Morguard Corporation Announces 2023 Results and Regular Eligible Dividend
MISSISSAUGA, ON, Feb. 22, 2024 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) is pleased to announce its financial results for the year ended December 31, 2023.
Reporting Highlights
- Normalized funds from operations(1) ("Normalized FFO") was $239.7 million, or $21.98 per common share, for the year ended December 31, 2023. This represents an increase of $20.9 million, or 9.5%, compared to $218.8 million, or $19.75 per common share for the same period in 2022.
- Net income decreased by $54.0 million to $58.2 million for the year ended December 31, 2023, compared to $112.2 million for the same period in 2022.
- Total revenue from real estate properties increased by $84.2 million, or 9.2%, to $1.0 billion for the year ended December 31, 2023, compared to $916.5 million for the same period in 2022.
- Adjusted NOI(1) increased by $57.7 million, or 10.8%, to $594.4 million for the year ended December 31, 2023, compared to $536.7 million for the same period in 2022.
Operational and Balance Sheet Highlights
- The Company acquired two multi-suite residential properties for a purchase price of $223.8 million, including closing costs.
- The Company issued $175.0 million of 9.5% Series H senior unsecured debentures due on September 26, 2026.
- The Company repaid $175.0 million of 4.402% Series G senior unsecured debentures on maturity.
- The Company financed new and existing mortgages for additional net proceeds of $169.3 million at an average interest rate of 6.05% and an average term of 4.4 years.
- The Company ended the year in a strong liquidity position with $318.0 million of cash and available credit facilities, and a $1.2 billion pool of unencumbered properties, hotels and other investments.
- As at December 31, 2023, the Company's total assets were $11.6 billion, compared to $11.7 billion at December 31, 2022.
- Subsequent to December 31, 2023, the Company sold a portfolio of 14 hotels for gross proceeds of $410.0 million and repaid first mortgage debt totalling $48.7 million, resulting in net proceeds of $361.3 million before closing costs and customary adjustments.
(1) |
Refer to Specified Financial Measures |
Financial Highlights |
||
For the years ended December 31 |
||
(in thousands of dollars) |
2023 |
2022 |
Revenue from real estate properties |
$1,000,726 |
$916,517 |
Revenue from hotel properties |
161,601 |
162,169 |
Management and advisory fees |
43,572 |
41,339 |
Interest and other income |
18,119 |
16,650 |
Total revenue |
$1,224,018 |
$1,136,675 |
Revenue from real estate properties |
$1,000,726 |
$916,517 |
Revenue from hotel properties |
161,601 |
162,169 |
Property operating expenses |
(451,698) |
(414,010) |
Hotel operating expenses |
(115,213) |
(128,039) |
Net operating income ("NOI") |
$595,416 |
$536,637 |
Net income attributable to common shareholders |
$74,176 |
$122,771 |
Net income per common share – basic and diluted |
$6.80 |
$11.08 |
Funds from operations(1) |
$214,122 |
$211,603 |
FFO per common share – basic and diluted(1) |
$19.64 |
$19.10 |
Normalized funds from operations(1) |
$239,700 |
$218,821 |
Normalized FFO per common share – basic and diluted(1) |
$21.98 |
$19.75 |
(1) Refer to Specified Financial Measures. |
||
Total revenue during the year ended December 31, 2023, increased by $87.3 million to $1.2 billion compared to $1.1 billion in 2022, primarily due to an increase in revenue from real estate properties in the amount of $84.2 million due to higher average monthly rent ("AMR") within the multi-suite residential segment and an increase of $21.4 million from a change in foreign exchange rates.
Net income for the year ended December 31, 2023 was $58.2 million, compared to $112.2 million in 2022. The decrease in net income of $54.0 million for the year ended December 31, 2023, was primarily due to the following:
- An increase in non-cash net fair value loss of $94.4 million, mainly due to an increase in fair value loss on real estate properties, a decrease in fair value gain on the Morguard Residential REIT units, and an increase in fair value loss on other real estate funds investments;
- An increase in net operating income of $58.8 million, primarily due to an increase in AMR at multi-suite residential properties. In addition, higher NOI from the hotel portfolio due to an increase in transient and corporate demand compared to 2022;
- An increase in interest expense of $35.3 million, mainly due to higher interest on mortgages payable and bank indebtedness, partially offset by lower interest on the Debentures, primarily due to the repayment of the Series C senior unsecured debentures on September 15, 2022. The change in foreign exchange rate increased U.S. mortgage interest by $5.8 million;
- An increase in property management and corporate expenses of $9.5 million; and
- A recovery of impairment on hotel properties of $11.0 million.
During the year, 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.
