MISSISSAUGA, ON,
July 31,
2024 /CNW/ - Morguard
Real Estate Investment Trust ("the Trust")
(TSX: MRT.UN) today is pleased to announce its 2024 Second Quarter
Results.
|
In thousands of
dollars, except per-unit amounts
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
2024
|
2023
|
|
Revenue from real
estate properties
|
$64,046
|
$61,891
|
$128,444
|
$126,707
|
|
Net operating
income
|
31,832
|
30,467
|
62,737
|
62,013
|
|
Fair value losses on
real estate properties
|
(16,242)
|
(15,297)
|
(66,465)
|
(36,838)
|
|
Net
loss
|
(2,226)
|
(1,828)
|
(39,001)
|
(6,985)
|
|
Funds from
operations 1
|
14,108
|
14,976
|
27,527
|
31,254
|
|
Adjusted funds from
operations 1,2
|
8,033
|
9,106
|
15,442
|
19,406
|
|
Amounts presented on
a per unit basis
|
|
|
|
|
|
Net loss –
basic
|
($0.03)
|
($0.03)
|
($0.61)
|
($0.11)
|
|
Net loss –
diluted
|
($0.03)
|
($0.03)
|
($0.61)
|
($0.11)
|
|
Funds from operations
– basic 1
|
$0.22
|
$0.23
|
$0.43
|
$0.49
|
|
Funds from operations
– diluted 1
|
$0.19
|
$0.20
|
$0.37
|
$0.42
|
|
Adjusted funds from
operations – basic 1,2
|
$0.12
|
$0.14
|
$0.24
|
$0.30
|
|
Adjusted funds from
operations – diluted 1,2
|
$0.12
|
$0.13
|
$0.23
|
$0.28
|
|
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.
|
SELECTED FINANCIAL INFORMATION
The table below sets forth selected financial data relating to
the Trust's fiscal three and six months ended June 30, 2024, and 2023. This financial data is
derived from the Trust's condensed consolidated statements which
are prepared in accordance with IFRS.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
%
Change
|
2024
|
2023
|
%
Change
|
|
Revenue from real
estate properties
|
$64,046
|
$61,891
|
3.5 %
|
$128,444
|
$126,707
|
1.4 %
|
|
Property operating
expenses
|
(17,939)
|
(17,449)
|
2.8 %
|
(36,348)
|
(36,060)
|
0.8 %
|
|
Property
taxes
|
(12,080)
|
(11,858)
|
1.9 %
|
(24,946)
|
(24,278)
|
2.8 %
|
|
Property management
fees
|
(2,195)
|
(2,117)
|
3.7 %
|
(4,413)
|
(4,356)
|
1.3 %
|
|
Net operating
income
|
31,832
|
30,467
|
4.5 %
|
62,737
|
62,013
|
1.2 %
|
|
Interest
expense
|
(17,243)
|
(14,891)
|
15.8 %
|
(34,119)
|
(29,600)
|
15.3 %
|
|
General and
administrative
|
(922)
|
(1,003)
|
(8.1 %)
|
(1,946)
|
(2,059)
|
(5.5 %)
|
|
Amortization
expense
|
—
|
(20)
|
(100.0 %)
|
—
|
(41)
|
(100.0 %)
|
|
Fair value losses on
real estate properties
|
(16,242)
|
(15,297)
|
6.2 %
|
(66,465)
|
(36,838)
|
80.4 %
|
|
Net income/(loss) from
equity-accounted investment
|
349
|
(1,084)
|
(132.2 %)
|
792
|
(460)
|
(272.2 %)
|
|
Net
loss
|
($2,226)
|
($1,828)
|
21.8 %
|
($39,001)
|
($6,985)
|
458.4 %
|
CONSOLIDATED OPERATING HIGHLIGHTS
The following is an analysis of net operating income by asset
type:
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
%
|
2024
|
2023
|
%
Change
|
|
Enclosed regional
centres
|
$10,878
|
$9,832
|
10.6 %
|
$21,049
|
$21,392
|
(1.6 %)
|
|
Community strip
centres
|
5,514
|
5,741
|
(4.0 %)
|
11,315
|
11,401
|
(0.8 %)
|
|
Subtotal –
retail
|
16,392
|
15,573
|
