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Morguard Real Estate Investment Trust Announces 2022 Third Quarter Results - Oct 26, 2022

Morguard Real Estate Investment Trust Announces 2022 Third Quarter Results

Oct 26, 2022

MISSISSAUGA, ON, Oct. 26, 2022 /CNW/ - Morguard Real Estate Investment Trust ("the Trust") (TSX: MRT.UN) today is pleased to announce its 2022 Third Quarter Results.

In thousands of dollars, except per-unit

amounts

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenue from real estate properties

$61,127

$58,760

$182,965

$178,205

Net operating income

30,433

30,407

88,660

90,440

Fair value losses on real estate properties

(73,263)

(7,382)

(35,973)

(42,668)

Net (loss)/income

(58,279)

6,676

9,279

5,681

Funds from operations 1

16,633

16,567

47,821

50,943

Adjusted funds from operations 1,2

10,385

12,162

29,976

37,576

Amounts presented on a per unit basis





Net (loss)/income – basic

($0.91)

$0.10

$0.14

$0.09

Net (loss)/income – diluted

($0.91)

$0.10

$0.14

$0.09

Funds from operations – basic 1

$0.26

$0.26

$0.75

$0.79

Funds from operations – diluted 1

$0.22

$0.26

$0.64

$0.78

Adjusted funds from operations – basic 1,2

$0.16

$0.19

$0.47

$0.59

Adjusted funds from operations – diluted 1,2

$0.15

$0.19

$0.43

$0.59

Distributions per unit

$0.06

$0.06

$0.18

$0.20






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 three and nine month periods ended September 30, 2022 and 2021. 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,


2022

2021

% Change

2022

2021

% Change

Revenue from real estate properties

$61,127

$58,760

4.0 %

$182,965

$178,205

2.7 %

Property operating expenses

(16,410)

(14,336)

14.5 %

(51,608)

(44,451)

16.1 %

Property taxes

(12,111)

(11,955)

1.3 %

(36,394)

(37,061)

(1.8 %)

Property management fees

(2,173)

(2,062)

5.4 %

(6,303)

(6,253)

0.8 %

Net operating income

30,433

30,407

0.1 %

88,660

90,440

(2.0 %)

Interest expense

(13,343)

(13,317)

0.2 %

(39,426)

(39,968)

(1.4 %)

General and administrative

(935)

(1,013)

(7.7 %)

(2,923)

(2,980)

(1.9 %)

Other items

(20)

(21)

(4.8 %)

(62)

1,920

(103.2 %)

Fair value losses on real estate properties

(73,263)

(7,382)

892.5 %

(35,973)

(42,668)

(15.7 %)

Net loss from equity-accounted investment

(1,151)

(1,998)

(42.4 %)

(997)

(1,063)

(6.2 %)

Net (loss)/income

($58,279)

$6,676

N/A

$9,279

$5,681

63.3 %

Net (loss)/income per unit – basic

($0.91)

$0.10

N/A

$0.14

$0.09

55.6 %

Funds from operations per unit – basic

$0.26

$0.26

— %

$0.75

$0.79

(5.1 %)

Adjusted funds from operations per unit – basic

$0.16

$0.19

(15.8 %)

$0.47

$0.59

(20.3 %)


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,


2022

2021

%

2022

2021

%

Enclosed regional centres

$9,532

$9,199

3.6 %

$27,005

$26,992

— %

Community strip centres

5,648

6,037

(6.4 %)

16,951

17,598

(3.7 %)

Subtotal – retail

15,180

15,236

(0.4 %)

43,956

44,590

(1.4 %)








Single-/dual-tenant buildings

11,833

11,909

(0.6 %)

34,775

35,479

(2.0 %)

Multi-tenant buildings

2,818

2,682

5.1 %

8,141

8,869

(8.2 %)

Subtotal – office

14,651

14,591

0.4 %

42,916

44,348

(3.2 %)








Industrial

602

580

3.8 %

1,788

1,502

19.0 %

Net operating income

$30,433

$30,407

0.1 %

$88,660

$90,440

(2.0 %)


The decrease in community strip centre net operating income for both the three and nine month periods is due to the sale of Wonderland Corners in London, Ontario in September 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:


