MISSISSAUGA, ON,
Feb. 14,
2024 /CNW/ - Morguard Real Estate Investment Trust
("the Trust") (TSX: MRT.UN) today is pleased to announce its 2023
Fourth Quarter and Annual Results.
|
In thousands of
dollars, except per-unit
amounts
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
|
2023
|
2022
|
2023
|
2022
|
|
Revenue from real
estate properties
|
$65,857
|
$59,664
|
$255,076
|
$242,629
|
|
Net operating
income
|
33,409
|
33,539
|
125,973
|
122,199
|
|
Fair value losses on
real estate properties
|
(42,880)
|
(113,004)
|
(131,765)
|
(148,977)
|
|
Net
loss
|
(27,795)
|
(95,376)
|
(74,445)
|
(86,097)
|
|
Funds from
operations 1
|
15,685
|
19,002
|
60,896
|
66,823
|
|
Adjusted funds from
operations 1,2
|
9,670
|
12,745
|
36,965
|
42,721
|
|
Amounts presented on
a per unit basis
|
|
|
|
|
|
Net loss –
basic
|
($0.43)
|
($1.48)
|
($1.16)
|
($1.34)
|
|
Net loss –
diluted
|
($0.43)
|
($1.48)
|
($1.16)
|
($1.34)
|
|
Funds from operations
– basic 1
|
$0.24
|
$0.30
|
$0.95
|
$1.04
|
|
Funds from operations
– diluted 1,3
|
$0.21
|
$0.25
|
$0.82
|
$0.89
|
|
Adjusted funds from
operations – basic 1,2
|
$0.15
|
$0.20
|
$0.58
|
$0.67
|
|
Adjusted funds from
operations – diluted 1,2,3
|
$0.14
|
$0.18
|
$0.54
|
$0.60
|
|
|
|
|
|
|
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.
|
|
|
3. Includes the
dilutive impact of convertible debentures and presented on a cash
settlement basis for consistency with industry practice for
calculating FFO and AFFO.
|
SELECTED FINANCIAL INFORMATION
The table below sets
forth selected financial data relating to the Trust's fiscal years
ended December 31, 2023 and 2022. This financial data is
derived from the Trust's consolidated statements which are prepared
in accordance with IFRS.
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
|
|
|
|
For the year ended
December 31,
|
2023
|
2022
|
%
Change
|
2023
|
2022
|
%
Change
|
|
Revenue from real
estate properties
|
$65,857
|
$59,664
|
10.4 %
|
$255,076
|
$242,629
|
5.1 %
|
|
Property operating
expenses
|
(18,292)
|
(17,193)
|
6.4 %
|
(72,066)
|
(68,801)
|
4.7 %
|
|
Property
taxes
|
(11,896)
|
(6,905)
|
72.3 %
|
(48,296)
|
(43,299)
|
11.5 %
|
|
Property management
fees
|
(2,260)
|
(2,027)
|
11.5 %
|
(8,741)
|
(8,330)
|
4.9 %
|
|
Net operating
income
|
33,409
|
33,539
|
(0.4 %)
|
125,973
|
122,199
|
3.1 %
|
|
Interest
expense
|
(17,173)
|
(14,097)
|
21.8 %
|
(62,845)
|
(53,523)
|
17.4 %
|
|
General and
administrative
|
(873)
|
(818)
|
6.7 %
|
(3,843)
|
(3,741)
|
2.7 %
|
|
Other items
|
(8)
|
1,029
|
(100.8 %)
|
(65)
|
967
|
(106.7 %)
|
|
Fair value losses on
real estate properties
|
(42,880)
|
(113,004)
|
(62.1 %)
|
(131,765)
|
(148,977)
|
(11.6 %)
|
|
Net loss from
equity-accounted investment
|
(270)
|
(2,025)
|
(86.7 %)
|
(1,900)
|
(3,022)
|
(37.1 %)
|
|
Net
loss
|
($27,795)
|
($95,376)
|
(70.9 %)
|
($74,445)
|
($86,097)
|
(13.5 %)
|
CONSOLIDATED OPERATING HIGHLIGHTS
The following is an
analysis of net operating income by asset type:
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
|
For the year ended
December 31,
|
2023
|
2022
|
%
