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Morguard Real Estate Investment Trust Announces 2022 Second Quarter Results - Jul 27, 2022

Morguard Real Estate Investment Trust Announces 2022 Second Quarter Results

Jul 27, 2022

MISSISSAUGA, ON, July 27, 2022 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2022 Second Quarter Results.

In thousands of dollars, except per-unit amounts

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Revenue from real estate properties

$60,512

$58,475

$121,838

$119,445

Net operating income

29,683

28,975

58,227

60,033

Fair value gains/(losses) on real estate properties

12,325

(20,837)

37,290

(35,286)

Net income/(loss)

27,649

(5,845)

67,558

(995)

Funds from operations 1

16,227

15,043

31,188

34,376

Adjusted funds from operations 1,2

10,486

10,664

19,591

25,414

Amounts presented on a per unit basis

       

Net income/(loss) – basic

$0.43

($0.09)

$1.05

($0.02)

Net income/(loss) – diluted

$0.31

($0.09)

$0.75

($0.02)

Funds from operations – basic 1

$0.25

$0.23

$0.49

$0.54

Funds from operations – diluted 1

$0.22

$0.23

$0.42

$0.53

Adjusted funds from operations – basic 1,2

$0.16

$0.17

$0.31

$0.40

Adjusted funds from operations – diluted 1,2

$0.15

$0.17

$0.28

$0.40

         

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 periods ended June 30, 2022 and 2021. 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,

 

2022

2021

% Change

2022

2021

% Change

Revenue from real estate properties

$60,512

$58,475

3.5 %

$121,838

$119,445

2.0 %

Property operating expenses

(17,102)

(15,008)

14.0 %

(35,198)

(30,115)

16.9 %

Property taxes

(11,669)

(12,357)

(5.6 %)

(24,283)

(25,106)

(3.3 %)

Property management fees

(2,058)

(2,135)

(3.6 %)

(4,130)

(4,191)

(1.5 %)

Net operating income

29,683

28,975

2.4 %

58,227

60,033

(3.0 %)

Interest expense

(13,092)

(13,379)

(2.1 %)

(26,083)

(26,651)

(2.1 %)

General and administrative

(894)

(1,052)

(15.0 %)

(1,988)

(1,967)

1.1 %

Other items

(21)

(21)

— %

(42)

1,941

(102.2 %)

Fair value gains/(losses) on real estate properties

12,325

(20,837)

(159.1 %)

37,290

(35,286)

(205.7 %)

Net (loss)/income from equity-accounted investment

(352)

469

(175.1 %)

154

935

(83.5 %)

Net income/(loss)

$27,649

($5,845)

N/A

$67,558

($995)

N/A


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,

 

2022

2021

%

2022

2021

%

Enclosed regional centres

$9,378

$8,082

16.0 %

$17,473

$17,793

(1.8 %)

Community strip centres

5,681

5,733

(0.9 %)

11,303

11,561

(2.2 %)

Subtotal – retail

15,059

13,815

9.0 %

28,776

29,354

(2.0 %)

             

Single-/dual-tenant buildings

11,602

11,441

1.4 %

22,942

23,570

(2.7 %)

Multi-tenant buildings

2,445

3,292

(25.7 %)

5,323

6,187

(14.0 %)

Subtotal – office

14,047

14,733

(4.7 %)

28,265

29,757

(5.0 %)

             

Industrial

577

427

35.1 %

1,186

922

28.6 %

Net operating income

$29,683

$28,975

2.4 %

$58,227

$60,033

(3.0 %)


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 June 30,

Six Months Ended June 30,

 

2022

2021

%

2022

2021

%

Industrial

$1,087

$880

23.5 %

$2,123

$1,771

19.9 %

Office – Single-/dual-tenant buildings

20,361

19,748

3.1 %

40,734

39,355

3.5 %

Office – Multi-tenant buildings

6,443

6,983

(7.7 %)

13,644

13,902

(1.9 %)

Retail – Community strip centres

8,950

8,958

(0.1 %)

