Morguard Corporation Announces 2019 First Quarter Results and Regular Eligible Dividend

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Morguard Corporation

May 07, 2019, 16:50 ET

MISSISSAUGA, ON, May 7, 2019 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) today announced its financial results for the three months ended March 31, 2019.

Reporting Highlights

  • Total revenue increased by $15.8 million, or 5.8%, to $290.6 million for the three months ended March 31, 2019, compared to $274.8 million for the same period in 2018.

  • Net operating income ("NOI") increased by $4.8 million, or 4.8%, to $104.6 million for the three months ended March 31, 2019, compared to $99.8 million for the same period in 2018, primarily due to acquisitions completed during and subsequent to March 31, 2018 and the impact of the adoption of IFRS 16.

  • Net income decreased by $86.0 million to $39.0 million for the three months ended March 31, 2019, compared to $125.0 million for the same period in 2018, primarily from a decrease in non-cash net fair value gain of $75.1 million

  • Funds from operations ("FFO") increased by $3.7 million to $53.6 million or $4.74 per common share, for the three months ended March 31, 2019, compared to $49.9 million, or $4.32 per common share, for the same period in 2018, representing a 7.3% increase.

Operational and Balance Sheet Highlights:

  • On January 25, 2019, the Company issued $225.0 million of 4.715% Series E senior unsecured debentures due January 25, 2024.

  • During and subsequent to the three months ended March 31, 2019, the Company sold five multi-suite residential properties located in Louisiana, comprising 843 suites for net proceeds of $27.5 million, after the assumption and repayment of mortgages payable.

  • The adoption of IFRS 16 on January 1, 2019, resulted in the initial recognition of land and office right-of-use assets included in real estate properties ($153.6 million), hotel properties ($2.3 million) and other assets ($5.7 million) and their corresponding lease liabilities of $161.6 million.

  • During the three months ended March 31, 2019, 6,971 common shares were repurchased through the Company's normal course issuers bid for cash consideration of $1.3 million.

  • As at March 31, 2019, occupancy was consistent across all asset classes, supporting the Company's business objective of generating stable and increasing cash flow through its diversified portfolio of real estate assets.

Financial Highlights

For the three months ended March 31


(in thousands of dollars, except per common share)

2019

2018

Revenue from real estate

$219,840

$203,839

Revenue from hotel properties

53,627

53,852

Management and advisory fees

11,651

14,437

Interest and other income

4,036

1,440

Sales of product and land

1,491

1,250

Total revenue

$290,645

$274,818




Revenue from real estate properties

$219,840

$203,839

Revenue from hotel properties

53,627

53,852

Property operating expenses

(124,379)

(115,176)

Hotel operating expenses

(44,514)

(42,770)

Net operating income

$104,574

$99,745




Net income attributable to common shareholders

$33,486

$116,608

Net income per common share – basic and diluted

$2.97

$10.10








Funds from operations

$53,566

$49,911

FFO per common share – basic and diluted

$4.74

$4.32




Normalized funds from operations

$51,020

$49,506

Normalized FFO per common share – basic and diluted

$4.52

$4.29

Net Income

Net income for the three months ended March 31, 2019, was $39.0 million compared to net income of $125.0 million in 2018. The decrease in net income of $86.0 million for the three months ended March 31, 2019, was primarily due to the following:

  • An increase in net operating income of $4.8 million, primarily due to the three office acquisitions completed during and subsequent to March 31, 2018 and the impact of the adoption of IFRS 16, resulting in land rent expense being included in NOI in the comparative period while effective January 1, 2019, a finance charge is included in interest expense;

  • A decrease in management and advisory fees of $2.8 million, primarily due to lower disposition fees earned as well as a decrease in asset management fees compared to 2018;

  • An increase in interest and other income of $2.6 million;

  • An increase in interest expense of $9.0 million, mainly due to interest on lease liabilities (noted above), higher interest on Unsecured Debentures and higher interest on mortgages payable;

  • An increase in property management and corporate expense of $5.1 million, primarily due to an increase in non-cash compensation expense related to the Company's stock appreciation rights plan ("SARs"); and

  • A decrease in non-cash net fair value gain of $75.1 million, primarily due to a higher fair value loss on Morguard Residential REIT Units and a lower fair value gain on real estate properties.

Net Operating Income

NOI increased by $4.8 million, or 4.8%, during the three months ended March 31, 2019, to $104.6 million, compared to $99.8 million generated in 2018, and is further analyzed by asset type below.

