Morguard Corporation Announces 2024 Second Quarter Results and Regular Eligible Dividend
Operational and Balance Sheet Highlights
- The Company ended the second quarter in a strong liquidity position with
$632.5 million of cash and available credit facilities, and a$1.1 billion pool of unencumbered properties and other investments. - During the second quarter, a retail property in
Calgary, Alberta , was sold for net proceeds of$37.1 million , including closing costs, and the Company repaid the mortgage payable secured by the property in the amount of$17.0 million . - Utilizing proceeds from the sale of 14 hotels on
January 18, 2024 (the "Hotel Portfolio Disposition "), the Company lowered its non-consolidated indebtedness to gross book value ratio(1) to 38.5% at June 30, 2024, compared to 43.2% atDecember 31, 2023 . - As at
June 30, 2024 , the Company's total assets were$11.5 billion , compared to$11.6 billion atDecember 31, 2023 .
Reporting Highlights
- Total revenue from real estate properties increased by
$8.3 million , or 3.4%, to$254.9 million for the three months endedJune 30, 2024 , compared to$246.6 million for the same period in 2023. - Total revenue from hotel properties decreased by
$35.3 million , or 80%, to$8.8 million for the three months endedJune 30, 2024 , compared to$44.1 million for the same period in 2023, primarily due to theHotel Portfolio Disposition . - Comparative NOI increased by $4.1 million, or 3.0%, to $139.9 million for the three months ended June 30, 2024, compared to
$135.8 million for the same period in 2023. - Adjusted NOI(1) decreased by
$8.8 million , or 5.8%, to$142.4 million for the three months ended June 30, 2024, compared to$151.2 million for the same period in 2023, primarily due to theHotel Portfolio Disposition , partially offset by an increase in average monthly rent ("AMR") within the multi-suite residential segment. - Normalized funds from operations(1) ("Normalized FFO") was
$51.3 million , or$4.74 per common share, for the three months endedJune 30, 2024 . This represents a decrease of$10.9 million , or 17.5%, compared to$62 .2 million, or $5.67 per common share for the same period in 2023. - Net income decreased by
$40.4 million to$55.4 million for the three months endedJune 30, 2024 , compared to$95.8 million for the same period in 2023, primarily due to a decrease in non-cash fair value gain on real estate properties.
(1) Refer to Specified Financial Measures |
Financial Highlights
|
Three months ended |
Six months ended |
||
(in thousands of dollars) |
2024 |
2023 |
2024 |
2023 |
Revenue from real estate properties |
|
|
|
|
Revenue from hotel properties |
8,826 |
44,149 |
19,263 |
75,308 |
Management and advisory fees |
10,522 |
10,984 |
20,179 |
21,134 |
Interest and other income |
4,325 |
4,343 |
8,808 |
9,439 |
Total revenue |
|
|
|
|
Revenue from real estate properties |
|
|
|
|
Revenue from hotel properties |
8,826 |
44,149 |
19,263 |
75,308 |
Property operating expenses |
(99,841) |
(96,651) |
(262,985) |
(253,480) |
Hotel operating expenses |
(5,964) |
(28,816) |
(15,598) |
(54,399) |
Net operating income ("NOI") |
|
|
|
|
Net income attributable to common shareholders |
|
|
|
|
Net income per common share – basic and diluted |
|
|
|
|
Funds from operations(1) |
|
|
|
|
FFO per common share – basic and diluted(1) |
|
|
|
|
Normalized funds from operations(1) |
|
|
|
|
Normalized FFO per common share – basic and diluted(1) |
|
|
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|
(1) Refer to Specified Financial Measures. |
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|
Total revenue during the three months ended
Net income for the three months ended
- A decrease in net operating income of
$7.3 million , mainly due to theHotel Portfolio Disposition , partially offset by an increase in AMR at multi-suite residential properties; - An increase in non-cash net fair value loss of
$42.9 million , mainly due to a lower fair value gain on real estate properties; and - A decrease in income tax expense (current and deferred) of
$3.1 million , mainly due to a lower fair value gain recorded on the Company's Canadian andU.S. properties, partially offset by EIFEL Rules which became substantively enacted during the second quarter of 2024.
Total revenue during the six months ended
Net income for the six months ended
- A decrease in net operating income of
$7.7 million , mainly due to theHotel Portfolio Disposition , partially offset by an increase in AMR at multi-suite residential properties; - A decrease in amortization of hotel properties and other of
$8.1 million ; - An increase in gain on sale of hotel properties of
$150.6 million , due to theHotel Portfolio Disposition ; - An increase in non-cash net fair value loss of
$62.2 million , mainly due to a lower fair value gain on real estate properties; and - A decrease in income tax expense (current and deferred) of
$19.6 million , mainly due to a lower fair value gain recorded on the Company's Canadian andU.S. properties, partially offset by EIFEL Rules which became substantively enacted during the second quarter of 2024.
