Morguard Corporation Announces 2025 First Quarter Results and Regular Eligible Dividend

Cision Canada

06-05-2025

MISSISSAUGA, ON, May 6, 2025 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) is pleased to announce its financial results for the three months ended March 31, 2025.
Operational and Balance Sheet Highlights
The Company ended the first quarter in a strong liquidity position with $278.0 million of cash and available credit facilities, and a $1.1 billion pool of unencumbered properties and other investments.
The Company refinanced maturing mortgages for gross proceeds of $201.1 million at a weighted average interest rate of 4.55% and a weighted average term of 6.3 years.
As at March 31, 2025, the Company's total assets were $11.9 billion, compared to $11.8 billion at December 31, 2024.
On January 31, 2025, the Company acquired the remaining 40% ownership interest in Lincluden Investment Management Limited, for a purchase price of $4.0 million.
During the first quarter, the Company incurred $19.3 million of development expenditures, predominantly at the Company's residential project comprising 431 suites located in Mississauga, Ontario. The project is anticipated to commence occupancies in the second half of 2027.
On April 17, 2025, DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Debentures rating of the Company at BB (high) and changed the trends to Positive from Stable.
Reporting Highlights
Total revenue from real estate properties increased by $6.1 million, or 2.3%, to $263.0 million for the three months ended March 31, 2025, compared to $257.1 million for the same period in 2024.
Comparative NOI (1) remained stable at $136.6 million for the three months ended March 31, 2025, compared to $136.6 million for the same period in 2024.
Adjusted NOI (1) decreased by $0.9 million, or 0.7%, to $137.1 million for the three months ended March 31, 2025, compared to $138.0 million for the same period in 2024.
Normalized funds from operations (1) ("Normalized FFO") was $50.0 million, or $4.66 per common share, for the three months ended March 31, 2025. This represents a decrease of $2.6 million, or 5.0%, compared to $52.6 million, or $4.86 per common share for the same period in 2024.
Net income decreased by $62.0 million to $54.8 million for the three months ended March 31, 2025, compared to $116.8 million for the same period in 2024, primarily due to a gain on sale of hotel properties in 2024, partially offset by an increase in non-cash net fair value gain.
1) Refer to Specified Financial Measures
Financial Highlights
For the three months ended March 31
(in thousands of dollars)
2025
2024
Revenue from real estate properties
$263,049
$257,089
Revenue from hotel properties
5,374
10,437
Management and advisory fees
9,491
9,657
Interest and other income
4,285
4,483
Total revenue
$282,199
$281,666
Revenue from real estate properties
$263,049
$257,089
Revenue from hotel properties
5,374
10,437
Property operating expenses
(173,651)
(163,144)
Hotel operating expenses
(4,698)
(9,634)
Net operating income ("NOI")
$90,074
$94,748
Net income attributable to common shareholders
$58,135
$130,446
Net income per common share – basic and diluted
$5.42
$12.06
Funds from operations (1)
$47,242
$31,943
FFO per common share – basic and diluted (1)
$4.41
$2.95
Normalized funds from operations (1)
$49,964
$52,576
Normalized FFO per common share – basic and diluted (1)
$4.66
$4.86
(1) Refer to Specified Financial Measures.
Total revenue during the three months ended March 31, 2025, increased by $0.5 million to $282.2 million compared to $281.7 million in 2024, primarily due to an increase in revenue from real estate properties in the amount of $6.1 million primarily due to higher AMR within the multi-suite residential segment, and from the net impact of acquisition and disposition of properties, partially offset by a decrease in revenue from the sale of 14 hotels on January 18, 2024 (the "Hotel Portfolio Disposition") in the amount of $5.1 million.
Net income for the three months ended March 31, 2025 was $54.8 million, compared to $116.8 million in 2024. The decrease in net income of $62.0 million for the three months ended March 31, 2025, was primarily due to the following:
A decrease in NOI of $4.7 million, mainly due to a decrease in basic rent and increase in vacancy costs at Penn West Plaza, resulting from the expiry of Obsidian Energy's lease, partially offset by increases in AMR and occupancy at multi-suite residential properties;
An increase in non-cash net fair value gain of $101.2 million, mainly due to an increase in fair value gain on real estate properties, a decrease in fair value loss on the Morguard Residential REIT units, on other real estate funds investments and on marketable securities;
