MISSISSAUGA, ON, May 4, 2021 /CNW/ – Morguard Corporation (“Morguard” or the “Company”) (TSX: MRC) today announced its financial results for the three months ended March 31, 2021.
Morguard is pleased to report its financial and operating results for the three months ended March 31, 2021, that demonstrate the resilient nature of the Company’s portfolio and also reflect the prudent actions taken by management and staff in our continued response to the ongoing COVID-19 pandemic.
Reporting Highlights
- Net income increased by $26.8 million to $17.9 million for the three months ended March 31, 2021, compared to net loss of $8.9 million for the same period in 2020. The increase was primarily due to a higher net fair value gain of $75.7 million and a lower provision for impairment of $23.9 million, partially offset by a decrease in NOI of $16.1 million, an increase in property management and corporate expense of $9.1 million and an increase in deferred income tax expense of $64.9 million.
- Normalized FFO was $43.2 million, or $3.89 per common share, for the three months ended March 31, 2021. This represents a decrease of $7.4 million, or 14.6% compared to $50.6 million for the same period in 2020.
- Total revenue from real estate properties decreased by $16.9 million, or 7.4% to $211.4 million for the three months ended March 31, 2021, compared to $228.3 million for the same period in 2020.
- Total revenue from hotel properties decreased by $25.7 million, or 53.7% to $22.1 million for the three months ended March 31, 2021, compared to $47.8 million for the same period in 2020.
- Net operating income (“NOI”) decreased by $16.1 million, or 15.7%, to $86.5 million for the three months ended March 31, 2021, compared to $102.6 million for the same period in 2020, primarily due to higher vacancy at residential properties and a decrease from the retail portfolio due to a decrease in basic rent and higher bad debt expense. In addition, lower NOI from the hotel portfolio was due to hotel closures and reduced occupancies from the impact of COVID-19 and was partially offset by a provision for CEWS.
Operational and Balance Sheet Highlights
- Rent collections from all commercial asset classes have been strong with an average of approximately 95% collected since the second quarter of 2020.
- During the year, occupancy was consistent across all commercial and residential asset classes, supporting the Company’s business objective of generating stable and increasing cash flow through its diversified portfolio of real estate assets.
- As at March 31, 2021 and December 31, 2020, the Company’s total assets were $11.1 billion.
Financial Highlights
|
For the three months ending March 31 |
||
|
(in thousands of dollars, except per common share) |
2021 |
2020 |
|
Revenue from real estate properties |
$211,364 |
$228,266 |
|
Revenue from hotel properties |
22,148 |
47,805 |
|
Management and advisory fees |
10,126 |
12,197 |
|
Interest and other income |
3,324 |
4,042 |
|
Total revenue |
$246,962 |
$292,310 |
|
Revenue from real estate properties |
$211,364 |
$228,266 |
|
Revenue from hotel properties |
22,148 |
47,805 |
|
Property operating expenses – excluding bad debt expense |
(126,668) |
(129,821) |
|
Property operating expenses – bad debt expense |
(2,280) |
(1,113) |
|
Hotel operating expenses |
(18,090) |
(42,536) |
|
Net operating income |
$86,474 |
$102,601 |
|
Net income attributable to common shareholders |
$15,155 |
$33,412 |
|
Net income per common share â basic and diluted |
$1.37 |
$2.97 |
|
Funds from operations |
$44,351 |
$6,993 |
|
FFO per common share â basic and diluted |
$4.00 |
$0.62 |
|
Normalized funds from operations |
$43,224 |
$50,633 |
|
Normalized FFO per common share â basic and diluted |
$3.89 |
$4.50 |
Rental Collection Summary
As at May 4, 2021, the Company’s collection of rental revenues since January 1, 2020 is summarized below by asset class as follows:
|
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
April |
% Rental |
|
|
Asset Class |
2020 |
2020 |
2020 |
2020 |
2021 |
2021 |
Revenue |
|
Residential |
99.8% |
99.6% |
99.4% |
99.2% |
98.2% |
95.8% |
44.3% |
|
Retail |
98.3% |
62.4% |
85.6% |
90.5% |
86.5% |
84.4% |
27.1% |
|
Office |
99.9% |
92.8% |
98.1% |
97.7% |
97.7% |
96.8% |
27.3% |
|
Industrial |
100.0% |
93.5% |
96.9% |
99.6% |
98.0% |
95.0% |
1.3% |
|
Total |
99.4% |
86.6% |
95.0% |
96.2% |
94.7% |
92.9% |
100.0% |
Liquidity
The Company has liquidity of approximately $562 million comprised of $121 million in cash and $441 million available under its revolving credit facilities. In addition, the Company has approximately $1,315 million of unencumbered income producing and hotel properties, and other investments which could be utilized for financing. To further enhance liquidity, the Company has narrowed down the scope of its capital expenditure program to ensure the availability of resources, allocating an amount that enables the Company to maintain the structural and overall safety of the properties. Management has also implemented various initiatives to reduce or defer operating expenses, property tax instalments, hydro payments and corporate income tax instalments. Management is also monitoring various government assistance programs in Canada and the U.S. structured to provide relief from personnel costs and commercial rent subsidies.
The Company has approximately $875 million of mortgages payable maturing during 2021 and 2022 having an aggregate loan-to-value ratio of 42% and a weighted-average interest rate of 3.9% which management expects to be able to refinance at similar or favourable terms. In addition, the Company has $200 million of senior unsecured debentures maturing in May 2021. The Company expects to be able to issue new debt instruments and use current liquidity sufficient to permit the repayment of its 2021 and 2022 maturities.
