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Morguard Real Estate Investment Trust Announces 2021 Fourth Quarter and Annual Results - Feb 16, 2022

Morguard Real Estate Investment Trust Announces 2021 Fourth Quarter and Annual Results

Feb 16, 2022

MISSISSAUGA, ON, Feb. 16, 2022 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2021 Fourth Quarter and Annual Results. 

Summary of Operations

Three Months Ended December 31,

Year Ended December 31,

In thousands of dollars,  except per-unit amounts

2021

2020

2021

2020

Revenue from real estate properties

$63,235

$67,495

$241,440

$253,764

Net operating income

31,689

33,253

122,129

123,778

Net (loss)/income

(796)

(67,934)

4,885

(357,419)

Funds from operations 1

18,001

19,447

68,944

66,924

Adjusted funds from operations 1,2

13,912

16,350

51,488

51,564

Amounts presented on a per unit basis





Net (loss)/income – basic

($0.01)

($1.07)

$0.08

($5.75)

Net (loss)/income – diluted

($0.01)

($1.07)

$0.08

($5.75)

Funds from operations – basic 1

$0.28

$0.31

$1.07

$1.08

Funds from operations – diluted 1

$0.26

$0.30

$1.05

$1.06

Adjusted funds from operations – basic 1,2 

$0.22

$0.26

$0.80

$0.83

Adjusted funds from operations – diluted 1,2

$0.21

$0.25

$0.80

$0.83



(1)

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.

(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 3 months and fiscal years ended December 31, 2021 and 2020. 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,

2021

2020

2021

2020

Revenue from real estate properties

$63,235

$67,495

$241,440

$253,764

Bad debt expense

(1,523)

(4,750)

(1,184)

(14,857)

Property operating expenses

(16,423)

(15,916)

(61,213)

(59,314)

Property taxes

(11,563)

(11,680)

(48,624)

(47,822)

Property management fees

(2,037)

(1,896)

(8,290)

(7,993)

Net operating income

31,689

33,253

122,129

123,778

Interest expense

(13,313)

(13,712)

(53,281)

(56,376)

General and administrative

(865)

(828)

(3,845)

(3,587)

Other items

14

(20)

1,934

(82)

Fair value losses on real estate properties

(18,306)

(85,804)

(60,974)

(419,766)

Net loss from equity-accounted investment

(15)

(823)

(1,078)

(1,386)

Net (loss)/income

($796)

($67,934)

$4,885

($357,419)

CONSOLIDATED OPERATING HIGHLIGHTS
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 year ended December 31,                                                                      

2021

2020

Industrial

$3,649

$3,479

Office – Single-/dual-tenant buildings

79,199

80,392

Office – Multi-tenant buildings

27,610

29,787

Retail – Community strip centres

37,005

37,701

Retail – Enclosed regional centres

93,977

102,405

Total

$241,440

$253,764

The decline in enclosed regional centres revenue is due to the enclosed mall tenant failures in 2020 and subsequent restructured rent arrangements provided to certain retail tenants that are struggling as part of the COVID-19 pandemic.

The following is an analysis of net operating income by asset type:

For the year ended December 31, 

2021

2020

Enclosed regional centres

$38,067

$39,347

Community strip centres

23,272

23,107

Subtotal – retail

61,339

62,454




Single-/dual-tenant buildings

46,670

46,471

Multi-tenant buildings

12,039

13,052

Subtotal – office

58,709

59,523




Industrial

2,081

1,801

Net operating income

$122,129

$123,778

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

For the year ended December 31,

2021

2020

Rental revenue

$151,038

$155,433

CAM recoveries

42,853

50,369

Property tax and insurance recoveries

36,469

39,073

Other revenue and lease cancellation fees

7,946

5,609

Parking revenue

3,887

4,168

Amortized rents

(753)

(888)


$241,440

$253,764

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

Property operating expenses include costs related to interior and exterior maintenance, insurance and utilities. Property operating expenses (excluding bad debt expense) for the year ended December 31, 2021, increased 3.2% to $61.2 million from $59.3 million for the same period in 2020. This increase is primarily due to more normalized operating expenses in 2021 as compared to 2020 when sharp reductions occurred due to the pandemic.

Net operating income for the year ended December 31, 2021, decreased 1.3% as compared to 2020. This decrease was the result of restructured rent arrangements provided to certain retail tenants that are struggling as part of the COVID-19 pandemic, offset by an increase of $2.3 million in lease cancellation fees.

Interest expense for the year ended December 31, 2021, decreased 5.5% to $53.3 million from $56.4 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 3.6% from 3.8% in the third quarter of 2020, in addition to a $53.2 million reduction in overall debt on a year over year basis.

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. In accordance with this policy, the following fair value adjustments by segment have been recorded:

For the year ended December 31,

2021

2020

Retail – enclosed regional centres

($37,190)

($308,432)

Retail – community strip centres

370

(16,439)

Office

(32,551)

(94,838)

Industrial

8,397

(57)


($60,974)

($419,766)

Reported net income for year ended December 31, 2021, was $4.9 million as compared to loss of $357.4 million in 2020. This change is due to the fair value losses recorded in 2020, as described above.

LIQUIDITY AND FINANCING UPDATE
On December 7, 2021, the Trust issued $159.0 million principal amount of 5.25% convertible unsecured subordinated debentures maturing on December 31, 2026. These proceeds were used to redeem the $175.0 million in convertible debentures issued in 2016.

The Trust has available liquidity of $184.8 million as of December 31, 2021 and also has a unencumbered asset pool of $314.6 million in order to raise necessary capital, if required.  This compares to liquidity as of December 31, 2020 which was $141.9 million 

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
The Trust presents FFO and AFFO in accordance with the current definition of the Real Property Association of Canada ("REALpac") as follows:

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS        


Three Months Ended December 31,

Year Ended December 31,

In thousands of dollars  

2021

2020

2021

2020

Net (loss)/income:

($796)

($67,934)

$4,885

($357,419)

Adjustments:





Fair value losses on real estate properties

18,820

87,393

64,129

424,384

Amortization of right-of-use assets

20

20

83

82

Payment of lease liabilities, net

(43)

(32)

(153)

(123)

Funds from operations - basic

18,001

19,447

68,944

66,924

Interest expense on convertible debentures

2,287

1,985

8,177

7,875

Funds from operations - diluted

$20,288

$21,432

$77,121

$74,799











Funds from operations - basic

$18,001

$19,447

$68,944

$66,924

Adjustments:





Amortized stepped rents

536

28

1,044

265

Normalized PCME

(4,625)

(3,125)

(18,500)

(15,625)

Adjusted funds from operations - basis

13,912

16,350

51,488

51,564

Interest expense on convertible debentures

2,287

1,985

8,177

7,875

Adjusted funds from operations - diluted

$16,199

$18,335

$59,665

$59,439

SPECIFIED FINANICAL 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 year ended December 31, 2021 and available on the Trust's profile on SEDAR at www.sedar.com.

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 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, February 17, 2022 4:00 p.m. (ET)

Conference Call #: 

416-764-8688 or 1-888-390-0546

Conference ID #:

47659057

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 $2.5 billion and approximately 8.3 million square feet of leasable space.

SOURCE Morguard Real Estate Investment Trust

For further information: 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


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