Change
|
2023
|
2022
|
%
Change
|
|
Enclosed regional
centres
|
$12,220
|
$12,411
|
(1.5 %)
|
$43,606
|
$39,416
|
10.6 %
|
|
Community strip
centres
|
6,052
|
5,719
|
5.8 %
|
23,232
|
22,670
|
2.5 %
|
|
Subtotal –
retail
|
18,272
|
18,130
|
0.8 %
|
66,838
|
62,086
|
7.7 %
|
|
|
|
|
|
|
|
|
Single-/dual-tenant
buildings
|
12,454
|
12,528
|
(0.6 %)
|
49,120
|
47,303
|
3.8 %
|
|
Multi-tenant
buildings
|
2,155
|
2,437
|
(11.6 %)
|
8,129
|
10,578
|
(23.2 %)
|
|
Subtotal –
office
|
14,609
|
14,965
|
(2.4 %)
|
57,249
|
57,881
|
(1.1 %)
|
|
|
|
|
|
|
|
|
Industrial
|
528
|
444
|
18.9 %
|
1,886
|
2,232
|
(15.5 %)
|
|
Net operating
income
|
$33,409
|
$33,539
|
(0.4 %)
|
$125,973
|
$122,199
|
3.1 %
|
The increase in enclosed regional centres net operating income
for the year ended December 31, 2023,
is due to 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,
coupled with increased rents earned in 2023. The decrease in
multi-tenant office net operating income for the year ended
December 31, 2023, is due to higher
vacancy in this asset class. The decrease in industrial net
operating income for the year ended December
31, 2023, is due to temporary vacancy at one of the Trust's
single tenant industrial properties.
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
December 31,
|
Year Ended December
31,
|
|
For the year ended
December 31,
|
2023
|
2022
|
%
Change
|
2023
|
2022
|
%
Change
|
|
Industrial
|
$975
|
$828
|
17.8 %
|
$3,591
|
$3,944
|
(9.0 %)
|
|
Office –
Single-/dual-tenant buildings
|
22,175
|
21,930
|
1.1 %
|
86,846
|
83,455
|
4.1 %
|
|
Office – Multi-tenant
buildings
|
6,476
|
6,442
|
0.5 %
|
24,865
|
27,080
|
(8.2 %)
|
|
Retail – Community
strip centres
|
9,320
|
8,768
|
6.3 %
|
37,244
|
35,983
|
3.5 %
|
|
Retail – Enclosed
regional centres
|
26,911
|
21,696
|
24.0 %
|
102,530
|
92,167
|
11.2 %
|
|
Total
|
$65,857
|
$59,664
|
10.4 %
|
$255,076
|
$242,629
|
5.1 %
|
The following is an analysis of revenue from real estate
properties by revenue type:
|
For the three months
ended December 31,
|
2023
|
2022
|
Variance
|
|
Rental
revenue
|
$40,222
|
$39,531
|
$691
|
|
CAM
recoveries
|
13,087
|
13,125
|
(38)
|
|
Property tax and
insurance recoveries
|
9,782
|
4,570
|
5,212
|
|
Other revenue and lease
cancellation fees
|
1,608
|
1,355
|
253
|
|
Parking
revenue
|
1,384
|
1,232
|
152
|
|
Amortized
rents
|
(226)
|
(149)
|
(77)
|
|
$65,857
|
$59,664
|
$6,193
|
|
For the year ended
December 31,
|
2023
|
2022
|
Variance
|
|
Rental
revenue
|
$154,744
|
$153,685
|
$1,059
|
|
CAM
recoveries
|
50,659
|
48,501
|
2,158
|
|
Property tax and
insurance recoveries
|
40,531
|
32,063
|
8,468
|
|
Other revenue and lease
cancellation fees
|
5,102
|
5,165
|
(63)
|
|
Parking
revenue
|
5,413
|
4,507
|
906
|
|
Amortized
rents
|
(1,373)
|
(1,292)
|
(81)
|
|
$255,076
|
$242,629
|
$12,447
|
Property operating expenses for the three months ended
December 31, 2023, increased 6.4% to
$18.3 million from $17.2 million for the same period in 2022. This
increase is primarily due to increased bad debt expense and
insurance deductibles compared to 2022.
