MISSISSAUGA, ON, Feb. 15, 2023 /CNW/ – Morguard Real Estate Investment Trust (“the Trust”) (TSX: MRT.UN) today is pleased to announce its 2022 Fourth Quarter and Annual Results.
|
In thousands of dollars, except per-unit amounts |
Three Months Ended December 31, |
Year Ended December 31, |
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|
2022 |
2021 |
2022 |
2021 |
|
|
Revenue from real estate properties |
$59,664 |
$63,235 |
$242,629 |
$241,440 |
|
Net operating income |
33,539 |
31,689 |
122,199 |
122,129 |
|
Fair value losses on real estate properties |
(113,004) |
(18,306) |
(148,977) |
(60,974) |
|
Net (loss)/income |
(95,376) |
(796) |
(86,097) |
4,885 |
|
Funds from operations 1 |
19,002 |
18,001 |
66,823 |
68,944 |
|
Adjusted funds from operations 1,2 |
12,745 |
13,912 |
42,721 |
51,488 |
|
Amounts presented on a per unit basis |
||||
|
Net (loss)/income – basic |
($1.48) |
($0.01) |
($1.34) |
$0.08 |
|
Net (loss)/income – diluted |
($1.48) |
($0.01) |
($1.34) |
$0.08 |
|
Funds from operations – basic 1 |
$0.30 |
$0.28 |
$1.04 |
$1.07 |
|
Funds from operations – diluted 1,3 |
$0.25 |
$0.26 |
$0.89 |
$1.05 |
|
Adjusted funds from operations – basic 1,2 |
$0.20 |
$0.22 |
$0.67 |
$0.80 |
|
Adjusted funds from operations – diluted 1,2,3 |
$0.18 |
$0.21 |
$0.60 |
$0.80 |
|
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”. |
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2. The Trust uses normalized productive capacity maintenance expenditures to calculate adjusted funds from operations. |
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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. |
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The table below sets forth selected financial data relating to the Trust’s three months and fiscal years ended December 31, 2022, and 2021. 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, |
|||||
|
2022 |
2021 |
% Change |
2022 |
2021 |
% Change |
|
|
Revenue from real estate properties |
$59,664 |
$63,235 |
(5.6 %) |
$242,629 |
$241,440 |
0.5 % |
|
Property operating expenses |
(17,193) |
(17,946) |
(4.2 %) |
(68,801) |
(62,397) |
10.3 % |
|
Property taxes |
(6,905) |
(11,563) |
(40.3 %) |
(43,299) |
(48,624) |
(11.0 %) |
|
Property management fees |
(2,027) |
(2,037) |
(0.5 %) |
(8,330) |
(8,290) |
0.5 % |
|
Net operating income |
33,539 |
31,689 |
5.8 % |
122,199 |
122,129 |
0.1 % |
|
Interest expense |
(14,097) |
(13,313) |
5.9 % |
(53,523) |
(53,281) |
0.5 % |
|
General and administrative |
(818) |
(865) |
(5.4 %) |
(3,741) |
(3,845) |
(2.7 %) |
|
Other items |
1,029 |
14 |
7,250.0 % |
967 |
1,934 |
(50.0 %) |
|
Fair value losses on real estate properties |
(113,004) |
(18,306) |
517.3 % |
(148,977) |
(60,974) |
144.3 % |
|
Net loss from equity-accounted investment |
(2,025) |
(15) |
13,400.0 % |
(3,022) |
(1,078) |
180.3 % |
|
Net (loss)/income |
($95,376) |
($796) |
N/A |
($86,097) |
$4,885 |
(1,862.5 %) |
The following is an analysis of net operating income by asset type:
|
Three Months Ended December 31, |
Year Ended December 31, |
|||||
|
2022 |
2021 |
% |
2022 |
2021 |
% |
|
|
Enclosed regional centres |
$12,411 |
$11,075 |
12.1 % |
$39,416 |
$38,067 |
3.5 % |
|
Community strip centres |
5,719 |
5,674 |
0.8 % |
22,670 |
23,272 |
(2.6 %) |
|
Subtotal – retail |
18,130 |
16,749 |
8.2 % |
62,086 |
61,339 |
1.2 % |
|
Single-/dual-tenant buildings |
12,528 |
11,191 |
11.9 % |
47,303 |
46,670 |
1.4 % |
|
Multi-tenant buildings |
2,437 |
3,170 |
(23.1 %) |
10,578 |
12,039 |
(12.1 %) |
|
Subtotal – office |
14,965 |
14,361 |
4.2 % |
57,881 |
58,709 |
(1.4 %) |
|
Industrial |
444 |
579 |
(23.3 %) |
2,232 |
2,081 |
7.3 % |
|
Net operating income |
$33,539 |
$31,689 |
5.8 % |
$122,199 |
$122,129 |
0.1 % |
The decrease in community strip centres net operating income for the year ended December 31, 2022, is due to the sale of Wonderland Corners in London, Ontario on September 29, 2021.
The decrease in multi-tenant office net operating income for the year ended December 31, 2022, is due to higher vacancy in this asset class.
