MORGUARD CORPORATION Corporation/Finan… · affecting debt ratios. Over the year, Morguard...

MORGUARD CORPORATION

2014 ANNUAL REPORT

MANAGING FOR GROWTH

MORGUARD CORPORATION

Morguard Corporation is a real estate operating company listed on the Toronto Stock Exchange (TSX) under the symbol MRC. At December 31, 2014, the Company’s owned and managed real estate portfolio was valued at $15.0 billion.

Morguard’s primary business strategy is to create shareholder value through stable and increasing cash flow and asset value. This is achieved by improving the performance of the real estate portfolio and by acquiring and developing real estate properties in sound economic markets.

The Company has three diversified lines of business:

Investments in Real Property: Morguard owns a diversified portfolio of high-quality multi-unit residential, retail, office and industrial, and hotel properties in North America.

Real Estate Investment Trusts: Morguard owns a significant interest in two real estate investment trusts (REITs): Morguard REIT (TSX: MRT.UN), a closed-end Trust with a diversified portfolio of Canadian commercial real estate assets; and Morguard North American Residential REIT (TSX: MRG.UN), an open-end Trust with a diversified portfolio of multi-unit residential assets across North America.

Advisory and Investment Services: Morguard provides real estate advisory services and portfolio management services, specializing in publicly traded equities and fixed-income securities, to institutional clients and private investors.

On our cover: Performance Court, Ottawa, ON

Our core strength is real estate – and our shareholders and clients continue to benefit from our proven management platform, strong cash flow, and a conservatively leveraged balance sheet.

We are extremely proud of our performance in 2014. The following pages speak about many of our important strategic, operational and financial accomplishments during the past year. Acknowledging that a strong company is not built around the most recent year’s results we have also detailed some of our important milestones and metrics from our 17-year history as a real estate company. Morguard’s long-term performance is gratifying and we remain committed to our track record of building a stronger company.

In 2014, the contribution of the two real estate investment trusts, Morguard REIT and Morguard North American Residential REIT, in which Morguard Corporation is the major shareholder, delivered increases in FFO per unit and AFFO per unit. Both REITs continue to maintain a level of distribution that is well covered from current levels of cash flow.

Looking ahead, we will continue to build shareholder value and seek attractive real estate investment opportunities in promising Canadian and U.S. markets.

Finally, I express my appreciation to our management team and employees for their dedication and commitment, to our directors for their guidance and wisdom and to our shareholders for their support.

K. (RAI) SAHI Chairman and Chief Executive Officer

FELLOW SHAREHOLDERS

In 2014, Morguard Corporation delivered outstanding financial performance, benefiting from the quality of our real estate portfolio, the diversification of our business and the experience of our management team.

MORGUARD CORPOR ATION2

55 City Centre Drive, Mississauga, ON

STRONG FINANCIAL

RESULTS

DELIVER ING

2014 ANNUAL REPORT 3

FUNDS FROM OPERATIONS

FINANCIAL HIGHLIGHTS

(in thousands of dollars, except per share amounts) 2010 2011 2012 2013 2014

Revenue from real estate properties $284,184 $297,265 $315,590 $417,376 $472,808

Total revenue 363,836 392,958 414,439 516,882 566,326

Net operating income 155,122 164,330 170,989 201,496 241,193

Funds from operations1 114,692 128,609 149,420 169,782 174,988

Funds from operations per share – basic $8.46 $9.92 $11.63 $13.39 $13.98

Total assets 3,007,962 3,486,107 4,409,816 5,452,995 7,993,684

Shareholders’ equity 1,385,180 1,683,100 2,048,288 2,329,972 2,498,605

Shareholders’ equity, per common share $106.83 $129.98 $160.37 $185.12 $202.27

FINANCIAL PERFORMANCE

Morguard’s strong financial performance flows directly from the strength of its real estate portfolio, the skilled management of its investments in real property, and the highly diversified nature of our revenue streams. Morguard has delivered to shareholders another year of strong and reliable financial results and has exceeded key financial objectives.

Morguard’s portfolio was built through many acquisitions and development projects, beginning in 1997 with the first real estate acquisition, a $36 million investment in multi-unit residential properties through Goldlist Properties Inc. From this acquisition, and our initial transitional year, we have never looked back and our real estate portfolio of owned assets are valued at $7.5 billion, while our managed portfolio is valued at an additional $7.5 billion. Essential to our success is building a portfolio with long-term value while delivering superior year-over-year results.

Our key financial metric is funds from operations1 (“FFO”), and Morguard has reported an increase in FFO per share in 13 of the past 17 years. Over this 17-year period, the compound annual growth rate in FFO per common share was 12.4%.

In 2014, Morguard realized another significant year-over-year increase in FFO. FFO reached $175.0 million, up from $169.8 million a year earlier, an increase of $5.2 million, or 3.1%. FFO per common share, basic and diluted, reached $13.98 in 2014, up from $13.39 in 2013, an increase of 4.4%.

Morguard Corporation recorded a year of strong financial results in 2014, benefiting from its substantial and diversified portfolio of real estate investments.