Net operating income for the three months ended December 31, 2023, increased 0.4% as compared to
2022. This increase was the result increases in basic rent in 2023
in the retail asset class, offset by increases in vacancy costs in
the multi-tenant office asset class.
Interest expense for the three months ended December 31, 2023, increased 21.8% to
$17.2 million from $14.1 million for the same period in 2022. This
increase is primarily due to higher interest rates on both variable
and new fixed rate debt on a year-over-year basis, offset by a
$11.7 million decline in overall debt
levels on a year-over-year basis.
Fair value losses for the three months ended December 31, 2023, were $42.9 million, versus fair value losses of
$113.0 million for the three months
ended December 31, 2022. The
following fair value adjustments by segment have been recorded
during the quarter:
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
|
For the year ended
December 31,
|
2023
|
2022
|
2023
|
2022
|
|
Retail – enclosed
regional centres
|
($459)
|
($49,635)
|
($387)
|
($90,118)
|
|
Retail – community
strip centres
|
(4,083)
|
(3,465)
|
(8,837)
|
7,991
|
|
Office
|
(41,045)
|
(60,961)
|
(136,985)
|
(78,044)
|
|
Industrial
|
2,707
|
1,057
|
14,444
|
11,194
|
|
($42,880)
|
($113,004)
|
($131,765)
|
($148,977)
|
Reported net loss for the year ended December 31, 2023, was $74.4 million as compared to loss of $86.1 million in 2022. This change is due to the
fair value losses recorded in 2023, 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 REALPAC.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM
OPERATIONS
|
In thousands of
dollars, except per unit amounts
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
|
2023
|
2022
|
% Change
|
2023
|
2022
|
% Change
|
|
Net loss
|
($27,795)
|
($95,376)
|
(70.9 %)
|
($74,445)
|
($86,097)
|
(13.5 %)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Fair value losses on
real estate properties 1
|
43,500
|
115,499
|
(62.3 %)
|
135,433
|
154,104
|
(12.1 %)
|
|
Amortization of
right-of-use assets
|
14
|
21
|
(33.3 %)
|
76
|
83
|
(8.4 %)
|
|
Payment of lease
liabilities, net
|
(34)
|
(42)
|
(19.0 %)
|
(168)
|
(167)
|
0.6 %
|
|
Expropriation proceeds
(other income)
|
—
|
(1,100)
|
— %
|
—
|
(1,100)
|
(100.0 %)
|
|
Funds from
operations – basic
|
15,685
|
19,002
|
(23.2 %)
|
60,896
|
66,823
|
(8.9 %)
|
|
Interest expense on
convertible debentures
|
2,070
|
2,070
|
— %
|
8,348
|
8,348
|
— %
|
|
Funds from
operations – diluted 2
|
$17,755
|
$21,072
|
(21.0 %)
|
$69,244
|
$75,171
|
(7.9 %)
|
|
|
|
|
|
|
|
|
Funds from operations –
basic
|
$15,685
|
$19,002
|
(17.5 %)
|
$60,896
|
$66,823
|
(8.9 %)
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortized stepped rents
1
|
235
|
(7)
|
(3,457.1 %)
|
1,069
|
898
|
19.0 %
|
|
Normalized
PCME
|
(6,250)
|
(6,250)
|
— %
|
(25,000)
|
(25,000)
|
— %
|
|
Adjusted funds from
operations – basic
|
9,670
|
12,745
|
(24.1 %)
|
36,965
|
42,721
|
(13.5 %)
|
|
Interest expense on
convertible debentures
|
2,070
|
2,070
|
— %
|
8,348
|
8,348
|
— %
|
|
Adjusted funds from
operations – diluted 2
|
$11,740
|
$14,815
|
(20.8 %)
|
$45,313
|
$51,069
|
(11.3 %)
|
|
|
|
|
|
|
|
|
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 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 December 31, 2023 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 Q4 2023 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, February 15, 2024,
4:00 p.m. (ET)
Conference Call #:
416-764-8688 or 1-888-390-0546
Conference ID #:
53362834
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 $2.3 billion and
approximately 8.2 million square feet of leasable space.
SOURCE Morguard Real Estate Investment Trust
