MISSISSAUGA, ON, Oct. 25,
2023 /CNW/ - Morguard
Real Estate Investment Trust ("the Trust")
(TSX: MRT.UN) today is pleased to announce its 2023 Third Quarter
Results.
|
In thousands of
dollars, except per-unit amounts
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
Revenue from real
estate properties
|
$62,512
|
$61,127
|
$189,219
|
$182,965
|
|
Net operating
income
|
30,551
|
30,433
|
92,564
|
88,660
|
|
Fair value losses on
real estate properties
|
(52,047)
|
(73,263)
|
(88,885)
|
(35,973)
|
|
Net
(loss)/income
|
(39,665)
|
(58,279)
|
(46,650)
|
9,279
|
|
Funds from
operations 1
|
13,957
|
16,633
|
45,211
|
47,821
|
|
Adjusted funds from
operations 1,2
|
7,889
|
10,385
|
27,295
|
29,976
|
|
Amounts presented on
a per unit basis
|
|
|
|
|
|
Net (loss)/income –
basic
|
($0.62)
|
($0.91)
|
($0.73)
|
$0.14
|
|
Net (loss)/income –
diluted
|
($0.62)
|
($0.91)
|
($0.73)
|
$0.14
|
|
Funds from operations
– basic 1
|
$0.22
|
$0.26
|
$0.70
|
$0.75
|
|
Funds from operations
– diluted 1
|
$0.19
|
$0.22
|
$0.61
|
$0.64
|
|
Adjusted funds from
operations – basic 1,2
|
$0.12
|
$0.16
|
$0.42
|
$0.47
|
|
Adjusted funds from
operations – diluted 1,2
|
$0.12
|
$0.15
|
$0.40
|
$0.43
|
|
Distributions per
unit
|
$0.06
|
$0.06
|
$0.18
|
$0.18
|
|
|
|
|
|
|
1. The following
represents a non-GAAP financial measure/ratio that does not have
any standardized meaning prescribed by IFRS and is not necessarily
comparable to similar measures presented by other reporting issuers
in similar or different industries. This measure should be
considered as supplemental in nature and not as substitutes for
related financial information prepared in accordance with IFRS.
Additional information on this non-GAAP financial measure/ratio can
be found under the MD&A section Part I, "Specified Financial
Measures".
|
|
2. The Trust uses
normalized productive capacity maintenance expenditures to
calculate adjusted funds from operations.
|
|
3. Includes the
dilutive impact of convertible debentures and presented on a cash
settlement basis for consistency with industry practice for
calculating FFO and AFFO.
|
SELECTED FINANCIAL INFORMATION
The table below sets
forth selected financial data relating to the Trust's fiscal three
and nine months ended September 30, 2023, and 2022. This
financial data is derived from the Trust's condensed consolidated
statements which are prepared in accordance with IFRS.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
%
Change
|
2023
|
2022
|
%
Change
|
|
Revenue from real
estate properties
|
$62,512
|
$61,127
|
2.3 %
|
$189,219
|
$182,965
|
3.4 %
|
|
Property operating
expenses
|
(17,714)
|
(16,410)
|
7.9 %
|
(53,774)
|
(51,608)
|
4.2 %
|
|
Property
taxes
|
(12,122)
|
(12,111)
|
0.1 %
|
(36,400)
|
(36,394)
|
— %
|
|
Property management
fees
|
(2,125)
|
(2,173)
|
(2.2 %)
|
(6,481)
|
(6,303)
|
2.8 %
|
|
Net operating
income
|
30,551
|
30,433
|
0.4 %
|
92,564
|
88,660
|
4.4 %
|
|
Interest
expense
|
(16,072)
|
(13,343)
|
20.5 %
|
(45,672)
|
(39,426)
|
15.8 %
|
|
General and
administrative
|
(911)
|
(935)
|
(2.6 %)
|
(2,970)
|
(2,923)
|
1.6 %
|
|
Other items
|
(16)
|
(20)
|
(20.0 %)
|
(57)
|
(62)
|
(8.1 %)
|
|
Fair value losses on
real estate properties
|
(52,047)
|
(73,263)
|
(29.0 %)
|
(88,885)
|
(35,973)
|
147.1 %
|
|
Net loss from
equity-accounted investment
|
(1,170)
|
(1,151)
|
1.7 %
|
(1,630)
|
(997)
|
