MISSISSAUGA, ON, Nov. 4, 2021 /CNW/ - Morguard Corporation
("Morguard" or the "Company") (TSX: MRC) today announced its
financial results for the three and nine months ended September 30, 2021.
Morguard is pleased to report its financial and operating
results for the three and nine months ended September 30, 2021, that demonstrate the
resilient nature of the Company's portfolio and also reflect the
prudent actions taken by management and staff in our continued
response to the ongoing COVID-19 pandemic.
Reporting Highlights
- Net income increased by $146.4
million to $108.8 million for
the three months ended September 30,
2021, compared to a net loss of $37.6
million for the same period in 2020. The increase was
primarily due to an increase in net fair value gain of $189.5 million, partially offset by an increase
in deferred income tax expense of $46.5
million and an increase in impairment on hotel properties of
$9.6 million.
- Normalized FFO was $58.7 million,
or $5.29 per common share, for the
three months ended September 30,
2021. This represents an increase of $14.9 million, or 34.1% compared to $43.8 million for the same period in 2020.
- Total revenue from real estate properties and hotels increased
by $10.8 million, or 4.5% to
$249.3 million for the three months
ended September 30, 2021, compared to
$238.5 million for the same period in
2020.
- Net operating income ("NOI") increased by $5.2 million, or 4.0%, to $135.4 million for the three months ended
September 30, 2021, compared to
$130.3 million for the same period in
2020, primarily due to higher NOI from the hotel portfolio due to
increased revenue per available room ("RevPar") and many hotels
being temporarily closed during 2020. In addition, higher NOI from
the retail, office and industrial portfolio was mainly caused by
lower bad debt expense. The increase in NOI was partially offset by
a decrease in multi-suite residential NOI due to higher vacancies.
The change in foreign exchange rate decreased NOI by $2.6 million.
Operational and Balance Sheet Highlights
- Rent collections from all commercial asset classes have been
strong with an average of approximately 97% collected since the
second quarter of 2020.
- During the year, occupancy was 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 September 30, 2021 the
Company's total assets were $11.2
billion, compared to $11.1
billion at December 31,
2020.
- During the quarter, the Company sold four hotels, one located
in Yellowknife, Northwest
Territories and three located in Fort McMurray, Alberta for gross proceeds of
$21.5 million.
- On September 29, 2021, the
Company sold an unenclosed retail property located in London, Ontario, for gross proceeds of
$15.0 million.
Financial Highlights
|
Three months
ended
September
30
|
Nine months
ended
September
30
|
(in thousands of
dollars, except per common share)
|
2021
|
2020
|
2021
|
2020
|
Revenue from real
estate properties
|
$210,557
|
$216,706
|
$630,612
|
$663,449
|
Revenue from hotel
properties
|
38,723
|
21,780
|
90,987
|
78,416
|
Management and
advisory fees
|
10,424
|
9,342
|
32,050
|
31,620
|
Interest and other
income
|
11,731
|
3,641
|
18,514
|
11,199
|
Total
revenue
|
$271,435
|
$251,469
|
$772,163
|
$784,684
|
|
|
|
|
|
Revenue from real
estate properties
|
$210,557
|
$216,706
|
$630,612
|
$663,449
|
Revenue from hotel
properties
|
38,723
|
21,780
|
90,987
|
78,416
|
Property operating
expenses – excluding bad debt expense
|
(85,718)
|
(82,819)
|
(295,392)
|
(289,598)
|
Property operating
expenses – bad debt expense
|
(329)
|
(8,554)
|
(3,661)
|
(17,952)
|
Hotel operating
expenses
|
(27,788)
|
(16,845)
|
(66,082)
|
(70,272)
|
Net operating
income
|
$135,445
|
$130,268
|
$356,464
|
$364,043
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
$102,626
|
($4,606)
|
$134,279
|
($36,590)
|
Net income (loss) per
common share – basic and diluted
|
$9.25
|
($0.42)
|
$12.10
|
($3.26)
|
|
|
|
|
|
Funds from
operations
|
$52,817
|
$43,104
|
$144,048
|
$98,978
|
FFO per common share
– basic and diluted
|
$4.76
|
$3.84
|
$12.98
|
$8.81
|
|
|
|
|
|
Normalized funds from
operations
|
$58,673
|
$43,756
|
$143,266
|
$136,772
|
Normalized FFO per
common share – basic and diluted
|
$5.29
|
$3.91
|
$12.91
|
$12.17
|
Rental Collection Summary
