MISSISSAUGA, ON, Aug. 2, 2017 /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, 2017. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
During the quarter ended June 30, 2017, the Trust completed three development projects, bringing 137,000 square feet of leasable area onstream.
All three of these projects are now generating revenue.
At Parkland Mall in Red Deer, Alberta, the project to introduce Goodlife Fitness into the mall completed and brought 87,500 square feet of leasable area back onstream, including 52,000 square feet of new area. As at June 30, 2017, this project was 86.3% occupied.
At Shoppers Mall in Brandon, Manitoba, the Trust's $7.1 million project to remerchandise the former Safeway space completed and brought 37,500 square feet of leasable area back onstream. As at June 30, 2017, this area was 64.0% occupied with an additional 22.9% committed.
At The Centre in Saskatoon, Saskatchewan, a portion (12,000 square feet) of the former Target Canada Corporation space is now 100.0% occupied.
The Trust's fully diluted FFO for the three months ended June 30, 2017, was $26.0 million ($0.38 per unit) versus $38.2 million ($0.57 per unit) for the same three months ended June 30, 2016. This represents a decrease of $12.2 million ($0.19 per unit). Included in the fully diluted FFO for the three months ended June 30, 2016, was the income reported from the Target Corporation settlement of $11.2 million ($0.17 per unit). Adjusting for this one-time activity, the decrease quarter-over-quarter was $1.0 million ($0.02 per unit).
The new convertible debenture issue in December 2016, impacted the number of diluted units outstanding quarter-over-quarter. The impact of the higher number of diluted units outstanding was to decrease FFO per unit by $0.01. The issue of these convertible debentures also has a negative impact on interest expense, as the Trust received an additional $25.0 million in proceeds. Interest expense related to convertible debentures for the three months ended June 30, 2017, was $2.4 million versus $2.1 million for the same period ended June 30, 2016.
While the convertible debenture issue negatively impacted interest expense, as a whole, interest expense decreased during the three months ended June 30, 2017, versus the same period ended June 30, 2016, by $0.3 million. This was largely the result of scheduled mortgage amortizations ($0.4 million) and increased capitalized interest ($0.2 million). Overall, interest expense impacted fully diluted FFO by $0.01 per unit.
Net operating income for the three months ended June 30, 2017, was $39.1 million, versus $40.5 million for the three months ended June 30, 2016. This is a decrease of $1.5 million. While the completion of the Trust's three development projects increased net operating income $0.3 million, net operating income was negatively impacted by the performance of the retail portfolio ($1.6 million). Overall occupancy in the retail portfolio has decreased 3.0% since June 30, 2016. This increased vacancy, combined with rental abatements and base rent, at a number of the Trust's enclosed regional centres, resulted in unfavourable net operating income.
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). The Trust presents FFO in accordance with the Real Property Association of Canada white paper on funds from operations and adjusted funds from operations for IFRS issued February 2017. FFO is a non-GAAP measure that is widely accepted as a supplemental measure of financial performance for real estate entities. In accordance with such white paper, the Trust defines FFO as net income adjusted for fair value changes on real estate properties and gains/(losses) on the sale of real estate properties.
Financial Statements and Management's Discussion and Analysis
The Trust's Q2 2017 Condensed Consolidated Financial Statements and Management's Discussion and Analysis along with its 2016 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:
Thursday, August 3, 2017 at 4:00 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 industrial income producing properties in Canada with a book value of $3.0 billion and approximately 8.8 million square feet of leasable 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