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Morguard Corporation Announces 2016 Results and Regular Eligible Dividend

MISSISSAUGA, ON, Feb. 23, 2017 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (MRC.TO) today announced its financial results for the year ended December 31, 2016.

Operational Highlights:

  • On February 1, 2016, the Company acquired a 370 suite residential property located in Ottawa, Ontario, for $67.0 million. The acquisition was funded by cash on hand and a mortgage of $38.6 million at an interest rate of 2.88% for a term of 10 years.
  • On February 1, 2016, the Company acquired three hotels comprising 417 rooms located in Toronto, Ontario, for a gross purchase price of $33.5 million.
  • On November 18, 2016, the Company issued $200.0 million (net proceeds including issuance costs - $199.2 million) of 4.013% Series B senior unsecured debentures due on November 18, 2020.
  • On December 14, 2016, the Company acquired 54,578,187 common shares of Temple Hotels Inc. ("Temple") increasing its ownership in Temple from 38.9% to 55.9%. This acquisition of control has been reflected as a business combination occurring on December 31, 2016.
  • On December 30, 2016, Morguard REIT issued $175.0 million principal amount of 4.50% convertible unsecured subordinated debentures, of which Morguard owns $60.0 million.
  • During the year, the Company received $22.5 million in settlement proceeds relating to the release of Target Corporation from indemnity agreements.
  • Recently completed development of the Marquee at Block 37, Chicago, Illinois, a 34-storey, 691-suite residential tower. Leasing began in March 2016 and the project is currently 61.7% leased.
  • Completed the initial lease-up of The Heathview, a 30-storey, twin-tower, multi-suite residential property located in Toronto, Ontario. As at December 31, 2016, The Heathview's occupancy is 94.0%.

Reporting Highlights:

  • Funds from operations ("FFO") increased by $30.2 million to $213.3 million for the year ended December 31, 2016, compared to $183.1 million for the same period in 2015, representing a 16.5% increase.
  • On a per common share basis, FFO increased to $17.86 for the year ended December 31, 2016, compared to $14.96 in 2015, representing an increase of 19.4%.
  • Normalized FFO for the year ended December 31, 2016, was $198.3 million, or $16.60 per common share, versus $194.5 million, or $15.89 per common share, for the same period in 2015, which represents an increase of $3.8 million or 2.0%.
  • Shareholders' equity per common share (excluding non-controlling interest) increased to $239.98 compared to $224.94 as at December 31, 2015.
  • Total revenue increased by $38.4 million to $922.0 million compared to $883.6 million for the same period in 2015.
  • Comparable NOI increased by $10.6 million, or 2.5%, to $434.0 million compared to $423.4 million for the same period in 2015.
  • During the year, 64,235 common shares were purchased for cash consideration of $8.8 million at a weighted average price of $137.29 per common share.
  • During the year the Company acquired 1,120,929 units of Morguard REIT for cash consideration of $16.1 million increasing the Company's ownership interest in Morguard REIT from 50.4% as at December 31, 2015, to 52.5% as at December 31, 2016.

Financial Highlights

For the years ended December 31,


(in thousands of dollars, except per common share)

2016

2015

Revenue from real estate

$775,746

$762,033

Revenue from hotel properties

66,567

46,562

Management and advisory fees

67,895

59,536

Interest and other income

6,349

7,819

Sales of product and land

5,419

7,609

Total revenues

$921,976

$883,559




Revenue from real estate properties

$775,746

$762,033

Revenue from hotel properties

66,567

46,562

Property operating expenses

(337,308)

(334,949)

Hotel operating expenses

(51,607)

(37,747)

Net operating income

$453,398

$435,899




Funds from operations

$213,282

$183,139

FFO per common share – basic and diluted

$17.86

$14.96




Normalized funds from operations

$198,299

$194,476

Per common share amounts – basic and diluted

$16.60

$15.89




Net income attributable to common shareholders

$172,745

$80,542

Net income per common share – basic and diluted

$14.46

$6.58

 

Net Income

Net income for the year ended December 31, 2016, was $209.9 million compared to $103.5 million for the same period in 2015. The increase in net income of $106.4 million year ended December 31, 2016, was primarily due to the following:

  • An increase in net operating income of $17.5 million;
  • An increase in management and advisory fees of $8.4 million;
  • An increase in interest expense of $4.1 million;
  • An increase in property management and corporate expense of $14.0 million;
  • A decrease in non-cash net fair value loss of $35.5 million;
  • An increase in non-cash equity income of $48.6 million;
  • An increase in other income (expense) of $42.3 million; and
  • An increase in income taxes (current and deferred) of $28.7 million.

