MISSISSAUGA, ON, Aug. 5, 2015 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its financial results for the three and six months ended June 30, 2015 ("Q2"). These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
The Trust's results for the second quarter reflect continuing activities around the re-leasing and repositioning of its Target Canada Corporation ("Target") locations. During the second quarter the Trust successfully re-negotiated its Target leases at Pine Centre, Southdale Shopping Centre and Aurora Centre. The replacement of the Target stores with Lowes, Walmart and Canadian Tire significantly improve the tenant strength and will help to drive increased traffic to these centres. The successful re-leasing of the Target space to Lowes at Pine Centre was especially beneficial to the Trust, as this one location did not have a rental guarantee from Target U.S. At The Centre at Circle and 8th, the Trust successfully acquired the Target lease to maintain control of the space in light of internal discussions to improve the centre. At Cambridge Centre, Brandon Shoppers Mall and Prairie Mall, Target disclaimed these leases. The Trust is currently executing on re-merchandising the Target units into multi-unit space; demanding higher rents and improved returns on the funds to be re-invested. The space vacated by Target equates to the early termination of 379,500 square feet and as a result, the Trust's retail occupancy has decreased to 88%. Adjusting for the vacant Target space, the Trust's retail portfolio occupancy rate has held firm at 96%. The Trust has elected to stop recording revenue on the disclaimed leases until all outstanding amounts under the Target U.S. guarantee have been received. This has resulted in a negative impact on the Trust's second quarter net operating income of $0.4 million.
The renovation of St. Laurent Centre is complete. During the term of the renovation, the centre experienced an increase in vacancy due to the early termination of some fashion tenants and the bankruptcy of Everest College. The timing of the renovation puts the Trust in a better position to replace these tenancies. During the second quarter of 2014 the Trust accelerated the recovery of certain maintenance items at the St. Laurent Centre to offset savings in other areas. This acceleration improved the Trust's net operating income in 2014. This same acceleration was not required during 2015. As a result, the Trust's quarter over quarter net operating income is lower by $0.9 million.
Putting the Target and St. Laurent Centre challenges aside, the Trust's results for the second quarter 2015 versus the second quarter 2014 were largely unchanged. The exit of Target from our centres has had no impact on sales. In addition to the renegotiation of the Target spaces the Trust completed over 385,000 square feet of leasing. The Trust was also able to close on two more of the properties held for sale. These proceeds were largely used to buy back units of the Trust. During the second quarter the Trust repurchased 362,119 units.
Highlights from Management's Discussion and Analysis
- Funds from operations ("FFO") for the three and six months ended June 30, 2015 was $25.1 million and $52.2 million, respectively, as compared to $27.0 million and $53.1 million, respectively, for the same periods in 2014.
- On a per unit diluted basis, FFO for the three and six months ended June 30, 2015 was $0.40 and $0.82, respectively, as compared to $0.42 and $0.83, respectively, for the same periods in 2014.
- Net operating income from same assets for the three and six months ended June 30, 2015 was $40.3 million and $81.9 million, respectively, as compared to $42.1 million and $83.1 million, respectively, for the same periods in 2014.
- Acquisitions of Citadel West and 301 Laurier Avenue in 2014 add $0.3 million and $0.7 million, respectively, to net operating income for the three months and six months ended June 30, 2015.
- Dispositions of 5591-5631 Finch and 20-24 Lesmill completed during Q2 2015, 350 Sparks and 361 Queen in February 2015 and Cedar Pointe Business Park in July 2014, along with other assets re-classified to "held for sale", reduces net operating income by $1.1 million and $1.8 million, respectively, during the three and six months ended June, 30, 2015.
Funds from operations is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. A reconciliation of net income to funds from operations is included.
At June 30, 2015, the Trust's debt consisted of $1.2 billion of fixed-rate debt with weighted average interest rate of 4.2% and weighted average term to maturity of 5.5 years, $147.1 million of 4.85% fixed-rate convertible debentures and $5.4 million debt associated with real estate properties held for sale. The Trust has a debt to total assets ratio of 45.3%.
- On March 2, 2015, the Trust entered into an agreement to sell 5591-5631 Finch for a total price of $10.0 million. On April 1, 2015, the Trust completed the sale of this property for net proceeds of $3.3 million, after settlement of mortgage and selling costs.
- On December 10, 2014, the Trust entered into an agreement to sell 20-24 Lesmill for a total price of $6.4 million. On May 15, 2015, the Trust completed the sale of this property, for a total price of $6.4 million, less selling costs.
- The Trust's 2015 NCIB participation to-date totals 362,119 units, which were purchased for cancellation.
Net Operating Income, Funds from Operations
This press release and accompanying financial information make reference to net operating income and funds from operations on a total and per unit basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting interest expense, general and administrative expenses and fair value gains/(losses). Funds from operations is defined as net income prior to extraordinary items, valuation adjustments, and certain other non-cash items, if any.
Financial Statements and Management's Discussion and Analysis
The Trust's Q2 2015 Condensed Consolidated Financial Statements and Management's Discussion and Analysis along with its 2014 Annual Report are available on the Trust's website at www.morguard.com and have been filed with SEDAR at www.sedar.com
Conference Call Details:
August 7, 2015 at 12:00 p.m. (ET)
647-427-7450 or 1-888-231-8191
About Morguard Real Estate Investment Trust
The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 49 retail, office and mixed-use income producing properties in Canada with a book value of $2.9 billion and approximately 8.6 million square feet of leaseable space.
SOURCE Morguard Real Estate Investment Trust
For further information: Morguard Real Estate Investment Trust, K. Rai Sahi, President and Chief Executive Officer, T 905-281-4800; Pamela McLean, Chief Financial Officer, T 905-281-4800