1 FFO is a real estate industry standard that supplements net income and evaluates operating performance but is not indicative of funds available to meet the Company’s future cash requirements. The Company considers FFO a useful measure for reviewing its comparative operating and financial performance. FFO can assist with comparisons of the operating performance of the Company’s real estate between periods and relative to other entities in the industry. FFO is computed in accordance with the current definition of the Real Property Association of Canada and is defined as net income attributable to common shareholders plus (i) deferred income taxes, (ii) realty taxes accounted for under IFRIC 21, (iii) internal leasing costs and (iv) the Company’s proportionate share of Morguard REIT’s FFO and excludes (i) fair value adjustments, (ii) gains/losses from the sale of real estate properties and (iii) other non-cash items.

10

$115

11

$129

12 13

$149

$170

14

$175

(in millions of dollars)


December 31 2013 2014

Retail Canada 11% 28%

Office 17% 28%

Residential Canada 32% 19%

Residential U.S. 29% 18%

Retail U.S. 8% 5%

Hotel 3% 2%

In 2014, Morguard’s total revenues increased to $566.3 million from $516.9 million the previous year, an increase of $49.4 million, or 9.6%. Revenue from our real estate properties accounted for 83% of total revenues (or $472.8 million), while management and advisory fees accounted for 13% of total revenues (or $73.4 million). Interest and other income accounted for the remainder of total revenues (4%).

The 2014 increase in total revenues is primarily the result of the Company’s 2013 acquisition program and our active development program. Two development properties were completed during 2014 and contributed $4.7 million to total revenues. During 2013, $605 million was spent on acquisitions, producing a $35.8 million increase in revenues year over year. During 2014, Morguard chose to remain disciplined in a competitive environment for real estate asset acquisitions and did not acquire any properties.

For 2014, net operating income (“NOI”) (revenue from real estate properties less operating expenses and property taxes) rose to $241.2 million from $201.5 million a year earlier, representing an increase of $39.7 million, or 19.7%. The increase in NOI was the result of acquisitions completed during 2013, a more favourable foreign exchange rate used to translate results of our U.S. portfolio and a non-recurring land lease charge recorded in 2013. Morguard has reported an increase in NOI in 15 of the past 17 years; and over this 17-year period the compound annual growth rate in NOI was 17.2%.

PORTFOLIO ANALYSIS

On December 31, 2014, the portfolio of real estate properties that the Company reports on was significantly altered due to the consolidation of Morguard REIT. The most significant impact of this accounting change requires the Company to combine Morguard REIT’s $2.9 billion real estate portfolio with Morguard Corporation’s real estate portfolio and eliminate the reporting of the investment in Morguard REIT, which had a book value of $713.8 million.

The composition of Morguard’s real estate properties at December 31, 2014, is shown to the right, with a comparison to December 31, 2013 (which excludes the assets of Morguard REIT).

The Company’s portfolio of real estate properties is highly diversified, by value, by asset class and by geography. Approximately 23% of the Company’s real estate properties are located in the U.S. (37% as at December 31, 2013). The Canadian and U.S. properties are further diversified, with NOI being generated from seven Canadian provinces and eight U.S. states. We believe that the highly diversified nature of the Company’s real estate portfolio is a key strength and insulates shareholders from the cyclical nature of real estate downturns in any particular asset class or location.

At December 31, 2014, Morguard’s total assets were $8.0 billion, compared with $2.8 billion at January 1, 2010. During 2010, as part of its adoption of International Financial Reporting Standards (IFRS), the Company adjusted its balance sheet to reflect the fair value of its real estate portfolio. The Company uses 2010 as its benchmark year to measure growth in its balance sheet.

The increase in total assets has been driven by the consolidation of Morguard REIT’s assets on December 31, 2014, significant acquisition and development programs and increases in the value of the Company’s

9.6% INCREASE IN TOTAL REVENUE

19.7% INCREASE IN NET OPERATING INCOME

FAIR VALUE BY SEGMENT


real estate properties. These value increases are a combination of capital reinvestment, improved cash flows and compressed capitalization rates. The five-year compound annual growth rate in total assets (January 1, 2010 to December 31, 2014) is 23.3%.

CAPITAL MANAGEMENT

The Company’s primary sources of capital are long-term debt and equity. Prudent management of debt financing is a vital element in Morguard’s success, and in 2014 the Company continued to take advantage of the prevailing low level of interest rates. During 2014, the refinancing of mortgages at amounts in excess of maturing balances was made possible through value increases in the underlying secured assets. This allowed Morguard to use leverage to improve total returns without negatively affecting debt ratios. Over the year, Morguard refinanced $468 million of maturing mortgage debt that yielded approximately $131 million of net proceeds. The 2014 mortgage refinancing program lowered Morguard’s weighted average interest rate at December 31, 2014, to 4.17%, compared with 4.47% a year earlier. It also extended its weighted average term to maturity to 5.7 years from 4.8 years at the end of 2013.

Another key metric for Morguard is shareholders’ equity per common share. Increases in total shareholders’ equity will reflect accumulated earnings, dividends paid to shareholders and other capital transactions such as common share repurchases. Shareholders’ equity per common share is defined as shareholders’ equity (excluding non-controlling interest) divided by the number of common shares outstanding. At December 31, 2014, Morguard’s shareholders’ equity per common share was $202.27, compared with $89.42 at January 1, 2010. As with total assets, 2010 represents the benchmark year for this metric. The increase in shareholders’ equity per common share between January 1, 2010, and December 31, 2014, represents a compound annual growth rate of 22.6%.

