MISSISSAUGA, ON, Nov. 1, 2023
/CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX:
MRC) is pleased to announce its financial results for the three and
nine months ended September 30, 2023.
Reporting Highlights
- Normalized funds from operations(1) ("Normalized
FFO") was $64.4 million, or
$5.95 per common share, for the three
months ended September 30, 2023. This
represents an increase of $1.0
million, or 1.6%, compared to $63.4
million, or $5.71 per common
share for the same period in 2022.
- Net income decreased by $65.2
million to a net loss of $9.4
million for the three months ended September 30, 2023, compared to net income of
$55.8 million for the same period in
2022, primarily due to an increase in non-cash fair value loss on
real estate properties and an increase in interest expense, partly
offset by an increase in fair value gain on Morguard Residential
REIT units, a decrease in deferred tax, a recovery of impairment
and an increase in net operating income.
- Total revenue from real estate properties increased by
$15.8 million, or 6.7%, to
$250.6 million for the three months
ended September 30, 2023, compared to
$234.8 million for the same period in
2022.
- Adjusted NOI(1) increased by $6.2 million, or 4.3%, to $151.7 million for the three months ended
September 30, 2023, compared to
$145.5 million for the same period in
2022.
Operational and Balance Sheet Highlights
- On September 26, 2023, the
Company issued $175.0 million of 9.5%
Series H senior unsecured debentures due on September 26, 2026.
- On September 28, 2023, the
Company fully repaid $175.0 million
of 4.402% Series G senior unsecured debentures on maturity.
- During the third 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 September 30, 2023, and
December 31, 2022, the Company's
total assets were $11.7 billion.
- During the third quarter, the Company financed new and existing
mortgages for gross proceeds of $122.4
million at an average interest rate of 6.34% and an average
term of 5.0 years. The weighted average interest rate of maturing
mortgages was 4.00%.
- The Company ended the third quarter in a strong liquidity
position with $350.5 million of cash
and available credit facilities, and a $1.2
billion pool of unencumbered properties, hotels and other
investments.
|
(1) Refer to
Specified Financial Measures
|
Financial Highlights
|
Three months
ended
|
Nine months
ended
|
|
September
30
|
September
30
|
|
(in thousands of
dollars)
|
2023
|
2022
|
2023
|
2022
|
|
Revenue from real
estate properties
|
$250,640
|
$234,863
|
$743,558
|
$681,459
|
|
Revenue from hotel
properties
|
47,895
|
50,416
|
123,203
|
123,983
|
|
Management and advisory
fees
|
9,618
|
10,018
|
30,752
|
30,441
|
|
Interest and other
income
|
4,208
|
4,204
|
13,647
|
11,324
|
|
Total
revenue
|
$312,361
|
$299,501
|
$911,160
|
$847,207
|
|
|
|
|
|
|
Revenue from real
estate properties
|
$250,640
|
$234,863
|
$743,558
|
$681,459
|
|
Revenue from hotel
properties
|
47,895
|
50,416
|
123,203
|
123,983
|
|
Property operating
expenses
|
(102,648)
|
(94,775)
|
(356,128)
|
(330,044)
|
|
Hotel operating
expenses
|
(30,095)
|
(32,470)
|
(84,494)
|
(95,537)
|
|
Net operating income
("NOI")
|
$165,792
|
$158,034
|
$426,139
|
$379,861
|
|
|
|
|
|
|
Net income attributable
to common shareholders
|
$5,494
|
$66,824
|
$60,622
|
$505,801
|
|
Net income per common
share – basic and diluted
|
$0.51
|
$6.02
|
$5.54
|
$45.58
|
|
|
|
|
|
|
Funds from
operations(1)
|
$60,163
|
$53,889
|
$148,166
|
$136,736
|
|
FFO per common share –
basic and diluted(1)
|
$5.56
|
$4.86
|
$13.55
|
$12.32
|
|
|
|
|
|
|
Normalized funds from
operations(1)
|
$64,394
|
$63,396
|
$176,833
|
$158,661
|
|
Normalized FFO per
common share – basic and diluted(1)
|
$5.95
|
$5.71
|
$16.17
|
$14.30
|
|
(1) Refer to
Specified Financial Measures.