18,440

18,415

0.1 %

Retail – Enclosed regional centres

23,671

21,906

8.1 %

46,897

46,002

1.9 %

Total

$60,512

$58,475

3.5 %

$121,838

$119,445

2.0 %


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

For the three months ended June 30,

2022

2021

Variance

Rental revenue

$38,045

$37,099

$946

CAM recoveries

11,730

10,384

1,346

Property tax and insurance recoveries

8,714

8,815

(101)

Other revenue and lease cancellation fees

1,549

1,737

(188)

Parking revenue

1,124

908

216

Amortized rents

(650)

(468)

(182)

 

$60,512

$58,475

$2,037

       
       
       

For the six months ended June 30,

2022

2021

Variance

Rental revenue

$75,619

$74,583

$1,036

CAM recoveries

23,840

19,438

4,402

Property tax and insurance recoveries

18,512

18,288

224

Other revenue and lease cancellation fees

2,832

5,193

(2,361)

Parking revenue

2,132

1,862

270

Amortized rents

(1,097)

81

(1,178)

 

$121,838

$119,445

$2,393


Net operating income for the three months ended June 30, 2022, increased 2.4% as compared to 2021. This increase was mainly the result an increase in basic rents in the retail portfolio.

Interest expense for the three months ended June 30, 2022, decreased 2.1% to $13.1 million from $13.4 million for the same period in 2021. This decline is primarily due to a $43.1 million decline in overall debt levels on a year-over-year basis.

In 2021, other items included $2.0 million in non-recurring settlement proceeds from Sears.

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,

 

2022

2021

2022

2021

Retail – enclosed regional centres

($5,546)

($15,366)

($1,667)

($22,475)

Retail – community strip centres

11,141

(514)

13,743

216

Office

2,183

(10,419)

12,880

(21,508)

Industrial

4,547

5,462

12,334

8,481

 

$12,325

($20,837)

$37,290

($35,286)


Reported net income for three months ended June 30, 2022, was $27.6 million as compared to loss of $5.8 million in 2021. This change is due to the fair value losses recorded in 2021, 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 Real Property Association of Canada ("REALpac") as follows:

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,

2022

2021

%

2022

2021

%

Net income/(loss)

$27,649

($5,845)

(573.0 %)

$67,558

($995)

(6,889.7 %)

Adjustments:

           

Fair value (gains)/losses on real estate properties 1

(11,401)

20,907

(154.5 %)

(36,330)

35,401

(202.6 %)

Amortization of right-of-use assets

21

21

— %

42

42

— %

Payment of lease liabilities, net

(42)

(40)

5.0 %

(82)

(72)

13.9 %

Funds from operations – basic

16,227

15,043

7.9 %

31,188

34,376

(9.3 %)

Interest expense on convertible debentures

2,116

1,963

7.8 %

4,174

3,905

6.9 %

Funds from operations – diluted

$18,343

$17,006

7.9 %

$35,362

$38,281

(7.6 %)

             

Funds from operations – basic

$16,227

$15,043

7.9 %

$31,188

$34,376

(9.3 %)

Adjustments:

           

Amortized stepped rents 1

509

246

106.9 %

903

288

213.5 %

Normalized PCME

(6,250)

(4,625)

35.1 %

(12,500)

(9,250)

35.1 %

Adjusted funds from operations – basic

10,486

10,664

(1.7 %)

19,591

25,414

(22.9 %)

Interest expense on convertible debentures

2,116

1,963

7.8 %

4,174

3,905

6.9 %

Adjusted funds from operations – diluted

$12,602

$12,627

(0.2 %)

$23,765

$29,319

(18.9 %)

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

 

2. Includes the dilutive impact of convertible debentures and presented on a cash settlement basis for consistency with industry practice for calculating FFO and AFFO.


SPECIFIED FINANICAL 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, 2022 and available on the Trust's profile on SEDAR at www.sedar.com.

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 2022 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, July 28, 2022 4:00 p.m. (ET)
Conference Call #:                     416-764-8688 or 1-888-390-0546
Conference ID #:                        58801677

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

For further information: 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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