Multi-unit Residential51%

Retail26%

Office and Industrial19%

Hotel4%

NET OPERATING

INCOME (NOI)

$468M IN REFINANCING

PORTFOLIO DIVERSIFICATION

Portfolio diversification shown by percentage of NOI for the year ended December 31, 2014:

58% CANADA

42% U.S.

10

5.2%

11

5.1%

12 13

4.7% 4.5%

14

4.2%

WEIGHTED AVERAGE INTEREST RATE


GROWTH IN ASSETS OWNED AND UNDER MANAGEMENT

Assets under management (“AUM”) is another important metric for Morguard as increased AUM strengthens our management platform and increases operational efficiencies.

At December 31, 2014, Morguard’s real estate AUM was $15.0 billion. Included in the total are Morguard’s owned real estate investments (including assets of Morguard Corporation, Morguard REIT and Morguard North American Residential REIT) and the real estate assets that Morguard manages for third-party clients, valued at $7.5 billion.

In early 2015, Morguard commenced reporting AUM that includes the value of our portfolio of managed equities and fixed income. The addition of managed equities and fixed income to reported AUM is the result of Morguard’s acquisition of a 60% interest in Lincluden Investment Management Limited, which closed February 3, 2015. The Lincluden acquisition, which adds $3.6 billion of AUM, increases the critical mass of the Company’s existing equity management entity, Morguard Financial Corp. As of February 3, 2015, Morguard’s total AUM, including real estate and managed equities, reached $18.9 billion.

Morguard’s owned portfolio of real properties includes 170 multi-unit residential, retail, office, industrial and hotel properties, comprising 16,423 multi-unit residential suites, approximately 16.5 million square feet of commercial leasable space and 1,056 hotel rooms.

Part of Morguard’s growth and overall financial success can be attributed to its stake in two substantial real estate investment trusts.

Morguard currently has a 46.8% interest in Morguard REIT, which, in turn, owns a Canadian portfolio of high-quality, income producing real estate assets – including 53 commercial properties with approximately 9.2 million square feet of gross leasable area located in six provinces1.

ASSETS OWNED AND UNDER MANAGEMENT

Assets under management (AUM) is another important metric for Morguard as increased AUM strengthens our management platform and increases operational efficiencies. As at February 3, 2015:

$15B REAL ESTATE ASSETS OWNED AND UNDER MANAGEMENT

Managed Real Estate$7.5B

Owned Real Estate $7.5B

Managed Equities and Fixed Income$3.9B

Real Estate$15.0B

1 Excluding assets held for sale, Morguard REIT has 49 commercial properties with approximately 8.6 million square feet of gross leasable area.

TOTAL ASSETS UNDER MANAGEMENT$18.9 BILLION


Morguard REIT had total assets of $3.0 billion as at December 31, 2014, and in 2014 had net operating income of $169.7 million, up from $161.3 million a year earlier.

Morguard also owns a 48.7% effective interest in Morguard North American Residential REIT, which was launched with Morguard’s sponsorship in 2012. This REIT was created to benefit from the demand for high-quality residential rental properties in key markets across North America.

Today Morguard North American Residential REIT owns a portfolio of 12,850 residential suites, including 30 apartment communities located in seven U.S. states and 14 residential apartment communities located in two Canadian provinces, with a total appraised value of $1.8 billion. In 2014, Morguard North American Residential REIT earned normalized NOI (excluding the impact of IFRIC 21) of $90.2 million, up from $73.5 million in 2013.

THIRD-PARTY SERVICES AND INVESTMENT VEHICLES

Morguard’s extensive range of third party real estate advisory services earned fees of $73.4 million in 2014, compared with $74.6 million in 2013.

Morguard provides a range of real estate investment and management services to major institutional clients and private investors. As well, the Company co-invests in a variety of properties. Morguard also supports the two REITs in which it has substantial interests by providing valuable advisory and management services offered by Morguard’s investment, property management and leasing groups.

Morguard additionally offers a broad range of proven investment vehicles and provides portfolio management services, specializing in publicly traded equities and fixed-income securities, through Lincluden Investment Management.

RESULTS FOR SHAREHOLDERS

The long-term growth in the value of Morguard shares is an important goal for the Company’s management. During 2014, the Company’s stock price increased from $125.77 on January 1 to $150.00 at year-end, an increase of 19.3%. The Company believes that markets will usually reward strong performance, sound strategies and skillful execution. Management is extremely proud to report that, over the past 17 years, the compound annual growth rate in the stock price was 17.3%.

Morguard has regularly made use of a normal course issuer bid to repurchase common shares. During 2014, Morguard purchased 233,232 common shares for a total of $32 million, representing an average price of $137.88 per common share. Management continues to believe that the purchase and cancellation of common shares represents a prudent use of the Company’s financial resources.

48.7% EFFECTIVE INTEREST IN MORGUARD NORTH AMERICAN RESIDENTIAL REIT

46.8% INTEREST IN MORGUARD REIT

19.3% INCREASE IN STOCK PRICE


Bramalea City Centre, Brampton, ON

THROUGH SKILL, EXPERIENCE AND DEPTH

EVOLV ING


2010

In the late 1990’s, Morguard Corporation (formerly Acktion Corporation) disposed of businesses in the industrial, automotive and safety products industries. The proceeds from those dispositions were allocated to real estate investments. The first real estate investment was a $36 million acquisition of common shares of Goldlist Properties Inc. in 1997. Investment in units of Morguard REIT soon followed. The transformation of Acktion Corporation into a diversified real estate company was advanced considerably in 1998 with the acquisition of Morguard Investments Limited and further investments in Goldlist, Revenue Properties Company Limited and Devan Properties Limited.