As at November 4, 2021, the
Company's collection of rental revenues since January 1, 2020 is summarized below by asset
class as follows:
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
Q3
|
October
|
%
Rental
|
Asset
Class
|
2020
|
2020
|
2020
|
2020
|
2021
|
2021
|
2021
|
2021
|
Revenue
|
Residential
|
99.8%
|
99.6%
|
99.4%
|
99.2%
|
99.1%
|
99.3%
|
98.2%
|
96.0%
|
44.5%
|
Retail
|
98.3%
|
62.4%
|
85.6%
|
90.5%
|
91.6%
|
93.2%
|
93.4%
|
91.1%
|
26.4%
|
Office
|
99.9%
|
92.8%
|
98.1%
|
97.7%
|
99.9%
|
99.0%
|
99.0%
|
97.8%
|
27.7%
|
Industrial
|
100.0%
|
93.5%
|
96.9%
|
99.6%
|
99.5%
|
99.2%
|
98.5%
|
89.4%
|
1.4%
|
Total
|
99.4%
|
86.6%
|
95.0%
|
96.2%
|
96.9%
|
97.5%
|
97.1%
|
95.1%
|
100.0%
|
Liquidity
The Company has liquidity of approximately $476 million comprised of $129 million in cash and $347 million available under its revolving credit
facilities. In addition, the Company has approximately $1.1 billion of unencumbered income producing and
hotel properties, and other investments which could be utilized for
financing. To further enhance liquidity, the Company has narrowed
down the scope of its capital expenditure program to ensure the
availability of resources, allocating an amount that enables the
Company to maintain the structural and overall safety of the
properties. Management has also implemented various initiatives to
reduce or defer operating expenses and is monitoring various
government assistance programs in Canada and the U.S. structured to provide
relief from personnel costs and commercial rent subsidies.
The Company has approximately $639
million of mortgages payable maturing during 2021 and 2022
having an aggregate loan-to-value ratio of 43% and a
weighted-average interest rate of 3.73% which management expects to
be able to refinance at similar or favourable terms. In addition,
the Company has $200 million of
senior unsecured debentures maturing in September 2022 and $115
million of MRT convertible debentures maturing in
December 2021. The Company expects to
be able to issue new debt instruments and use current liquidity
sufficient to permit the repayment of its 2021 and 2022
maturities.
Net Operating Income
NOI increase by $5.2 million, or
4.0%, during the three months ended September 30, 2021, to $135.4 million, compared to $130.3 million generated in 2020, and is further
analyzed by asset type below.
|
Three months
ended
September 30
|
Nine months
ended
September
30
|
(in thousands of
dollars)
|
2021
|
2020
|
2021
|
2020
|
Multi-suite
residential
|
$50,058
|
$54,551
|
$152,084
|
$175,300
|
Retail
|
29,160
|
26,714
|
85,294
|
87,615
|
Office
|
32,978
|
31,921
|
99,284
|
98,783
|
Industrial
|
2,052
|
1,711
|
5,548
|
5,283
|
Hotels
|
10,935
|
4,935
|
24,905
|
8,144
|
Adjusted
NOI
|
125,183
|
119,832
|
367,115
|
375,125
|
IFRIC 21 adjustment –
multi-suite residential
|
8,917
|
9,044
|
(9,299)
|
(9,711)
|
IFRIC 21 adjustment –
retail
|
1,345
|
1,392
|
(1,352)
|
(1,371)
|
NOI
|
$135,445
|
$130,268
|
$356,464
|
$364,043
|
Adjusted NOI for the three months ended September 30, 2021, increase by $5.4 million, or 4.5% to $125.2 million, compared to $119.8 million in 2020, primarily due to the
following:
- A decrease in the Canadian residential portfolio of
$1.9 million, primarily due to
increased vacancy as a result of lower leasing traffic resulting
from social distancing restrictions and current economic
conditions;
- A decrease in U.S. residential portfolio of US$0.7 million, primarily due to a decrease of
US$2.1 million mainly due to higher
vacancy and rental concessions at three properties located in
Chicago, Illinois, partially
offset by an increase of US$1.4
million mainly due to lower vacancy and higher average
rental rates mainly at properties located in Florida;
- An increase in the Canadian retail portfolio of $2.4 million, mainly due to a decrease in bad
debt expense of $6.2 million when
compared to the same period in 2020, partially offset by a decrease
of $3.2 million due to a higher
proportion of tenants converting to percentage rent leases
resulting in lower recoveries of operating expenses and lower basic
rent;
- An increase in the office portfolio of $1.1 million, primarily due to an increase of
$0.4 million in lease cancellation
