Morguard Corporation Announces 2022 First Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, May 3, 2022 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:MRC) is pleased to announce its consolidated financial results for the three months ended March 31, 2022.

Reporting Highlights

• Net income increased by $213.8 million to $231.7 million for the three months ended March 31, 2022, compared to $17.9 million for the same period in 2021.
• Normalized funds from operations ("Normalized FFO") was $42.9 million, or $3.86 per common share, for the three months ended March 31, 2022. This represents a decrease of $0.3 million compared to $43.2 million for the same period in 2021.
• Total revenue from real estate properties increased by $11.2 million, or 5.3%, to $222.6 million for the three months ended March 31, 2022, compared to $211.4 million for the same period in 2021.
• Total revenue from hotel properties increased by $5.9 million, or 26.7%, to $28.0 million for the three months ended March 31, 2022, compared to $22.1 million for the same period in 2021.
• Net operating income ("NOI") decreased by $6.4 million, or 7.4%, to $80.1 million for the three months ended March 31, 2022, compared to $86.5 million for the same period in 2021, primarily due to lower NOI from the hotel portfolio resulting from a decrease in a provision for Canada Emergency Wage Subsidy ("CEWS"), and lower NOI from the office portfolio as a result of a bad debt recovery at a property recorded in 2021.

Operational and Balance Sheet Highlights

• Subsequent to March 31, 2022, the Company entered into conditional agreements to sell two multi-suite residential properties located in Atlanta, Georgia and Slidell, Louisiana, providing net proceeds of $90.7 million (US$72.6 million), excluding closing costs and after the repayment of mortgage loans secured by the properties.
• During the quarter, the Company sold two hotels located in Thunder Bay, Ontario, for gross proceeds of $18.1 million, resulting in net cash proceeds of $4.9 million after deducting closing costs, working capital adjustments and after the repayment of the mortgage loan secured by these hotels.
• Rent collections from all commercial asset classes continue to show strength with an average collection of approximately 97% in the current quarter.
• 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 March 31, 2022 the Company's total assets were $11.8 billion, compared to $11.5 billion at December 31, 2021.

Financial Highlights

For the three months ending March 31
(in thousands of dollars)	2022	2021
Revenue from real estate properties	$222,593	$211,364
Revenue from hotel properties	28,051	22,148
Management and advisory fees	10,262	10,126
Interest and other income	4,031	3,324
Total revenue	$264,937	$246,962
Revenue from real estate properties	$222,593	$211,364
Revenue from hotel properties	28,051	22,148
Property operating expenses	(142,750)	(128,948)
Hotel operating expenses	(27,803)	(18,090)
Net operating income	$80,091	$86,474
Net income attributable to common shareholders	$206,269	$15,155
Net income per common share – basic and diluted	$18.58	$1.37
Funds from operations^(1)	$41,867	$44,351
FFO per common share – basic and diluted^(1)	$3.77	$4.00
Normalized funds from operations^(1)	$42,871	$43,224
Normalized FFO per common share – basic and diluted^(1)	$3.86	$3.89

(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 outin the Company's Management's Discussion and Analysis for the three months ended March 31, 2021 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 notnecessarily 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 financialinformation prepared in accordance with IFRS. The Company's management uses these measures to aid inassessing the Company's underlying core performance and provides these additional measures so that investorsmay do the same. Management believes that the non-GAAP financial measures described below, which supplementthe IFRS measures, provide readers with a more comprehensive understanding of management's perspective on theCompany'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 estateproperties 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 InterpretationsCommittee ("IFRIC") Interpretation 21, Levies ("IFRIC 21"). IFRIC 21 states that an entity recognizes a levy liability inaccordance with the relevant legislation. The obligating event for realty taxes for the U.S. municipalities in which theREIT 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. propertiesacquired during the year in which the realty taxes are not recorded in the year of acquisition. Adjusted NOI recordsrealty 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 measurementfor the following periods:

For the three months ending March 31
(in thousands of dollars)	2022	2021
Multi-suite residential	$54,779	$50,749
Retail	27,398	28,222
Office	31,132	33,519
Industrial	2,120	1,781
Hotel	248	4,058
Adjusted NOI	115,677	118,329
IFRIC 21 adjustment - multi-suite residential	(31,732)	(27,859)
IFRIC 21 adjustment - retail	(3,854)	(3,996)
NOI	$80,091	$86,474