The cornerstones of the real estate strategy remained consistent throughout; acquire high-quality, well-located assets, remain disciplined on acquisition opportunities, seek high levels of diversification within the real estate portfolio and employ reasonable levels of debt.

The outcome of this strategy is long-term growth in the Company’s stock price for shareholders. Since embarking on the real estate strategy in 1998, Morguard has produced a compound annual growth rate (“CAGR”) of 17.3%.

2920 Matheson Blvd. E., Mississauga, ON

Morguard Corporation has been completely transformed since embarking on a strategy to invest in real estate; a strategy that dates back to 1997.

1997

First Real Estate

Investments $103.6M

1998

Acquisition of

Morguard Investments

Limited

2000

Initiated Dividend

$204M Office and Multi-unit Res

Development

Acquired U.S. REIT

$478M

Acquired Chicago

Multi-unit Res Building

US$302M

MRG IPO

Acquired U.S. Multi-unit Res

Portfolio US$450M

The Heathview and

Performance Court

Development$89.42 Book Value per Share

(After IFRS Adoption)

2004 2006 2012 2013 2014

17.3 % STOCK PRICE CAGR SINCE 1998

17.3% STOCK PRICE CAGR


Performance Court, Ottawa, ON

150 ELGINOTTAWA, ON

PERFORMING


THE OPPORTUNITY

Execute on a vision to build a LEED Gold Class A office tower in downtown Ottawa that meets the market demand for competitive and sustainable workplaces, provides stable income and high yields for Morguard’s shareholders and its co-investor client, and sets the benchmark for public benefit spaces.

THE VALUE PROPOSITION

The concept of Performance Court at 150 Elgin Street was born in a formal design competition held by the City of Ottawa. Morguard’s proven track record in managing LEED-standard urban development projects and its financial capacity were instrumental in winning the bid to revitalize the site.

Morguard’s approved design called for a 360,000-square-foot Class A office tower with commitments to public benefit spaces and preservation of a designated heritage building on the site.

Morguard’s asset management, development and leasing teams worked collaboratively to:

• secure a solid deal structure

• create long-term value for shareholders and investors

• develop and implement a lease strategy

THE RESULT

Leased at 75% by substantial completion and currently 95% committed, Performance Court has attracted tenants such as the Canada Council for the Arts, Shopify and KPMG, who required flexible workplace configurations to engage and retain top talent and support their business, financial and sustainability goals.

As a LEED Gold candidate, Performance Court has one of the smallest carbon footprints of any multi-tenanted office tower in Canada. The target is a 50% reduction in energy consumption compared to the Model National Energy Code for Buildings (MNECB).

First-of-its-kind in Canada, interactive public benefit space including a street level art gallery, a winter garden with a three-storey digital screen and an outdoor terrace with sweeping views of the nation’s capital.

95% OF SF COMMITTED

Performance Court – a LEED Gold candidate Class A office tower in the nation’s capital is an urban development that realizes performance at every level.

Performance Court, Ottawa, ON


DEVELOPING MAPLE LEAF FOODS

DISTRIBUTION CENTRE

Maple Leaf Foods Distribution Centre, Puslinch, ON


THE RESULT

Delivered a high quality, state-of-the-art facility that meets the tenant’s business and distribution strategy while also enhancing Morguard’s industrial portfolio.

Enhanced both income and real estate value for the Company’s shareholders and investor clients through strong returns and rental growth over the 15-year term. Cash returns from this $47 million development project have exceeded initial expectations.

Awarded Industrial Development of the Year by NAIOP Greater Toronto and was recognized as Canada’s first refrigerated distribution centre to receive LEED Gold certification under the more stringent 2009 standards.

Using exceptional project and process management, Morguard and its team delivered the first LEED Gold refrigerated distribution centre in Canada.

THE OPPORTUNITY

Maple Leaf Foods, a leading Canadian consumer packaged meats company, issued a request for proposal for a build-to-suit refrigerated distribution centre to establish a critical hub for its Eastern Canada distribution network that would serve to consolidate and improve productivity.


Morguard’s proven expertise in project management of complex industrial developments and its financial capacity to provide equity were instrumental to the success of the project.

Morguard structured the transaction to provide an acceptable risk-adjusted yield for both the Company’s shareholders and investor clients, while ensuring an appropriate and competitive rental rate for Maple Leaf Foods.

Morguard led a team of specialized experts through all phases of pre-development and development. The team consulted closely with Maple Leaf Foods to understand every detail of its supply chain to create a facility that would reduce operational cost and complexity, increase productivity and set a new standard for sustainable building performance through LEED design.

$47M INDUSTRIAL DEVELOPMENT

Maple Leaf Foods Distribution Centre


Block 37, Chicago, IL

EXPANDING OUR PRESENCE AND

SERVICE OFFERINGS


THE RESULT

Expanded investments and management capabilities resulting in access to above-market returns for shareholders and investor clients and continued investment potential in a tight real estate market.

Block 37 provided Morguard with an opportunity to expand its presence in an existing market. The downtown Chicago market has rewarded Morguard with strong performance in the past. When completed, Block 37 will complement our existing Chicago property, Alta at K Station.

Acquired a reputable management platform for equities and fixed income that creates a scalable business for Morguard. It fits the market expansion strategy of growing AUM through existing asset classes.

