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.
Average Occupancy Levels
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,
California. Including the one property previously under initial
lease-up, occupancy at December 31, 2023 is 96.1%
(September 30, 2023 - 96.1%, June 30, 2023 - 96.7%,
March 31, 2023 - 96.8%, December
31, 2022 - 96.3%).
|
(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
industrial properties with 1,066,000 square feet of
GLA.
|
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
December 31
|
Year ended
December 31
|
(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
31, 2023 of $2,200 (2022 - $1,966) and $7,526 (2022
- $8,788), 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
December 31
|
Year ended
December 31
|
(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):
Basic and diluted
|
10,813
|
11,022
|
10,903
|
11,079
|
|
Three months
ended
December 31
|
Year ended
December 31
|
(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
|
First Quarter
Dividend
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.
Subsequent Events
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.
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 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
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.
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.
About Morguard Corporation
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