Net Operating Income ("NOI")

NOI increased by $17.5 million, or 4.0%, during the year ended December 31, 2016, to $453.4 million, compared to $435.9 million generated in 2015, and is further analyzed by asset type below.

For the years ended December 31,



(in thousands of dollars)

2016

2015

Multi-suite residential

$169,436

$149,303

Retail

141,606

147,885

Office

120,947

121,907

Industrial

7,020

7,517

Hotels

14,472

8,815

Adjusted NOI

453,481

435,427

IFRIC 21 adjustment – multi-suite residential

-

472

IFRIC 21 adjustment – retail

(83)

-

NOI

$453,398

$435,899

 

NOI for the year ended December 31, 2016, increased by $17.5 million to $453.4 million compared to $435.9 million in 2015, primarily due to the following:

  • An increase of $5.1 million due to rental rate growth in Canadian residential properties;
  • An increase of $4.9 million due to the Monterra and 160 Chapel acquisitions completed during and subsequent to the year ended December 31, 2015;
  • Additional NOI of $4.9 million generated from the lease-up of the Company's completed development property, The Heathview, a 587 suite rental development in Toronto, Ontario;
  • A decrease of $5.8 million in Canadian and U.S. retail properties due to increased vacancy and non-recoverable costs, as well as vacant space resulting from the disclaimed Target leases and the disposition of two U.S. properties during and the year ended December 31, 2016;
  • A decrease in the office portfolio of $1.0 million primarily due to vacancy at a single tenant office property located in Alberta and the disposition of a property during the second quarter of 2016;
  • A decrease in the industrial portfolio of $0.5 million is primarily due to the sale of two industrial properties during the second quarter of 2015;
  • An increase in the hotel portfolio of $5.7 million primarily due to the acquisition of three hotels near Toronto's Pearson International Airport on February 1, 2016; and an increase at two hotel properties which were under renovation during 2015; and
  • An increase of $4.2 million due to the change in the U.S. dollar foreign exchange rate.

Funds From Operations

For the year ended December 31, 2016, the Company recorded FFO of $213.3 million ($17.86 per common share), compared to $183.1 million ($14.96 per common share) in 2015. The increase in FFO of $30.2 million is mainly due to the following:

  • Higher Adjusted NOI of $18.1 million, which excludes the impact of IFRIC 21;
  • Higher management and advisory fee of $8.4 million;
  • A decrease in equity-accounted FFO of $1.1 million;
  • An increase in interest expense of $4.1 million
  • Higher property management and corporate expense of $14.0 million;
  • An impairment provision on investment in publicly traded securities of $11.5 million recorded in the prior period;
  • An increase in current taxes of $13.7 million;
  • An increase in non-controlling interest share of Morguard Residential REIT of $2.7 million;
  • Lower non-controlling interest's share of FFO of $3.4 million; and
  • Target settlement proceeds of $22.5 million.

The change in foreign exchange rates had a positive impact on FFO of $1.7 million ($0.14 per common share).

Normalized FFO for the year ended December 31, 2016, was $198.3 million, or $16.60 per common share, versus $194.5 million, or $15.89 per common share, for the same period in 2015, which represents an increase of $3.8 million or 2.0%. Normalized FFO is computed as FFO adjusted for the impact of non-recurring items net of tax which includes an adjustment for the Target settlement proceeds net of tax received during 2016.

First Quarter Dividend

The Board of Directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2017 in the amount of $0.15 per common share will be paid on March 31, 2017, to shareholders of record at the close of business on March 15, 2017.

The Company's audited financial statements for the year ended December 31, 2016, 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 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 year ended December 31, 2016 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 $20.7 billion. Morguard owns a diversified portfolio of 205 multi-suite residential, retail, office, industrial and hotel properties comprised of 18,286 residential suites, approximately 16.0 million square feet of commercial leasable space and 5,647 hotel rooms. Morguard also currently owns a 52.5% interest in Morguard Real Estate Investment Trust ("Morguard REIT" or "MRT"), a 47.0% effective interest in Morguard North American Residential Real Estate Investment Trust ("Morguard Residential REIT" or "MRG") and a 55.9% effective interest in Temple Hotels Inc. Morguard also provides advisory and management services to institutional and other investors. For more information, visit the Company's website at www.morguard.com.