Through a market expansion strategy, Morguard is realizing new growth for its shareholders and creating opportunities for the future.

$3.6B INCREASE IN EQUITIES AND FIXED INCOME UNDER MANAGEMENT

THE OPPORTUNITY

With real estate values holding at peak levels and limited acquisition opportunities for core product, Morguard looked to a market expansion strategy to generate new growth. The Company’s strategy was to leverage its existing relationships and intellectual capital in the U.S. multi-unit residential market – and public markets.


Multi-Unit Residential Investment Morguard acquired a 49% stake in a 691-suite, 34-storey luxury residential rental development in Chicago, Illinois. The property is part of a prominent, mixed-use development known as Block 37 and is located at 108 North State Street – a prestigious downtown neighbourhood with immediate access to subways, restaurants and high-end retail shops.

Equities and Fixed Income Morguard acquired a 60% interest in Canadian money management company Lincluden Investment Management Limited, which manages $3.6 billion in equities and fixed income for institutional and private clients. This establishes a national platform for Morguard to transition its existing equities division, Morguard Financial Corp. This market expansion strategy increases the scale and scope of investment products and services to investor clients and realizes opportunities to access new capital pools in North America.

Block 37, Chicago, IL


Creekside Corporate Centre, Toronto, ON

Alta at K Station, Chicago, IL East York Town Centre, Toronto, ON

Residence Inn Marriot, Mississauga, ON


PORTFOLIO SUMMARY

The real estate portfolio of Morguard Corporation is broadly diversified and includes high-quality residential, retail, office, industrial and hotel properties in Canada and the United States.

$7.5B REAL ESTATE PROPERTIES

170 TOTAL PROPERTIES

52 MULTI-UNIT RESIDENTIAL PROPERTIES

68 OFFICE AND INDUSTRIAL PROPERTIES

44 RETAIL PROPERTIES

6 HOTEL PROPERTIES


MULTI-UNIT RESIDENTIAL PORTFOLIO Ownership Prov./ Interest Occupancy Property City State Ownership (%) Suites (%) CANADAMayfair Village South Edmonton AB MRC 100 237 100Square 104 Edmonton AB MRG 100 277 99Margaret Place Kitchener ON MRG 100 472 98The Arista Mississauga ON MRG 100 458 98The Elmwoods Mississauga ON MRG 100 321 99The Forestwoods Mississauga ON MRG 89 300 98The Maplewoods Mississauga ON MRG 87 300 98Meadowvale Gardens Mississauga ON MRG 100 325 981563 Mississauga Valley Blvd. Mississauga ON MRC 95 168 1001405 Mississauga Valley Blvd. Mississauga ON MRC 95 168 100Tomken Place Mississauga ON MRG 100 142 100The Valleywoods Mississauga ON MRG 91 373 98The Bay Club Toronto ON MRC 100 293 96The Colonnade Toronto ON MRC 100 157 97The Heathview1 Toronto ON MRC 100 336 55Leaside Towers Toronto ON MRC 100 989 98Rideau Towers 1 Toronto ON MRG 90 287 98Rideau Towers 2 Toronto ON MRG 100 380 96Rideau Towers 3 Toronto ON MRG 100 474 96Rideau Towers 4 Toronto ON MRG 100 400 97Condominium Units Toronto ON MRC 100 4 100Rouge Valley Residence Scarborough ON MRG 100 396 98126 Sparks Street Ottawa ON MRC 100 36 –

SUBTOTAL 7,293 98

1 Occupancy represents percentage north tower committed.

The Bay Club, Toronto, ONMayfair Village South, Edmonton, AB


Ownership Prov./ Interest Occupancy Property City State Ownership (%) Suites (%) U.S.Retreat at City Center Aurora CO MRG 100 225 95Settlers Creek Fort Collins CO MRG 100 229 97Grand Venetian Irving TX MRG 100 514 96The Retreat at Spring Park Garland TX MRG 100 188 94Verandah at Valley Ranch Irving TX MRG 100 319 97Colonial Manor Harahan LA MRG 100 48 98Garden Lane Gretna LA MRG 100 261 92The Georgian New Orleans LA MRG 100 135 98Greenbrier Slidell LA MRG 100 144 90Magnolia Place New Iberia LA MRG 100 148 95Steeplechase Lafayette LA MRG 100 192 96Villages of Williamsburg Shreveport LA MRG 100 194 87Alta at K Station Chicago IL MRC 100 848 90Bel Air Apartment Homes Mobile AL MRG 100 202 92The Estates at Lafayette Square Mobile AL MRG 100 675 96Hampton Park Mobile AL MRG 100 300 95Pine Bend Mobile AL MRG 100 152 91Barrett Walk Kennesaw GA MRG 100 290 97Briarhill Apartments Atlanta GA MRG 100 292 93The Savoy Apartments Atlanta GA MRG 100 232 96Blue Isle Coconut Creek FL MRG 100 340 98Emerald Lake Lake Worth FL MRC 100 337 96Governors Gate I Pensacola FL MRG 100 240 95Governors Gate II Pensacola FL MRG 100 204 95Jamestown Estates Pensacola FL MRG 100 177 93Woodcliff Apartment Homes Pensacola FL MRG 100 184 95Mallory Square Tampa FL MRG 100 383 91Village Crossing West Palm Beach FL MRG 100 189 98210 Watermark Bradenton FL MRG 100 216 97Woodbine Apartment Homes Riviera Beach FL MRG 100 408 99The Lodge at Crossroads Cary NC MRG 100 432 94Perry Point Raleigh NC MRG 100 432 93

