MISSISSAUGA, ON, Feb. 25, 2021 /CNW/ - Morguard Corporation
("Morguard" or the "Company") (TSX: MRC) today announced its
financial results for the year ended December 31, 2020, including a brief operational
and liquidity update as we continue to focus on managing through
the COVID-19 pandemic.
Reporting Highlights
- Total revenue from real estate properties increased by
$16.1 million, or 1.8% to
$888.3 million for the year ended
December 31, 2020, compared to
$872.2 million for the same period in
2019.
- Total revenue from hotel properties decreased by $147.2 million, or 60.0% to $98.1 million for the year ended December 31, 2020, compared to $245.3 million for the same period in 2019.
- Net operating income ("NOI") decreased by $65.0 million, or 11.7%, to $491.2 million for the year ended December 31, 2020, compared to $556.2 million for the same period in 2019,
primarily due to lower NOI from the hotel portfolio and higher bad
debt expense.
- Net loss increased by $438.8
million to a net loss of $250.0
million for the year ended December
31, 2020, compared to net income of $188.8 million for the same period in 2019. The
decrease was primarily due to a higher net fair value loss of
$501.7 million, a higher provision
for impairment of $14.1 million and a
decrease in NOI of $65.0 million,
partially offset by a decrease in equity loss from investments of
$21.4 million, a decrease in property
management and corporate of $34.5
million and an increase in deferred income tax recovery of
$103.3 million.
- Normalized FFO decreased by $44.4
million, or 19.7% to $181.2
million for the year ended December
31, 2020, compared to $225.6
million for the same period in 2019.
Operational and Balance Sheet Highlights
- During the year ended December 31,
2020, the Company issued $175
million of 4.402% Series G senior unsecured debentures due
on September 28, 2023. The proceeds
were used to repay the 4.013% Series B senior unsecured debentures
at maturity on November 18, 2020.
- During the year ended December 31,
2020, the Company financed new and existing mortgages for
additional net proceeds of $62.9
million at an average interest rate of 3.0%.
- Rent collections from all commercial asset classes have been
strong with approximately 95% collected during the third and fourth
quarters of 2020, compared to 86.6% collected during the second
quarter of 2020.
- As at December 31, 2020, the
Company's total assets were $11.1
billion compared to $11.7
billion as at December 31,
2019.
- During the year, occupancy was consistent across all commercial
and residential asset classes, supporting the Company's business
objective of generating stable and increasing cash flow through its
diversified portfolio of real estate assets.
- During the first quarter of 2020, Morguard purchased the
remaining interest in Temple Hotels Inc. ("Temple") not already
owned by the Company. All Temple shareholders, excluding Morguard,
received $2.10 per common share from
Morguard. Subsequently on February 19,
2020, Temple de-listed from the TSX.
