Morguard Real Estate Investment Trust Announces 2018 Third Quarter Results

MISSISSAUGA, ON, Oct. 31, 2018 /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, 2018.  These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The Trust's net income and comprehensive income for the three months ended September 30, 2018, was $5.0 million versus a net loss of $15.2 million for the three months ended September 30, 2017.

The increase of $20.2 million is largely the result of fair value changes.  Fair value losses for the three months ended September 30, 2018, were $16.9 million, versus fair value losses of $38.2 million for the three months ended September 30, 2017.

Income before fair value losses and net (loss)/income from equity-accounted investment was $22.1 million for the three months ended September 30, 2018, compared to $22.4 million for the same period ended September 30, 2017.  The decrease of $0.4 million is largely the result of a decrease in net operating income ($0.2 million), combined with an increase in interest expense ($0.1 million) and other expenses ($0.1 million).

Net operating income was $37.2 million for the three months ended September 30, 2018, versus $37.4 million for the three months ended September 30, 2017.

There are three components contributing to the decrease in net operating income of $0.2 million.  In the retail portfolio, increased vacancy ($1.0 million), including the impact of vacancy tied to the Sears Canada Inc. ("Sears") space (approximately $0.4 million), combined with lower rental rates to reduce the retail net operating income $1.8 million.  This negative net operating income was offset by revenue generated from the Trust's completed development projects, which contributed an additional $0.6 million to retail net operating income during the three months ended September 30, 2018, compared to the same period ended September 30, 2017.  During the quarter, 136,500 square feet ("SF") of development projects started generating revenue.  Finally, the Trust's office portfolio experienced an increase in net operating income of $1.1 million during the three months ended September 30, 2018, versus the same period ended September 30, 2017.  This favorable result was largely due to decreased vacancy costs, coupled with $0.3 million in one-time lease cancellation fees received in 2018, and $0.4 million in stepped rents.  During the quarter, the Trust completed over 40,000 SF of new leasing in its office portfolio.

The Trust's fully diluted FFO for the three months ended September 30, 2018, was $24.8 million ($0.35 per unit) versus $25.3 million ($0.36 per unit) for the same three months ended September 30, 2017.  This represents a decrease of $0.5 million ($0.01 per unit).  The decrease in FFO is largely attributed to the decrease in net operating income.

The Trust continues with its development program and expects an additional 53,500 square feet of new area under intensification and remerchandised area to become income producing by the end of 2018.  The Trust has secured commitments on 79% of the remerchandised area and 57% of the area under intensification.

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 2018.  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 2018 Condensed Consolidated Financial Statements and Management's Discussion and Analysis along with its 2017 Annual Report are available on the Trust's website at www.morguard.com and have been filed with SEDAR at www.sedar.com

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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 8.6 million square feet of leasable space.

SOURCE Morguard Real Estate Investment Trust