Morguard has revealed strong financial results for the financial year ended December 31, 2018 with revenue up 4% year-over-year ($44.1m) to $1,157.9 million.
The Mississauga-headquartered firm reported a 6.6% rise ($34.1m) in net operating income to $548m while net income decreased by $0.3 million to $344.1 million.
The company achieved high and stable occupancy across all asset classes, supporting its business strategy in generating stable and increasing cash flow through its diversified portfolio of real estate assets.
Adjusted NOI for the year ended December 31, 2018, increased by $17.8 million to $530.2 million compared to $512.4 million in 2017 primarily due to the following:
- An increase in the Canadian residential portfolio of $4.5 million primarily resulting from an increase of $3.8 millionfrom rental rate growth, improved occupancy and lower operating expenses and additional NOI of $0.7 milliongenerated from the Downsview Townhomes which reached stabilized occupancy on December 31, 2017;
- An increase in U.S. residential NOI of US$9.5 million predominantly resulting from an increase of $10.0 million due to the acquisition of five residential properties in the U.S. during and subsequent to the third quarter of 2017, partially offset by a decrease of US$2.8 million due to sale of four residential properties located in Mobile, Alabama, during the third quarter of 2017. In addition, NOI increase of $2.3 million primarily from rental rate growth, partially offset by an increase in vacancy and operating expenses at three properties;
- A decrease of $4.3 million in Canadian retail properties resulting from lower occupancy ($9.1 million), lower base rent, higher non-recoverable operating expenses and lower recoveries primarily at four properties and a tax refund received at a property in Toronto, Ontario in 2017 for prior periods, partially offset by an increase of $4.8 millionfrom higher occupancy, higher base rent and lower non-recoverable operating expenses primarily at three properties;
- An increase in the office portfolio of $6.3 million primarily due to acquisition of six properties during and subsequent to the third quarter of 2017, which resulted in an increase of $8.6 million, partially offset by a decrease of $1.8 million due to lower base rent, lower recoveries and higher non-recoverable operating expenses at the remaining Canadian office properties and a decrease of $0.5 million from lower lease cancellation fees;
- An increase in the industrial portfolio of $3.1 million primarily due to the acquisition of 1100 and 1101 Polytek Street in Ottawa, Ontario, during 2018, as well as improved occupancy and an increase in lease cancellation fees received in 2018;
- A decrease in the hotel portfolio by $4.0 million mainly due to increased vacancy as a result of renovations at two hotels located near Toronto's Pearson Airport, increased vacancy primarily at hotels located in Fort McMurray, Alberta hotels, including the expiry of a long-term lease at the Cortona Residence and a decrease of $0.5 milliondue to the sale of a hotel during the third quarter of 2017, partially offset due to stronger average room rates, improved occupancy and reduced costs at hotels located mainly in Ontario and Nova Scotia; and
- An increase of $2.8 million due to the change in the U.S. dollar foreign exchange rate.
Financing Activity
The following summarizes the Company's financing activities during the year ended December 31, 2018:
- New mortgage financing of $185.8 million at an average interest rate of 3.94% for an average term of 14.4 years.
- Refinancing of mortgages of $292.0 million at an average interest rate of 4.22% for an average term of 9.5 years as compared to $158.0 million of maturing mortgages at an average interest rate of 4.37%, resulting in additional mortgage proceeds of $134.0 million.
- Repayment of mortgages of $38.7 million at an average interest rate of 5.15%.
Full results are available at morguard.com
