Chairman’s Message

Fellow Shareholders:
In 2013, Morguard continued to build strength, enhancing our portfolio and generating record results for shareholders. 
By utilizing our financial strength, diversified business model and ability to serve tenants across many asset classes and locations, total revenues rose by 25% from the previous year, consolidated funds from operations rose by 14% and net operating income – representing gross profit from properties – increased by 16%. Morguard’s owned and managed real estate portfolio grew by 16% to $15.1 billion and our share price closed at $125 on December 31, 2013, a 9.4% increase over the December 31, 2012, closing price.
There are several reasons for this kind of performance. Through the year, market intelligence led us to a broad range of opportunities across North America. This translated into a successful year in which Morguard and its clients completed $1.3 billion of acquisitions across every major asset class. During the year, Morguard Corporation’s balance sheet grew via the acquisition of 18 properties in Canada and the U.S. at a cost of $600 million, which included acquisitions completed by our consolidated affiliate, Morguard North American Residential REIT. In addition, Morguard completed $500 million of new mortgage financings and refinancings of maturing debt – effectively reducing the Company’s weighted average interest rate. Our experience and skills in operations ensured that our properties were managed efficiently, that development was carried out intelligently, and that our tenants remained satisfied. In 2013, Morguard completed the development of a major warehouse and distribution facility and had two major development projects under way at year-end.
The strong performance of the two REITs in which Morguard Corporation is the major shareholder was another significant achievement. Both Morguard REIT and Morguard North American Residential REIT benefit from their relationship with Morguard, receiving valuable investment and advisory services from our experienced management team.
Morguard REIT, of which Morguard owns 44.5%, generated an 18% increase in net operating income and a 17% increase in funds from operations.
Morguard North American Residential REIT, of which Morguard owns a 48.7% effective interest, in its first full year of operations in 2013 achieved incredible growth, realizing a 78% increase in net operating income and a 75% increase in funds from operations.
Looking ahead, we remain committed to Morguard’s long-term goal of building shareholder value, and we remain confident in our ability to achieve success. Our base is strong, and our approach to growth is opportunistic; we continue to be aggressive in seeking investment opportunities where we can realize substantial returns, including projects with the potential for development. Morguard Corporation’s strategy is to remain focused on real estate investing in the most promising Canadian and U.S. markets.
Furthermore, our experience and intellectual capital have proven to be important resources in the growth, development and performance of the two REITs in which Morguard has significant interests, as well as for our third party clients.
With Morguard Corporation’s strong balance sheet, the skills and dedication of our management team and employees, and the high quality of our portfolio, we have every confidence in the Company’s future and we remain committed to enhancing the quality of our cash flow and building on our track record of creating shareholder value. I would like to take this opportunity to thank our employees for their dedication and commitment, our directors for their guidance and direction and our shareholders for their continued support.
K. (Rai) Sahi
Chairman and Chief Executive Officer
Morguard Corporation

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