MISSISSAUGA, ON, Aug. 4, 2021 /CNW/ - Morguard Corporation
("Morguard" or the "Company") (TSX: MRC) today announced its
financial results for the three and six months ended June 30, 2021.
Morguard is pleased to report its financial and operating
results for the three and six months ended June 30, 2021, that demonstrate the resilient
nature of the Company's portfolio and also reflect the prudent
actions taken by management and staff in our continued response to
the ongoing COVID-19 pandemic.
Reporting Highlights
- Net income increased by $121.2
million to $16.2 million for
the three months ended June 30, 2021,
compared to a net loss of $105.0
million for the same period in 2020. The increase was
primarily due to a decrease in net fair value loss of $155.1 million and an increase in equity income
of $25.5 million, partially offset by
a higher provision for hotel impairment of $28.1 million and an increase in deferred income
tax expense of $30.0 million.
- Normalized FFO was $41.4 million,
or $3.73 per common share, for the
three months ended June 30, 2021.
This represents a decrease of $1.0
million, or 2.4% compared to $42.4
million for the same period in 2020.
- Total revenue from real estate properties and hotels increased
by $11.5 million, or 5.1% to
$238.8 million for the three months
ended June 30, 2021, compared to
$227.3 million for the same period in
2020.
- Net operating income ("NOI") increased by $3.3 million, or 2.6%, to $134.5 million for the three months ended
June 30, 2021, compared to
$131.2 million for the same period in
2020, primarily due to higher NOI from the hotel portfolio due to
increased revenue per available room ("RevPar") and a higher
provision for the Canada Emergency
Wage Subsidy ("CEWS") program. In addition, higher NOI from the
retail, office and industrial portfolio was mainly caused by lower
bad debt expense. The increase in NOI is partially offset by a
decrease in multi-suite residential NOI due to higher vacancies.
The change in foreign exchange rate decreased NOI by $6.1 million.
Operational and Balance Sheet Highlights
- Rent collections from all commercial asset classes have been
strong with an average of approximately 96% collected since the
second quarter of 2020.
- During the year, occupancy was 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 June 30, 2021 and
December 31, 2020, the Company's
total assets were $11.1 billion.
- On May 14, 2021, the Company
fully repaid $200.0 million of 4.085%
Series D senior unsecured debentures on maturity.
Financial Highlights
|
Three months
ended
June
30
|
Six months
ended
June
30
|
(in thousands of
dollars, except per common share)
|
2021
|
2020
|
2021
|
2020
|
Revenue from real
estate properties
|
$208,691
|
$218,477
|
$420,055
|
$446,743
|
Revenue from hotel
properties
|
30,116
|
8,831
|
52,264
|
56,636
|
Management and
advisory fees
|
11,500
|
10,081
|
21,626
|
22,278
|
Interest and other
income
|
3,459
|
3,516
|
6,783
|
7,558
|
Total
revenue
|
$253,766
|
$240,905
|
$500,728
|
$533,215
|
|
|
|
|
|
Revenue from real
estate properties
|
$208,691
|
$218,477
|
$420,055
|
$446,743
|
Revenue from hotel
properties
|
30,116
|
8,831
|
52,264
|
56,636
|
Property operating
expenses – excluding bad debt expense
|
(83,052)
|
(77,116)
|
(209,720)
|
(206,937)
|
Property operating
expenses – bad debt expense
|
(1,006)
|
(8,127)
|
(3,286)
|
(9,240)
|
Hotel operating
expenses
|
(20,204)
|
(10,891)
|
(38,294)
|
(53,427)
|
Net operating
income
|
$134,545
|
$131,174
|
$221,019
|
$233,775
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
$16,498
|
($65,396)
|
$31,653
|
($31,984)
|
Net income (loss) per
common share – basic and diluted
|
$1.48
|
($5.81)
|
$2.85
|
($2.84)
|
|
|
|
|
|
Funds from
operations
|
$46,880
|
$48,881
|
$91,231
|
$55,874
|
FFO per common share
– basic and diluted
|
$4.22
|
$4.35
|
$8.22
|
$4.97
|
|
|
|
|
|
Normalized funds from
operations
|
$41,369
|
$42,383
|
$84,593
|
$93,016
|
Normalized FFO per
common share – basic and diluted
|
$3.73
|
$3.77
|
$7.62
|
$8.27
|
Rental Collection Summary
As at August 4, 2021, the Company's collection of
rental revenues since January 1, 2020
is summarized below by asset class as follows:
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
July
|
%
Rental
|
Asset
Class
|
2020
|
2020
|
2020
|
2020
|
2021
|
2021
|
2021
|
Revenue
|
Residential
|
99.8%
|
99.6%
|
99.4%
|
99.2%
|
99.1%
|
98.5%
|
96.0%
|
44.1%
|
Retail
|
98.3%
|
62.4%
|
85.6%
|
90.5%
|
91.6%
|
88.6%
|
87.3%
|
26.7%
|
Office
|
99.9%
|
92.8%
|
98.1%
|
97.7%
|
99.9%
|
98.5%
|
97.6%
|
27.8%
|
Industrial
|
100.0%
|
93.5%
|
96.9%
|
99.6%
|
99.5%
|
98.5%
|
96.2%
|
1.4%
|
Total
|
99.4%
|
86.6%
|
95.0%
|
96.2%
|
96.9%
|
95.7%
|
94.1%
|
100.0%
|
Liquidity
The Company has liquidity of approximately
$346 million comprised of
$140 million in cash and $206 million available under its revolving credit
facilities. In addition, the Company has approximately $1,290 million of unencumbered income producing
and hotel properties, and other investments which could be utilized
for financing. To further enhance liquidity, the Company has
narrowed down the scope of its capital expenditure program to
ensure the availability of resources, allocating an amount that
enables the Company to maintain the structural and overall safety
of the properties. Management has also implemented various
initiatives to reduce or defer operating expenses and is monitoring
various government assistance programs in Canada and the U.S. structured to provide
relief from personnel costs and commercial rent subsidies.