A decrease in gain on sale of hotel properties of $150.6 million due to the Hotel Portfolio Disposition; and
An increase in income tax expense (current and deferred) of $8.0 million, mainly due to a deferred tax increase from a higher fair value gain recorded on the Company's Canadian and U.S. properties, partly offset by a decrease in current taxes resulting from the disposal of properties in 2024.
The Hudson's Bay Company ("The Bay")
On Friday March 7, 2025, The Bay filed for creditor protection under the Companies' Creditors Arrangement Act. The Company has four Bay locations comprising a total of 439,250 square feet of GLA on a proportionate ownership basis (Centerpoint Mall, Toronto, Bramalea City Centre (20.7%), Brampton, St Laurent Centre, Ottawa and Cambridge Centre, Cambridge). Currently, The Bay is conducting liquidation sales at the Company's four Bay locations which is expected to conclude in the second quarter of 2025. The Company's annual gross rent earned from The Bay leases is approximately $2.5 million on a proportionate ownership basis.
Average Occupancy Levels
During the first quarter, occupancy was strong and consistent across the multi-suite residential and retail 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:
(1)
Retail occupancy has been adjusted to exclude development space of 379,572 square feet of GLA.
(2)
Office includes industrial properties with 1,013,500 square feet of GLA.
On February 1, 2025, Obsidian Energy's lease expired at Penn West Plaza, an office building located in Calgary, Alberta. As at March 31, 2025, the occupancy percentage for Penn West Plaza was 72.9% compared to 98.5% at March 31, 2024. As at March 31, 2025, including future commitments, Penn West Plaza is approximately 80% leased.
The following table provides a reconciliation of Adjusted NOI to its closely related financial statement measurement for the following periods:
(1)
Includes industrial properties with NOI for the three months ended March 31, 2025 of $2,804 (2024 - $2,477).
For the three months ended March 31, 2025, Adjusted NOI decreased by $0.9 million, or 0.7%, primarily due to a decrease in basic rent and higher vacancy at Penn West Plaza due to the Obsidian Energy lease expiry, partially offset by an increase in AMR within the multi-suite residential segment and from the net impact of acquisition and disposition of properties in 2024.
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)
2025
2024
Multi-suite residential
$74,850
$70,421
Retail
30,858
32,287
Office
30,707
34,494
Hotel
676
803
Adjusted NOI
137,091
138,005
Other Revenue
Management and advisory fees
9,491
9,657
Interest and other income
4,285
4,483
Equity-accounted FFO
556
1,075
14,332
15,215
Expenses and Other
Interest
(62,985)
(64,882)
Principal repayment of lease liabilities
(489)
(401)
Property management and corporate
(24,925)
(23,331)
Internal leasing costs
1,636
1,205
Amortization of capital assets
(288)
(281)
Current income taxes
(2,637)
952
Non-controlling interests' share of FFO
(11,923)
(13,657)
Unrealized changes in the fair value of financial instruments
(2,622)
(20,634)
Other income (expense)
52
(248)
FFO
$47,242
$31,943
FFO per common share amounts – basic and diluted
$4.41
$2.95
Weighted average number of common shares outstanding (in thousands):
Basic and diluted
10,718
10,813
For the three months ended March 31
(in thousands of dollars)
2025
2024
FFO (from above)
$47,242
$31,943
Add/(deduct):
Unrealized changes in the fair value of financial instruments
2,622
20,634
SARs plan increase in compensation expense
323
857
Lease cancellation fee and other
(265)
(1,037)
Tax effect of above adjustments
42
179
Normalized FFO
$49,964
$52,576
Per common share amounts – basic and diluted
$4.66
$4.86
Second Quarter Dividend
The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2025 in the amount of $0.20 per common share will be paid on June 30, 2025, to shareholders of record at the close of business on June 16, 2025.
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, 2025 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 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, and (v) loans payable.
The Company's unaudited condensed consolidated financial statements for the three months ended March 31, 2025, 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 $18.7 billion. As at May 6, 2025, Morguard owns a diversified portfolio of 156 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 67.0% interest in Morguard Real Estate Investment Trust and a 47.9% 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.