MISSISSAUGA, ON,
May 7,
2024 /CNW/ - Morguard Corporation ("Morguard" or the
"Company") (TSX: MRC) is pleased to announce its financial results
for the three months ended March 31,
2024.
Reporting Highlights
- Normalized funds from operations(1) ("Normalized
FFO") was $52.6 million, or
$4.86 per common share, for the three
months ended March 31, 2024. This
represents an increase of $2.3
million, or 4.6%, compared to
- $50.3 million, or $4.56 per common share for the same period in
2023.
- Net income increased by $148.1
million to $116.8 million for
the three months ended March 31,
2024, compared to a net loss of $31.3
million for the same period in 2023, primarily due to a gain
on sale of hotel properties of $150.6
million.
- Total revenue from real estate properties increased by
$10.7 million, or 4.3%, to
$257.1 million for the three months
ended March 31, 2024, compared to
$246.4 million for the same period in
2023.
- Total revenue from hotel properties decreased by $20.7 million, or 66.5%, to $10.4 million for the three months ended
March 31, 2024, compared to
$31.1 million for the same period in
2023, primarily due to the sale of 14 hotel properties on
January 18, 2024.
- Adjusted NOI(1) increased by $1.8 million, or 1.3%, to $138.0 million for the three months ended
March 31, 2024, compared to
$136.2 million for the same period in
2023.
Operational and Balance
Sheet Highlights
- The Company sold the common shares of its subsidiary, Morguard
Hotels Limited, and the beneficial interest in 14 hotels for net
proceeds of $405.8 million, including
closing costs and repaid three first mortgage loans totalling
$48.6 million.
- An office property in Ottawa
was sold for net proceeds of $125.2
million, including closing costs, and repaid the mortgage
payable secured by the property in the amount of $57.7 million.
- The Company fully repaid $225.0
million of 4.715% Series E senior unsecured debentures on
maturity.
- The Company ended the quarter in a strong liquidity position
with $435.0 million of cash and
available credit facilities, and a $1.2
billion pool of unencumbered properties, hotels and other
investments.
- As at March 31, 2024, the
Company's total assets were $11.4
billion, compared to $11.6
billion at December 31,
2023.
|
(1)
Refer to Specified Financial Measures
|
|
Financial Highlights
|
|
|
For the three months
ended March 31
|
|
(in thousands of dollars)
|
2024
|
2023
|
|
Revenue from real
estate properties
|
$257,089
|
$246,372
|
|
Revenue from hotel properties
|
10,437
|
31,159
|
|
Management and advisory fees
|
9,657
|
10,150
|
|
Interest and other income
|
4,483
|
5,096
|
|
Total revenue
|
$281,666
|
$292,777
|
|
Revenue
from real estate properties
|
$257,089
|
$246,372
|
|
Revenue from hotel properties
|
10,437
|
31,159
|
|
Property operating expenses
|
(163,144)
|
(156,829)
|
|
Hotel operating expenses
|
(9,634)
|
(25,583)
|
|
Net operating income ("NOI")
|
$94,748
|
$95,119
|
|
Net income (loss)
attributable to common shareholders
|
$130,446
|
($34,690)
|
|
Net income (loss)
per common share – basic and diluted
|
$12.06
|
($3.15)
|
|
Funds from
operations(1)
|
$31,943
|
$32,652
|
|
FFO per common share – basic
and diluted(1)
|
$2.95
|
$2.96
|
|
Normalized funds
from operations(1)
|
$52,576
|
$50,266
|
|
Normalized FFO per common share
– basic and diluted(1)
|
$4.86
|
$4.56
|
|
(1) Refer to Specified Financial Measures.
|
|
|
Total revenue
during the three months ended March 31, 2024, decreased
by $11.1 million to $281.7 million compared
to $292.8 million in 2023, primarily
due to an decrease in revenue from hotel properties in the amount of $20.7 million,
due to the sale of 14 hotel properties on January 18, 2024, partially offset by an increase
in revenue from real estate properties in the amount of
$10.7 million, primarily due to
higher average monthly rent ("AMR") within the multi-suite
residential segment and from the net impact of acquisition and
disposition of properties.
Net income for the three
months ended March
31, 2024 was $116.8 million,
compared to a net loss of $31.3
million in 2023. The increase in net income of
$148.1 million for the three months
ended March 31, 2024, was primarily
due to the following:
- An increase in gain on sale of hotel properties of $150.6 million, due to the sale of 14 hotel
properties;
- An increase in non-cash net fair value loss of $19.3 million, mainly due to a decrease in fair
value gain on real estate properties, a decrease in fair value loss
on the Morguard Residential REIT units, and an increase in fair
value loss on other real estate funds investments; and
- A decrease in income tax expense (current and deferred) of
$16.6 million, mainly due to a
decrease in deferred income taxes resulting from the utilization of
net operating losses, the derecognition of deferred taxes relating
to a property disposition, and a lower fair value gain recorded on
the Company's Canadian and U.S. properties, partially offset by an
increase in current taxes related to the disposal of
properties.
Average Occupancy Levels
During the first 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.
The following table provides
occupancy by asset class for the following periods:
|
Suites/GLA
Square Feet
|
Mar.
2024
|
Dec.
2023
|
Sep.