fees received, a decrease in bad debt expense of $1.5 million, partially offset by a decrease of
$0.8 million due to lower recovery of
operating expenses and higher vacancy;
- An increase in the hotel portfolio of $6.0 million, primarily due to an increase of
$9.4 million mainly due to increased
RevPar as the easing of pandemic restrictions positively impacted
travel demand compared to hotel closures during 2020. In addition,
three hotels designated under the Government Authorized
Accommodation ("GAA") program provided an increase in RevPar, which
was partially offset by a decrease of $2.6
million due to a provision for Canada Emergency Wage Subsidy ("CEWS");
and
- A decrease of $2.1 million due to
the change in the U.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended September 30,
2021, the Company recorded FFO of $52.8 million ($4.76 per common share), compared to $43.1 million ($3.84 per common share) in 2020. The increase in
FFO of $9.7 million is mainly due to
the following:
- An increase in Adjusted NOI of $5.4
million;
- An increase in management and advisory fees of $1.1 million;
- An increase in interest and other income of $8.1 million, primarily due to a one-time special
cash dividend from one of the Company's investments in marketable
securities;
- A decrease in equity-accounted FFO of $1.0 million;
- A decrease in interest expense of $3.8
million mainly due to lower interest on mortgages payable
and lower interest on the unsecured debentures;
- An increase in property management and corporate expenses of
$2.5 million, primarily due to an
increase in non-cash compensation expense related to the Company's
Stock Appreciation Rights plan and a decrease in a provision for
CEWS;
- An increase in current income taxes of $1.2 million; and
- A decrease in unrealized changes in the fair value of financial
instruments of $3.3 million.
The change in foreign exchange rate had a negative impact on FFO
of $0.9 million ($0.08 per common share).
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. Normalized FFO for the
three months ended September 30,
2021, was $58.7 million, or
$5.29 per common share, versus
$43.8 million, or $3.91 per common share, for the same period in
2020, which represents an increase of $14.9
million, or 34.1%.
Subsequent Events
On October 27, 2021, the Company
acquired the 40.9% interest not already owned in Lumina Hollywood,
a mixed-use residential property comprising 299 suites and 52,000
square feet of commercial space located in Los Angeles, California, for a purchase price
of US$79.4 million, excluding closing
costs. Concurrent with the acquisition, the Company closed the
mortgage financing in the amount of US$119
million (at the Company's 100% interest), with a fixed term
of three years and a floating interest rate of LIBOR plus
2.50%.
On October 28, 2021, the Company
entered into a binding commitment letter for the CMHC-insured
refinancing on four residential properties, located in Toronto and Mississauga, Ontario, providing gross mortgage
proceeds of up to $194.2 million and
for a weighted average term of 10.5 years. The Company expects to
close the refinancing on November 10,
2021, providing net mortgage proceeds of approximately
$120 million before financing
costs.
Fourth Quarter Dividend
The Board of Directors of Morguard Corporation announced that
the fourth quarterly, eligible dividend of 2021 in the amount of
$0.15 per common share will be paid
on December 31, 2021, to shareholders
of record at the close of business on December 15, 2021.
The Company's unaudited condensed consolidated financial
statements for the three and nine months ended September 30, 2021, 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 condensed 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 news 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 three and nine months
ended September 30, 2021 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 $19.4 billion. As at November 4, 2021, Morguard owns a diversified
portfolio of 198 multi-suite residential, retail, office,
industrial and hotel properties comprised of 17,752 residential
suites, approximately 16.9 million square feet of commercial
leasable space and 5,138 hotel rooms. Morguard also currently owns
a 60.9% 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