MISSISSAUGA, ON, July 29, 2020 /CNW/ – Morguard Real Estate Investment Trust (“the Trust”) (TSX: MRT.UN) today is pleased to announce its financial results for the six month period ending June 30, 2020. These results have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Also included is a brief operational and liquidity update as we continue to focus on managing through the COVID-19 pandemic and the resulting economic impact.
Financial Highlights
Three Months Ended June 30,
Six Months Ended June 30,
In thousands of dollars, except per-unit amounts
2020
2019
2020
2019
Revenue from real estate properties
$59,300
$67,008
$125,673
$137,462
Net operating income
27,200
36,957
62,028
74,817
Fair value losses on real estate properties
(111,430)
(24,602)
(232,547)
(30,282)
Net (loss)/income
(98,814)
(4,701)
(201,369)
12,214
Funds from operations
13,152
21,999
33,110
45,085
Adjusted funds from operations
10,032
15,838
23,763
32,697
Amounts presented on a per unit basis
Net (loss)/income – basic
($1.60)
($0.08)
($3.29)
$0.20
Net (loss)/income – diluted
($1.60)
($0.08)
($3.29)
$0.20
Funds from operations – basic
$0.21
$0.36
$0.54
$0.74
Funds from operations – diluted
$0.21
$0.35
$0.53
$0.71
Adjusted funds from operations – basic
$0.16
$0.26
$0.39
$0.54
Adjusted funds from operations – diluted
$0.16
$0.26
$0.39
$0.53
Distributions per unit
$0.16
$0.24
$0.40
$0.48
CONSOLIDATED OPERATING HIGHLIGHTS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2020 Revenue from real estate properties includes contracted rent from tenants along with recoveries of property expenses (including property taxes). Revenue for the three months ended June 30, 2020, decreased 11.5% to $59.3 million from $67.0 million for the same period in 2019. This decrease is primarily due to reduced recoveries of operating costs and the rent relief granted to Obsidian Energy Limited (“Obsidian”).
On March 30, 2020, the Trust announced the conclusion of its discussions with Obsidian regarding its tenancy in Penn West Plaza. It is estimated that this abatement will represent an annual reduction in the Trust’s net operating income in the range of $6.5–$7.0 million.
Allowance for doubtful accounts The Trust has $24.3 million in Q2 2020 rent arrears outstanding as of June 30, 2020. IFRS requires the Trust to establish an expected credit loss on these arrears taking into account the credit worthiness of the tenants responsible for the arrears. The Trust concluded that the most effective manner in establishing such an allowance was to consider the different components relating to (a) abatements granted through CECRA participation; and (b) future expected credit loss (including failed tenants). Abatements typically do not get recorded through the allowance for doubtful accounts and instead are considered to be a lease modification and are recorded on a straight-line basis throughout the life of the lease. A bad debt expense of $5.5 million has been recorded in relation to the above arrears.
Fair market value adjustments 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 periods (for both the three month and six month periods). These adjustments are a result of the Trust’s regular quarterly IFRS fair value process and include the impact of COVID-19 on the enclosed regional centres from the challenging retail landscape. In accordance with this policy, the following fair value adjustments by segment have been recorded:
Three Months Ended June 30,
Six Months Ended June 30,
2020
2019
2020
2019
Retail – enclosed regional centres
($74,072)
($29,446)
($170,886)
($40,556)
Retail – community strip centres
(9,358)
(2,572)
(10,292)
10,305
Office
(26,652)
8,183
(50,204)
423
Industrial
(1,348)
(767)
(1,165)
(454)
($111,430)
($24,602)
($232,547)
($30,282)
The IFRS value of the Trust’s enclosed mall portfolio has been reduced by $170.9 million since December 31, 2019. This included an average cap rate adjustment of 25 basis points in the first quarter along with changes in cash flow parameters in the second quarter. The second quarter changes represent changes to inputs into the forecasting of cash flows, including normalized vacancy rates, market rental rates, releasing assumptions and credit assumptions. The revised inputs into the discounted cash flow models have resulted in lower fair market values and higher implied overall cap rates.
Reported net loss for three months ended June 30, 2020, was $98.8 million as compared to net loss of $4.7 million in 2019. This change was attributed to the fair value losses recorded in 2020.
COVID-19 UPDATE In March 2020 the outbreak of the novel strain of coronavirus (“COVID-19”) resulted in governments enacting emergency measures to combat the spread of the virus. These measures, included the implementation of travel bans, quarantine periods and physical distancing, and have contributed to an economic recession along with material disruption to business. Governments have reacted with interventions intended to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, although the curtailment of spread in Canada is encouraging.