The following table provides occupancy by asset class for the following periods:
Suites/GLA Square Feet |
Dec. 2023 |
Sep. 2023 |
Jun. 2023 |
Mar. 2023 |
Dec. 2022 |
|
Multi-suite residential |
17,499 (1) |
96.2 % |
96.2 % |
96.8 % |
96.6 % |
96.6 % |
Retail |
7,832,000 (2) |
94.0 % |
93.5 % |
93.2 % |
92.9 % |
93.3 % |
Office(3) |
8,856,000 (3) |
88.4 % |
88.1 % |
85.9 % |
86.6 % |
87.2 % |
(1) |
Excludes one property that reached stabilized occupancy during the first quarter of 2023, located in Los Angeles, |
(2) |
Retail occupancy has been adjusted to exclude development space of 396,525 square feet of GLA. |
(3) |
Office occupancy has been adjusted to exclude development space of 48,206 square feet of GLA. Office includes |
The following table provides a reconciliation of Adjusted NOI to its closely related financial statement measurement for the following periods:
Three months ended |
Year ended |
|||
(in thousands of dollars) |
2023 |
2022 |
2023 |
2022 |
Multi-suite residential |
$75,518 |
$70,100 |
$279,087 |
$245,276 |
Retail |
36,898 |
34,906 |
132,563 |
120,419 |
Office(1) |
35,185 |
34,726 |
136,329 |
136,834 |
Hotel |
7,679 |
5,684 |
46,388 |
34,130 |
Adjusted NOI |
155,280 |
145,416 |
594,367 |
536,659 |
IFRIC 21 adjustment - multi-suite residential |
12,368 |
10,044 |
1,049 |
(115) |
IFRIC 21 adjustment - retail |
1,629 |
1,316 |
— |
93 |
NOI |
$169,277 |
$156,776 |
$595,416 |
$536,637 |
(1) |
Includes industrial properties with NOI for the three months and year ended December |
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 |
Year ended |
|||
(in thousands of dollars) |
2023 |
2022 |
2023 |
2022 |
Multi-suite residential |
$75,518 |
$70,100 |
$279,087 |
$245,276 |
Retail |
36,898 |
34,906 |
132,563 |
120,419 |
Office |
35,185 |
34,726 |
136,329 |
136,834 |
Hotel |
7,679 |
5,684 |
46,388 |
34,130 |
Adjusted NOI |
155,280 |
145,416 |
594,367 |
536,659 |
Other Revenue |
||||
Management and advisory fees |
12,820 |
10,898 |
43,572 |
41,339 |
Interest and other income |
4,472 |
5,326 |
18,119 |
16,650 |
Equity-accounted FFO |
978 |
1,119 |
5,496 |
5,195 |
18,270 |
17,343 |
67,187 |
63,184 |
|
Expenses and Other |
||||
Interest |
(70,142) |
(61,457) |
(264,675) |
(229,335) |
Principal repayment of lease liabilities |
(393) |
(695) |
(1,622) |
(1,732) |
Property management and corporate |
(21,877) |
(19,994) |
(87,131) |
(77,613) |
Internal leasing costs |
1,324 |
1,162 |
4,718 |
4,644 |
Amortization of capital assets |
(356) |
(340) |
(1,335) |
(1,453) |
Current income taxes |
(3,101) |
(2,464) |
(7,472) |
(8,228) |
Non-controlling interests' share of FFO |
(15,381) |
(17,951) |
(59,892) |
(62,713) |
Unrealized changes in the fair value of financial instruments |
2,190 |
13,226 |
(29,376) |
(13,209) |
Other income (expense) |
142 |
621 |
(647) |
1,399 |
FFO |
$65,956 |
$74,867 |
$214,122 |
$211,603 |
FFO per common share amounts – basic and diluted |
$6.10 |
$6.79 |
$19.64 |
$19.10 |
Weighted average number of common shares outstanding (in thousands): |
10,813 |
11,022 |
10,903 |
11,079 |
Three months ended |
Year ended |
|||
(in thousands of dollars) |
2023 |
2022 |
2023 |
2022 |
FFO (from above) |
$65,956 |
$74,867 |
$214,122 |
$211,603 |
Add/(deduct): Unrealized changes in the fair value of financial instruments |
(2,190) |
(13,226) |
29,376 |
13,209 |
SARs plan increase (decrease) in compensation expense |
203 |
(1,164) |
(663) |
(4,577) |
Lease cancellation fee and other |
(1,390) |
(369) |
(3,866) |
(1,815) |
Tax effect of above adjustments |
288 |
52 |
731 |
401 |
Normalized FFO |
$62,867 |
$60,160 |
$239,700 |
$218,821 |
Per common share amounts – basic and diluted |
$5.81 |
$5.46 |
$21.98 |
$19.75 |
The Board of Directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2024 in the amount of $0.15 per common share will be paid on March 28, 2024, to shareholders of record at the close of business on March 15, 2024.
On January 18, 2024, the Company sold a portfolio of 14 high-quality hotels for gross proceeds of $410.0 million. Upon closing the transaction, Morguard repaid first mortgage debt totalling $48.7 million, resulting in net proceeds of $361.3 million, before closing costs and customary adjustments.
Subsequent to December 31, 2023, the Company fully repaid the Series E senior unsecured debentures on maturity in the amount of $225.0 million and $151.0 million on the Company's operating lines of credit with net proceeds generated from the disposition of 14 hotel properties.
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 year ended December 31, 2023 and available on the Company's profile on SEDAR at www.sedarplus.ca
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 above.
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.
FFO (and FFO per common share) is a non-GAAP financial measure 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 (recovery of) 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 Company's audited condensed financial statements for the year ended December 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.sedarplus.ca.
Morguard Corporation is a real estate company, with total assets owned and under management valued at $18.6 billion. As at February 22, 2024, Morguard owns a diversified portfolio of 164 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,798 residential suites, approximately 17.1 million square feet of commercial leasable space and 771 hotel rooms. Morguard also currently owns a 65.3% interest in Morguard Real Estate Investment Trust and a 46.1% 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
Share this article