5.3 %
|
32,364
|
32,793
|
(1.3 %)
|
|
|
|
|
|
|
|
|
Single-/dual-tenant
buildings
|
12,759
|
12,327
|
3.5 %
|
25,271
|
24,456
|
3.3 %
|
|
Multi-tenant
buildings
|
1,940
|
2,130
|
(8.9 %)
|
3,843
|
3,892
|
(1.3 %)
|
|
Subtotal –
office
|
14,699
|
14,457
|
1.7 %
|
29,114
|
28,348
|
2.7 %
|
|
|
|
|
|
|
|
|
Industrial
|
741
|
437
|
69.6 %
|
1,259
|
872
|
44.4 %
|
|
Net operating
income
|
$31,832
|
$30,467
|
4.5 %
|
$62,737
|
$62,013
|
1.2 %
|
The decrease in enclosed regional centres net operating income
for the six months ended June 30,
2024, is due to a one-time prior year property tax refund
recorded in 2023 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. This decrease was partially offset by increases in basic
rent of $1.1 million, increases in
percentage rent of $0.3 million, and
decreases in bad debt expense of $0.2
million.
The increase in industrial net operating income for the six
months ended June 30, 2024, is due to
increased basic rent at one of the Trust's industrial properties
and increased occupancy.
The following is an analysis of revenue from real estate
properties by segment:
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
%
|
2024
|
2023
|
%
|
|
Industrial
|
$1,113
|
$892
|
24.8 %
|
$2,108
|
$1,765
|
19.4 %
|
|
Office –
Single-/dual-tenant buildings
|
21,874
|
21,444
|
2.0 %
|
44,010
|
43,187
|
1.9 %
|
|
Office – Multi-tenant
buildings
|
6,144
|
6,095
|
0.8 %
|
12,517
|
12,235
|
2.3 %
|
|
Retail – Community
strip centres
|
8,882
|
9,133
|
(2.7 %)
|
18,536
|
18,612
|
(0.4 %)
|
|
Retail – Enclosed
regional centres
|
26,033
|
24,327
|
7.0 %
|
51,273
|
50,908
|
0.7 %
|
|
Total
|
$64,046
|
$61,891
|
3.5 %
|
$128,444
|
$126,707
|
1.4 %
|
The following is an analysis of revenue from real estate
properties by revenue type:
|
For the three months
ended June 30,
|
2024
|
2023
|
Variance
|
|
Rental
revenue
|
$39,401
|
$38,302
|
$1,099
|
|
CAM
recoveries
|
12,332
|
12,277
|
55
|
|
Property tax and
insurance recoveries
|
9,745
|
9,189
|
556
|
|
Other revenue and lease
cancellation fees
|
1,305
|
1,343
|
(38)
|
|
Parking
revenue
|
1,463
|
1,355
|
108
|
|
Amortized
rents
|
(200)
|
(575)
|
375
|
|
$64,046
|
$61,891
|
$2,155
|
|
|
|
|
|
|
|
|
|
For the six months
ended June 30,
|
2024
|
2023
|
Variance
|
|
Rental
revenue
|
$78,567
|
$76,411
|
$2,156
|
|
CAM
recoveries
|
25,303
|
25,117
|
186
|
|
Property tax and
insurance recoveries
|
19,741
|
21,319
|
(1,578)
|
|
Other revenue and lease
cancellation fees
|
2,603
|
2,257
|
346
|
|
Parking
revenue
|
2,794
|
2,653
|
141
|
|
Amortized
rents
|
(564)
|
(1,050)
|
486
|
|
$128,444
|
$126,707
|
$1,737
|
Property operating expenses include costs related to interior
and exterior maintenance, insurance and utilities. Property
operating expenses for the three months ended June 30, 2024, increased 2.8% to $17.9 million from $17.4
million for the same period in 2023. This increase is
primarily due to increases in security costs, insurance premiums
and other general operating expenses.
