Morguard Real Estate Investment Trust Announces 2023 First Quarter Results

MISSISSAUGA, ON, April 26, 2023 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2023 First Quarter Results.

In thousands of dollars, except per-unit amounts	Three Months Ended March 31,
	2023	2022
Revenue from real estate properties	$64,816	$61,326
Net operating income	31,546	28,544
Fair value (losses)/gains on real estate properties	(21,541)	24,965
Net (loss)/income	(5,157)	39,909
Funds from operations ^1	16,278	14,961
Adjusted funds from operations^1,2	10,300	9,105
Amounts presented on a per unit basis
Net (loss)/income – basic	($0.08)	$0.62
Net (loss)/income – diluted	($0.08)	$0.44
Funds from operations – basic ^1	$0.25	$0.23
Funds from operations – diluted ^1	$0.22	$0.20
Adjusted funds from operations – basic^1,2	$0.16	$0.14
Adjusted funds from operations – diluted^1,2	$0.15	$0.13

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 months ended March 31, 2023, and 2022. This financial data is derived from the Trust's condensed consolidated statements which are prepared in accordance with IFRS.

For the three months ended March 31,	2023	2022	% Change
Revenue from real estate properties	$64,816	$61,326	5.7 %
Property operating expenses	(18,611)	(18,096)	2.8 %
Property taxes	(12,420)	(12,614)	(1.5 %)
Property management fees	(2,239)	(2,072)	8.1 %
Net operating income	31,546	28,544	10.5 %
Interest expense	(14,709)	(12,991)	13.2 %
General and administrative	(1,056)	(1,094)	(3.5 %)
Amortization expense	(21)	(21)	— %
Fair value (losses)/gains on real estate properties	(21,541)	24,965	(186.3 %)
Net income from equity-accounted investment	624	506	23.3 %
Net (loss)/income	($5,157)	$39,909	(112.9 %)

CONSOLIDATED OPERATING HIGHLIGHTS
The following is an analysis of net operating income by asset type:

For the three months ended March 31,	2023	2022	%
Enclosed regional centres	$11,560	$8,095	42.8 %
Community strip centres	5,660	5,622	0.7 %
Subtotal – retail	17,220	13,717	25.5 %
Single-/dual-tenant buildings	12,129	11,340	7.0 %
Multi-tenant buildings	1,762	2,878	(38.8 %)
Subtotal – office	13,891	14,218	(2.3 %)
Industrial	435	609	(28.6 %)
Net operating income	$31,546	$28,544	10.5 %

Revenue from real estate properties includes contracted rent from tenants along with recoveries of property expenses (including property taxes).

The following is an analysis of revenue from real estate properties by segment:

For the three months ended March 31,	2023	2022	Variance
Industrial	$873	$1,036	($163)
Office – Single-/dual-tenant buildings	21,743	20,373	1,370
Office – Multi-tenant buildings	6,140	7,201	(1,061)
Retail – Community strip centres	9,479	9,490	(11)
Retail – Enclosed regional centres	26,581	23,226	3,355
Total	$64,816	$61,326	$3,490

The following is an analysis of revenue from real estate properties by revenue type:

For the three months ended March 31,	2023	2022	Variance
Rental revenue	$38,109	$37,574	$535
CAM recoveries	12,840	12,110	730
Property tax and insurance recoveries	12,130	9,798	2,332
Other revenue and lease cancellation fees	914	1,283	(369)
Parking revenue	1,298	1,008	290
Amortized rents	(475)	(447)	(28)
	$64,816	$61,326	$3,490

Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities. Property operating expenses for the three months ended March 31, 2023, increased 2.8% to $18.6 million from $18.1 million for the same period in 2022. This increase is primarily due to significant increases in the cost of utilities in Alberta in 2023.

Net operating income for the three months ended March 31, 2023, increased 10.5% as compared to 2022, 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.

Interest expense for the three months ended March 31, 2023, increased 13.2% versus 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, offset by a $23.0 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:

For the three months ended March 31,	2023	2022
Retail – enclosed regional centres	$3,570	$3,879
Retail – community strip centres	(1,159)	2,602
Office	(24,461)	10,697
Industrial	509	7,787
	($21,541)	$24,965

Reported net loss for the three months ended March 31, 2023, was $5.2 million as compared to income of $39.9 million in 2022. This change is due to the increase in 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 March 31,
	2023	2022	%
Net (loss)/income	($5,157)	$39,909	(112.9 %)
Adjustments:
Fair value losses/(gains) on real estate properties ^1	21,458	(24,929)	(186.1 %)
Amortization of right-of-use assets	21	21	— %
Payment of lease liabilities, net	(44)	(40)	10.0 %
Funds from operations – basic	16,278	14,961	8.8 %
Interest expense on convertible debentures	2,058	2,058	— %
Funds from operations – diluted	$18,336	$17,019	7.7 %
Funds from operations – basic	$16,278	$14,961	8.8 %
Adjustments:
Amortized stepped rents ^1	272	394	(31.0 %)
Normalized PCME	(6,250)	(6,250)	— %
Adjusted funds from operations – basic	10,300	9,105	13.1 %
Interest expense on convertible debentures	2,058	2,058	— %
Adjusted funds from operations – diluted	$12,358	$11,163	10.7 %

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 March 31, 2023 and available on the Trust's profile on SEDAR at www.sedar.com.

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 Q1 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.sedar.com

Conference Call Details:
Date:                                          Thursday, April 27, 2023, 4:00 p.m. (ET)
Conference Call #:                     416-764-8688 or 1-888-390-0546
Conference ID #:                        98285742

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 $2.4 billion and approximately 8.2 million square feet of leasable space.

For further information, please contact: Morguard Real Estate Investment Trust

SOURCE Morguard Real Estate Investment Trust

K. Rai Sahi, President and Chief Executive Officer, T 905-281-4800; Andrew Tamlin, Chief Financial Officer, T 905-281-4800