The Company has approximately $717
million of mortgages payable maturing during 2021 and 2022
having an aggregate loan-to-value ratio of 43% and a
weighted-average interest rate of 3.73% which management expects to
be able to refinance at similar or favourable terms. The Company
expects to be able to issue new debt instruments and use current
liquidity sufficient to permit the repayment of its 2021 and 2022
maturities.
Net Operating Income
NOI increase by $3.3 million, or 2.6%, during the three months
ended June 30, 2021, to $134.5 million, compared to $131.2 million generated in 2020, and is further
analyzed by asset type below.
|
Three months
ended
June 30
|
Six months
ended
June
30
|
(in thousands of
dollars)
|
2021
|
2020
|
2021
|
2020
|
Multi-suite
residential
|
$51,277
|
$62,117
|
$102,026
|
$120,749
|
Retail
|
27,912
|
27,067
|
56,134
|
60,901
|
Office
|
32,787
|
32,102
|
66,306
|
66,862
|
Industrial
|
1,715
|
1,616
|
3,496
|
3,572
|
Hotels
|
9,912
|
(2,060)
|
13,970
|
3,209
|
Adjusted
NOI
|
123,603
|
120,842
|
241,932
|
255,293
|
IFRIC 21 adjustment –
multi-suite residential
|
9,643
|
8,901
|
(18,216)
|
(18,755)
|
IFRIC 21 adjustment –
retail
|
1,299
|
1,431
|
(2,697)
|
(2,763)
|
NOI
|
$134,545
|
$131,174
|
$221,019
|
$233,775
|
Adjusted NOI for the three months ended June 30, 2021, increase by $2.8 million, or 2.3% to $123.6 million, compared to $120.8 million in 2020, primarily due to the
following:
- A decrease in the Canadian residential portfolio of
$4.4 million, primarily due to
increased vacancy as a result of lower leasing traffic resulting
from social distancing restrictions and current economic
conditions;
- A decrease in U.S. residential portfolio of US$1.9 million, primarily from vacancy and rental
concessions at three properties located in Chicago, Illinois;
- An increase in the Canadian retail portfolio of $1.7 million, mainly due to a decrease in bad
debt expense of $6.5 million when
compared to the same period in 2020, partially offset by a decrease
of $5.3 million due to a higher
proportion of tenants converting to percentage rent leases
resulting in lower recoveries of operating expenses and lower basic
rent;
- An increase in the office portfolio of $0.7 million, primarily due to an increase of
$0.6 million in lease cancellation
fees received, as a decrease in bad debt expense of $1.3 million was partially offset by a decrease
of $1.2 million due to lower parking
revenue and higher vacancy;
- An increase in the hotel portfolio of $12.0 million, primarily due to an increase of
$10.2 million which was still
impacted by existing economic conditions experienced in all
provinces as a result of the COVID-19 pandemic that lead to prior
period closures. In addition, three hotels designated under the
Government Authorized Accommodation (GAA) program generated an
increase in RevPar as well as an increase of $0.9 million due to the sale of two hotel
properties during the third and fourth quarters of 2020; and
- A decrease of $5.3 million due to
the change in the U.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended June 30,
2021, the Company recorded FFO of $46.9 million ($4.22 per common share), compared to $48.9 million ($4.35 per common share) in 2020. The decrease in
FFO of $2.0 million is mainly due to
the following:
- An increase in Adjusted NOI of $2.8
million; primarily due to higher NOI from the hotel
portfolio due to increased RevPar and many hotels being temporarily
closed during 2020, and a higher provision for CEWS. In addition,
higher NOI from the retail, office and industrial portfolio was
mainly caused by lower bad debt expense. The increase in Adjusted
NOI was partially offset by a decrease in multi-suite residential
NOI due to higher vacancies;
- A decrease in management and advisory fees of $1.4 million;
- A decrease in equity-accounted FFO of $1.5 million, primarily due to the Company's
investment in Lumina Hollywood, which is under initial
lease-up;
- A decrease in interest of $3.7
million mainly due to lower interest on mortgages payable
and lower interest on the Debentures;
- An increase in property management and corporate expenses of
$8.9 million, primarily due to an
increase in non-cash compensation expense related to the Company's
Stock Appreciation Rights plan of $4.2
million and a decrease in a provision for CEWS of
$4.8 million;
- An increase in current income taxes of $1.8 million; and
- A decrease in the non-controlling interests' share of FFO of
$1.3 million;
The change in foreign exchange rate had a negative impact on FFO
of $2.0 million ($0.18 per common share).
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. Normalized FFO for the
three months ended June 30, 2021, was
$41.4 million, or $3.73 per common share, versus $42.4 million, or $3.77 per common share, for the same period in
2020, which represents a decrease of $1.0
million, or 2.4%.
Third Quarter Dividend
The Board of Directors of
Morguard Corporation announced that the third quarterly, eligible
dividend of 2021 in the amount of $0.15 per common share will be paid on
September 30, 2021, to shareholders
of record at the close of business on September 15, 2021.
The Company's unaudited condensed consolidated financial
statements for the six months ended June 30,
2021, 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 condensed 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 June 30,
2021 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 $19.2 billion. As at
August 4, 2021, Morguard owns a
diversified portfolio of 200 multi-suite residential, retail,
office, industrial and hotel properties comprised of 17,752
residential suites, approximately 16.9 million square feet of
commercial leasable space and 5,288 hotel rooms. Morguard also
currently owns a 60.9% 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