63.5 %
|
|
Net
(loss)/income
|
($39,665)
|
($58,279)
|
(31.9 %)
|
($46,650)
|
$9,279
|
N/A
|
CONSOLIDATED OPERATING
HIGHLIGHTS
The following is an analysis of net operating
income by asset type:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
%
|
2023
|
2022
|
%
|
|
Enclosed regional
centres
|
$9,994
|
$9,532
|
4.8 %
|
$31,386
|
$27,005
|
16.2 %
|
|
Community strip
centres
|
5,779
|
5,648
|
2.3 %
|
17,180
|
16,951
|
1.4 %
|
|
Subtotal –
retail
|
15,773
|
15,180
|
3.9 %
|
48,566
|
43,956
|
10.5 %
|
|
|
|
|
|
|
|
|
Single-/dual-tenant
buildings
|
12,210
|
11,833
|
3.2 %
|
36,666
|
34,775
|
5.4 %
|
|
Multi-tenant
buildings
|
2,082
|
2,818
|
(26.1 %)
|
5,974
|
8,141
|
(26.6 %)
|
|
Subtotal –
office
|
14,292
|
14,651
|
(2.5 %)
|
42,640
|
42,916
|
(0.6 %)
|
|
|
|
|
|
|
|
|
Industrial
|
486
|
602
|
(19.3 %)
|
1,358
|
1,788
|
(24.0 %)
|
|
Net operating
income
|
$30,551
|
$30,433
|
0.4 %
|
$92,564
|
$88,660
|
4.4 %
|
The increase in enclosed regional centres net operating income
for the nine months ended September 30,
2023, is due to a one-time prior year property tax refund
received on an enclosed regional centre in the amount of
$2.8 million primarily for vacant
space and space previously occupied by bankrupt or otherwise failed
tenants. The decrease in multi-tenant office net operating income
for the nine months ended September 30,
2023, is due to higher vacancy in this asset class. The
decrease in industrial office net operating income for the nine
months ended September 30, 2023, is
due to temporary vacancy at one of the Trust's single tenant
industrial properties.
The following is an analysis of revenue from real estate
properties by segment:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
%
|
2023
|
2022
|
%
|
|
Industrial
|
$851
|
$993
|
(14.3 %)
|
$2,616
|
$3,116
|
(16.0 %)
|
|
Office –
Single-/dual-tenant buildings
|
21,484
|
20,791
|
3.3 %
|
64,671
|
61,525
|
5.1 %
|
|
Office – Multi-tenant
buildings
|
6,154
|
6,994
|
(12.0 %)
|
18,389
|
20,638
|
(10.9 %)
|
|
Retail – Community
strip centres
|
9,312
|
8,775
|
6.1 %
|
27,924
|
27,215
|
2.6 %
|
|
Retail – Enclosed
regional centres
|
24,711
|
23,574
|
4.8 %
|
75,619
|
70,471
|
7.3 %
|
|
Total
|
$62,512
|
$61,127
|
2.3 %
|
$189,219
|
$182,965
|
3.4 %
|
The following is an analysis of revenue from real estate
properties by revenue type:
|
For the three months
ended September 30,
|
2023
|
2022
|
Variance
|
|
Rental
revenue
|
$38,111
|
$38,535
|
($424)
|
|
CAM
recoveries
|
12,455
|
11,536
|
919
|
|
Property tax and
insurance recoveries
|
9,430
|
8,981
|
449
|
|
Other revenue and lease
cancellation fees
|
1,237
|
978
|
259
|
|
Parking
revenue
|
1,376
|
1,143
|
233
|
|
Amortized
rents
|
(97)
|
(46)
|
(51)
|
|
$62,512
|
$61,127
|
$1,385
|
|
|
|
|
|
|
|
|
|
For the nine months
ended September 30,
|
2023
|
2022
|
Variance
|
|
Rental
revenue
|
$114,522
|
$114,154
|
$368
|
|
CAM
recoveries
|
37,572
|
35,376
|
2,196
|
|
Property tax and
insurance recoveries
|
30,749
|
27,493
|
3,256
|
|
Other revenue and lease
cancellation fees
|
3,494
|
3,810
|
(316)
|
|
Parking
revenue
|
4,029
|
3,275
|
754
|
|
Amortized
rents
|
(1,147)
|
(1,143)
|
(4)
|
|
$189,219
|
$182,965
|
$6,254
|
Property operating expenses include costs related to interior
and exterior maintenance, insurance and utilities. Property
operating expenses for the three months ended September 30, 2023, increased 7.9% to