SUBTOTAL 9,130 95

TOTAL MULTI-UNIT RESIDENTIAL 16,423 96

Governors Gate, Pensacola, FL210 Watermark, Bradenton, FL


RETAIL PORTFOLIO Ownership Total Ownership Prov./ Interest Area Area Occupancy Property City State Ownership (%) (SF) (SF) (%) Major Tenants

CANADA

Shelbourne Plaza Victoria BC MRT 100 57,000 57,000 100 Fairway Market, TD Canada Trust, Scotiabank

Burquitlam Plaza Coquitlam BC MRT 100 67,500 67,500 96 Shoppers Drug Mart, Dollarama, CIBC

Pine Centre Mall Prince George BC MRT 100 476,000 476,000 99 Sears, Sport Chek, Shoppers Drug Mart

Prairie Mall Grande Prairie AB MRC/MRT 100 296,000 296,000 96 Mark’s Work Wearhouse, Shoppers Drug Mart

Airdrie Co-op Centre Airdrie AB MRT 100 65,000 65,000 100 Co-op Grocery Store, TD Canada Trust

Airdrie Rona Centre Airdrie AB MRT 100 44,000 44,000 100 Rona

Heritage Towne Centre Calgary AB MRT 100 133,500 133,500 95 Home Outfitters, Ashley Furniture, Dollarama

Parkland Mall Red Deer AB MRT 100 429,500 429,500 90 Walmart, Sport Chek, Dollarama

The Centre at Circle Saskatoon SK MRT 100 489,500 489,500 95 Sport Chek, Shoppers Drug Martand Eighth

Brandon Shoppers Mall Brandon MB MRT 100 366,500 366,500 98 Capitol Theatre, Sport Chek

Charleswood Centre Winnipeg MB MRT 100 116,000 116,000 100 Safeway, Shoppers Drug Mart, Dollarama

Southdale Mall Winnipeg MB MRT 100 175,500 175,500 97 Dollarama, Rexall, Bank of Montreal

Wonderland Corners London ON MRT 100 47,500 47,500 91 Swiss Chalet

Cambridge Centre Cambridge ON MRT 100 726,500 726,500 96 Sears, Hudson’s Bay, Sport Chek, H&M

Kingsbury Centre Mississauga ON MRT 100 70,000 70,000 95 Longo’s, Shoppers Drug Mart

Bramalea City Centre Brampton ON MRC 21 1,423,500 295,000 96 Hudson’s Bay, Forever 21, Sport Chek, Old Navy

Woodbridge Square Vaughan ON MRT 50 113,000 56,500 98 Nations Fresh Foods, Scotiabank

Aurora Centre Aurora ON MRT 100 288,500 288,500 99 Sobeys, Cineplex Odeon

Yonge & McGill1 Toronto ON MRC 100 7,500 7,500 100

100 Cavell Avenue1 Toronto ON MRC 100 5,500 5,500 84

Centerpoint Mall Toronto ON MRC 100 606,500 606,500 99 Hudson’s Bay, No Frills, Canadian Tire

The Colonnade Toronto ON MRC 100 97,000 97,000 98 Prada, Chanel, Cartier

East York Town Centre Toronto ON MRC 100 382,500 382,500 93 Food Basics, Shoppers Drug Mart, Dollarama

Guildwood Village Toronto ON MRC 100 52,500 52,500 100 Valu-mart

Market Square Kanata ON MRT 100 58,000 58,000 100 Farm Boy, LCBO, TD Canada Trust

Hampton Park Ottawa ON MRT 100 102,000 102,000 89 Food Basics, Rexall, Swiss Chalet

Home Base Ottawa ON MRT 100 10,000 10,000 100 Royal Bank

St. Laurent Centre Ottawa ON MRT 100 850,000 850,000 97 Hudson’s Bay, Sears, Toys “R” Us

SUBTOTAL 7,556,500 6,371,500 97

Woodbridge Square, Vaughan, ONThe Colonnade, Toronto, ON


Ownership Total Ownership Prov./ Interest Area Area Occupancy Property City State Ownership (%) (SF) (SF) (%) Major Tenants

U.S.

Alta at K Station1 Chicago IL MRC 100 13,000 13,000 100

Airline Park Matairie LA MRC 100 54,000 54,000 100 Dollar Tree, Rite Aid

Azalea Gardens Jefferson LA MRC 100 45,000 45,000 100 Winn Dixie, Family Dollar, Aaron’s Rent

Colonial Harahan LA MRC 100 44,000 44,000 38 Dollar General

Gonzales Plaza Gonzales LA MRC 100 73,000 73,000 95 Big Lots, Dollar Tree, Aaron’s Rent

North Shore Square Slidell LA MRC 100 429,500 429,500 72 JC Penney, Footlocker, Forever 21, Victoria’s Secret

Southland Mall Houma LA MRC 100 445,000 445,000 92 Sears, JC Penney, Victoria’s Secret, American Eagle

Westgate Alexandria LA MRC 100 168,000 168,000 97 Big Lots, Autozone, Rite Aid, Aaron’s Rent

Westland Kenner LA MRC 100 109,000 109,000 83 Herzing University, Houston Marine, Family Dollar

