Morguard Real Estate Investment Trust Announces 2024 Second Quarter Results

Jul 31, 2024

MISSISSAUGA, ON, July 31, 2024 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2024 Second Quarter Results.

In thousands of dollars, except per-unit amounts

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Revenue from real estate properties

$64,046

$61,891

$128,444

$126,707

Net operating income

31,832

30,467

62,737

62,013

Fair value losses on real estate properties

(16,242)

(15,297)

(66,465)

(36,838)

Net loss

(2,226)

(1,828)

(39,001)

(6,985)

Funds from operations 1

14,108

14,976

27,527

31,254

Adjusted funds from operations 1,2

8,033

9,106

15,442

19,406

Amounts presented on a per unit basis





Net loss – basic

($0.03)

($0.03)

($0.61)

($0.11)

Net loss – diluted

($0.03)

($0.03)

($0.61)

($0.11)

Funds from operations – basic 1

$0.22

$0.23

$0.43

$0.49

Funds from operations – diluted 1

$0.19

$0.20

$0.37

$0.42

Adjusted funds from operations – basic 1,2

$0.12

$0.14

$0.24

$0.30

Adjusted funds from operations – diluted 1,2

$0.12

$0.13

$0.23

$0.28

1. The following represents a non-GAAP financial measure/ratio that does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other reporting issuers in similar or different industries. This measure should be considered as supplemental in nature and not as substitutes for related financial information prepared in accordance with IFRS. Additional information on this non-GAAP financial measure/ratio can be found under the MD&A section Part I, "Specified Financial Measures".

2. The Trust uses normalized productive capacity maintenance expenditures to calculate adjusted funds from operations.

SELECTED FINANCIAL INFORMATION

The table below sets forth selected financial data relating to the Trust's fiscal three and six months ended June 30, 2024, and 2023. This financial data is derived from the Trust's condensed consolidated statements which are prepared in accordance with IFRS.


Three Months Ended June 30,

Six Months Ended June 30,


2024

2023

% Change

2024

2023

% Change

Revenue from real estate properties

$64,046

$61,891

3.5 %

$128,444

$126,707

1.4 %

Property operating expenses

(17,939)

(17,449)

2.8 %

(36,348)

(36,060)

0.8 %

Property taxes

(12,080)

(11,858)

1.9 %

(24,946)

(24,278)

2.8 %

Property management fees

(2,195)

(2,117)

3.7 %

(4,413)

(4,356)

1.3 %

Net operating income

31,832

30,467

4.5 %

62,737

62,013

1.2 %

Interest expense

(17,243)

(14,891)

15.8 %

(34,119)

(29,600)

15.3 %

General and administrative

(922)

(1,003)

(8.1 %)

(1,946)

(2,059)

(5.5 %)

Amortization expense

—

(20)

(100.0 %)

—

(41)

(100.0 %)

Fair value losses on real estate properties

(16,242)

(15,297)

6.2 %

(66,465)

(36,838)

80.4 %

Net income/(loss) from equity-accounted investment

349

(1,084)

(132.2 %)

792

(460)

(272.2 %)

Net loss

($2,226)

($1,828)

21.8 %

($39,001)

($6,985)

458.4 %

CONSOLIDATED OPERATING HIGHLIGHTS

The following is an analysis of net operating income by asset type:


Three Months Ended June 30,

Six Months Ended June 30,


2024

2023

%

2024

2023

% Change

Enclosed regional centres

$10,878

$9,832

10.6 %

$21,049

$21,392

(1.6 %)

Community strip centres

5,514

5,741

(4.0 %)

11,315

11,401

(0.8 %)

Subtotal – retail

16,392

15,573

5.3 %

32,364

32,793

(1.3 %)








Single-/dual-tenant buildings

12,759

12,327

3.5 %

25,271

24,456

3.3 %

Multi-tenant buildings

1,940

2,130

(8.9 %)

3,843

3,892

(1.3 %)

Subtotal – office

14,699

14,457

1.7 %

29,114

28,348

2.7 %








Industrial

741

437

69.6 %

1,259

872

44.4 %

Net operating income

$31,832

$30,467

4.5 %

$62,737

$62,013

1.2 %

The decrease in enclosed regional centres net operating income for the six months ended June 30, 2024, is due to a one-time prior year property tax refund recorded in 2023 on an enclosed regional centre in the amount of $2.8 million, primarily for vacant space and space previously occupied by bankrupt or otherwise failed tenants. This decrease was partially offset by increases in basic rent of $1.1 million, increases in percentage rent of $0.3 million, and decreases in bad debt expense of $0.2 million.