2023
|
Jun.
2023
|
Mar.
2023
|
|
Multi-suite residential
|
17,798
|
95.6 %
|
96.1 %
|
96.1 %
|
96.7 %
|
96.6 %
|
|
Retail
7,868,000 (1)
93.8%
|
94.0 %
|
93.5 %
|
93.2 %
|
92.9 %
|
|
Office(2)
8,591,000 (2)
87.9%
|
88.4 %
|
88.1 %
|
85.9 %
|
86.6 %
|
|
(1)
|
Retail occupancy has
been adjusted to exclude development space of 396,525 square feet
of GLA.
|
|
(2)
|
Office occupancy has
been adjusted to exclude development space of 48,206 square feet of
GLA. Office
includes industrial properties with 1,053,000
square feet of GLA.
|
The following table provides a reconciliation of Adjusted NOI to its closely related
financial statement measurement for the following
periods:
|
For the three months
ended March 31
(in thousands of dollars)
|
2024
|
2023
|
|
Multi-suite residential
|
$70,421
|
$64,634
|
|
Retail
|
32,287
|
32,965
|
|
Office(1)
|
34,494
|
32,993
|
|
Hotel
|
803
|
5,576
|
|
Adjusted NOI
|
138,005
|
136,168
|
|
IFRIC 21 adjustment - multi-suite residential
|
(37,203)
|
(35,781)
|
|
IFRIC 21 adjustment -
retail
|
(6,054)
|
(5,268)
|
|
NOI
|
$94,748
|
$95,119
|
|
(1)
|
Includes industrial
properties
with NOI for the three months ended
March 31, 2024 of $2,477
(2023 - $1,507).
|
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:
|
For the three months
ended March 31
(in thousands of dollars)
|
2024
|
2023
|
|
Multi-suite residential
|
$70,421
|
$64,634
|
|
Retail
|
32,287
|
32,965
|
|
Office
|
34,494
|
32,993
|
|
Hotel
|
803
|
5,576
|
|
Adjusted NOI
Other Revenue
|
138,005
|
136,168
|
|
Management and advisory fees
|
9,657
|
10,150
|
|
Interest and other income
|
4,483
|
5,096
|
|
Equity-accounted FFO
|
1,075
|
1,388
|
|
Expenses and Other
|
15,215
|
16,634
|
|
Interest
|
(64,882)
|
(62,727)
|
|
Principal repayment of lease liabilities
|
(401)
|
(410)
|
|
Property management and corporate
|
(23,331)
|
(21,906)
|
|
Internal leasing costs
|
1,205
|
642
|
|
Amortization of capital assets
|
(281)
|
(331)
|
|
Current income taxes
|
952
|
138
|
|
Non-controlling interests' share
of FFO
|
(13,657)
|
(16,111)
|
|
Unrealized changes in the fair
value of financial instruments
|
(20,634)
|
(18,576)
|
|
Other expense
|
(248)
|
(869)
|
|
FFO
|
$31,943
|
$32,652
|
|
FFO per common share
amounts – basic and diluted
|
$2.95
|
$2.96
|
|
Weighted average
number of common
shares outstanding (in thousands):
Basic and
diluted
|
10,813
|
11,022
|
|
For the three months
ended March 31
(in thousands of dollars)
|
2024
|
2023
|
|
FFO (from
above)
|
$31,943
|
$32,652
|
|
Add/(deduct):
Unrealized changes in the fair
value of financial instruments
|
20,634
|
18,576
|
|
SARs plan increase (decrease) in compensation expense
|
857
|
(675)
|
|
Lease cancellation fee and other
|
(1,037)
|
(344)
|
|
Tax effect of above
adjustments
|
179
|
57
|
|
Normalized FFO
|
$52,576
|
$50,266
|
|
Per common share amounts
– basic and diluted
|
$4.86
|
$4.56
|
Second Quarter Dividend
The Board of Directors of Morguard Corporation announced that
the second quarterly, eligible dividend of 2024 in the amount of
$0.15 per common share will be paid
on June 28, 2024, to shareholders of
record at the close of business on June 14,
2024.
Subsequent Events
As at March 31, 2024, the Company has entered into a binding
agreement to sell a retail property for gross proceeds
of $37.5 million, excluding closing
costs and will repay the mortgage payable secured by the property
in the amount of $17.0 million. The
transaction is expected to close during the second quarter of
2024.
Subsequent to March 31, 2024, the
Company entered into binding commitment letters for the Canada
Mortgage and Housing Corporation ("CMHC") insured refinancing of
three multi-suite residential properties located in Mississauga, Ontario, providing gross proceeds
of up to $203.7 million. The Company
expects to close the refinancing during the
second quarter of 2024. The maturing mortgages amount to $90.9
million, and have a weighted
average interest rate of 3.36%.
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 months ended March
31, 2024 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 non-cash
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 non-cash fair value adjustments excluded from
REALPAC's definition of FFO described above.
The Company's unaudited condensed financial statements for the
three months ended March 31, 2024,
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 $17.8
billion. As at May 7, 2024, Morguard
owns a diversified portfolio of 160 multi-suite residential, retail, office,
industrial and hotel properties comprised of 17,798 residential
suites, approximately 16.9 million square feet of commercial
leasable space and 472 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