Boynton Town Center Boynton Beach FL MRC 100 209,500 209,500 94 Best Buy, Shoe Carnival, Michael’s

Florida Shores Edgewater FL MRC 100 79,500 79,500 91 Winn Dixie, Beall’s Outlet

Lantana Plaza Lake Worth FL MRC 100 245,500 245,500 99 Home Depot, Publix, Office Depot, Dollar Tree

Rainbow Square Dunnellon FL MRC 100 116,000 116,000 94 Beall’s Outlet

Town & Country Palatka FL MRC 100 196,500 196,500 100 Publix, K-Mart, Beall’s Outlet, Dollar Tree

Weeki Wachee Village Brooksville FL MRC 100 82,500 82,500 81 Winn Dixie

Westward West Palm Beach FL MRC 100 225,000 225,000 68 Office Depot, Chuck E. Cheese, Aldi, Dollar Tree

SUBTOTAL 2,535,000 2,535,000 87

TOTAL RETAIL 10,091,500 8,906,500 94 1 No major tenant listed due to GLA.

Lantana Plaza, Lake Worth, FLBoynton Town Center, Boynton Beach, FL


OFFICE AND INDUSTRIAL PORTFOLIO Ownership Total Ownership Interest Area Area Occupancy Property City Prov. Ownership (%) (SF) (SF) (%) Major Tenants

CANADA

Seymour Place Victoria BC MRT 100 239,000 239,000 100 Province of British Columbia

Chancery Place Vancouver BC MRT 100 142,500 142,500 100 Ministry of Citizens’ Service and Open Government

111 Dunsmuir Vancouver BC MRT 100 222,000 222,000 100 AMEC Americas, Stantec Consulting

Alberta Treasury Calgary AB MRT 100 41,500 41,500 100 Alberta Treasury Branches

7315 – Eighth Street Calgary AB MRT 100 19,500 19,500 100 Genesis Land Development

Centre 810 Calgary AB MRT 100 77,500 77,500 95 Tektelic Communications Inc., The MI Group

Deerport Centre Calgary AB MRT 100 47,500 47,500 100 Colleaux Engineering, Aerotek, State Farm

Duncan Building Calgary AB MRT 100 81,000 81,000 100 RCMP

505 Third Street Calgary AB MRT 50 142,000 71,000 100 Horizon Logistics, Strike Energy, Step Energy

Citadel West Calgary AB MRT 100 78,500 78,500 100 CH2M Hill Canada

Penn West Plaza Calgary AB MRT 100 636,500 636,500 100 Penn West Petroleum

Scotia Place Edmonton AB MRT 20 572,500 114,500 85 City of Edmonton, APEGA, Grant Thornton

Petroleum Plaza Edmonton AB MRT 50 304,000 152,000 100 Alberta Infrastructure

4211 Albert Street Regina SK MRC 100 37,500 37,500 100 Regina Health Region

444 St. Mary Avenue Winnipeg MB MRC 20 247,500 49,500 91 Great West Life

Maple Leaf Foods Puslinch ON MRC 59 283,898 167,500 100 Maple Leaf FoodsDistribution Centre

33 City Centre Drive Mississauga ON MRC 50 211,000 105,500 69 Accenture, Easyhome, Royal Bank, Aviva

55 City Centre Drive Mississauga ON MRC 50 175,000 87,500 93 Morguard, Sunguard, Bier Markt

77 City Centre Drive Mississauga ON MRC 50 194,000 97,000 89 Mississauga Board of Trade, Pallett Valo LLP

201 City Centre Drive Mississauga ON MRC 50 215,000 107,500 70 City of Mississauga, ACS HR, Merit Loyalty

2920 Matheson Blvd. East Mississauga ON MRC 50 233,000 116,500 100 Bayer Inc.

Bramalea City Centre Brampton ON MRC 21 79,614 16,500 48 Hanson International, Municipality of Peel

77 Bloor Street West Toronto ON MRT 50 393,000 196,500 98 TD Canada Trust, Harry Rosen, Realstar

200 Yorkland Toronto ON MRT 100 149,000 149,000 87 Ferring, Investors Group, AG Simpson

Creekside Corporate Centre Toronto ON MRC 100 301,500 301,500 100 TD Financial Group

945 Wilson Avenue Toronto ON MRC 32 228,125 73,000 100 Sevencontinents Corporation, Picadilly Fashions

Leaside Corporate Centre Toronto ON MRC 95 93,684 89,000 94 OMVIC, Mount Pleasant Group

1875 Leslie Toronto ON MRT 100 52,000 52,000 96 Body and Soul Fitness, Goose & Firkin

5591-5631 Finch1 Toronto ON MRT 100 210,000 210,000 92

20-24 Lesmill1 Toronto ON MRT 100 27,500 27,500 100

2041-2141 McCowan1 Toronto ON MRT 100 196,500 196,500 93

279 Yorkland Toronto ON MRT 100 18,000 18,000 100 Loblaw Properties Ltd.

285 Yorkland Toronto ON MRT 100 25,000 25,000 100 Mitchell Partnership

Quinte Courthouse Belleville ON MRC 50 173,000 86,500 100 Superior Court of Justice, Legal Aid Ontario

525 Coventry Ottawa ON MRT 100 42,500 42,500 100 TD Waterhouse

Green Valley Office Park Ottawa ON MRT 100 123,000 123,000 94 Canadian Centre for Ethics in Sports

