MISSISSAUGA, ON, Feb. 23,
2023 /CNW/ - Morguard Corporation ("Morguard" or the
"Company") (TSX: MRC) is pleased to announce its financial results
for the year ended December 31,
2022.
Reporting Highlights
- Normalized funds from operations ("Normalized FFO") was
$218.8 million, or $19.75 per common share, for the year ended
December 31, 2022. This represents an
increase of $24.7 million, or 12.7%,
compared to $194.1 million, or
$17.48 per common share for the same
period in 2021.
- Net income decreased by $144.4
million to $112.2 million for
the year ended December 31, 2022,
compared to $256.6 million for the
same period in 2021.
- Total revenue from real estate properties increased by
$63.8 million, or 7.5%, to
$916.5 million for the year ended
December 31, 2022, compared to
$852.7 million for the same period in
2021.
- Total revenue from hotel properties increased by $38.3 million, or 30.9%, to $162.2 million for the year ended December 31, 2022, compared to $123.9 million for the same period in 2021.
- Net operating income ("NOI") increased by $48.6 million, or 10.0%, to $536.6 million for the year ended December 31, 2022, compared to $488.0 million for the same period in 2021.
Operational and Balance Sheet Highlights
- The Company acquired four properties for a purchase price of
$317.9 million, including closing
costs.
- The Company sold six properties for proceeds of $256.7 million, and repaid mortgages payable
secured by three of the properties in the amount of $65.0 million.
- The Company sold 14 hotels for proceeds of $98.1 million. At closing, the Company repaid
eight first mortgage loans totalling $71.8
million that were secured by the hotels.
- The Company repaid $200.0 million
of 4.333% Series C senior unsecured debentures on maturity.
- The Company financed new and existing mortgages for additional
net proceeds of $165.5 million at an
average interest rate of 5.12% and an average term of 5.4
years.
- 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.
- As at December 31, 2022, the
Company's total assets were $11.7
billion, compared to $11.5
billion at December 31,
2021.
Financial Highlights
For the years ended
December 31
|
|
|
(in thousands of
dollars)
|
2022
|
2021
|
Revenue from real
estate properties
|
$916,517
|
$852,692
|
Revenue from hotel
properties
|
162,169
|
123,916
|
Management and advisory
fees
|
41,339
|
45,302
|
Interest and other
income
|
16,650
|
22,934
|
Total
revenue
|
$1,136,675
|
$1,044,844
|
|
|
|
Revenue from real
estate properties
|
$916,517
|
$852,692
|
Revenue from hotel
properties
|
162,169
|
123,916
|
Property operating
expenses
|
(414,010)
|
(392,436)
|
Hotel operating
expenses
|
(128,039)
|
(96,172)
|
Net operating
income
|
$536,637
|
$488,000
|
|
|
|
Net income attributable
to common shareholders
|
$122,771
|
$249,760
|
Net income per common
share – basic and diluted
|
$11.08
|
$22.50
|
|
|
|
Funds from
operations(1)
|
$211,603
|
$187,920
|
FFO per common share –
basic and diluted(1)
|
$19.10
|
$16.93
|
|
|
|
Normalized funds from
operations(1)
|
$218,821
|
$194,077
|
Normalized FFO per
common share – basic and diluted(1)
|
$19.75
|
$17.48
|
(1) Represents a
non-GAAP financial measure/ratio that does not have any
standardized meaning prescribed by IFRS and is not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. This measure should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with
IFRS.
|
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, 2022 and
available on the Company's profile on SEDAR at www.sedar.com.
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 below.
Adjusted Net Operating Income ("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.
