Morguard Corporation Announces 2012 Results and Regular Eligible Dividend

TSX: MRC

MISSISSAUGA, ON, March 6, 2013 /CNW/ - Morguard Corporation (TSX: MRC) announced its financial results for the year ended December 31, 2012.

HIGHLIGHTS

  • Funds from operations increased by 10.4% to $142 million, or $11.05 per share, compared to $128.6 million, or $9.92 per share in 2011;
  • Total revenues increased by 6.3% to $415.9 million compared to $391.1 million in 2011;
  • Total net operating income increased by 4.9% to $171.3 million compared to $163.3 million in 2011;
  • Net income attributable to common shareholders totalled $389.4 million compared to $288.0 million in 2011; the increase is predominantly due to higher fair value gains recorded on real estate properties in the amount of $45.8, a decrease in income taxes of $24.6 and a gain on sale of marketable securities of $13.6 million;
  • During the year, the Company acquired three U.S. multi-unit residential properties for a total purchase price of US$384.1 million and disposed of a 50% interest in a development property for total sales proceeds of $20.3 million;
  • On April 18, 2012, the Company completed an initial public offering ("IPO") of trust units of Morguard North American  Residential Real Estate Trust (the "Morguard Residential REIT" or the "REIT").  The IPO, including the over-allotment option, raised gross proceeds of $82.5 million for 8,250,000 trust units at a price of $10.00 per trust unit; and
  • On September 12, 2012, Morguard Residential REIT completed an additional offering which raised gross proceeds of $150.7 million for 12,720,000 trust units sold at a price of $11.85 per trust unit.

All amounts in thousands of Canadian dollars, except for per share amounts, unless otherwise noted.

FINANCIAL HIGHLIGHTS

   
Year ended December 31,         
(In thousands of dollars) 2012 2011
Revenue from income producing properties $313,715 $297,265
Management and advisory fees 75,858 73,556
Interest and other 20,982 14,347
Sales of product and land 5,362 5,977
Total revenues 415,917 391,145
     
Revenue from income producing properties $313,715 $297,265
Property operating costs and realty tax expense   (142,372)   (133,922)
Net operating income $171,343 $163,343
     
Funds from operations $141,982 $128,609
     
Net income attributable to common shareholders $389,443 $288,026
     
Income per share:    
  Basic and diluted  - net income $30.31 $22.22

NET INCOME
The Company's net income attributable to common shareholders for the year ended December 31, 2012, was $389,443 ($30.31 per share) compared to $288,026 ($22.22 per share) for the same period in 2011. The increase in net income of $101,417 for the year ended December 31, 2012, was primarily due to an increase in fair value gains on real estate properties of $45,844, an increase in net operating income of $8,000, an increase in revenue from management and advisory fees of $2,302, an increase in interest and other income of $6,635, an increase in equity income from Morguard REIT of $9,776, a gain on sale of marketable securities of $13,598, an increase in other income of $2,883 and a decrease in income taxes of $24,553. These items were partially offset by an increase in property management and corporate expense of $7,522 and a net fair value loss of $3,883 on the Residential REIT Units.

NET OPERATING INCOME

Year ended December 31,
(In thousands of dollars)
2012 2011
Net operating income - Canadian properties    
Multi-unit residential - Canada $53,953 $52,341
Retail - Canada 32,832 30,931
Office and industrial 41,334 41,603
  128,119 124,875
Net operating income - U.S. properties in U.S. dollars    
Multi-unit residential - U.S. US 19,623 US 16,983
Retail - U.S. US 23,618 US 21,890
  US 43,241 US 38,873
Exchange amount to Canadian dollars (17) (405)
Net operating income - U.S. properties in Canadian dollars 43,224 38,468
Net operating income $171,343 $163,343

Net operating income ("NOI") for the year ended December 31, 2011, increased by $8.0 million to $171.3 million compared to $163.3 million in 2011, representing an increase of 4.9%.  The increase was predominantly the result of the following:

  • Higher NOI in Canadian multi-unit residential properties primarily as a result of higher rental rates;
  • Higher NOI in Canadian retail properties predominantly due to increased rental rates, higher percentage rent and an increase in revenue at the redeveloped Bramalea City Centre;
  • Lower NOI in office and industrial primarily as a result of a decrease in occupancy at three office properties; partially offset by an increase in occupancy in the industrial portfolio;
  • Higher NOI in U.S. multi residential properties primarily as a result of the acquisitions of three properties in 2012 and one property during the latter part of 2011; partially offset by an increase in rent concessions and expenditures incurred as a result of damages caused by Hurricane Isaac;
  • Higher NOI in U.S. retail properties primarily as a result of the acquisitions during the latter part of 2011; and
  • The change in the foreign exchange rate increased reported NOI by $0.4 million.