Funds From Operations and Normalized FFO

FFO (and FFO per common share) are non-GAAP financial measures widely used as a real estate industry standardthat supplement net income (loss) and evaluates operating performance but is not indicative of funds available tomeet the Company's cash requirements. FFO can assist with comparisons of the operating performance of theCompany's real estate between periods and relative to other real estate entities. FFO is computed in accordance withthe 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 valueof real estate properties, (iii) realty taxes accounted for under IFRIC 21, (iv) internal leasing costs, (v) gains/lossesfrom 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 estateassets (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 valueadjustments and non-cash items. The Company considers FFO to be a useful measure for reviewing its comparativeoperating and financial performance. FFO per common share is calculated as FFO divided by the weighted averagenumber of common shares outstanding during the period.

Normalized FFO (and normalized FFO per common share) are computed as FFO excluding non-recurring items on anet of tax basis and other fair value adjustments. The Company believes it is useful to provide an analysis ofNormalized FFO which excludes non-recurring items on a net of tax basis and other fair value adjustments excludedfrom 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:

For the three months ending March 31
(in thousands of dollars)	2022	2021
Multi-suite residential	$54,779	$50,749
Retail	27,398	28,222
Office	31,132	33,519
Industrial	2,120	1,781
Hotel	248	4,058
Adjusted NOI	115,677	118,329
Other Revenue
Management and advisory fees	10,262	10,126
Interest and other income	4,031	3,324
Equity-accounted FFO	1,162	(782)
	15,455	12,668
Expenses and Other
Interest	(54,884)	(55,966)
Principal repayment of lease liabilities	(376)	(449)
Property management and corporate	(20,514)	(19,296)
Internal leasing costs	721	770
Amortization of capital assets	(391)	(835)
Current income taxes	(551)	(832)
Non-controlling interests' share of FFO	(14,047)	(14,495)
Unrealized changes in the fair value of financial instruments	(1,358)	1,968
Other income	2,135	2,489
FFO	$41,867	$44,351
FFO per common share amounts – basic and diluted	$3.77	$4.00
Weighted average number of common shares outstanding (in thousands):
Basic and diluted	11,101	11,101

For the three months ending March 31
(in thousands of dollars)	2022	2021
FFO (from above)	$41,867	$44,351
Add/(deduct):
Unrealized changes in the fair value of financial instruments	1,358	(1,968)
SARs plan increase in compensation expense	450	456
Sears settlement, net of non-controlling interest	—	(1,238)
Lease cancellation fee and other	(952)	1,623
Tax effect of above adjustments	148	—
Normalized FFO	$42,871	$43,224
Per common share amounts – basic and diluted	$3.86	$3.89

First Quarter Dividend

The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2022 in the amount of $0.15 per common share will be paid on June 30, 2022, to shareholders of record at the close of business on June 15, 2022.

Subsequent Events

Subsequent to March 31, 2022, the Company sold a hotel property for gross proceeds of $8.7 million, excluding closing costs. The purchase price was satisfied with cash of $5.6 million and a promissory note receivable of $3.1 million. At closing, the Company repaid a first mortgage loan totaling $10.1 million that was secured by the hotel.

Subsequent to March 31, 2022, the Company completed the refinancing of a multi-suite residential property located in West Palm Beach, Florida, in the amount of $19.1 million (US$15.3 million) at an interest rate of 3.89% and for a term of 10 years. The maturing mortgage amounts to $11.3 million (US$9.1 million), was open and prepayable at no penalty before its scheduled maturity on August 1, 2022, and has an interest rate of 3.96%.

Subsequent to March 31, 2022, the Company entered into a binding commitment letter for the refinancing of a multi-suite residential property located in Palm Beach County, Florida, in the amount of $57.1 million (US$45.7 million) at an interest rate of 4.19% and for a term of 10 years. The Company expects to close the refinancing during the second quarter of 2022. The maturing mortgage amounts to $29.1 million (US$23.3 million), is open and prepayable at no penalty before its scheduled maturity on October 1, 2022, and has an interest rate of 3.78%.

The Company's unaudited financial statements for the three months ended March 31, 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 $19.9 billion. As at May 3, 2022, Morguard owns a diversified portfolio of 195 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,752 residential suites, approximately 16.8 million square feet of commercial leasable space and 4,874 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

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