Net Operating Income
NOI decreased by $16.1 million, or 15.7%, during the three months ended March 31, 2021, to $86.5 million, compared to $102.6 million generated in 2020, and is further analyzed by asset type below.
|
For the three months ending March 31 |
||
|
(in thousands of dollars) |
2021 |
2020 |
|
Multi-suite residential |
$50,749 |
$58,632 |
|
Retail |
28,222 |
33,834 |
|
Office |
33,519 |
34,760 |
|
Industrial |
1,781 |
1,956 |
|
Hotels |
4,058 |
5,269 |
|
Adjusted NOI |
118,329 |
134,451 |
|
IFRIC 21 adjustment â multi-suite residential |
(27,859) |
(27,656) |
|
IFRIC 21 adjustment â retail |
(3,996) |
(4,194) |
|
NOI |
$86,474 |
$102,601 |
Adjusted NOI for the three months ended March 31, 2021, decreased by $16.1 million, or 12.0% to $118.3 million, compared to $134.5 million in 2020, primarily due to the following:
- A decrease in the Canadian residential portfolio of $2.2 million, primarily due to increased vacancy as a result of lower leasing traffic resulting from social distancing restrictions and current economic conditions;
- A decrease in U.S. residential portfolio of US$2.9 million, primarily from higher vacancy and rental concessions at two properties located in Chicago, Illinois;
- A decrease in the Canadian retail portfolio of $5.2 million, mainly due to an increase in bad debt expense of $2.2 million due to higher bad debt expense resulting from an expected credit loss due to the economic impact of COVID-19, as well as a decrease of $5.6 million from higher vacancy, lower recoveries of operating expenses and lower basic rent due to conversion to percentage rent leases, partially offset by an increase of $2.5 million in lease cancellation fees;
- A decrease in the office portfolio of $1.2 million, primarily due to lower basic rent, parking revenue, lower recoveries of operating expenses as well as rent abatement at a property in Calgary, Alberta, partially offset by an increase of $1.2 million due to a recovery of bad debt provision at a property located in Saint-Laurent, Québec;
- A decrease in the hotel portfolio of $1.2 million, primarily due to a decrease of $5.7 million resulting from hotel closures, lower occupancy and lower average daily rate due to current economic conditions experienced in all provinces as a result of the COVID-19 pandemic, partially offset by an increase of $4.5 million due to a provision for CEWS; and
- A decrease of $3.1 million due to the change in the U.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended March 31, 2021, the Company recorded FFO of $44.4 million ($4.00 per common share), compared to $7.0 million ($0.62 per common share) in 2020. The increase in FFO of $37.4 million is mainly due to the following:
- A decrease in Adjusted NOI of $16.1 million, primarily due to higher vacancy at residential properties and a decrease from the retail portfolio due to a decrease in basic rent and higher bad debt expenses. In addition, lower Adjusted NOI from the hotel portfolio was due to hotel closures and reduced occupancies from the impact of COVID-19 and was partially offset by a provision for CEWS;
- A decrease in management and advisory fees of $2.1 million;
- A decrease in equity-accounted FFO of $2.2 million, primarily due to the Company’s investment in Lumina Hollywood, which is under initial lease-up;
- A decrease in interest expense of $5.4 million, mainly due to lower interest on mortgages payable, bank indebtedness, loans payable and other, and lower amortization of deferred financing cost;
- An increase in property management and corporate expenses of $9.1 million, primarily due to an increase in non-cash compensation expense related to the Company’s Stock Appreciation Rights plan of $11.2 million, partially offset by a provision for CEWS;
- A decrease in current income taxes of $1.7 million;
- A decrease in the non-controlling interests’ share of FFO of $1.3 million;
- An increase in unrealized changes in the fair value of the Company’s financial instruments of $56.4 million; and
- An increase in other income of $2.7 million, primarily due to settlement proceeds received on four disclaimed leases from Sears Canada Inc.
The change in foreign exchange rate had a negative impact on FFO of $1.0 million ($0.09 per common share).
The Company believes it is useful to provide an analysis of Normalized FFO which excludes non-recurring items on a net of tax basis and other fair value adjustments. Normalized FFO for the three months ended March 31, 2021, was $43.2 million, or $3.89 per common share, versus $50.6 million, or $4.50 per common share, for the same period in 2020, which represents a decrease of $7.4 million, or 14.6%.
Second Quarter Dividend
The Board of Directors of Morguard Corporation announced that the second quarterly, eligible dividend of 2021 in the amount of $0.15 per common share will be paid on June 30, 2021, to shareholders of record at the close of business on June 15, 2021.
The Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2021, along with Management’s Discussion and Analysis will be available on the Company’s website at www.morguard.com and will be filed with SEDAR at www.sedar.com.
Non-IFRS Measures
The Company’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures, NOI, Adjusted NOI, Comparative NOI, FFO and Normalized FFO (collectively, the “non-IFRS measures”) as well as other measures discussed elsewhere in this press release, do not have a standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. The Company uses these measures to better assess the Company’s underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the Company’s Management’s Discussion and Analysis for the three months ended March 31, 2021 and available on the Company’s profile on SEDAR at www.sedar.com.
About Morguard Corporation
Morguard Corporation is a real estate company, with total assets owned and under management valued at $19.2 billion. As at May 4, 2021, Morguard owns a diversified portfolio of 203 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,752 residential suites, approximately 16.9 million square feet of commercial leasable space and 5,517 hotel rooms. Morguard also currently owns a 60.9% interest in Morguard Real Estate Investment Trust and a 44.7% effective interest in Morguard North American Residential Real Estate Investment Trust. Morguard also provides advisory and management services to institutional and other investors. For more information, visit the Company’s website at www.morguard.com.
SOURCE Morguard Corporation
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