The increase in industrial net operating income for the six months ended June 30, 2024, is due to increased basic rent at one of the Trust's industrial properties and increased occupancy.

The following is an analysis of revenue from real estate properties by segment:


Three Months Ended June 30,

Six Months Ended June 30,


2024

2023

%

2024

2023

%

Industrial

$1,113

$892

24.8 %

$2,108

$1,765

19.4 %

Office – Single-/dual-tenant buildings

21,874

21,444

2.0 %

44,010

43,187

1.9 %

Office – Multi-tenant buildings

6,144

6,095

0.8 %

12,517

12,235

2.3 %

Retail – Community strip centres

8,882

9,133

(2.7 %)

18,536

18,612

(0.4 %)

Retail – Enclosed regional centres

26,033

24,327

7.0 %

51,273

50,908

0.7 %

Total

$64,046

$61,891

3.5 %

$128,444

$126,707

1.4 %

The following is an analysis of revenue from real estate properties by revenue type:

For the three months ended June 30,

2024

2023

Variance

Rental revenue

$39,401

$38,302

$1,099

CAM recoveries

12,332

12,277

55

Property tax and insurance recoveries

9,745

9,189

556

Other revenue and lease cancellation fees

1,305

1,343

(38)

Parking revenue

1,463

1,355

108

Amortized rents

(200)

(575)

375


$64,046

$61,891

$2,155









For the six months ended June 30,

2024

2023

Variance

Rental revenue

$78,567

$76,411

$2,156

CAM recoveries

25,303

25,117

186

Property tax and insurance recoveries

19,741

21,319

(1,578)

Other revenue and lease cancellation fees

2,603

2,257

346

Parking revenue

2,794

2,653

141

Amortized rents

(564)

(1,050)

486


$128,444

$126,707

$1,737

Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities. Property operating expenses for the three months ended June 30, 2024, increased 2.8% to $17.9 million from $17.4 million for the same period in 2023. This increase is primarily due to increases in security costs, insurance premiums and other general operating expenses.

Net operating income for the three months ended June 30, 2024, increased 4.5% as compared to 2023. This increase stems largely from increases in basic rent in the enclosed mall portfolio.

Interest expense for the three months ended June 30, 2024, increased 15.8% vs the same period in 2023. This increase is primarily due to higher interest rates on both variable and new fixed rate debt on a year-over-year basis, partially offset by a $38.3 million decline in overall debt levels.

The Trust records its income producing properties at fair value in accordance with IFRS. These adjustments are a result of the Trust's regular quarterly IFRS fair value process. In accordance with this policy, the following fair value adjustments by segment have been recorded:


Three Months Ended June 30,

Six Months Ended June 30,


2024

2023

2024

2023

Retail – enclosed regional centres

$5,469

($2,104)

($16,695)

$1,466

Retail – community strip centres

3,094

(2,894)

3,790

(4,053)

Office

(24,771)

(17,207)

(53,566)

(41,668)

Industrial

(34)

6,908

6

7,417


($16,242)

($15,297)

($66,465)

($36,838)

Reported net loss for three months ended June 30, 2024, was $2.2 million as compared to net loss of $1.8 million in 2023. This change is due to increased interest expense in 2024, as described above.

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

The Trust presents FFO and AFFO in accordance with the current definition of the REALPAC.

