MISSISSAUGA, ON, Nov. 1, 2017 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its financial results for the three and nine months ended September 30, 2017. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
During the quarter ended September 30, 2017, the Trust completed five development projects, bringing an additional 127,500 square feet of leasable area onstream.
These projects include retail intensification at three of the Trust's community strip centres which increase leasable area by 25,500 square feet and the remerchandising of 102,000 square feet at two of the Trust's regional shopping centres.
All five of these projects are now generating revenue in addition to the three projects brought onstream during the second quarter.
The Trust's fully diluted FFO for the three months ended September 30, 2017, was $25.3 million ($0.36 per unit) versus $26.0 million ($0.39 per unit) for the same three months ended September 30, 2016. This represents a decrease of $0.8 million ($0.03 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 diluted 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 September 30, 2017, was $2.4 million versus $2.1 million for the same period ended September 30, 2016.
While the convertible debenture issue negatively impacted interest expense, as a whole, interest expense was largely unchanged during the three months ended September 30, 2017, versus the same period ended September 30, 2016. This was largely the result of lower scheduled mortgage amortizations ($0.3 million).
Net operating income for the three months ended September 30, 2017, was $37.4 million, versus $38.2 million for the three months ended September 30, 2016. This is a decrease of $0.9 million. While the completion of the Trust's five development projects increased net operating income $0.8 million, net operating income was negatively impacted by the performance of the retail portfolio ($1.4 million). Overall occupancy in the retail portfolio has decreased 2.0% since September 30, 2016. This increased vacancy, combined with rental abatements and lower base rent at a number of the Trust's enclosed regional centres, resulted in unfavourable net operating income.
On October 16, 2017, Sears Canada Inc. ("Sears") announced it has received approval from the Ontario Superior Court of Justice to proceed with a liquidation. Sears and certain of its subsidiaries were granted an Initial Order and protection under the Companies' Creditors Arrangement Act on June 22, 2017. Sears accounts for less than 1.0% of the Trust's annual revenue.
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 Q3 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
In connection with a continuous disclosure review by the Ontario Securities Commission, the Trust has determined to revise the disclosure presented in its MD&A in respect of the operating and financial results of the Trust's joint venture arrangements to present this information in accordance with its reported GAAP financial results, thereby providing greater prominence to the GAAP presentation while providing the information required adjust to proportionate consolidation in later sections of the MD&A. As a result, the Trust has included revised and restated disclosure in its current MD&A for the interim periods ended June 30, 2017, March 31, 2017 and the year ended December 31, 2016 as discussed in further detail under "Basis of Presentation" in its MD&A.
Conference Call Details:
Thursday, November 2, 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 48 retail, office and industrial income producing properties in Canada with a book value of $2.9 billion and approximately 8.6 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