The following table provides a reconciliation of Adjusted NOI to
its closely related financial statement measurement for the
following periods:
|
Three months
ended
|
Year
ended
|
|
December
31
|
December
31
|
(in thousands of
dollars)
|
2022
|
2021
|
2022
|
2021
|
Multi-suite
residential
|
$70,100
|
$52,059
|
$245,276
|
$204,143
|
Retail
|
34,906
|
31,447
|
120,419
|
116,741
|
Office
|
32,760
|
32,391
|
128,046
|
131,675
|
Industrial
|
1,966
|
1,911
|
8,788
|
7,459
|
Hotel
|
5,684
|
2,839
|
34,130
|
27,744
|
Adjusted
NOI
|
145,416
|
120,647
|
536,659
|
487,762
|
IFRIC 21 adjustment -
multi-suite residential
|
10,044
|
9,537
|
(115)
|
238
|
IFRIC 21 adjustment -
retail
|
1,316
|
1,352
|
93
|
—
|
NOI
|
$156,776
|
$131,536
|
$536,637
|
$488,000
|
Funds From Operations and Normalized FFO
FFO (and FFO per common share) are non-GAAP financial measures
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 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 following tables provide a reconciliation of FFO and
Normalized FFO to its closely related financial statement
measurement for the following periods:
|
Three months
ended
|
Year
ended
|
|
December
31
|
December
31
|
(in thousands of
dollars)
|
2022
|
2021
|
2022
|
2021
|
Multi-suite
residential
|
$70,100
|
$52,059
|
$245,276
|
$204,143
|
Retail
|
34,906
|
31,447
|
120,419
|
116,741
|
Office
|
32,760
|
32,391
|
128,046
|
131,675
|
Industrial
|
1,966
|
1,911
|
8,788
|
7,459
|
Hotel
|
5,684
|
2,839
|
34,130
|
27,744
|
Adjusted
NOI
|
145,416
|
120,647
|
536,659
|
487,762
|
Other
Revenue
|
|
|
|
|
Management and advisory
fees
|
10,898
|
13,252
|
41,339
|
45,302
|
Interest and other
income
|
5,326
|
4,420
|
16,650
|
22,934
|
Equity-accounted
FFO
|
1,119
|
656
|
5,195
|
(191)
|
|
17,343
|
18,328
|
63,184
|
68,045
|
Expenses and
Other
|
|
|
|
|
Interest
|
(61,457)
|
(54,190)
|
(229,335)
|
(220,312)
|
Principal repayment of
lease liabilities
|
(695)
|
(379)
|
(1,732)
|
(1,756)
|
Property management and
corporate
|
(19,994)
|
(20,022)
|
(77,613)
|
(80,201)
|
Internal leasing
costs
|
1,162
|
1,183
|
4,644
|
3,502
|
Amortization of capital
assets
|
(340)
|
896
|
(1,453)
|
(1,593)
|
Current income
taxes
|
(2,464)
|
(14,498)
|
(8,228)
|
(21,488)
|
Non-controlling
interests' share of FFO
|
(17,951)
|
(14,131)
|
(62,713)
|
(55,244)
|
Unrealized changes in
the fair value of financial instruments
|
13,226
|
5,808
|
(13,209)
|
6,006
|
Other income
|
621
|
230
|
1,399
|
3,199
|
FFO
|
$74,867
|
$43,872
|
$211,603
|
$187,920
|
FFO per common share
amounts – basic and diluted
|
$6.79
|
$3.95
|
$19.10
|
$16.93
|
Weighted average number
of common shares outstanding (in thousands):
|
Basic and
diluted
|
11,022
|
11,101
|
11,079
|
11,101
|
|
Three months
ended
|
Year
ended
|
|
December
31
|
December
31
|
(in thousands of
dollars)
|
2022
|
2021
|
2022
|
2021
|
FFO (from
above)
|
$74,867
|
$43,872
|
$211,603
|
$187,920
|
Add/(deduct):
|
|
|
|
|
Unrealized changes in
the fair value of financial instruments
|
(13,226)
|
(5,808)
|
13,209
|
(6,006)
|
SARs plan increase
(decrease) in compensation expense
|
(1,164)
|
641
|
(4,577)
|
3,971
|
Sears settlement, net
of non-controlling interest
|
—
|
—
|
—
|
(1,238)
|
Lease cancellation fee
and other
|
(369)
|
(730)
|
(1,815)
|
(3,258)
|
Tax effect of above
adjustments
|
52
|
(99)
|
401
|
(247)
|
Current tax on
redemption of Class C LP units
|
—
|
12,935
|
—
|
12,935
|
Normalized
FFO
|
$60,160
|
$50,811
|
$218,821
|
$194,077
|
Per common share
amounts – basic and diluted
|
$5.46
|
$4.58
|
$19.75
|
$17.48
|
First Quarter Dividend
The Board of Directors of Morguard Corporation announced that
the first quarterly, eligible dividend of 2023 in the amount of
$0.15 per common share will be paid
on March 31, 2023, to shareholders of
record at the close of business on March 15,
2023.
Subsequent Event
On February 22, 2023, Morguard
Residential REIT announced a public offering, on a bought deal
basis and subject to regulatory approval, of $50.0 million aggregate principal amount of 6.00%
convertible unsecured subordinated debentures due March 31, 2028 (the "2023 Debentures"), excluding
an over-allotment option of up to $6.8
million. The 2023 Debentures will be convertible, at the
option of the holder, into trust units of Morguard Residential REIT
at $24.15 per trust unit. Morguard
Residential REIT also announced that it will redeem all of its
outstanding 4.50% convertible unsecured subordinated debentures on
March 24, 2023.
The Company's audited financial statements for the year ended
December 31, 2022, 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.
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 23,
2023, Morguard owns a diversified portfolio of 180
multi-suite residential, retail, office, industrial and hotel
properties comprised of 17,326 residential suites, approximately
17.1 million square feet of commercial leasable space and 2,907
hotel rooms. Morguard also currently owns a 61.6% 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