Morguard Corporation Announces 2024 First Quarter Results and Regular Eligible Dividend
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
