MISSISSAUGA, ON, Feb. 20, 2025 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) is pleased to announce its financial results for the year ended December 31, 2024.
Operational and Balance Sheet Highlights
The Company ended the year in a strong liquidity position with $333.0 million of cash and available credit facilities, and a $1.1 billion pool of unencumbered properties and other investments.
Utilizing proceeds primarily 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 37.7% at December 31, 2024, compared to 43.2% at December 31, 2023.
The Company refinanced new and existing mortgages for additional net proceeds of $124.7 million at an average interest rate of 5.51% and an average term of 4.7 years.
The Company repaid $450.0 million of Series E and F senior unsecured debentures at maturity.
Morguard officially launched the construction of its new purpose-built rental community in Mississauga, Ontario. The 431 suite development will be comprised of one nine-storey and two eight-storey mid-rise residential buildings.
As at December 31, 2024, the Company's total assets were $11.8 billion, compared to $11.6 billion at December 31, 2023.
Reporting Highlights
The Company acquired a 20% interest in an office building ("Telus Garden") located in Vancouver, British Columbia, for a purchase price of $99.4 million, including closing costs.
Total revenue from real estate properties increased by $32.1 million, or 3.2%, to $1.03 billion for the year ended December 31, 2024, compared to $1.0 billion for the same period in 2023.
Total revenue from hotel properties decreased by $126.4 million, or 78.2%, to $35.2 million for the year ended December 31, 2024, compared to $161.6 million for the same period in 2023, primarily due to the Hotel Portfolio Disposition.
Comparative NOI(1) increased by $14.4 million, or 2.7%, to $554.0 million for the year ended December 31, 2024, compared to $539.6 million for the same period in 2023.
Adjusted NOI(1) decreased by $27.5 million, or 4.6%, to $566.9 million for the year ended December 31, 2024, compared to $594.4 million for the same period in 2023, primarily due to the Hotel Portfolio Disposition.
Normalized funds from operations(1) ("Normalized FFO") was $220.4 million, or $20.39 per common share, for the year ended December 31, 2024. This represents a decrease of $19.3 million, or 8.1%, compared to $239.7 million, or $21.98 per common share for the same period in 2023.
Net income increased by $181.4 million to $239.6 million for the year ended December 31, 2024, compared to $58.2 million for the same period in 2023, primarily due to the impacts of hotel dispositions and lower net fair value losses incurred, partially offset by a decrease in net operating income.
1) Refer to Specified Financial Measures
Financial Highlights
For the years ended December 31
(in thousands of dollars)
2024
2023
Revenue from real estate properties
$1,032,802
$1,000,726
Revenue from hotel properties
35,242
161,601
Management and advisory fees
39,679
43,572
Interest and other income
19,360
18,119
Total revenue
$1,127,083
$1,224,018
Revenue from real estate properties
$1,032,802
$1,000,726
Revenue from hotel properties
35,242
161,601
Property operating expenses
(475,143)
(451,698)
Hotel operating expenses
(25,998)
(115,213)
Net operating income ("NOI")
$566,903
$595,416
Net income attributable to common shareholders
$261,799
$74,176
Net income per common share – basic and diluted
$24.23
$6.80
Funds from operations(1)
$206,651
$214,122
FFO per common share – basic and diluted(1)
$19.12
$19.64
Normalized funds from operations(1)
$220,361
$239,700
Normalized FFO per common share – basic and diluted(1)
$20.39
$21.98
(1) Refer to Specified Financial Measures.
Total revenue during the year ended December 31, 2024, decreased by $0.1 billion to $1.1 billion compared to $1.2 billion in 2023, primarily due to a decrease in revenue from hotel properties in the amount of $126.4 million, due to the Hotel Portfolio Disposition, partially offset by an increase in revenue from real estate properties in the amount of $32.1 million, primarily due to higher AMR within the multi-suite residential segment and from the net impact of acquisition and disposition of properties.
Net income for the year ended December 31, 2024 was $239.6 million, compared to $58.2 million in 2023. The increase in net income of $181.4 million for the year ended December 31, 2024, was primarily due to the following:
A decrease in NOI of $28.5 million, mainly due to the Hotel Portfolio Disposition, partially offset by an increase in AMR at multi-suite residential properties;
An increase in gain on sale of hotel properties of $150.6 million, due to the Hotel Portfolio Disposition;
A decrease in non-cash net fair value loss of $93.9 million, mainly due to a decrease in fair value loss on real estate properties, partially offset by an increase in fair value loss on the Morguard Residential REIT units;
An increase in income tax expense (current and deferred) of $35.5 million, mainly due to higher current taxes resulting from the disposal of properties and a deferred tax increase due to a lower fair value loss recorded on the Company's Canadian and U.S. properties.
Average Occupancy Levels
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.
The following table provides occupancy by asset class for the following periods:
Suites/GLA
Dec.
Sep.
Jun.
Mar.
Dec.
Square Feet
2024
2024
2023
2023
2023
Multi-suite residential
17,798
95.5 %
94.6 %
95.3 %
95.6 %
96.1 %
Retail
7,754,500
(1)
93.1 %
93.2 %
93.6 %
93.8 %
94.0 %
Office(2)
8,678,500
89.4 %
88.9 %
88.3 %
87.9 %
88.4 %
(1) Retail occupancy has been adjusted to exclude development space of 379,572 square feet of GLA.