Three Months Ended September 30,

Nine Months Ended September 30,


2022

2021

%

2022

2021

%

Industrial

$993

$892

11.3 %

$3,116

$2,663

17.0 %

Office – Single-/dual-tenant buildings

20,791

20,115

3.4 %

61,525

59,470

3.5 %

Office – Multi-tenant buildings

6,994

6,484

7.9 %

20,638

20,386

1.2 %

Retail – Community strip centres

8,775

9,280

(5.4 %)

27,215

27,695

(1.7 %)

Retail – Enclosed regional centres

23,574

21,989

7.2 %

70,471

67,991

3.6 %

Total

$61,127

$58,760

4.0 %

$182,965

$178,205

2.7 %


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

For the three months ended September 30,

2022

2021

Variance

Rental revenue

$38,535

$37,651

$884

CAM recoveries

11,536

10,392

1,144

Property tax and insurance recoveries

8,981

8,927

54

Other revenue and lease cancellation fees

978

1,250

(272)

Parking revenue

1,143

978

165

Amortized rents

(46)

(438)

392


$61,127

$58,760

$2,367









For the nine months ended September 30,

2022

2021

Variance

Rental revenue

$114,154

$112,234

$1,920

CAM recoveries

35,376

29,830

5,546

Property tax and insurance recoveries

27,493

27,215

278

Other revenue and lease cancellation fees

3,810

6,443

(2,633)

Parking revenue

3,275

2,840

435

Amortized rents

(1,143)

(357)

(786)


$182,965

$178,205

$4,760


Included in other revenue and lease cancellation fees in the nine month period ending September 30, 2021, is $2.3 million received from Lowe's at Pine Centre in order to facilitate the Save-On-Foods development.

Net operating income for the three months ended September 30, 2022, increased slightly 0.1% as compared to 2021.

Interest expense for the three months ended September 30, 2022, decreased 0.2% vs the same period in 2021. This decline is primarily due to a $30.4 million decline in overall debt levels on a year-over-year basis, offset by higher interest rates on both variable and new fixed rate debt on a year-over-year basis.

In 2021, other items included $2.0 million in non-recurring settlement proceeds from Sears.

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,


2022

2021

2022

2021

Retail – enclosed regional centres

($38,816)

($3,191)

($40,483)

($25,666)

Retail – community strip centres

(2,287)

2,854

11,456

3,070

Office

(29,963)

(7,360)

(17,083)

(28,868)

Industrial

(2,197)

315

10,137

8,796


($73,263)

($7,382)

($35,973)

($42,668)


Reported net loss for three months ended September 30, 2022, was $58.3 million as compared to income of $6.7 million in 2021. This change is due to the fair value losses recorded in 2022, 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 Real Property Association of Canada ("REALpac") as follows:

FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS

In thousands of dollars, except per unit amounts

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

%

2022

2021

%

Net (loss)/income

($58,279)

$6,676

(973.0 %)

$9,279

$5,681

63.3 %

Adjustments:







Fair value losses on real estate properties 1

74,935

9,908

656.3 %

38,605

45,309

(14.8 %)

Amortization of right-of-use assets

20

21

(4.8 %)

62

63

(1.6 %)

Payment of lease liabilities, net

(43)

(38)

13.2 %

(125)

(110)

13.6 %

Funds from operations – basic

16,633

16,567

0.4 %

47,821

50,943

(6.1 %)

Interest expense on convertible debentures

2,104

1,985

6.0 %

6,278

5,890

6.6 %

Funds from operations – diluted

$18,737

$18,552

1.0 %

$54,099

$56,833

(4.8 %)








Funds from operations – basic

$16,633

$16,567

0.4 %

$47,821

$50,943

(6.1 %)

Adjustments:







Amortized stepped rents 1

2

220

(99.1 %)

905

508

78.1 %

Normalized PCME

(6,250)

(4,625)

35.1 %

(18,750)

(13,875)

35.1 %

Adjusted funds from operations – basic

10,385

12,162

(14.6 %)

29,976

37,576

(20.2 %)

Interest expense on convertible debentures

2,104

1,985

6.0 %

6,278

5,890

6.6 %

Adjusted funds from operations – diluted

$12,489

$14,147

(11.7 %)

$36,254

$43,466

(16.6 %)








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 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 period ended September 30, 2022 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 Q3 2022 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, October 27, 2022 4:00 p.m. (ET)
Conference Call #:                   416-764-8688 or 1-888-390-0546
Conference ID #:                      31199770

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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