Financial Highlights
For the years
ending December 31
|
|
(in thousands of
dollars, except per common share)
|
2020
|
2019
|
Revenue from real
estate properties
|
$888,324
|
$872,223
|
Revenue from hotel
properties
|
98,046
|
245,282
|
Management and
advisory fees
|
42,080
|
52,401
|
Interest and other
income
|
15,739
|
19,267
|
Total
revenue
|
$1,044,189
|
$1,189,173
|
|
|
|
Revenue from real
estate properties
|
$888,324
|
$872,223
|
Revenue from hotel
properties
|
98,046
|
245,282
|
Property operating
expenses - excluding bad debt expense
|
(378,266)
|
(368,038)
|
Property operating
expenses - bad debt expense
|
(27,192)
|
(3,558)
|
Hotel operating
expenses
|
(89,669)
|
(189,728)
|
Net operating
income
|
$491,243
|
$556,181
|
|
|
|
Net income (loss)
attributable to common shareholders
|
($98,918)
|
$186,939
|
Net income (loss) per
common share – basic and diluted
|
($8.83)
|
$16.57
|
|
|
|
Funds from
operations
|
$161,200
|
$250,871
|
FFO per common share
– basic and diluted
|
$14.39
|
$22.23
|
|
|
|
Normalized funds from
operations
|
$181,205
|
$225,612
|
Normalized FFO per
common share – basic and diluted
|
$16.17
|
$19.99
|
2020 Rental Collections
As at February 25, 2021, the Company's collection of
rental revenues during 2020 is summarized below by asset class:
Asset
Class
|
|
|
|
|
|
|
%
Rental
|
Q1
|
Q2
|
Q3
|
October
|
November
|
December
|
Revenue
|
Residential
|
99.8%
|
99.6%
|
99.4%
|
99.0%
|
98.6%
|
98.2%
|
44.3%
|
Retail
|
98.3%
|
62.4%
|
85.6%
|
88.7%
|
87.1%
|
84.0%
|
27.1%
|
Office
|
99.9%
|
92.8%
|
98.1%
|
97.3%
|
96.9%
|
96.5%
|
27.3%
|
Industrial
|
100.0%
|
93.5%
|
96.9%
|
98.8%
|
98.3%
|
97.3%
|
1.3%
|
Total
|
99.4%
|
86.6%
|
95.0%
|
95.5%
|
94.6%
|
93.4%
|
100.0%
|
Liquidity
The Company has liquidity of approximately
$564 million comprised of
$142 million in cash and $422 million available under its revolving credit
facilities. In addition, the Company has approximately $1,315 million of unencumbered income producing
and hotel properties, and other investments which could be utilized
for financing. To further enhance liquidity, the Company has
narrowed down the scope of its capital expenditure program to
ensure the availability of resources, allocating an amount that
enables the Company to maintain the structural and overall safety
of the properties. Management has also implemented various
initiatives to reduce or defer operating expenses, property tax
instalments, hydro payments and corporate income tax instalments.
Management is also monitoring various government assistance
programs in Canada and the U.S.
structured to provide relief from personnel costs and commercial
rent subsidies.
The Company has approximately $877.5
million of mortgages payable maturing during 2021 and 2022
having an aggregate loan-to-value ratio of 42% and a
weighted-average interest rate of 3.9% which management expects to
be able to refinance at similar or favourable terms. In addition,
the Company has $200 million of
senior unsecured debentures maturing in May
2021. The Company expects to be able to issue new debt
instruments and use current liquidity sufficient to permit the
repayment of its 2021 and 2022 maturities.
The duration and impact of the COVID-19 pandemic is unknown at
this time. It is not possible to reliably estimate the length and
severity of these developments and the impact on the financial
performance and financial position of the Company in future
periods.
Morguard's strategically diversified asset portfolio and
healthy, conservative debt ratios and financial resources provide
strength against economic and real estate cycles. Morguard has
always been driven by our commitment to real estate for the long
term. Our experience has proven that this persistence has driven
greater value for our shareholders year over year, and our
diversified portfolio and conservative debt level positions us well
against any potential challenges. We will continue to carry on with
this approach.
Net Operating Income
NOI decreased by $65.0 million, or
11.7%, during the year ended December 31,
2020, to $491.2 million,
compared to $556.2 million generated
in 2019, and is further analyzed by asset type below.
