Morguard Real Estate Investment Trust 2010 Results

 HIGHLIGHTS FOR 2010

  • On June 1, 2010, the Trust acquired a 50% co-ownership interest in a 300,000-square-foot retail shopping centre located in Grande Prairie, Alberta for a purchase price of $40.8 million plus other acquisition costs of $1.5 million.
  • On July 30, 2010, the Trust, together with Morguard Corporation, acquired a 50% co-ownership interest in a 890,000-square-foot Class A office building complex together with 56.0 acres of development land, located in Montreal, Quebec for a total purchase price of $82.5 million plus other acquisition costs of $2.2 million.
  • Overall portfolio occupancy levels were stable at 95%.

FINANCIAL HIGHLIGHTS

  • Net operating income for 2010 increased to $123.7 million from $114.1 million for the same period in 2009.
  • Net income totaled $29.3 million or $0.52 per unit compared to $32.4 million or $0.56 per unit for the same period in 2009.  In 2010, net income from continuing operations increased approximately by 3.0% over levels reported in 2009. The increase was mainly the result of increases in net operating income resulting from acquisitions made in late 2009 and during 2010, a significant reduction in issue costs offset somewhat by higher interest and amortization expense associated with acquisitions made by the Trust. In 2009, net income was significantly impacted by the expensing of $4.2 million of issue costs relating to the issuance of the $103.5 million of 6.50% convertible unsecured subordinated debentures partially offset by $3.1 million in gains on sale of real estate properties. 
  • Recurring distributable income ("RDI") increased to $63.8 million or $1.12 per unit (basic) and $1.10 per unit (diluted) compared to $61.1 million or $1.07 per unit (basic) and $1.06 (diluted) for the same period in 2009.
  • Funds from operations ("FFO") increased to $73.1 million or $1.29 per unit (basic) and $1.24 per unit (diluted) compared to $66.5 million or $1.16 per unit (basic) and $1.14 per unit (diluted)  for the same period in 2009.  In 2009, FFO was significantly impacted by $4.2 million of issue costs ($0.07 per unit, basic and diluted) relating to the issuance of the $103.5 million of 6.50% convertible unsecured subordinated debentures.

 

Net Income
[In thousands of dollars, except per-unit amounts] 2010 2009
     
Income from real estate properties 221,079 204,996
Property operating income 123,659 114,054
     
Net income for the year from continuing operations 29,016 28,177
Income for the year from discontinued operations 323 4,177
Net income for the year 29,339 32,354
     
Net income per unit (basic and diluted)    
Continuing operations 0.51 0.49
Discontinued operations 0.01 0.07
  0.52 0.57

Distributable Income

Distributable income is net income after adjusting for the amortization of buildings and intangible assets, accretion and issue costs of convertible debentures and providing for any reserves, provisions and allowances established by the Board of Trustees of the Trust plus any amount the Trustees, in their discretion, determine to be appropriate.

Recurring distributable income is distributable income excluding gain or loss on sale of real estate properties, unusual or non-recurring items and provisions for diminution in value of real estate properties.  Distributed income, which is income distributed to unitholders, is expressed as a percentage of RDI to arrive at a payout ratio.

The following table outlines the Trust's distributable income, recurring distributable income and payout ratios for the year ended December 31, 2010 and 2009. 

[In thousands of dollars, except per-unit amounts
and percentages]

2010 2009
     
Net income for the year 29,339 32,354
     
Add/(deduct)    
Amortization - buildings 27,310 25,141
Amortization - intangibles 7,249 3,848
Amortization - above/(below) market-rate leases, net (1,116) (904)
Accretion of convertible debentures 1,250 260
Issue costs - convertible debentures ---- 4,195
     
Distributable income 63,781 64,218
Loss/(Gain) on sale of real estate properties 8 (3,141)
     
Recurring distributable income 63,789 61,077
     
Distributed income - regular 51,164 51,778
     
Payout ratio: Recurring distributable income 80.2% 84.8%
     
Recurring distributable income - per unit (basic) 1.12 1.07
Recurring distributable income - per unit (diluted) 1.10 1.06
     
Weighted average number of units - in thousands (basic) 56,848 57,577
Weighted average number of units - in thousands (diluted) 64,256 60,094

 1 Payout ratio is calculated using regular distributions as a percentage of recurring distributable income

 Funds from Operations

The real estate industry has adopted a measure of FFO to supplement net income as an operating performance measurement.  The Trust's calculation of FFO is consistent with the definition provided by the Real Property Association of Canada (REALPac).

FFO is defined as net income adjusted for amortization of buildings, leasehold improvements, intangible items, deferred leasing costs, accretion of convertible debentures and any gain or loss on sale of real estate properties as well as any and any provisions against capital.  FFO per unit is calculated by dividing FFO attributable to unitholders by the weighted average number of units outstanding for the period.

FFO was calculated as follows:

 

[In thousands of dollars, except per-unit amounts]
2010
2009
 
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
             
Net income for the year 29,016 323 29,339 28,177 4,177 32,354
Add/(deduct) items not affecting cash:            
Loss/(Gain) on sale of real estate properties ---- 8 8 ---- (4,141) (3,141)
Amortization - buildings 27,274 36 27,310 24,867 274 25,141
Amortization - intangibles 7,249 ---- 7,249 3,848 ---- 3,848
Amortization - leasehold improvements 5,515 ---- 5,515 5,708 17 5,725
Amortization - deferred leasing costs 2,436 ---- 2,436 2,332 14 2,346
Accretion of convertible debentures 1,250 ---- 1,250 260 ---- 260
Funds from operations 72,740 367 73,107 65,192 1,341 66,533
             
Funds from operations per unit (basic) 1.28 0.01 1.29 1.14 0.02 1.16
Funds from operations per unit (diluted) 1.23 0.01 1.24 1.12 0.02 1.14

 

on February 28, 2011