Heritage Place Ottawa ON MRT 50 227,000 113,500 81 Public Works

St. Laurent Business Centre Ottawa ON MRT 100 88,000 88,000 69 Intact Insurance Company, The Pythian Group

Standard Life Ottawa ON MRT 50 381,000 190,500 99 Public Works

Time Square Ottawa ON MRT 100 111,000 111,000 98 Public Works, Le Droit, Empire Grill

301 Laurier Ave Ottawa ON MRT 50 26,000 13,000 100 Unifor

181 Queen Street Ottawa ON MRC 100 251,500 251,500 100 CBC

131 Queen Street Ottawa ON MRC 100 329,500 329,500 100 Public Works

350 Sparks Ottawa ON MRC/MRT 100 173,000 173,000 85 Morguard, Morneau Shepell

Performance Court2 Ottawa ON MRC 50 361,000 180,500 95 Shopify, Canada Council for the Arts, KPMG

Centre de la Cité Montreal QC MRT 100 127,500 127,500 79 On-Line Executive Centre, Sun Life Assurance

825 Des Érables Salaberry-de- QC MRT 50 485,000 242,500 100 Diageo Valleyfield

Place Innovation Saint-Laurent QC MRC/MRT 100 896,000 896,000 100 Bombardier, AJW Technique, Amdocs

Saint John City Hall Saint John NB MRC 50 157,000 78,500 52 City of Saint John

Industrial Portfolio Various Various MRC 100 526,000 526,000 87 Acklands Grainger, Carquest

TOTAL OFFICE AND INDUSTRIAL 10,452,822 7,619,000 93 1 Properties held for sale and excluded from Morguard REIT portfolio summary.2 Occupancy represents percentage committed.


Place Innovation, Saint-Laurent, QC

Penn West Plaza, Calgary, AB Courtyard Marriott, Mississauga, ON

HOTEL PORTFOLIO Ownership Interest Property City Province Ownership (%) Suites CANADA

Courtyard Marriott Mississauga Mississauga ON MRC 100 144

Residence Inn Marriott Mississauga ON MRC 100 100

Toronto Airport Marriott Toronto ON MRC 95 424

Courtyard Marriott Vaughan Vaughan ON MRC 100 144

Courtyard Marriott Markham Markham ON MRC 100 144

Residence Inn Marriott Markham ON MRC 100 100

TOTAL HOTEL 1,056

Registered Office55 City Centre Drive Suite 1000Mississauga, ON L5B 1M3Tel: [email protected]

Transfer Agents Computershare Trust Company of [email protected]

AuditorsErnst & Young LLP

Principal BankersRoyal Bank of CanadaToronto-Dominion Bank

Share ListingToronto Stock Exchange

SymbolMRC

Investor RelationsVisit our website atwww.morguard.com or view our filings on SEDAR at www.sedar.com.

Pamela McLeanChief Financial OfficerMorguard REITSenior Vice President, Finance, and Chief Financial OfficerMorguard Investments Limited John LevacVice President,Asset Management,Morguard REIT

Andrew Edmundson Corporate Director

Timothy J. Murphy 2, 3

Partner, McMillan LLP

Michael S. Robb 1, 3

Corporate Director

K. (Rai) SahiChairman and Chief Executive Officer

Paul MiatelloChief Financial Officer

Beverley G. FlynnGeneral Counsel and Secretary

Robert WrightVice President, Chief Financial Officer, Morguard North American Residential REIT

K. (Rai) Sahi 4

Chairman and Chief Executive Officer

David A. King 2, 4

Vice ChairmanMorguard CorporationCorporate Director

For additional information, please contact:Paul MiatelloChief Financial [email protected]

Beverley G. FlynnGeneral Counsel and [email protected]

Tel: [email protected]

W. Scott MacDonaldExecutive Vice President, RetailMorguard Investments Limited

Gordon VollmerExecutive Vice President, Office and IndustrialMorguard Investments Limited

Margaret KnowlesSenior Vice President, DevelopmentMorguard Investments Limited

Bruce K. Robertson 1, 4

Vice President, InvestmentsThe Woodbridge Company Limited

L. Peter Sharpe 1, 3, 4

Corporate Director

Annual Shareholder MeetingWednesday, May 13, 2015at 10:30 a.m.Rattlesnake Point Golf Club5407 Regional Road 25Milton, ON L9T 2X5

Brian AtheyVice President,Operations (Canada)Morguard North American Residential REIT

John TalanoVice President,Operations (U.S.),Morguard North American Residential REIT

Robert McFarlaneVice President, Internal Audit

1 Audit Committee

2 Human Resources, Compensation and Pension Committee

3 Corporate Governance and Nominating Committee

4 Investment Committee

EXECUTIVE DIRECTORY

BOARD OF DIRECTORS

CORPORATE INFORMATION

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INVESTOR INFORMATION

The selected annual financial information in the 2014 Annual Report highlights certain key metrics for the Company. As a result, this Report should be read in conjunction with Morguard’s Consolidated Financial Statements for the year ended December 31, 2014, related Management’s Discussion and Analysis (“MD&A”) and the Annual Information Form (“AIF”).

These documents are available on the Company’s website at www.morguard.com. All continuous disclosure documents required by securities regulators are also filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and can be accessed electronically at www.sedar.com.

55 City Centre DriveSuite 1000Mississauga, ON L5B 1M3905-281-3800

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