,302)
|
(55,247)
|
(110,186)
|
(111,213)
|
|
Principal repayment of lease liabilities
|
(345)
|
(424)
|
(721)
|
(873)
|
|
Property management and corporate
|
(16,789)
|
(24,348)
|
(37,303)
|
(43,644)
|
|
Internal leasing costs
|
1,237
|
929
|
1,958
|
1,699
|
|
Amortization of capital assets
|
(377)
|
(798)
|
(768)
|
(1,633)
|
|
Current income taxes
|
(993)
|
(4,621)
|
(1,544)
|
(5,453)
|
|
Non-controlling interests' share of FFO
|
(15,075)
|
(13,025)
|
(29,122)
|
(27,520)
|
|
Unrealized changes in the fair value of financial instruments
|
(15,195)
|
5,866
|
(16,553)
|
7,834
|
|
Other income (expense)
|
(822)
|
308
|
1,313
|
2,797
|
|
FFO
|
$40,980
|
$46,880
|
$82,847
|
$91,231
|
|
FFO per common share amounts – basic and diluted
|
$3.69
|
$4.22
|
$7.46
|
$8.22
|
|
Weighted average number of common shares outstanding (in thousands):
|
|
Basic and diluted
|
11,100
|
11,100
|
11,100
|
11,100
|
|
|
|
|
Three months ended
|
Six months ended
|
|
June 30
|
June 30
|
|
(in thousands of dollars)
|
2022
|
2021
|
2022
|
2021
|
|
FFO (from above)
|
$40,980
|
$46,880
|
$82,847
|
$91,231
|
|
Add/(deduct):
|
|
|
|
|
|
Unrealized changes in the fair value of financial instruments
|
15,195
|
(5,866)
|
16,553
|
(7,834)
|
|
SARs plan increase (decrease) in compensation expense
|
(3,850)
|
4,069
|
(3,400)
|
4,525
|
|
Sears settlement, net of non-controlling interest
|
—
|
—
|
—
|
(1,238)
|
|
Lease cancellation fee and other
|
(80)
|
(3,622)
|
(1,032)
|
(1,999)
|
|
Tax effect of above adjustments
|
149
|
(92)
|
297
|
(92)
|
|
Normalized FFO
|
$52,394
|
$41,369
|
$95,265
|
$84,593
|
|
Per common share amounts – basic and diluted
|
$4.72
|
$3.73
|
$8.58
|
$7.62
|
Third Quarter Dividend
The Board of Directors of Morguard Corporation announced that the third quarterly, eligible dividend of 2022 in the amount of $0.15 per common share will be paid on September 29, 2022, to shareholders of record at the close of business on September 15, 2022.
Subsequent Events
On July 1, 2022, the Company completed the refinancing of a multi-suite residential property located in Palm Beach County, Florida, in the amount of $59.9 million (US$46.5 million) at an interest rate of 4.19% and for a term of 10 years. The maturing mortgage amounts to $30.2 million (US$23.5 million), was open and prepayable at no penalty before its scheduled maturity on October 1, 2022, and had an interest rate of 3.78%.
Subsequent to June 30, 2022, the Company sold a hotel property located in Saskatoon, Saskatchewan for gross proceeds of $4.3 million, excluding closing costs. The purchase price was satisfied with cash of $0.8 million and a promissory note receivable of $3.5 million.
The Company entered into a binding agreement to acquire a multi-suite residential property comprising 350 suites in Chicago, Illinois, for a purchase price of $171.4 million (US$133.0 million), excluding closing costs. The acquisition is expected to close during the third quarter of 2022.
The Company's unaudited financial statements for the three and six months ended June 30, 2022, 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 $19.4 billion. As at August 3, 2022, Morguard owns a diversified portfolio of 189 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,460 residential suites, approximately 16.9 million square feet of commercial leasable space and 3,944 hotel rooms. Morguard also currently owns a 60.8% 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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