FUNDS FROM OPERATIONS ("FFO")

FFO was calculated as follows:

     
Year ended December 31,
(In thousands of dollars except for per share amounts)
2012 2011
Net income attributable to common shareholders $389,443 $288,026
Items not affecting cash:    
  Fair value gains on real estate properties (226,070) (180,226)
  Fair value gain on Residential REIT Units (1,281) -
  Non-controlling interest's share of fair value gain (loss) on real estate property 142 (470)
  Future income taxes 21,163 53,361
  Depreciation on owner occupied property 104 104
  Equity income from Morguard REIT (77,929) (68,153)
  Morguard REIT's equity accounted FFO 36,812 35,960
  (Gain) loss on sale of property (402) 7
Funds from operations $141,982 $128,609
Funds from operations    
    Per share amounts - basic and diluted $11.05 $9.92

For the year ended December 31, 2012, the Company recorded FFO of $141,982 ($11.05 per share) compared to $128,609 ($9.92 per share) in 2011.  The increase in FFO of $13,373 is mainly due to a gain on sale of marketable securities of $13,598, an increase in NOI of $8,000, an increase in management and advisory fees of $2,302, an increase in interest and other income of $6,635 and an increase in other income of $2,883.  These items were partially offset by an increase in current taxes of $7,645, an increase in property management and corporate expenses of $7,522 and distributions of $5,164 to the Residential REIT's unitholders. The change in foreign exchange rates had a negative impact on FFO of $133 or $0.01 per share.

MORGUARD NORTH AMERICAN RESIDENTIAL REAL ESTATE INVESTMENT TRUST
On April 18, 2012, the Company completed an IPO of trust units of Morguard Residential REIT. The offering, including the over-allotment option, raised gross proceeds of $82.5 million.  A total of 8,250,000 trust units were sold at a price of $10.00 per trust unit.

On September 12, 2012, the REIT completed the offering of $150.7 million for 12,720,000 trust units sold at a price of $11.85 per trust unit. Morguard acquired 4,220,000 of the trust units issued on September 12, 2012.

On February 25, 2013, the REIT reached an agreement with a syndicate of underwriters to issue to the public, subject to regulatory approval, on a bought deal basis, 8,270,000 trust units at a price of $11.50 per Unit representing gross proceeds of $95,105 and $60,000 aggregate principal amount of 4.65% convertible unsecured subordinated debentures due March 30, 2018 (the "Debentures", collectively with the Units the "Offering").  The Debentures are convertible at the option of the holder, into trust units of the REIT at $15.50 per trust unit.

As part of the transaction, Morguard has agreed to purchase approximately $10 million of the Units being offered, being 870,000 Units, at the offering price and $5 million aggregate principal amount of the Debentures.   At December 31, 2012, Morguard owned a 57.1% effective interest in the REIT through ownership of Units and Class B LP Units; after the Offering Morguard will hold an approximate 48.8% effective interest in the REIT.

The net proceeds from the Offering will be used to partially fund the acquisition of 3,752 multi-family residential units in the U.S. for gross consideration of US$457.8 million, as previously announced on January 9, 2013, and for general trust purposes. The Offering is not conditional upon the closing of such acquisition.

FIRST QUARTER DIVIDEND
The board of directors of Morguard Corporation announced today that the first quarterly eligible dividend of 2013 in the amount of $0.15 per common share would be paid on March 28, 2013, to shareholders of record at the close of business on March 15, 2013.

Readers are cautioned that although the terms "Net Operating Income", and "Funds From Operations" are commonly used to measure, compare and explain the operating and financial performance of Canadian real estate companies and such terms are defined in the Management's Discussion and Analysis, such terms are not recognized terms under Canadian generally accepted accounting principles.  Such terms do not necessarily have a standardized meaning and may not be comparable to similarly titled measures presented by the other publicly traded entities.

The Company's audited financial statements for the year ended December 31, 2012, along with the 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.

Morguard Corporation is a real estate company, which owns a diversified portfolio of 103 retail, multi-unit residential, office and industrial properties comprising of 12,110 multi-unit residential suites and approximately 7.1 million square feet of commercial leasable space. Morguard Corporation also owns a 42.9% interest in Morguard Real Estate Investment Trust and a 57.1% effective interest in Morguard North American Residential Real Estate Investment Trust. Morguard provides advisory and management services to institutional and other investors through Morguard Investments Limited and Morguard Residential. For more information, visit the Company's website at www.morguard.com.

SOURCE Morguard Corporation



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