Morguard Real Estate Investment Trust Announces 2021 Third Quarter Results
MISSISSAUGA, ON, Oct. 27, 2021 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2021 Third Quarter Results. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
SUMMARY OF OPERATIONS
In thousands of dollars, except per-unit amounts |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||
2021 |
2020 |
2021 |
2020 |
|
Revenue from real estate properties |
$58,760 |
$60,596 |
$178,205 |
$186,269 |
Net operating income |
30,407 |
28,497 |
90,440 |
90,525 |
Fair value losses on real estate properties |
(7,382) |
(101,415) |
(42,668) |
(333,962) |
Net income/(loss) |
6,676 |
(88,116) |
5,681 |
(289,485) |
Funds from operations |
16,567 |
14,367 |
50,943 |
47,477 |
Adjusted funds from operations |
12,162 |
11,451 |
37,576 |
35,214 |
Amounts presented on a per unit basis |
||||
Net income/(loss) – basic |
$0.10 |
($1.41) |
$0.09 |
($4.70) |
Net income/(loss) – diluted |
$0.10 |
($1.41) |
$0.09 |
($4.70) |
Funds from operations – basic |
$0.26 |
$0.23 |
$0.79 |
$0.77 |
Funds from operations – diluted |
$0.26 |
$0.23 |
$0.78 |
$0.76 |
Adjusted funds from operations – basic |
$0.19 |
$0.18 |
$0.59 |
$0.57 |
Adjusted funds from operations – diluted |
$0.19 |
$0.18 |
$0.59 |
$0.57 |
Distributions per unit |
$0.06 |
$0.12 |
$0.20 |
$0.52 |
CONSOLIDATED OPERATING HIGHLIGHTS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2021
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:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||
2021 |
2020 |
% |
2021 |
2020 |
% |
|
Industrial |
$892 |
$808 |
10.4% |
$2,663 |
$2,519 |
5.7% |
Office – Single-/dual-tenant buildings |
20,115 |
19,170 |
4.9% |
59,470 |
59,592 |
(0.2%) |
Office – Multi-tenant buildings |
6,484 |
7,358 |
(11.9%) |
20,386 |
22,375 |
(8.9%) |
Retail – Community strip centres |
9,280 |
9,063 |
2.4% |
27,695 |
27,623 |
0.3% |
Retail – Enclosed regional centres |
21,989 |
24,197 |
(9.1%) |
67,991 |
74,160 |
(8.3%) |
Total |
$58,760 |
$60,596 |
(3.0%) |
$178,205 |
$186,269 |
(4.3%) |
The decline in enclosed regional centres revenue is due to the enclosed mall tenant failures in 2020 and subsequent restructured rent arrangements provided to certain retail tenants that are struggling as part of the COVID-19 pandemic.
The following is an analysis of revenue from real estate properties by revenue type:
For the three months ended September 30, |
2021 |
2020 |
Variance |
Rental revenue |
$37,651 |
$38,542 |
($891) |
CAM recoveries |
10,392 |
10,688 |
(296) |
Property tax and insurance recoveries |
8,927 |
9,461 |
(534) |
Other revenue and lease cancellation fees |
1,250 |
1,604 |
(354) |
Parking revenue |
978 |
889 |
89 |
Amortized rents |
(438) |
(588) |
150 |
$58,760 |
$60,596 |
($1,836) |
|
For the nine months ended September 30, |
2021 |
2020 |
Variance |
Rental revenue |
$112,234 |
$116,981 |
($4,747) |
CAM recoveries |
29,830 |
34,024 |
(4,194) |
Property tax and insurance recoveries |
27,215 |
29,617 |
(2,402) |
Other revenue and lease cancellation fees |
6,443 |
3,402 |
3,041 |
Parking revenue |
2,840 |
3,258 |
(418) |
Amortized rents |
(357) |
(1,013) |
656 |
$178,205 |
$186,269 |
($8,064) |
Included in other revenue and lease cancellation fees in the nine-month period ending September 30, 2021, is $2.3 million received from Lowe's at Pine Centre in order to facilitate the Save-on-Foods development.
Under IFRS, the Trust is required to establish an expected credit loss which would include considerations for failed or restructuring tenants as well as doubtful account provisions for future expected credit losses on accounts receivable arrears, including rent abatements or rent forgiveness. The following is an analysis of the allowance for doubtful accounts for the nine-month period ending September 30, 2021.
Nine months ended September 30, 2021 |
Retail |
Office |
Industrial |
Total |
Opening allowance balance – January 1, 2021 |
$7,469 |
$1,335 |
$15 |
$8,819 |
Bad debt expense/(recovery) charged to income statement |
150 |
(509) |
20 |
(339) |
Failed tenant writeoffs and abatements granted |
(3,079) |
(140) |
— |
(3,219) |
Closing allowance balance – September 30, 2021 |
$4,540 |
$686 |
$35 |
$5,261 |
Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities.
Property operating expenses (excluding bad debt expense) for the three months ended September 30, 2021, increased 6.8% to $14.8 million from $13.8 million for the same period in 2020. This increase is primarily due to more normalized operating expenses in 2021 as compared to 2020 when sharp reductions occurred due to the pandemic.
Net operating income for the three months ended September 30, 2021, increased 6.7% as compared to 2020. This increase was the result of a decrease in bad debt expense in 2021 as compared to 2020.
Interest expense for the three months ended September 30, 2021, decreased 5.4% to $13.3 million from $14.1 million for the same period in 2020. This decline is primarily due to the decline in the Trust's weighted average interest rate on mortgages to 3.6% from 3.9% in the third quarter of 2020, in addition to a reduction in overall debt.
The Trust records its income producing properties at fair value in accordance with IFRS. The financial results include fair value adjustments that are more significant than previous years. These adjustments are a result of the Trust's regular quarterly IFRS fair value process and include the impact of COVID-19 on the enclosed regional centres from the challenging retail landscape. In accordance with this policy, the following fair value adjustments by segment have been recorded:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||
2021 |
2020 |
2021 |
2020 |
|
Retail – enclosed regional centres |
($3,191) |
($85,038) |
($25,666) |
($255,924) |
Retail – community strip centres |
2,854 |
(2,425) |
3,070 |
(12,717) |
Office |
(7,360) |
(13,685) |
(28,868) |
(63,889) |
Industrial |
315 |
(267) |
8,796 |
(1,432) |
($7,382) |
($101,415) |
($42,668) |
($333,962) |
|
Reported net income for three months ended September 30, 2021, was $6.7 million as compared to loss of $88.1 million in 2020. This change is due to the fair value losses recorded in 2020, as described above.
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. 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 2021 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, October 28, 2021 4:00 p.m. (ET)
Conference Call #: 416-764-8688 or 1-888-390-0546
Conference ID #: 81871155
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 $2.5 billion and approximately 8.3 million square feet of leasable space.
SOURCE Morguard Real Estate Investment Trust
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
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