$17.7 million from $16.4 million for the same period in 2022. This
increase is primarily due to increased security, insurance and
environmental costs in 2023, coupled with lower bad debt recoveries
in 2023.
Net operating income for the three months ended September 30, 2023, increased 0.4% as compared to
2022. This increase was the result of lower vacancy costs in 2023
in the enclosed mall asset class, offset by increases in vacancy
costs in the multi-tenant office asset class.
Net operating income for the nine months ended September 30, 2023, increased 4.4% as compared to
2022. This increase includes a one-time prior year property tax
refund received on an enclosed regional centre in the amount of
$2.8 million primarily for vacant
space and space previously occupied by bankrupt or otherwise failed
tenants.
Interest expense for the three months ended September 30, 2023, increased 20.5% vs the same
period in 2022. This increase is primarily due to higher interest
rates on both variable and new fixed rate debt on a year-over-year
basis, partially offset by a $12.0
million decline in overall debt levels on a year-over-year
basis.
The Trust records its income producing properties at fair value
in accordance with IFRS. These adjustments are a result of the
Trust's regular quarterly IFRS fair value process. In accordance
with this policy, the following fair value adjustments by segment
have been recorded:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
Retail – enclosed
regional centres
|
($1,394)
|
($38,816)
|
$72
|
($40,483)
|
|
Retail – community
strip centres
|
(701)
|
(2,287)
|
(4,754)
|
11,456
|
|
Office
|
(54,272)
|
(29,963)
|
(95,940)
|
(17,083)
|
|
Industrial
|
4,320
|
(2,197)
|
11,737
|
10,137
|
|
($52,047)
|
($73,263)
|
($88,885)
|
($35,973)
|
Reported net loss for three months ended September 30, 2023, was $39.7 million as compared to loss of $58.3 million in 2022. This change is due to
the fair value losses recorded in 2023, as described above.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM
OPERATIONS
The Trust presents FFO and AFFO in accordance
with the current definition of the REALpac.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM
OPERATIONS
|
In thousands of
dollars, except per unit amounts
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
%
|
2023
|
2022
|
%
|
|
Net
(loss)/income
|
($39,665)
|
($58,279)
|
(31.9 %)
|
($46,650)
|
$9,279
|
(602.7 %)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Fair value losses on
real estate properties 1
|
53,646
|
74,935
|
(28.4 %)
|
91,933
|
38,605
|
138.1 %
|
|
Amortization of
right-of-use assets
|
21
|
20
|
5.0 %
|
62
|
62
|
— %
|
|
Payment of lease
liabilities, net
|
(45)
|
(43)
|
4.7 %
|
(134)
|
(125)
|
7.2 %
|
|
Funds from
operations – basic
|
13,957
|
16,633
|
(16.1 %)
|
45,211
|
47,821
|
(5.5 %)
|
|
Interest expense on
convertible debentures
|
2,104
|
2,104
|
— %
|
6,278
|
6,278
|
— %
|
|
Funds from
operations – diluted
|
$16,061
|
$18,737
|
(14.3 %)
|
$51,489
|
$54,099
|
(4.8 %)
|
|
|
|
|
|
|
|
|
Funds from operations –
basic
|
$13,957
|
$16,633
|
(16.1 %)
|
$45,211
|
$47,821
|
(5.5 %)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortized stepped rents
1
|
182
|
2
|
9,000.0 %
|
834
|
905
|
(7.8 %)
|
|
Normalized
PCME
|
(6,250)
|
(6,250)
|
— %
|
(18,750)
|
(18,750)
|
— %
|
|
Adjusted funds from
