MISSISSAUGA, ON, Oct. 30, 2024 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2024 Third Quarter Results.
In thousands of dollars, except per-unit amounts
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenue from real estate properties
$63,293
$62,512
$191,737
$189,219
Net operating income
32,248
30,551
94,985
92,564
Fair value gains/(losses) on real estate properties
868
(52,047)
(65,597)
(88,885)
Net income/(loss)
15,571
(39,665)
(23,430)
(46,650)
Funds from operations 1
14,917
13,957
42,444
45,211
Adjusted funds from operations 1,2
8,750
7,889
24,192
27,295
Amounts presented on a per unit basis
Net income/(loss) – basic
$0.24
($0.62)
($0.36)
($0.73)
Net income/(loss) – diluted
$0.19
($0.62)
($0.36)
($0.73)
Funds from operations – basic 1
$0.23
$0.22
$0.66
$0.70
Funds from operations – diluted 1
$0.20
$0.19
$0.58
$0.61
Adjusted funds from operations – basic 1,2
$0.14
$0.12
$0.38
$0.42
Adjusted funds from operations – diluted 1,2
$0.13
$0.12
$0.36
$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 fiscal three and nine months ended September 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 September 30,
Nine Months Ended September 30,
2024
2023
% Change
2024
2023
% Change
Revenue from real estate properties
$63,293
$62,512
1.2 %
$191,737
$189,219
1.3 %
Property operating expenses
(16,593)
(17,714)
(6.3 %)
(52,941)
(53,774)
(1.5 %)
Property taxes
(12,309)
(12,122)
1.5 %
(37,255)
(36,400)
2.3 %
Property management fees
(2,143)
(2,125)
0.8 %
(6,556)
(6,481)
1.2 %
Net operating income
32,248
30,551
5.6 %
94,985
92,564
2.6 %
Interest expense
(16,839)
(16,072)
4.8 %
(50,958)
(45,672)
11.6 %
General and administrative
(875)
(911)
(4.0 %)
(2,821)
(2,970)
(5.0 %)
Other items
(60)
(16)
275.0 %
(60)
(57)
5.3 %
Fair value gains/(losses) on real estate properties
868
(52,047)
(101.7 %)
(65,597)
(88,885)
(26.2 %)
Net income/(loss) from equity-accounted investment
229
(1,170)
(119.6 %)
1,021
(1,630)
(162.6 %)
Net income/(loss)
$15,571
($39,665)
(139.3 %)
($23,430)
($46,650)
(49.8 %)
CONSOLIDATED OPERATING HIGHLIGHTS
The following is an analysis of net operating income by asset type:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
%
2024
2023
% Change
Enclosed regional centres
$11,418
$9,994
14.2 %
$32,467
$31,386
3.4 %
Community strip centres
5,102
5,779
(11.7 %)
16,417
17,180
(4.4 %)
Subtotal – retail
16,520
15,773
4.7 %
48,884
48,566
0.7 %
Single-/dual-tenant buildings
12,305
12,210
0.8 %
37,576
36,666
2.5 %
Multi-tenant buildings
2,571
2,082
23.5 %
6,414
5,974
7.4 %
Subtotal – office
14,876
14,292
4.1 %
43,990
42,640
3.2 %
Industrial
852
486
75.3 %
2,111
1,358
55.4 %
Net operating income
$32,248
$30,551
5.6 %
$94,985
$92,564
2.6 %
The increase in enclosed regional centres net operating income for the nine months ended September 30, 2024, is due to increases in basic rent of $2.2 million, increases in percentage rent of $0.7 million, and decreased vacancy costs of $0.6 million. These increases were partially offset by 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.
The decrease in community strip centres net operating income for the nine months ended September 30, 2024, is due to the sale of Heritage Towne Centre during the second quarter of 2024.
The increase in industrial net operating income for the nine months ended September 30, 2024, is due to increased basic rent at one of the Trust's industrial properties, as well as increased occupancy.