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, |
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|
2022 |
2021 |
% |
2022 |
2021 |
% |
|
|
Industrial |
$828 |
$986 |
(16.0 %) |
$3,944 |
$3,649 |
8.1 % |
|
Office – Single-/dual-tenant buildings |
21,930 |
19,729 |
11.2 % |
83,455 |
79,199 |
5.4 % |
|
Office – Multi-tenant buildings |
6,442 |
7,224 |
(10.8 %) |
27,080 |
27,610 |
(1.9 %) |
|
Retail – Community strip centres |
8,768 |
9,310 |
(5.8 %) |
35,983 |
37,005 |
(2.8 %) |
|
Retail – Enclosed regional centres |
21,696 |
25,986 |
(16.5 %) |
92,167 |
93,977 |
(1.9 %) |
|
Total |
$59,664 |
$63,235 |
(5.6 %) |
$242,629 |
$241,440 |
0.5 % |
The following is an analysis of revenue from real estate properties by revenue type:
|
For the three months ended December 31, |
2022 |
2021 |
Variance |
|
Rental revenue |
$39,531 |
$38,804 |
$727 |
|
CAM recoveries |
13,125 |
13,023 |
102 |
|
Property tax and insurance recoveries |
4,570 |
9,254 |
(4,684) |
|
Other revenue and lease cancellation fees |
1,355 |
1,503 |
(148) |
|
Parking revenue |
1,232 |
1,047 |
185 |
|
Amortized rents |
(149) |
(396) |
247 |
|
$59,664 |
$63,235 |
($3,571) |
|
|
For the year ended December 31, |
2022 |
2021 |
Variance |
|
Rental revenue |
$153,685 |
$151,038 |
$2,647 |
|
CAM recoveries |
48,501 |
42,853 |
5,648 |
|
Property tax and insurance recoveries |
32,063 |
36,469 |
(4,406) |
|
Other revenue and lease cancellation fees |
5,165 |
7,946 |
(2,781) |
|
Parking revenue |
4,507 |
3,887 |
620 |
|
Amortized rents |
(1,292) |
(753) |
(539) |
|
$242,629 |
$241,440 |
$1,189 |
The decline in property tax and insurance recoveries for the year ended December 31, 2022 is due to $5.6 million (2021 – $1.0 million) of prior year property tax refunds processed during 2022 which also resulted in a decline in property tax expense. Included in other revenue and lease cancellation fees in the 12-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.
In 2022, other items included $1.1 million in non-recurring settlement proceeds relating to a land expropriation at one of the Trust’s British Columbia properties. 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 December 31, |
Year Ended December 31, |
|||
|
2022 |
2021 |
2022 |
2021 |
|
|
Retail – enclosed regional centres |
($49,635) |
($11,524) |
($90,118) |
($37,190) |
|
Retail – community strip centres |
(3,465) |
(2,700) |
7,991 |
370 |
|
Office |
(60,961) |
(3,683) |
(78,044) |
(32,551) |
|
Industrial |
1,057 |
(399) |
11,194 |
8,397 |
|
($113,004) |
($18,306) |
($148,977) |
($60,974) |
|
Reported net loss for the year ended December 31, 2022, was $86.1 million as compared to income of $4.9 million in 2021. This change is due to the increase in fair value losses recorded in 2022, as described above.
The Trust presents FFO and AFFO in accordance with the current definition of the REALpac.
|
Three Months Ended December 31, |
Year Ended December 31, |
|||||
|
2022 |
2021 |
% |
2022 |
2021 |
% |
|
|
Net (loss)/income |
($95,376) |
($796) |
11,881.9 % |
($86,097) |
$4,885 |
(1,862.5 %) |
|
Adjustments: |
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|
Fair value losses on real estate properties 1 |
115,499 |
18,820 |
513.7 % |
154,104 |
64,129 |
140.3 % |
|
Amortization of right-of-use assets |
21 |
20 |
5.0 % |
83 |
83 |
— % |
|
Payment of lease liabilities, net |
(42) |
(43) |
(2.3 %) |
(167) |
(153) |
9.2 % |
|
Expropriation proceeds (other income) |
(1,100) |
— |
— % |
(1,100) |
— |
— % |
|
Funds from operations – basic |
19,002 |
18,001 |
11.7 % |
66,823 |
68,944 |
(3.1 %) |
|
Interest expense on convertible debentures |
2,070 |
2,287 |
(9.5 %) |
8,348 |
8,177 |
2.1 % |
|
Funds from operations – diluted |
$21,072 |
$20,288 |
9.3 % |
$75,171 |
$77,121 |
(2.5 %) |
|
Funds from operations – basic |
$19,002 |
$18,001 |
5.6 % |
$66,823 |
$68,944 |
(3.1 %) |
|
Adjustments: |
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|
Amortized stepped rents 1 |
(7) |
536 |
(101.3 %) |
898 |
1,044 |
(14.0 %) |
|
Normalized PCME |
(6,250) |
(4,625) |
35.1 % |
(25,000) |
(18,500) |
35.1 % |
|
Adjusted funds from operations – basic |
12,745 |
13,912 |
(8.4 %) |
42,721 |
51,488 |
(17.0 %) |
|
Interest expense on convertible debentures |
2,070 |
2,287 |
(9.5 %) |
8,348 |
8,177 |
2.1 % |
|
Adjusted funds from operations – diluted |
$14,815 |
$16,199 |
(8.5 %) |
$51,069 |
$59,665 |
(14.4 %) |
|
1. Includes respective adjustments included in net income from equity-accounted investment. |
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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, 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.
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.
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.
The Trust’s Q4 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, February 16, 2023, 4:00 p.m. (ET)
Conference Call #: 416-764-8688 or 1-888-390-0546
Conference ID #: 18877454
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 8.3 million square feet of leasable space.
SOURCE Morguard Real Estate Investment Trust
Featured image: Megapixl © Adrian825