|
Adjusted Net Operating Income ("Adjusted NOI")
The following table provides a reconciliation of Adjusted NOI to
its closely related financial statement measurement
for the following periods:
|
Three months
ended
September 30
|
Nine month ended
September 30
|
|
(in thousands of
dollars)
|
2023
|
2022
|
2023
|
2022
|
|
Multi-suite
residential
|
$68,557
|
$62,533
|
$203,569
|
$175,176
|
|
Retail
|
30,855
|
29,277
|
95,665
|
85,513
|
|
Office(1)
|
34,519
|
35,783
|
101,144
|
102,108
|
|
Hotel
|
17,800
|
17,946
|
38,709
|
28,446
|
|
Adjusted
NOI
|
151,731
|
145,539
|
439,087
|
391,243
|
|
IFRIC 21 adjustment -
multi-suite residential
|
12,242
|
11,159
|
(11,319)
|
(10,159)
|
|
IFRIC 21 adjustment -
retail
|
1,819
|
1,336
|
(1,629)
|
(1,223)
|
|
NOI
|
$165,792
|
$158,034
|
$426,139
|
$379,861
|
|
(1) Includes industrial
properties with NOI for the three and nine months ended September
30, 2023 of $2,362 (2022 - $2,591), and $5,326 (2022 - $6,822),
respectively.
|
Funds From Operations and Normalized FFO
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
September 30
|
Nine month ended
September 30
|
|
(in thousands of
dollars)
|
2023
|
2022
|
2023
|
2022
|
|
Multi-suite
residential
|
$68,557
|
$62,533
|
$203,569
|
$175,176
|
|
Retail
|
30,855
|
29,277
|
95,665
|
85,513
|
|
Office
|
34,519
|
35,783
|
101,144
|
102,108
|
|
Hotel
|
17,800
|
17,946
|
38,709
|
28,446
|
|
Adjusted
NOI
|
151,731
|
145,539
|
439,087
|
391,243
|
|
Other
Revenue
|
|
|
|
|
|
Management and advisory
fees
|
9,618
|
10,018
|
30,752
|
30,441
|
|
Interest and other
income
|
4,208
|
4,204
|
13,647
|
11,324
|
|
Equity-accounted
FFO
|
1,449
|
1,550
|
4,518
|
4,076
|
|
15,275
|
15,772
|
48,917
|
45,841
|
|
Expenses and
Other
|
|
|
|
|
|
Interest
|
(66,830)
|
(57,692)
|
(194,533)
|
(167,878)
|
|
Principal repayment of
lease liabilities
|
(405)
|
(316)
|
(1,229)
|
(1,037)
|
|
Property management and
corporate
|
(20,773)
|
(20,316)
|
(65,254)
|
(57,619)
|
|
Internal leasing
costs
|
1,320
|
1,524
|
3,394
|
3,482
|
|
Amortization of capital
assets
|
(318)
|
(345)
|
(979)
|
(1,113)
|
|
Current income
taxes
|
(2,280)
|
(4,220)
|
(4,371)
|
(5,764)
|
|
Non-controlling
interests' share of FFO
|
(12,468)
|
(15,640)
|
(44,511)
|
(44,762)
|
|
Unrealized changes in
the fair value of financial instruments
|
(5,116)
|
(9,882)
|
(31,566)
|
(26,435)
|
|
Other income
(expense)
|
27
|
(535)
|
(789)
|
778
|
|
FFO
|
$60,163
|
$53,889
|
$148,166
|
$136,736
|
|
FFO per common share
amounts – basic and diluted
|
$5.56
|
$4.86
|
$13.55
|
$12.32
|
|
Weighted average number
of common shares outstanding (in thousands):
|
|
Basic and
diluted
|
10,813
|
11,095
|
10,933
|
11,098
|
|
Three months
ended
September 30
|
Nine month ended
September 30
|
|
(in thousands of
dollars)
|
2023
|
2022
|
2023
|
2022
|
|
FFO (from
above)
|
$60,163
|
$53,889
|
$148,166
|
$136,736
|
|
Add/(deduct):
|
|
|
|
|
|
Unrealized changes in
the fair value of financial instruments
|
5,116
|
9,882
|
31,566
|
26,435
|
|
SARs plan decrease in
compensation expense
|
(57)
|
(13)
|
(866)
|
(3,413)
|
|
Lease cancellation fee
and other
|
(1,020)
|
(414)
|
(2,476)
|
(1,446)
|
|
Tax effect of above
adjustments
|
192
|
52
|
443
|
349
|
|
Normalized
FFO
|
$64,394
|
$63,396
|
$176,833
|
$158,661
|
|
Per common share
amounts – basic and diluted
|
$5.95
|
$5.71
|
$16.17
|
$14.30
|
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 and nine months ended September 30,
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
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.
Funds From Operations and Normalized FFO
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.
Fourth Quarter Dividend
The Board of Directors of Morguard Corporation announced that
the fourth quarterly, eligible dividend of 2023 in the amount of
$0.15 per common share will be paid
on December 29, 2023, to shareholders
of record at the close of business on December 15, 2023.
The Company's unaudited condensed financial statements for the
three and nine months ended September 30, 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.
About Morguard Corporation
Morguard Corporation is a real estate company, with total assets
owned and under management valued at $18.6
billion. As at November 1,
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 65.3% interest in
Morguard Real Estate Investment Trust and a 45.8% 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