For the years
ending December 31
|
|
(in thousands of
dollars)
|
2020
|
2019
|
Multi-suite
residential
|
$227,565
|
$212,039
|
Retail
|
116,201
|
143,458
|
Office
|
131,836
|
136,480
|
Industrial
|
7,264
|
8,795
|
Hotels
|
8,377
|
55,554
|
Adjusted
NOI
|
491,243
|
556,326
|
IFRIC 21 adjustment –
multi-suite residential
|
-
|
(134)
|
IFRIC 21 adjustment –
retail
|
-
|
(11)
|
NOI
|
$491,243
|
$556,181
|
Adjusted NOI for the year ended December
31, 2020, decreased by $65.1
million, or 11.7% to $491.2
million, compared to $556.3
million in 2019, primarily due to the following:
- An increase in the Canadian residential portfolio of
$1.6 million, primarily from an
increase in rental revenue from higher average monthly rent and
lower repairs and maintenance expenditures from reduced
non-essential spending, net of higher bad debt expense, increased
vacancy and concessions given to existing tenants during the
pandemic through August 2020;
- An increase in U.S. residential portfolio of US$9.4 million, primarily from an increase of
US$9.6 million due to the acquisition
of the remaining 51% interest in Marquee at Block 37, Chicago, Illinois, and consolidation of its
equity investment interest during the fourth quarter of 2019,
partially offset by lower NOI due to the sale of five properties
located in Louisiana, during the
first and second quarter of 2019;
- A decrease in the Canadian retail portfolio of $24.0 million, mainly due to an increase in bad
debt expense of $18.0 million,
resulting from failed tenants and an expected credit loss due to
the economic impact of COVID-19, of which $4.0 million is due to the 25% landlord portion
of the CECRA program, as well as a decrease of $4.2 million from lower recoveries and lower
basic rent due to leases being restructured;
- A decrease in the office portfolio of $4.6 million, primarily due to an increase in bad
debt expense of $3.3 million, in part
from the 25% landlord portion of CECRA program and the economic
impact of COVID-19, as well as lower basic rent, parking revenue
and a decrease of $6.1 million due to
a rent abatement at a property located in Calgary, Alberta, partially offset by the
acquisition of two properties during 2019, which resulted in
additional NOI of $7.5 million;
- A decrease in the hotel portfolio of $47.2 million, primarily due to a decrease of
$61.3 million resulting from hotel
closures, lower occupancy and lower revenue per available room due
to current economic conditions experienced in all provinces as a
result of the COVID-19 pandemic, partially offset by an increase of
$14.1 million due to a provision for
CEWS; and
- An increase of $4.0 million due
to the change in the U.S. dollar foreign exchange rate.
Fair Value Gain (Loss) on Real Estate Properties
Fair value adjustments are determined based on the movement of
various valuation parameters on a quarterly basis, including
changes in projected cash flows as a result of leasing,
capitalization rates, discount rates and terminal capitalization
rates. During the year ended December 31,
2020, the Company recognized a net fair value loss on real
estate properties of $511.5 million,
compared to a net fair value gain of $27.1
million in 2019.
Fair value gain (loss) on real estate properties consists of the
following:
For the years
ending December 31
|
|
|
(in thousands of
dollars, except per common share)
|
2020
|
2019
|
Multi-suite
residential
|
$86,287
|
$72,823
|
Retail
|
(477,368)
|
(51,861)
|
Office
|
(134,417)
|
(14,511)
|
Industrial
|
11,603
|
13,600
|
Properties under
development
|
-
|
(61)
|
Land held for
development
|
2,423
|
7,067
|
|
($511,472)
|
$27,057
|
For the year ended December 31,
2020, the Company recognized a net fair value gain of
$86.3 million in the residential
portfolio. The fair value gain is comprised of $196.3 million at the Canadian properties
primarily as a result of a 25 basis point decrease in
capitalization rates at properties located in the GTA as well as an
increase in stabilized NOI, and a fair value loss of $110.0 million at the U.S. properties due to a
decrease in stabilized NOI.
For the year ended December 31,
2020, the Company recognized a net fair value loss of
$477.4 million in the retail
portfolio. The fair value loss consists of $414.6 million at the Canadian properties
predominantly due to a 25-50 basis point increase in capitalization
rates and reductions in cash flow assumptions at most of the
Company's enclosed malls due to COVID-19, and a fair value loss of
$62.8 million at U.S. properties
which was predominantly due to a 75 basis point increase in the
capitalization rate at a property located in Louisiana and due to lower stabilized NOI.