For the three months ended March 31


(in thousands of dollars)

2019

2018

Multi-suite residential

$51,076

$47,395

Retail

36,811

31,636

Office

33,727

30,889

Industrial

2,148

2,266

Hotels

9,113

11,082

Adjusted NOI

132,875

123,268

IFRIC 21 adjustment – multi-suite residential

(24,158)

(19,673)

IFRIC 21 adjustment – retail

(4,143)

(3,850)

NOI

$104,574

$99,745

Adjusted NOI for the three months ended March 31, 2019, increased by $9.6 million to $132.9 million compared to $123.3 million in 2018 primarily due to the following:

  • An increase in the Canadian residential portfolio of $1.5 million, primarily resulting from an increase of $1.0 million mainly from rental rate growth, improved occupancy and lower operating expenses, and an increase in NOI of $0.5 million due to the adoption of IFRS 16;

  • An increase in U.S. residential NOI of US$0.7 million, primarily from rental rate growth and the acquisition of two properties subsequent to the first quarter of 2018, partially offset by the sale of four properties located in Louisiana during the first quarter of 2019;

  • An increase of $4.1 million in Canadian retail properties resulting from an increase of $2.3 million due to the adoption of IFRS 16,  an increase of $0.7 million from increased occupancy, higher base rent and lower non-recoverable operating expenses at the Canadian properties and $1.1 million of non-recurring income from a prior year realty tax refund and a settlement of disputed charges;

  • An increase in the office portfolio of $2.8 million, primarily due to acquisition of three properties during and subsequent to the first quarter of 2018, which resulted in an increase of $2.5 million;

  • A decrease in the hotel portfolio by $2.0 million due to a decrease of $1.4 million resulting from higher vacancy at hotels located in Alberta, including the expiry of a long term lease at the Cortona Residence and a decrease of $0.6 million due to lower food and beverage sales and higher operating costs at a hotel located in Red Deer, Alberta; and

  • An increase of $2.0 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the three months ended March 31, 2019, the Company recorded FFO of $53.6 million ($4.74 per common share), compared to $49.9 million ($4.32 per common share) in 2018. The increase in FFO of $3.7 million is mainly due to the following:

  • An increase in Adjusted NOI of $9.6 million, primarily due to the acquisition of properties and the impact of the adoption of IFRS 16, resulting in land rent expense being included in NOI in the comparative period while effective January 1, 2019, a finance charge is included in interest expense;

  • A decrease in management and advisory fees of $2.8 million, primarily due to lower disposition fees earned as well as a decrease in asset management fees;

  • An increase in interest and other income of $2.6 million due to finance interest earned from the Etobicoke Wellness Centre at Etobicoke General Hospital, classified as a finance lease receivable as well as higher dividend income earned on investments;

  • An increase in interest expense of $9.0 million, mainly due to interest on lease liabilities (noted above), higher interest on Unsecured Debentures and higher interest on mortgage payable;

  • An increase in property management and corporate expense of $5.1 million, primarily due to an increase in non-cash compensation expense related to the Company's SARs plan;

  • A decrease in the non-controlling interests' share of FFO of $1.6 million;

  • An increase in other income of $1.5 million from insurance proceeds; and

  • An increase in unrealized gain in the fair value of financial instrument of $6.3 million.

The change in foreign exchange rates had a positive impact on FFO of $0.6 million ($0.05 per common share).

Normalized FFO for the three months ended March 31, 2019, was $51.0 million, or $4.52 per common share, versus $49.5 million, or $4.29 per common share, for the same period in 2018, which represents an increase of $1.5 million or 3.1%. Normalized FFO is computed as FFO adjusted for the impact of non-recurring items net of tax.

Subsequent Events

On April 4, 2019, Temple completed a rights offering and issued 25,022,329 common shares at a price of $1.75 per share for gross proceeds of $43.8 million. Morguard acquired 21,045,702 common shares for $36.8 million increasing its ownership in Temple to 71.4%.

On April 8, 2019, Temple fully repaid the 7.25% Series E convertible debentures in the amount of $40.6 million.

On April 29, 2019, Temple announced that it has filed a rights offering circular for the subscription of up to 50,044,658 rights and gross proceeds of up to $37.5 million. A maximum of 25,022,329 common shares will be issued as each right will entitle the holder thereof to subscribe for one-half of a common share upon payment of the subscription price of $1.50 per common share.

On April 30, 2019, the Company sold a property located in Harahan, Louisiana, comprising 48 suites, for gross proceeds of $4.6 million (US$3.4 million) and the purchaser assumed the mortgage secured by the property in the amount of $2.9 million (US$2.1 million).

Second Quarter Dividend

The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2019 in the amount of $0.15 per common share will be paid on June 28, 2019, to shareholders of record at the close of business on June 14, 2019.

The Company's unaudited condensed consolidated financial statements for the three months ended March 31, 2019, 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, 2019 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 $21.1 billion. Morguard owns a diversified portfolio of 210 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,686 residential suites, approximately 17.3 million square feet of commercial leasable space and 5,903 hotel rooms. Morguard also currently owns a 57.6% interest in Morguard Real Estate Investment Trust ("Morguard REIT" or "MRT"), a 46.9% effective interest in Morguard North American Residential Real Estate Investment Trust ("Morguard Residential REIT" or "MRG") and a 71.4% 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

Morguard Corporation, K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Paul Miatello, Chief Financial Officer, T 905-281-3800

Related Links

http://www.morguard.com

Organization Profile

Morguard Corporation