Morguard Real Estate Investment Trust Announces 2021 First Quarter Results

MISSISSAUGA, ON, April 28, 2021 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2021 First Quarter Results. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").

	Three Months Ended March 31,
In thousands of dollars, except per-unit amounts	2021	2020
Revenue from real estate properties	$60,970	$66,373
Net operating income	31,058	34,828
Fair value losses on real estate properties	(14,449)	(121,117)
Net income/(loss)	4,850	(102,555)
Funds from operations	19,333	19,958
Adjusted funds from operations	14,750	13,731
Amounts presented on a per unit basis
Net income/(loss) – basic	$0.08	($1.69)
Net income/(loss) – diluted	$0.08	($1.69)
Funds from operations – basic	$0.30	$0.33
Funds from operations – diluted	$0.29	$0.32
Adjusted funds from operations – basic	$0.23	$0.23
Adjusted funds from operations – diluted	$0.23	$0.23
Distributions per unit	$0.08	$0.24
Payout ratio – Adjusted funds from operations	34.8%	104.3%

CONSOLIDATED OPERATING HIGHLIGHTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2021

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:

For the three months ended March 31,	2021	2020	Variance
Industrial	$891	$814	$77
Office – Single-/dual-tenant buildings	19,607	21,127	(1,520)
Office – Multi-tenant buildings	6,919	8,071	(1,152)
Retail – Community strip centres	9,457	9,827	(370)
Retail – Enclosed regional centres	24,096	26,534	(2,438)
Total	$60,970	$66,373	($5,403)

On March 30, 2020, the Trust announced the conclusion of its discussions with Obsidian Energy Ltd. regarding its tenancy in Penn West Plaza (a single-tenant building). This rent reduction represents a reduction in the Trust's net operating income of approximately $0.6 million for the quarter.

The decline in enclosed regional centres revenue is due to the enclosed mall tenant failures and restructured rent arrangements provided to tenants that are struggling as part of the COVID-19 pandemic.

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

For the three months ended March 31,	2021	2020	Variance
Rental revenue	$37,484	$39,876	($2,392)
CAM recoveries	9,054	13,669	(4,615)
Property tax and insurance recoveries	9,473	10,682	(1,209)
Other revenue and lease cancellation fees	3,456	1,086	2,370
Parking revenue	954	1,289	(335)
Amortized rents	549	(229)	778
	$60,970	$66,373	($5,403)

Included in other revenue and lease cancellation fees is $2.3 million received from Lowe's at Pine Centre in the three-month period ending March 31, 2021, in order to facilitate the Save-on-Foods development.

Under IFRS, the Trust is required to establish an expected credit loss which would include considerations for failed or restructuring tenants as well as doubtful account provisions for future expected credit losses on accounts receivable arrears, including rent abatements or rent forgiveness. The following is an analysis of the allowance for doubtful accounts for the three-month period ending March 31, 2021.

Three months ended March 31, 2021	Retail	Office	Industrial	Total
Opening allowance balance – January 1, 2021	$7,469	$1,335	$15	$8,819
Bad debt expense/(recovery) charged to income	865	(554)	(2)	309
Failed tenant writeoffs and abatements granted	(253)	(1)	—	(254)
Closing allowance balance – March 31, 2021	$8,081	$780	$13	$8,874

The following is an analysis of revenue and bad debt expense for the three months ended March 31, 2021:

Three months ended March 31, 2021	Retail	Office	Industrial	Total
Revenue from real estate properties	$33,553	$26,526	$891	$60,970
Bad debt expense	865	(554)	(2)	309
% of revenue from real estate properties	3%	(2%)	—%	1%

The following is an analysis of revenue and bad debt expense for the three months ended March 31, 2020:

Three months ended March 31, 2020	Retail	Office	Industrial	Total
Revenue from real estate properties	$36,361	$29,198	$814	$66,373
Bad debt expense	278	7	—	285
% of revenue from real estate properties	1%	—%	—%	—%

Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities. Property operating expenses (excluding bad debt expense) for the three months ended March 31, 2021, decreased 10.1% to $14.8 million from $16.5 million for the same period in 2020. This decrease is primarily due to lower operating and repair and maintenance expenses in 2021 due to less traffic in the retail and office assets during the COVID-19 pandemic.

Net operating income for the three months ended March 31, 2021, declined 10.8% as compared to 2020. This decline was the result of COVID-19 related tenant failures in the enclosed regional centre asset class.

Interest expense for the three months ended March 31, 2021, decreased 8.9% to $13.3 million from $14.6 million for the same period in 2020. This decline is primarily due to the decline in the Trust's weighted average interest rate on mortgages to 3.7% from 4.1% in the first quarter of 2020.

The increase of $2.0 million in other items for the three months ended March 31, 2021, is the result of bankruptcy proceeds received from Sears regarding their former occupancy in three of the Trust's properties.

The Trust records its income producing properties at fair value in accordance with IFRS. The financial results include fair value adjustments that are more significant than previous years. These adjustments are a result of the Trust's regular quarterly IFRS fair value process and include the impact of COVID-19 on the enclosed regional centres from the challenging retail landscape. In accordance with this policy, the following fair value adjustments by segment have been recorded:

For the three months ended March 31,	2021	2020
Retail – enclosed regional centres	($7,109)	($96,814)
Retail – community strip centres	730	(934)
Office	(11,089)	(23,552)
Industrial	3,019	183
	($14,449)	($121,117)

Reported net income for three months ended March 31, 2021, was $4.9 million as compared to loss of $102.6 million in 2020. This change is due to the fair value losses recorded in 2020, as described above.

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. 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 Q1 2021 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 April 29, 2021 4:00 p.m. (ET)
Conference Call #:	416-764-8688 or 1-888-390-0546
Conference ID #:	74676376

About Morguard Real Estate Investment Trust
The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 47 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

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

Related Links

http://www.morguardreit.com