Morguard Real Estate Investment Trust announces 2014 third quarter results

TSX: MRT.UN

MISSISSAUGA, ON, Nov. 4, 2014 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its financial results for the three and nine months ended September 30, 2014 ("Q3"). These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").

Highlights

Funds from Operations (FFO)

• Funds from operations for the three and nine months ended September 30, 2014 was $25.3 million and $78.4 million, respectively, as compared to $24.3 million and $73.6 million, respectively, for the same periods in 2013. On a per unit diluted basis, funds from operations for the three and nine months ended September 30, 2014 was $0.40 and $1.23, respectively, as compared to $0.38 and $1.13, respectively for the same periods in 2013.  The increase in FFO was primarily the result of the acquisition of Pine Centre completed by the Trust in December 2013.
• Funds from operations is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. A reconciliation of net income to funds from operations is included.

Net Operating Income (NOI)

• Net operating income for the three and nine months ended September 30, 2014 was $41.6 million and $125.9 million, respectively, as compared to $39.6 million and $119.1 million, respectively, for the same periods in 2013.  Net operating income from same assets for the three and nine months ended September 30, 2014 was $39.5 million and $118.9 million, respectively, as compared to $38.3 million and $115.0 million, respectively, for the same periods in 2013.
• Net operating income is an additional GAAP measure, but not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. A calculation of net operating income is included.

Net Income

• Net income for the three and nine months ended September 30, 2014 was $20.0 million and $90.4 million, respectively, as compared to $31.7 million and $158.8 million, respectively, for the same periods in 2013. The decrease in net income was mainly the result of lower fair value gains on real estate properties recorded in 2014.

Operations

• The portfolio occupancy remained stable and was 96% at September 30, 2014, 97% at December 31, 2013 and 96% at September 30, 2013.

At September 30, 2014, the Trust's total enterprise value was approximately $2.5 billion (based on the market closing price of the Trust's units on September 30, 2014 plus total debt outstanding). At September 30, 2014, the Trust had $1.4 billion of outstanding debt, equating to debt to total enterprise value ratio of 54.3%.  The Trust's debt consisted of $1.2 billion of fixed-rate debt with weighted average interest rate of 4.2% and weighted average term to maturity of 6.05 years, $146.3 million of 4.85% fixed-rate convertible debentures and $30.1 million debt associated with real estate properties held for sale.  The Trust has a debt to total assets ratio of 45.2%.

• On November 4, 2014, the Trust, upon the recommendation of a special committee comprised of independent trustees, executed an agreement to sell its 50% interest in 350 Sparks Street and 361 Queen Street, a mixed-use office and hotel complex located in downtown Ottawa to Morguard Corporation, the existing 50% co-owner of these properties.  The final sale price was $37,692, less selling costs, to be satisfied by cash and the assumption of the existing mortgage.  The closing date for this transaction is expected to be late 2014.

NET OPERATING INCOME, FUNDS FROM OPERATIONS
This press release and accompanying financial information make reference to net operating income and funds from operations on a total and per unit basis.  Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting interest expense, general and administrative expenses and fair value gains (losses).   Funds from operations is defined as net income prior to extraordinary items, valuation adjustments, and certain other non-cash items, if any.

FINANCIAL STATEMENTS AND MORGUARD'S DISCUSSION AND ANALYSIS
Morguard REIT's Q3 2014 Condensed Interim Consolidated Financial Statement and Management's Discussion and Analysis along with its 2013 Annual Report are available on Morguard REIT's website at www.morguard.com and have been filed with SEDAR at www.sedar.com

CONFERENCE CALL DETAILS:

Date:	Friday, November 7, 2014 at 11:00 a.m. (ET)
Conference Call#:	647.427.7450 or 1.888.231.8191
Conference ID#:	25944656

ABOUT MORGUARD REAL ESTATE INVESTMENT TRUST
Morguard REIT is a closed-end real estate investment trust, which owns a diversified portfolio of 50 retail, office and mixed-use income producing properties in Canada with a book value of $2.9 billion and approximately 8.7 million square feet of leaseable space.

Condensed Interim Consolidated Balance Sheets

(In thousands of Canadian dollars)	September 30,	December 31,
	2014	2013
Assets
Real estate properties	$     2,855,505	$     2,869,358
Equity accounted investments	34,507	44,857
Amounts receivable	44,062	14,505
Other assets	10,827	920
Cash and cash equivalents	21,324	13,159
	2,966,225	2,942,799
Real estate properties held for sale	56,090	—
	$     3,022,315	$     2,942,799
Liabilities
Mortgages and bonds payable	$     1,190,818	$     1,194,682
Convertible debentures payable	146,252	145,460
Accounts payable and other liabilities	57,102	44,919
Bank indebtedness	—	5,000
	1,394,172	1,390,061
Mortgages payable on real estate properties held for sale	30,110	—
Total liabilities	1,424,282	1,390,061
Unitholders' Equity	1,598,033	1,552,738
	$     3,022,315	$    2,942,799

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(In thousands of Canadian dollars)	Three months ended		Nine months ended
	September 30,		September 30,
	2014	2013	2014	2013
Revenue from real estate properties	$     72,876	$     68,945	$     221,005	$     206,529
Property operating expenses	28,969	27,109	87,985	80,853
Property management fees	2,341	2,202	7,125	6,623
Net operating income	41,566	39,634	125,895	119,053
Interest expense	16,082	14,694	46,828	44,519
General and administrative	1,229	1,387	3,891	3,624
Amortization expense	—	10	—	31
Other income	(168)	(1)	(168)	(6)
Income before fair value (losses)/gains, (loss)/gain on sale  of real estate properties and net income from equity accounted investments	24,423	23,544	75,344	70,885
Fair value (losses)/gains on real estate properties	(5,283)	6,888	12,133	81,129
(Loss)/gain on sale of real estate properties	(15)	—	(15)	2,058
Net income from equity accounted investments	846	1,248	2,933	4,749
Net income for the period	$     19,971	$     31,680	$     90,395	$     158,821
Other comprehensive income
Items to be reclassified to profit or loss in   subsequent periods:
Amortization – cash flow hedge	253	248	756	741
Comprehensive income	$     20,224	$     31,928	$     91,151	$      159,562

Reconciliation of Net Income to Funds from Operations

(In thousands of Canadian dollars, except per-unit amounts)	Three months ended		Nine months ended
	September 30,		September 30,
	2014	2013	2014	2013
Net income for the period	$   19,971	$   31,680	$  90,395	$  158,821
Add/(deduct) :
Fair value losses/(gains) on real estate properties^(1)	5,314	(7,351)	(12,048)	(83,144)
Loss/(gain) on sale of real estate properties	15	—	15	(2,058)
Funds from operations	$   25,300	$   24,329	$ 78,362	$   73,619
Interest expense on convertible debentures	1,833	1,803	5,441	5,441
Diluted FFO	$   27,133	$   26,132	$   83,803	$   79,060
Funds from operations per unit:
Basic	$0.41	$0.38	$1.26	$1.15
Diluted^(2)	$0.40	$0.38	$1.23	$1.13
Weighted average units outstanding (in thousands)
Basic	62,149	63,489	62,170	63,872
Diluted^(2)	68,246	69,586	68,267	69,970

(1) Includes fair value gains from equity accounted investments

(2) Includes dilutive impact of convertible debentures

 

SOURCE: Morguard Real Estate Investment Trust

K. (Rai) Sahi, President and Chief Executive Officer, Tel: [phone], or Pamela McLean, Chief Financial Officer, Tel: [phone].

Related Links

http://www.morguardreit.com