Net operating income for the three months ended June 30, 2024, increased 4.5% as compared to
2023. This increase stems largely from increases in basic rent in
the enclosed mall portfolio.
Interest expense for the three months ended June 30, 2024, increased 15.8% vs the same period
in 2023. 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 $38.3 million
decline in overall debt levels.
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
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
2024
|
2023
|
|
Retail – enclosed
regional centres
|
$5,469
|
($2,104)
|
($16,695)
|
$1,466
|
|
Retail – community
strip centres
|
3,094
|
(2,894)
|
3,790
|
(4,053)
|
|
Office
|
(24,771)
|
(17,207)
|
(53,566)
|
(41,668)
|
|
Industrial
|
(34)
|
6,908
|
6
|
7,417
|
|
($16,242)
|
($15,297)
|
($66,465)
|
($36,838)
|
Reported net loss for three months ended June 30, 2024, was $2.2
million as compared to net loss of $1.8 million in 2023. This change is due to
increased interest expense in 2024, 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
June 30,
|
Six Months Ended
June 30,
|
|
2024
|
2023
|
%
|
2024
|
2023
|
% Change
|
|
Net loss
|
($2,226)
|
($1,828)
|
21.8 %
|
($39,001)
|
($6,985)
|
458.4 %
|
|
Adjustments:
|
|
|
|
|
|
|
|
Fair value losses on
real estate properties 1
|
16,356
|
16,829
|
(2.8 %)
|
66,571
|
38,287
|
73.9 %
|
|
Amortization of
right-of-use assets
|
—
|
20
|
(100.0 %)
|
—
|
41
|
(100.0 %)
|
|
Payment of lease
liabilities, net
|
(22)
|
(45)
|
(51.1 %)
|
(43)
|
(89)
|
(51.7 %)
|
|
Funds from
operations – basic
|
14,108
|
14,976
|
(5.8 %)
|
27,527
|
31,254
|
(11.9 %)
|
|
Interest expense on
convertible debentures
|
2,081
|
2,116
|
(1.7 %)
|
4,139
|
4,174
|
(0.8 %)
|
|
Funds from
operations – diluted
|
$16,189
|
$17,092
|
(5.3 %)
|
$31,666
|
$35,428
|
(10.6 %)
|
|
|
|
|
|
|
|
|
Funds from operations –
basic
|
$14,108
|
$14,976
|
(5.8 %)
|
$27,527
|
$31,254
|
(11.9 %)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortized stepped rents
1
|
175
|
380
|
(53.9 %)
|
415
|
652
|
(36.3 %)
|
|
Normalized
PCME
|
(6,250)
|
(6,250)
|
— %
|
(12,500)
|
(12,500)
|
— %
|
|
Adjusted funds from
operations – basic
|
8,033
|
9,106
|
(11.8 %)
|
15,442
|
19,406
|
(20.4 %)
|
|
Interest expense on
convertible debentures
|
2,081
|
2,116
|
(1.7 %)
|
4,139
|
4,174
|
(0.8 %)
|
|
Adjusted funds from
operations – diluted
|
$10,114
|
$11,222
|
(9.9 %)
|
$19,581
|
$23,580
|
(17.0 %)
|
|
|
|
|
|
|
|
|
1. Includes respective
adjustments included in net income from equity-accounted
investment.
|
|
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 June 30, 2024 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
Q2 2024 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, August 1,
2024, 4:00 p.m. (ET)
|
|
Conference Call
#:
|
416-764-8688 or
1-888-390-0546
|
|
Conference ID
#:
|
71360846
|
About Morguard Real Estate Investment Trust
The Trust is a closed-end real estate investment trust, which
owns a diversified portfolio of 45 retail, office and industrial
income producing properties in Canada with a book value of $2.2 billion and approximately 8.1 million square
feet of leasable space.
SOURCE Morguard Real Estate Investment Trust