(2) Office includes industrial properties with 1,018,000 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
Years ended
December 31
December 31
(in thousands of dollars)
2024
2023
2024
2023
Multi-suite residential
$72,495
$75,518
$285,696
$279,087
Retail
37,653
36,898
134,963
132,563
Office(1)
34,652
35,185
137,000
136,329
Hotel
2,400
7,679
9,244
46,388
Adjusted NOI
147,200
155,280
566,903
594,367
IFRIC 21 adjustment - multi-suite residential
12,308
12,368
—
1,049
IFRIC 21 adjustment - retail
1,529
1,629
—
—
NOI
$161,037
$169,277
$566,903
$595,416
(1) Includes industrial properties with NOI for the three months and year ended December 31, 2024 of $2,722 (2023 - $2,200) and $10,631 (2023 - $7,526), respectively.
For the year ended December 31, 2024, Adjusted NOI decreased by $27.5 million, or 4.6%, primarily due to the Hotel Portfolio Disposition, partially offset by an increase in AMR within the multi-suite residential segment and from the net impact of acquisition and disposition of properties.
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
Years ended
December 31
December 31
(in thousands of dollars)
2024
2023
2024
2023
Multi-suite residential
$72,495
$75,518
$285,696
$279,087
Retail
37,653
36,898
134,963
132,563
Office
34,652
35,185
137,000
136,329
Hotel
2,400
7,679
9,244
46,388
Adjusted NOI
147,200
155,280
566,903
594,367
Other Revenue
Management and advisory fees
10,445
12,820
39,679
43,572
Interest and other income
4,585
4,472
19,360
18,119
Equity-accounted FFO
540
978
2,756
5,496
15,570
18,270
61,795
67,187
Expenses and Other
Interest
(64,369)
(70,142)
(256,743)
(264,675)
Principal repayment of lease liabilities
(365)
(393)
(1,392)
(1,622)
Property management and corporate
(21,533)
(21,877)
(87,867)
(87,131)
Internal leasing costs
900
1,324
4,112
4,718
Amortization of capital assets
(301)
(356)
(1,168)
(1,335)
Current income taxes
599
(3,101)
(6,996)
(7,472)
Non-controlling interests' share of FFO
(14,505)
(15,381)
(55,739)
(59,892)
Unrealized changes in the fair value of financial instruments
755
2,190
(16,261)
(29,376)
Other income (expense)
336
142
7
(647)
FFO
$64,287
$65,956
$206,651
$214,122
FFO per common share amounts – basic and diluted
$5.96
$6.10
$19.12
$19.64
Weighted average number of common shares outstanding (in thousands):
Basic and diluted
10,784
10,813
10,806
10,903
Three months ended
Years ended
December 31
December 31
(in thousands of dollars)
2024
2023
2024
2023
FFO (from above)
$64,287
$65,956
$206,651
$214,122
Add/(deduct):
Unrealized changes in the fair value of financial instruments
(755)
(2,190)
16,261
29,376
SARs plan increase (decrease) in compensation expense
(532)
203
578
(663)
Lease cancellation fee and other
(264)
(1,390)
(3,954)
(3,866)
Tax effect of above adjustments
41
288
825
731
Normalized FFO
$62,777
$62,867
$220,361
$239,700
Per common share amounts – basic and diluted
$5.82
$5.81
$20.39
$21.98
First Quarter Dividend
The Board of Directors of Morguard Corporation announced that the first quarterly, eligible dividend of 2025 in the amount of $0.20 per common share will be paid on March 31, 2025, to shareholders of record at the close of business on March 14, 2025.
Subsequent Events
The Company entered into a binding commitment letter for the CMHC-insured refinancing of a multi-suite residential
property located in Kitchener, Ontario, providing gross proceeds of up to $79.4 million for a term of 10 years. The maturing mortgage amounts to $30.8 million and has an interest rate of 2.25%. The Company expects to close the refinancing during the first quarter of 2025.
Subsequent to December 31, 2024, the Company acquired the remaining 40% ownership interest in Lincluden
Investment Management Limited for a purchase price of $4.0 million before closing costs and working capital
adjustments.
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, 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.
Comparative NOI
Comparative NOI is presented in this earnings release because management considers this non-GAAP financial measure to be an important measure of the Company's operating performance for properties owned by the Company continuously for the current and comparable reporting period and does not take into account the impact of the operating performance of property acquisitions and dispositions as well as properties subject to significant change as a result of recently completed development. In addition, Comparative NOI is presented in local currency, isolating any impact of foreign exchange fluctuations, and eliminates the impact of straight-line rents, realty taxes accounted for under IFRIC 21, lease cancellation fees and other non-cash and non-recurring items.
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.
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 audited consolidated financial statements for the year ended December 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 $18.6 billion. As at February 20, 2025, Morguard owns a diversified portfolio of 157 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 66.0% interest in Morguard Real Estate Investment Trust and a 47.4% 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.