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

In thousands of dollars, except per unit amounts

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

%

2024

2023

% Change

Net loss

($2,226)

($1,828)

21.8 %

($39,001)

($6,985)

458.4 %

Adjustments:







Fair value losses on real estate properties 1

16,356

16,829

(2.8 %)

66,571

38,287

73.9 %

Amortization of right-of-use assets

—

20

(100.0 %)

—

41

(100.0 %)

Payment of lease liabilities, net

(22)

(45)

(51.1 %)

(43)

(89)

(51.7 %)

Funds from operations – basic

14,108

14,976

(5.8 %)

27,527

31,254

(11.9 %)

Interest expense on convertible debentures

2,081

2,116

(1.7 %)

4,139

4,174

(0.8 %)

Funds from operations – diluted

$16,189

$17,092

(5.3 %)

$31,666

$35,428

(10.6 %)








Funds from operations – basic

$14,108

$14,976

(5.8 %)

$27,527

$31,254

(11.9 %)

Adjustments:







Amortized stepped rents 1

175

380

(53.9 %)

415

652

(36.3 %)

Normalized PCME

(6,250)

(6,250)

— %

(12,500)

(12,500)

— %

Adjusted funds from operations – basic

8,033

9,106

(11.8 %)

15,442

19,406

(20.4 %)

Interest expense on convertible debentures

2,081

2,116

(1.7 %)

4,139

4,174

(0.8 %)

Adjusted funds from operations – diluted

$10,114

$11,222

(9.9 %)

$19,581

$23,580

(17.0 %)








1. Includes respective adjustments included in net income from equity-accounted investment.


SPECIFIED FINANCIAL MEASURES

The Trust reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). However, this earnings release also uses specified financial measures that are not defined by IFRS which follow the disclosure requirements established by National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. Specified financial measures are categorized as non-GAAP financial measures, non-GAAP ratios, and other financial measures. Additional details on specified financial measures including supplementary financial measures, capital management measures and total segment measures are set out in the Trust's Management's Discussion and Analysis for the period ended June 30, 2024 and available on the Trust's profile on SEDAR+ at www.sedarplus.ca

The following Non-GAAP financial measures do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other reporting issuers in similar or different industries. These measures should be considered as supplemental in nature and not as substitutes for related financial information prepared in accordance with IFRS. The Trust's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same. Management believes that the non-GAAP financial measures, which supplement the IFRS measures, provide readers with a more comprehensive understanding of management's perspective on the Trust's operating results and performance.

FUNDS FROM OPERATIONS ("FFO")

FFO is a non-GAAP measure widely used as a real estate industry standard that supplements net income and evaluates operating performance but is not indicative of funds available to meet the Trust's cash requirements. FFO can assist with comparisons of the operating performance of the Trust's real estate between periods and relative to other real estate entities. FFO is computed by the Trust in accordance with the current definition of the Real Property Association of Canada ("REALPAC") and is defined as net income adjusted for fair value changes on real estate properties and gains/(losses) on the sale of real estate properties. The Trust considers FFO to be a useful measure for reviewing its comparative operating and financial performance.

ADJUSTED FUNDS FROM OPERATIONS ("AFFO")

AFFO is a non-GAAP measure that was developed to be a recurring economic earnings measure for real estate entities. The Trust presents AFFO in accordance with the current definition of the REALPAC. The Trust defines AFFO as FFO adjusted for straight-line rent and productive capacity maintenance expenditures ("PCME"). AFFO should not be interpreted as an indicator of cash generated from operating activities as it does not consider changes in working capital.

Financial Statements and Management's Discussion and Analysis

The Trust's Q2 2024 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.sedarplus.ca

Conference Call Details:

Date:

Thursday, August 1, 2024, 4:00 p.m. (ET)

Conference Call #:

416-764-8688 or 1-888-390-0546

Conference ID #:

71360846

About Morguard Real Estate Investment Trust

The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 45 retail, office and industrial income producing properties in Canada with a book value of $2.2 billion and approximately 8.1 million square feet of leasable space.

SOURCE Morguard Real Estate Investment Trust

For further information: For further information, please contact: 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