Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its financial results for the three and six months ended June 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 June 30, 2018, was $43.4 million versus $52.4 million for the three months ended June 30, 2017.
The decrease of $9.0 million is largely the result of fair value changes. Fair value gains for the three months ended June 30, 2018, were $22.1 million, versus an overall gain of $28.2 million for the three months ended June 30, 2017.
Income before fair value gains and net income from equity-accounted investment was $22.0 million for the three months ended June 30, 2018, compared to $23.2 million for the same period ended June 30, 2017. The decrease of $1.3 million is largely the result of a decrease in net operating income.
Net operating income was $36.9 million for the three months ended June 30, 2018, versus $38.0 million for the three months ended June 30, 2017.
The decrease in net operating income of $1.1 million is largely the result of increased vacancy and lower base rents in the Trust's office and retail portfolios. In the retail portfolio, increased vacancy, including the impact of vacancy tied to the Sears Canada Inc. space (approximately $0.4 million), and reduced rental rates were partially offset by increased revenue from the Trust's development program. Since January 1, 2017, 303,700 square feet of development activity became income producing. These projects contributed $1.4 million to revenue in the second quarter, an increase of $1.0 million from the second quarter of 2017.
The Trust's fully diluted funds from operations ("FFO") for the three months ended June 30, 2018, was $24.8 million ($0.36 per unit) versus $26.0 million ($0.38 per unit) for the same three months ended June 30, 2017. This represents a decrease of $1.2 million ($0.02 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 197,500 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 Q2 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
Conference Call Details:
Thursday, August 2, 2018 at 4:00 p.m. (ET)
Conference Call #:
416-764-8688 or 1-888-390-0546
Conference ID #:
About Morguard Real Estate Investment Trust
The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 48 retail, office and industrial income producing properties in Canada with a book value of $2.9 billion and approximately 8.4 million square feet of leasable space.
please contact: Morguard Real Estate Investment Trust, K. Rai Sahi, President and Chief Executive Officer, T 905-281-4800; Pamela McLean, Chief Financial Officer, T 905-281-4800