Morguard Corporation Announces 2023 First Quarter Results and Regular Eligible Dividend

MISSISSAUGA, ON, May 2, 2023 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) is pleased to announce its financial results for the three months ended March 31, 2023.

Reporting Highlights

• Normalized funds from operations ("Normalized FFO") was $50.3 million, or $4.56 per common share, for the three months ended March 31, 2023. This represents an increase of $7.4 million, or 17.2%, compared to $42.9 million, or $3.86 per common share for the same period in 2022.
• Net income decreased by $263.1 million to a net loss of $31.4 million for the three months ended March 31, 2023, compared to net income of $231.7 million for the same period in 2022, primarily due to a decrease in non-cash fair value gain, partly offset by a decrease in deferred tax expense and an increase in net operating income.
• Total revenue from real estate properties increased by $23.8 million, or 10.7%, to $246.4 million for the three months ended March 31, 2023, compared to $222.6 million for the same period in 2022.
• Total revenue from hotel properties increased by $3.1 million, or 11.1%, to $31.2 million for the three months ended March 31, 2023, compared to $28.0 million for the same period in 2022.
• Adjusted NOI increased by $20.5 million, or 17.7%, to $136.2 million for the three months ended March 31, 2023, compared to $115.7 million for the same period in 2022.

Operational and Balance Sheet Highlights

• During the first quarter, the Company acquired a multi-suite residential property comprising 240 suites located in Chicago, Illinois, for a purchase price of $113.0 million (US$83.2), including closing costs.
• Morguard Residential REIT issued $56.0 million of 6.0% convertible unsecured subordinated debentures, and fully repaid $85.5 million of 4.5% convertible unsecured subordinated debentures.
• 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, 2023, the Company's total assets were $11.8 billion, compared to $11.7 billion at December 31, 2022.

Financial Highlights

For the three months ended March 31
(in thousands of dollars)	2023	2022
Revenue from real estate properties	$246,372	$222,593
Revenue from hotel properties	31,159	28,051
Management and advisory fees	10,150	10,262
Interest and other income	5,096	4,031
Total revenue	$292,777	$264,937
Revenue from real estate properties	$246,372	$222,593
Revenue from hotel properties	31,159	28,051
Property operating expenses	(156,829)	(142,750)
Hotel operating expenses	(25,583)	(27,803)
Net operating income	$95,119	$80,091
Net income (loss) attributable to common shareholders	($34,690)	$206,269
Net income (loss) per common share – basic and diluted	($3.15)	$18.58
Funds from operations^(1)	$32,652	$41,867
FFO per common share – basic and diluted^(1)	$2.96	$3.77
Normalized funds from operations^(1)	$50,266	$42,871
Normalized FFO per common share – basic and diluted^(1)	$4.56	$3.86

(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 months ended March 31, 2023 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:

For the three months ended March 31
(in thousands of dollars)	2023	2022
Multi-suite residential	$64,634	$54,779
Retail	32,965	27,398
Office	32,993	33,252
Hotel	5,576	248
Adjusted NOI	136,168	115,677
IFRIC 21 adjustment - multi-suite residential	(35,781)	(31,732)
IFRIC 21 adjustment - retail	(5,268)	(3,854)
NOI	$95,119	$80,091

(1) Includes industrial properties with NOI for the three months ended March 31, 2023 of $1,507 (2022 - $2,120).

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) is 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:

For the three months ended March 31
(in thousands of dollars)	2023	2022
Multi-suite residential	$64,634	$54,779
Retail	32,965	27,398
Office	32,993	33,252
Hotel	5,576	248
Adjusted NOI	136,168	115,677
Other Revenue
Management and advisory fees	10,150	10,262
Interest and other income	5,096	4,031
Equity-accounted FFO	1,388	1,162
	16,634	15,455
Expenses and Other
Interest	(62,727)	(54,884)
Principal repayment of lease liabilities	(410)	(376)
Property management and corporate	(21,906)	(20,514)
Internal leasing costs	642	721
Amortization of capital assets	(331)	(391)
Current income taxes	138	(551)
Non-controlling interests' share of FFO	(16,111)	(14,047)
Unrealized changes in the fair value of financial instruments	(18,576)	(1,358)
Other income (expense)	(869)	2,135
FFO	$32,652	$41,867
FFO per common share amounts – basic and diluted	$2.96	$3.77
Weighted average number of common shares outstanding (in thousands):
Basic and diluted	11,022	11,101

For the three months ended March 31
(in thousands of dollars)	2023	2022
FFO (from above)	$32,652	$41,867
Add/(deduct):
Unrealized changes in the fair value of financial instruments	18,576	1,358
SARs plan increase (decrease) in compensation expense	(675)	450
Lease cancellation fee and other	(344)	(952)
Tax effect of above adjustments	57	148
Normalized FFO	$50,266	$42,871
Per common share amounts – basic and diluted	$4.56	$3.86

Second Quarter Dividend
The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2023 in the amount of $0.15 per common share will be paid on June 30, 2023, to shareholders of record at the close of business on June 15, 2023.

The Company's unaudited condensed financial statements for the three months ended March 31, 2023, 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 $18.8 billion. As at May 2, 2023, Morguard owns a diversified portfolio of 178 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,566 residential suites, approximately 17.1 million square feet of commercial leasable space and 2,907 hotel rooms. Morguard also currently owns a 64.2% interest in Morguard Real Estate Investment Trust and a 44.9% 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