operations – basic
|
7,889
|
10,385
|
(24.0 %)
|
27,295
|
29,976
|
(8.9 %)
|
|
Interest expense on
convertible debentures
|
2,104
|
2,104
|
— %
|
6,278
|
6,278
|
— %
|
|
Adjusted funds from
operations – diluted
|
$9,993
|
$12,489
|
(20.0 %)
|
$33,573
|
$36,254
|
(7.4 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Includes respective
adjustments included in net income from equity-accounted
investment.
|
|
|
2. Includes the
dilutive impact of convertible debentures and presented on a cash
settlement basis for consistency with industry practice for
calculating FFO and AFFO.
|
SPECIFIED FINANCIAL MEASURES
The Trust 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. 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 Trust's Management's Discussion and Analysis for
the period ended September 30, 2023
and available on the Trust'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
Trust's management uses these measures to aid in assessing the
Trust's underlying core performance and provides these additional
measures so that investors may do the same. Management believes
that the non-GAAP financial measures, which supplement the IFRS
measures, provide readers with a more comprehensive understanding
of management's perspective on the Trust's operating results and
performance.
FUNDS FROM OPERATIONS ("FFO")
FFO is a
non-GAAP measure widely used as a real estate industry standard
that supplements net income and
evaluates operating performance but is not indicative of funds available to meet the Trust's cash requirements. FFO
can
assist with comparisons of the operating performance of the Trust's real estate between
periods and relative to
other real estate entities. FFO is computed
by the Trust in accordance with the current
definition of the Real Property Association of
Canada ("REALpac") and is defined
as net income adjusted for fair value changes on real estate
properties and gains/(losses) on the sale of real estate properties. The Trust considers FFO to be a useful
measure for reviewing its comparative operating and financial
performance.
ADJUSTED FUNDS FROM OPERATIONS ("AFFO")
AFFO
is a non-GAAP measure that was developed to be a recurring economic
earnings measure for real estate
entities. The Trust presents AFFO in accordance with the current
definition of the REALpac. The Trust defines
AFFO as FFO adjusted for straight-line rent and productive capacity
maintenance expenditures ("PCME"). AFFO should not be interpreted
as an indicator of cash generated from operating activities as it
does not consider changes in working capital.
Financial Statements and Management's Discussion and
Analysis
The Trust's Q3 2023 Consolidated Financial Statements and Management's Discussion and Analysis will be made
available on the Trust's website at www.morguard.com and have been filed with SEDAR at www.sedarplus.ca
Conference Call Details:
Date:
Thursday, October 26, 2023, 4:00 p.m. (ET)
Conference Call #:
416-764-8688 or 1-888-390-0546
Conference ID #:
19761950
About Morguard
Real Estate Investment Trust
The Trust is a
closed-end real estate investment trust, which owns a diversified
portfolio of 46 retail, office and industrial income producing
properties in Canada with a book
value of $2.3 billion and
approximately 8.2 million square feet of leasable space.
SOURCE Morguard Real Estate Investment Trust