Average Occupancy Levels
During the second 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 |
|
Jun. 2024 |
Mar. 2024 |
Dec. 2023 |
Sep. 2023 |
Jun. 2023 |
Multi-suite residential |
17,798 |
|
95.3 % |
95.6 % |
96.1 % |
96.1 % |
96.7 % |
Retail |
7,754,000 |
(1) |
93.6 % |
93.8 % |
94.0 % |
93.5 % |
93.2 % |
Office(2) |
8,588,500 |
|
88.3 % |
87.9 % |
88.4 % |
88.1 % |
85.9 % |
(1) Retail occupancy has been adjusted to exclude development space of 379,562 square feet of GLA. |
(2) Office includes industrial properties with 1,044,000 square feet of GLA. |
Adjusted Net Operating Income ("Adjusted NOI")
The following table provides a reconciliation of Adjusted NOI to its closely related financial statement measurement for the following periods:
|
Three months ended |
Six months ended |
||
(in thousands of dollars) |
2024 |
2023 |
2024 |
2023 |
Multi-suite residential |
|
|
|
|
Retail |
32,065 |
31,845 |
64,352 |
64,810 |
Office(1) |
34,343 |
33,632 |
68,837 |
66,625 |
Hotel |
2,862 |
15,333 |
3,665 |
20,909 |
Adjusted NOI |
142,351 |
151,188 |
280,356 |
287,356 |
IFRIC 21 adjustment - multi-suite residential |
12,627 |
12,220 |
(24,576) |
(23,561) |
IFRIC 21 adjustment - retail |
2,901 |
1,820 |
(3,153) |
(3,448) |
NOI |
|
|
|
|
(1) Includes industrial properties with NOI for the three and six months ended June 30, 2024 of $2,639 (2023 - $1,457) and $5,116 (2023 - $2,964), respectively. |
For the three and six months ended
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:
|
Three months ended |
Six months ended |
||
(in thousands of dollars) |
2024 |
2023 |
2024 |
2023 |
Multi-suite residential |
|
|
|
|
Retail |
32,065 |
31,845 |
64,352 |
64,810 |
Office |
34,343 |
33,632 |
68,837 |
66,625 |
Hotel |
2,862 |
15,333 |
3,665 |
20,909 |
Adjusted NOI Other Revenue |
142,351 |
151,188 |
280,356 |
287,356 |
Management and advisory fees |
10,522 |
10,984 |
20,179 |
21,134 |
Interest and other income |
4,325 |
4,343 |
8,808 |
9,439 |
Equity-accounted FFO |
573 |
1,681 |
1,648 |
3,069 |
|
15,420 |
17,008 |
30,635 |
33,642 |
Expenses and Other |
|
|
|
|
Interest |
(63,234) |
(64,976) |
(128,116) |
(127,703) |
Principal repayment of lease liabilities |
(382) |
(414) |
(783) |
(824) |
Property management and corporate |
(21,609) |
(22,575) |
(44,940) |
(44,481) |
Internal leasing costs |
932 |
1,432 |
2,137 |
2,074 |
Amortization of capital assets |
(309) |
(330) |
(590) |
(661) |
Current income taxes |
(5,772) |
(2,229) |
(4,820) |
(2,091) |
Non-controlling interests' share of FFO |
(13,912) |
(15,932) |
(27,569) |
(32,043) |
Unrealized changes in the fair value of financial instruments |
(6,272) |
(7,874) |
(26,906) |
(26,450) |
Other income (expense) |
168 |
53 |
(80) |
(816) |
FFO |
|
|
|
|
FFO per common share amounts – basic and diluted |
|
|
|
|
Weighted average number of common shares outstanding (in thousands): |
|
|
|
|
Basic and diluted |
10,813 |
10,967 |
10,813 |
10,994 |
|
Three months ended |
Six months ended |
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(in thousands of dollars) |
2024 |
2023 |
2024 |
2023 |
FFO (from above) |
|
|
|
|
Add/(deduct): Unrealized changes in the fair value of financial instruments |
6,272 |
7,874 |
29,606 |
26,450 |
SARs plan increase (decrease) in compensation expense |
(547) |
(134) |
310 |
(809) |
Lease cancellation fee and other |
(2,399) |
(1,112) |
(3,436) |
(1,456) |
Tax effect of above adjustments |
563 |
194 |
742 |
251 |
Normalized FFO |
|
|
|
|
Per common share amounts – basic and diluted |
|
|
|
|
Third Quarter Dividend and Director Appointment
The Board of Directors of Morguard Corporation announced that the third quarterly, eligible dividend of 2024 in the amount of
The Board of Directors of Morguard Corporation is pleased to announce that George Armoyan has been appointed as a director of the Company effective
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 and six months ended
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
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
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.
Non-Consolidated Indebtedness to Gross Book Value Ratio
Non-consolidated indebtedness to gross book value ratio is a compliance measure and establishes the limit for financial leverage of the Company on a Non-Consolidated Basis. Non-consolidated indebtedness to gross book value ratio is presented in this earnings release because management considers this non-GAAP measure to be an important compliance measure of the Company's financial position.
Non-consolidated gross book value is a measure of the value of the Company's assets and is calculated as total assets less right-of-use assets accounted for under IFRS 16, Leases.
Non-consolidated indebtedness is defined as the sum of the current and non-current portion of: (i) mortgages payable, (ii) Unsecured Debentures, (iii) convertible debentures, (iv) bank indebtedness, (v) loans payable, and (vi) outstanding letters of credit.
The Company's unaudited condensed consolidated financial statements for the three and six months ended June 30, 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
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