For the year ended December 31,
2020, the Company recognized a net fair value loss of
$134.4 million in the office
portfolio. The fair value loss was mainly due to a 75 basis point
increase in the capitalization rate and reductions in cash flow
assumptions resulting from a lease amendment at a property located
in Calgary, Alberta, and due to
assumptions on the collectibility of rental revenue on cash flows
due to COVID-19.
Funds From Operations
For the year ended December 31,
2020, the Company recorded FFO of $161.2 million ($14.39 per common share), compared to
$250.9 million ($22.23 per common share) in 2019. The decrease in
FFO of $89.7 million is mainly due to
the following:
- A decrease in Adjusted NOI of $65.1
million, primarily due to lower Adjusted NOI from the hotel
portfolio;
- A decrease in management and advisory fees of $10.3 million, primarily due to lower property
management, asset management, leasing and disposition fees earned
compared to 2019, partially offset by a provision for CEWS;
- A decrease in interest and other income of $3.5 million, mainly due to lower income earned
from investments;
- An increase in interest expense of $5.8
million, mainly due to higher interest on unsecured
debentures and amortization of deferred financing costs, partially
offset by lower interest on convertible debentures, mortgages
payable and loans payable;
- A decrease in property management and corporate expenses of
$34.5 million, primarily due to a
decrease in non-cash compensation expense related to the Company's
Stock Appreciation Rights plan, a provision for CEWS and other
corporate expenses;
- A decrease in current income taxes of $7.3 million;
- A decrease in the non-controlling interests' share of FFO of
$13.0 million; and
- A decrease in unrealized changes in the fair value of the
Company's financial instruments of $58.8
million.
The change in foreign exchange rate had a positive impact on FFO
of $0.6 million ($0.05 per common share).
The Company believes it is useful to provide an analysis of
Normalized FFO which excludes non-recurring items on a net of tax
basis and other fair value adjustments. Normalized FFO for the
year ended December 31, 2020, was
$181.2 million, or $16.17 per common share, versus $225.6 million, or $19.99 per common share, for the same period in
2019, which represents a decrease of $44.4
million, or 19.7%.
First Quarter Dividend
The Board of Directors of Morguard Corporation announced that
the first quarterly, eligible dividend of 2021 in the amount of
$0.15 per common share will be paid
on March 31, 2021, to shareholders of
record at the close of business on March 15,
2021.
The Company's audited financial statements for the year ended
December 31, 2020, along with
Management's Discussion and Analysis will be available on the
Company's website at www.morguard.com and will be filed with
SEDAR at www.sedar.com.
Non-IFRS Measures
The Company's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS"). The following measures, NOI, Adjusted NOI, Comparative
NOI, FFO and Normalized FFO (collectively, the "non-IFRS measures")
as well as other measures discussed elsewhere in this press
release, do not have a standardized meaning prescribed by IFRS and
are, therefore, unlikely to be comparable to similar measures
presented by other reporting issuers in similar or different
industries. The Company uses these measures to better assess the
Company's underlying performance and financial position and
provides these additional measures so that investors may do the
same. Details on non-IFRS measures are set out in the Company's
Management's Discussion and Analysis for the year ended
December 31, 2020 and available on the Company's profile on
SEDAR at www.sedar.com.
About Morguard Corporation
Morguard Corporation is a real estate company, with total assets
owned and under management valued at $19.0
billion. As at February 25,
2021, Morguard owns a diversified portfolio of 203
multi-suite residential, retail, office, industrial and hotel
properties comprised of 17,752 residential suites, approximately
16.9 million square feet of commercial leasable space and 5,517
hotel rooms. Morguard also currently owns a 60.9% interest in
Morguard Real Estate Investment Trust and a 44.7% effective
interest in Morguard North American Residential Real Estate
Investment Trust. Morguard also provides advisory and management
services to institutional and other investors. For more
information, visit the Company's website at www.morguard.com.
SOURCE Morguard Corporation