The following is an analysis of revenue from real estate properties by segment:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
%
2024
2023
%
Industrial
$1,304
$851
53.2 %
$3,412
$2,616
30.4 %
Office – Single-/dual-tenant buildings
21,518
21,484
0.2 %
65,528
64,671
1.3 %
Office – Multi-tenant buildings
6,269
6,154
1.9 %
18,786
18,389
2.2 %
Retail – Community strip centres
8,202
9,312
(11.9 %)
26,738
27,924
(4.2 %)
Retail – Enclosed regional centres
26,000
24,711
5.2 %
77,273
75,619
2.2 %
Total
$63,293
$62,512
1.2 %
$191,737
$189,219
1.3 %
The following is an analysis of revenue from real estate properties by revenue type:
For the three months ended September 30,
2024
2023
Variance
Rental revenue
$39,023
$38,111
$912
CAM recoveries
11,947
12,455
(508)
Property tax and insurance recoveries
9,815
9,430
385
Other revenue and lease cancellation fees
1,133
1,237
(104)
Parking revenue
1,375
1,376
(1)
Amortized rents
—
(97)
97
$63,293
$62,512
$781
For the nine months ended September 30,
2024
2023
Variance
Rental revenue
$117,590
$114,522
$3,068
CAM recoveries
37,250
37,572
(322)
Property tax and insurance recoveries
29,556
30,749
(1,193)
Other revenue and lease cancellation fees
3,736
3,494
242
Parking revenue
4,169
4,029
140
Amortized rents
(564)
(1,147)
583
$191,737
$189,219
$2,518
Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities. Property operating expenses for the three months ended September 30, 2024, decreased 6.3% to $16.6 million from $17.7 million for the same period in 2023. This decrease is primarily due to decreases in utility costs across the portfolio.
Net operating income for the three months ended September 30, 2024, increased 5.6% as compared to 2023. This increase stems largely from increases in basic rent in the enclosed mall portfolio, partially offset by the sale of the retail community strip centre.
Interest expense for the three months ended September 30, 2024, increased 4.8% vs the same period in 2023. This increase is primarily due to higher interest rates on renewed fixed-rate debt, partially offset by a $30.5 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 September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Retail – enclosed regional centres
($807)
($1,394)
($17,502)
$72
Retail – community strip centres
(1,242)
(701)
2,548
(4,754)
Office
2,582
(54,272)
(50,984)
(95,940)
Industrial
335
4,320
341
11,737
$868
($52,047)
($65,597)
($88,885)
Reported net income for three months ended September 30, 2024, was $15.6 million as compared to net loss of $39.7 million in 2023. This change is largely due to fair value losses on real estate properties recorded in 2023.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
The Trust presents FFO and AFFO in accordance with the current definition of the REALPAC.
In thousands of dollars, except per unit amounts
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
%
2024
2023
% Change
Net income/(loss)
$15,571
($39,665)
(139.3 %)
($23,430)
($46,650)
(49.8 %)
Adjustments:
Fair value (gains)/losses on real estate properties 1
(641)
53,646
(101.2 %)
65,930
91,933
(28.3 %)
Amortization of right-of-use assets
60
21
185.7 %
60
62
(3.2 %)
Payment of lease liabilities, net
(73)
(45)
62.2 %
(116)
(134)
(13.4 %)
Funds from operations – basic
14,917
13,957
6.9 %
42,444
45,211
(6.1 %)
Interest expense on convertible debentures
2,104
2,104
— %
6,243
6,278
(0.6 %)
Funds from operations – diluted
$17,021
$16,061
6.0 %
$48,687
$51,489
(5.4 %)
Funds from operations – basic
$14,917
$13,957
6.9 %
$42,444
$45,211
(6.1 %)
Adjustments:
Amortized stepped rents 1
83
182
(54.4 %)
498
834
(40.3 %)
Normalized PCME
(6,250)
(6,250)
— %
(18,750)
(18,750)
— %
Adjusted funds from operations – basic
8,750
7,889
10.9 %
24,192
27,295
(11.4 %)
Interest expense on convertible debentures
2,104
2,104
— %
6,243
6,278
(0.6 %)
Adjusted funds from operations – diluted
$10,854
$9,993
8.6 %
$30,435
$33,573
(9.3 %)
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 September 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 Q3 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, October 31, 2024, 4:00 p.m. (ET)
Conference Call #:
1-437-900-0527 or 1-888-510-2154
Conference ID #:
36166
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.