Management has concluded that it is important for the Trust to play an important role in helping the tenants that have been negatively impacted by the pandemic. As such, the Trust is participating in the Canada Emergency Commercial Rent Assistance (“CECRA”) program as described below and have also been in discussions with larger tenants on a case-by-case basis to determine rent payment solutions.
The Government of Canada has partnered with the provincial governments to deliver the CECRA program. The program is intended to provide relief for small business tenants of commercial landlords who are experiencing financial difficulties during the COVID-19 Pandemic.
Over the course of the program, property owners that participate in the program will reduce rent by at least 75% for the months of April, May, June, and July 2020 for their small business tenants that qualify. The Government of Canada, via a forgivable loan, will cover 50% of the rent, with the tenant paying up to 25% and the landlord forgiving at least 25%.
COLLECTIONS UPDATE Due to non-essential business closure orders issued by the various provinces in Canada, the majority of the Trust’s retail tenants were closed for portions of the second quarter. The easing of these restrictions varied by province and by industry. All of the Trust’s enclosed malls are now open and the vast majority of tenants are allowed to operate.
The following is an analysis of collections by segment, by month, including expected collections for July 2020:
Approximate
Contribution to
Percentage Collections as of July 28, 2020
Revenue
April 2020
May 2020
June 2020
July 2020
Industrial
1%
76%
71%
69%
67%
Office – west
23%
99%
98%
98%
99%
Office – east (Ontario and Quebec)
20%
89%
86%
78%
80%
Retail – community strip centres
15%
80%
78%
76%
81%
Retail – enclosed regional centres
41%
39%
39%
46%
56%
Total
100%
70%
69%
70%
75%
Management is working with all tenants that have arrears to review their situation and to consider rent payment solutions as necessary.
OPERATIONAL UPDATE In response to the decline in collections, there has been a deferral of discretionary capital spending. Also, available deferrals of sales taxes, payroll taxes, property taxes and utility payments offered by the various levels of government have been acted upon. However, most of these deferrals initially acted upon have been reversed by the end of the second quarter.
The amount of PCME spending for 2020 will be less than typical levels. Discretionary spending is being reviewed in order to consider deferrals to later periods. The Trust has narrowed the scope of its capital expenditure program to ensure the availability of resources. Leasing capital will still be spent as opportunities arise in addition to capital needed for any structural or safety purposes. The development project at The Centre in Saskatoon is ongoing and the project at Pine Centre in Prince George is complete, pending the lease up of the remaining space.
FINANCIAL UPDATE The Trust has available liquidity of $54.0 million as of June 30, 2020, and also has an unencumbered asset pool of $327.7 million in order to raise necessary capital, if required. Available liquidity as of December 31, 2019, was $51.9 million.
Amount
Line of credit availability
$47,694
Cash
6,257
Liquidity
53,951
Estimated upfinancing closing in Q3 2020
75,000
Asset held for sale (closing August 2020)
6,800
Pro-Forma liquidity
$135,751
The Trust is working on a number of financings which will provide additional upfinancing proceeds of approximately $75.0 million. All of these financings are mortgages that mature in the third quarter of 2020.
Further, there is an asset that is under contract for sale which is expected to close in August 2020 for estimated proceeds of $6.8 million. This asset is known as Home Base in Ottawa, and has been vacant for the last two years.
Net Operating Income, Funds from Operations This press release and accompanying financial information make reference to net operating income and funds from operations on a total and per unit basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting interest expense, general and administrative expenses and fair value gains/(losses). The Trust presents FFO in accordance with the Real Property Association of Canada white paper on funds from operations and adjusted funds from operations for IFRS. FFO is a non- GAAP measure that is widely accepted as a supplemental measure of financial performance for real estate entities. In accordance with such white paper, the Trust defines FFO as net income adjusted for fair value changes on real estate properties and gains/(losses) on the sale of real estate properties.
Financial Statements and Management’s Discussion and Analysis The Trust’s Q2 2020 Consolidated Financial Statements and Management’s Discussion and Analysis will be made available on the Trust’s website at www.morguard.comand have been filed with SEDAR at www.sedar.com
Conference Call Details:
Date:
Thursday July 30, 2020 4:00 p.m. (ET)
Conference Call #:
416-764-8688 or 1-888-390-0546
Conference ID #:
16342298
About Morguard Real Estate Investment Trust The Trust is a closed-end real estate investment trust, which owns a diversified portfolio of 48 retail, office and industrial income producing properties in Canada with a book value of $2.8 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
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
