Morguard Real Estate Investment Trust Reports Third Quarter 2021 Results

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MISSISSAUGA, ON, October 27, 2021 / CNW / – Morguard Real Estate Investment Trust (“the Trust”) (TSX: MRT.UN) is pleased to announce today its results for the third quarter of 2021. These results have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

SUMMARY OF OPERATIONS

In thousands of dollars, except unit amounts

Three months ended September 30

Nine months ended September 30

2021

2020

2021

2020

Income from real estate

$ 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

(7 382)

(101,415)

(42,668)

(333,962)

Net income / (loss)

6,676

(88,116)

5 681

(289,485)

Operating funds

16,567

14 367

50 943

47,477

Adjusted operating funds

12,162

11 451

37,576

35 214

Amounts presented on a unit basis





Net income / (loss) – basic

$ 0.10

($ 1.41)

$ 0.09

($ 4.70)

Net profit / (loss) – diluted

$ 0.10

($ 1.41)

$ 0.09

($ 4.70)

Operating Fund – Core

$ 0.26

$ 0.23

$ 0.79

$ 0.77

Operating funds – diluted

$ 0.26

$ 0.23

$ 0.78

$ 0.76

Adjusted operating funds – basic

$ 0.19

$ 0.18

$ 0.59

$ 0.57

Adjusted operating funds – 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 ENDED THREE-MONTH PERIOD SEPTEMBER 30, 2021
Income from real estate includes rents contracted from tenants as well as recoveries of real estate expenses (including property taxes).

Here is an analysis of real estate revenue 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%

Offices – Buildings with one or two tenants

20 115

19 170

4.9%

59,470

59,592

(0.2%)

Offices – Multi-tenant buildings

6 484

7 358

(11.9%)

20,386

22,375

(8.9%)

Retail – Community Strip Centers

9,280

9,063

2.4%

27 695

27 623

0.3%

Shops – Closed regional centers

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 revenues from closed regional centers is due to tenant defaults at the closed shopping center in 2020 and subsequent restructured rental agreements provided to some retail tenants struggling in the COVID-19 pandemic.

Here is an analysis of real estate income by type of income:

For the three months ended September 30,

2021

2020

Variance

Rental income

$ 37,651

$ 38,542

($ 891)

CAM recoveries

10,392

10 688

(296)

Property taxes and insurance collections

8 927

9,461

(534)

Other income and lease termination fees

1250

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 income

$ 112,234

$ 116,981

($ 4,747)

CAM recoveries

29 830

34,024

(4,194)

Property taxes and insurance collections

27 215

29,617

(2 402)

Other income and lease termination 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 income and lease termination fees for the nine-month period ending September 30, 2021, is $ 2.3 million received from Lowe’s at the Pine Center to facilitate the development of Save-on-Foods.

Under IFRS, the Trust is required to establish an expected credit loss that would include considerations for defaulting or restructuring tenants as well as bad debt provisions for future expected credit losses on debt arrears, including rent reductions or rent discounts. 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 / (collection) charges charged to the income statement

150

(509)

20

(339)

Failure of tenant write-offs and allowances granted

(3,079)

(140)

(3,219)

Closing allocation balance – September 30, 2021

$ 4,540

$ 686

$ 35

$ 5,261

Real estate operating expenses include costs related to interior and exterior maintenance, insurance and public services.

Building operating expenses (excluding bad debt expenses) for the closed quarter September 30, 2021, increased by 6.8% for $ 14.8 million of $ 13.8 million for the same period in 2020. This increase is mainly due to more normalized operating expenses in 2021 compared to 2020, when large reductions occurred due to the pandemic.

Net operating income for the three months ended September 30, 2021, increased by 6.7% compared to 2020. This increase is the result of a decrease in bad debt expenses in 2021 compared to 2020.

Interest expense for the three months ended September 30, 2021, decreased from 5.4% to $ 13.3 million of $ 14.1 million for the same period in 2020. This decrease is mainly attributable to the decrease in the weighted average interest rate on the Trust’s mortgages to 3.6% from 3.9% in the third quarter of 2020, in addition to ‘a reduction in overall debt.

The Trust accounts for its income properties at fair value in accordance with IFRS. The financial results include more significant fair value adjustments than in previous years. These adjustments are the result of the Trust’s regular quarterly IFRS fair value process and include the impact of COVID-19 on closed regional hubs in the challenging retail landscape. In accordance with this policy, the following fair value adjustments by segment have been recognized:


Three months ended September 30

Nine months ended September 30


2021

2020

2021

2020

Retail trade – closed regional centers

($ 3,191)

($ 85,038)

($ 25,666)

($ 255,924)

Retail – community strip centers

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)

Net income published for the three months ended September 30, 2021, was $ 6.7 million compared to the loss of $ 88.1 million in 2020. This variation is due to the fair value losses recorded in 2020, as described above.

Net operating income, operating funds
This press release and accompanying financial information makes reference to net operating income and funds from operations on a total and per unit basis. Net operating income is defined as real estate operating income after deduction of operating costs, but before deduction of interest costs, general and administrative costs and fair value gains / (losses). The Trust presents FFOs in accordance with the Real Property Association of Canada white paper on operating funds and adjusted operating funds for IFRS. The FFO is a non-GAAP measure that is widely accepted as an additional measure of the financial performance of real estate entities. In accordance with this white paper, the Trust defines cash flow from operations as net income adjusted for changes in the fair value of real estate and gains / (losses) on the sale of real estate.

Financial statements and management report
The consolidated financial statements for the third quarter of 2021 and the Management’s Discussion and Analysis of the Trust will be 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 at 4 p.m. ET
Conference call number: 416 764-8688 or 1 888 390-0546
Conference ID: 81871155

About the Morguard Real Estate Investment Trust
The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 46 income-producing retail, office and industrial properties in Canada with a book value of $ 2.5 billion and approximately 8.3 million square feet of rental space.

SOURCE Morguard Real Estate Investment Trust

For further information: Morguard Real Estate Investment Trust, K. Rai Sahi, President and CEO, T 905-281-4800; Andrew Tamlin, Chief Financial Officer, T 905-281-4800

Related links

http://www.morguardreit.com

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