Canada NewsWire
MISSISSAUGA, ON, Aug. 5, 2020
MISSISSAUGA, ON, Aug. 5, 2020 /CNW/ - Morguard Corporation ("Morguard" or the "Company") (TSX: MRC) today announced its financial results for the three and six months ended June 30, 2020, including a brief operational and liquidity update as we continue to focus on managing through the COVID-19 pandemic.
Reporting Highlights
Operational and Balance Sheet Highlights
Financial Highlights
Three months ended June 30 | Six months ended June 30 | |||
(in thousands of dollars, except per common share) | 2020 | 2019 | 2020 | 2019 |
Revenue from real estate properties | $218,477 | $216,093 | $446,743 | $435,933 |
Revenue from hotel properties | 8,831 | 65,199 | 56,636 | 118,826 |
Management and advisory fees | 10,081 | 12,430 | 22,278 | 24,081 |
Interest and other income | 3,516 | 6,525 | 7,558 | 10,924 |
Total revenue | $240,905 | $300,247 | $533,215 | $589,764 |
Revenue from real estate properties | $218,477 | $216,093 | $446,743 | $435,933 |
Revenue from hotel properties | 8,831 | 65,199 | 56,636 | 118,826 |
Property operating expenses | (85,243) | (82,990) | (216,177) | (207,369) |
Hotel operating expenses | (10,891) | (48,157) | (53,427) | (92,671) |
Net operating income | $131,174 | $150,145 | $233,775 | $254,719 |
Net income (loss) attributable to common shareholders | ($65,396) | $69,722 | ($31,984) | $103,208 |
Net income (loss) per common share – basic and diluted | ($5.81) | $6.17 | ($2.84) | $9.14 |
Funds from operations | $48,881 | $62,311 | $55,874 | $115,877 |
FFO per common share – basic and diluted | $4.35 | $5.52 | $4.97 | $10.26 |
Normalized funds from operations | $41,652 | $59,085 | $93,008 | $111,562 |
Normalized FFO per common share – basic and diluted | $3.71 | $5.24 | $8.27 | $9.88 |
OPERATIONAL AND LIQUIDITY UPDATE
The Company recognizes the impact COVID-19 has on many of its tenants in North America and its stakeholders, and is committed in taking measures to protect the health of its employees, tenants and communities. In March, Morguard initiated its crisis management plan with a team mandated to maintain a safe environment for our tenants, residents, employees and stakeholders, coordinating efforts across our portfolio, standardizing communications and responding as circumstances demand.
These are unprecedented times. Everyone has been impacted by the global efforts to reduce the spread of COVID-19. With the guidance of public health authorities, and at the direction of various levels of government, Morguard has implemented measures to help reduce the spread of COVID-19 and we are actively monitoring the ongoing developments with regards to COVID-19 and are committed in ensuring a healthy and safe environment, adjusting our service model as necessary.
The Government of Canada has partnered with the provincial governments to deliver the Canada Emergency Commercial Rent Assistance ("CECRA") program. The program is intended to provide relief for small businesses and commercial landlords who are experiencing financial difficulties during the COVID-19 Pandemic.
The Company is currently finalizing the application under the CECRA program. The Company's commercial tenant enrolment was 5.6% (based on percentage of second quarter revenue) of which retail tenant enrollment was 9.5%.
On April 11, 2020, the Canada Emergency Wage Subsidy ("CEWS") was enacted, which provides a subsidy for each employee employed between March 15 to June 6, 2020. Subsequently, the Government of Canada extended CEWS to December 19, 2020.
The Company and associated related party group under common control with the Company, including Paros Enterprises Limited, have satisfied certain eligibility criteria, including (among others) a significant decline in revenue due to the temporary closures of non-essential services. The Company will continue to assess its eligibility to December 19, 2020. For the three and six months ended June 30, 2020, the Company recorded $13.4 million as a deduction of the related expense.
Liquidity
The Company has liquidity of approximately $469 million comprised of $136 million in cash and $333 million available under its revolving credit facilities. In addition, the Company has approximately $865 million of unencumbered income producing and hotel properties which could be financed. 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 installments, hydro payments and corporate income tax installments. 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 $361 million of mortgages payable maturing during 2020 having an aggregate loan-to-value ratio of 36% which management expects to be able to refinance at similar or favorable terms. In addition, the Company has $200 million of senior unsecured debentures maturing in November 2020. The Company expects to be able to issue new debt instruments and use current liquidity sufficient to permit the repayment of its 2020 maturities.
The duration and impact of the COVID-19 pandemic is unknown at this time. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial performance and financial position of the Company in future periods.
Morguard's strategically diversified asset portfolio and healthy, conservative debt ratios and financial resources provide strength against economic and real estate cycles. Morguard has always been driven by our commitment to real estate for the long term. Our experience has proven that this persistence has driven greater value for our shareholders year over year, and our diversified portfolio and conservative debt level position us well against any potential challenges. We will continue to carry on with this approach.
April - July 2020 Collections
As at August 5, 2020, the Company's collection of rental revenues since April 2020 is summarized below by asset class:
Asset Class | % Rental | ||||
April | May | June | July | Revenue | |
Residential | 99.1% | 98.4% | 97.2% | 95.3% | 41.7% |
Retail | 54.0% | 50.0% | 54.7% | 64.4% | 28.0% |
Office | 95.3% | 93.6% | 95.7% | 93.9% | 28.9% |
Industrial | 90.2% | 88.8% | 84.2% | 85.1% | 1.4% |
Total | 84.8% | 82.7% | 84.1% | 85.8% | 100.0% |
Operational Update
The following provides an operating update on the Company's portfolio by asset class:
Residential
The Company has halted evictions for non-payment of rent and implemented a rent deferral program for our residential tenants who are financially constrained due to the impact of COVID-19. The Company will also ensure pertinent and timely information regarding government financial support programs is shared with tenants. As at August 5, 2020, approximately 0.7% of residential tenants have deferred payment plans. In addition, commencing with April's rental payment, the Company has waived the collection of rental increases and late fees for existing tenants during this period of crisis.
As at August 5, 2020, the Company has collected approximately 95.3% (96.5% in Canada / 94.3% in the U.S.) of July residential rental revenue which is materially in line with historical collection rates. Management will monitor rent collections and compassionately follow up with those accounts in arrears as the impact of the pandemic continues to weigh on the North American economy.
As at August 5, 2020, the Company's occupancy remains stable in Canada and the U.S. as leasing agents work remotely and utilize online technology to continue leasing activity following the onset of social distancing guidelines. Generally speaking, current conditions including social distancing has reduced leasing traffic. Management will closely monitor traffic and turnover levels in the coming months as we move through our peak leasing season.
Retail & Office
Due to non-essential business closure orders issued by the various provinces in Canada, the majority of the Company'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 Company's enclosed malls are now open and the vast majority of tenants are allowed to operate.
Buildings within the Company's office portfolio have generally remained open during the pandemic, however, due to closure of non-essential businesses and social distancing requirements most our tenants have implemented a work-from-home protocol. The Company has a significant amount of office space leased to government tenants. This will help mitigate the risk of non-payment of rent. Approximately 37% of the Company's office annualized rental revenue is derived from government tenants.
The Company is working with all tenants to review their circumstances and to consider rent deferrals as necessary and are being especially supportive of small business retail tenants. Deferrals are being considered on a case-by- case basis. As at August 5, 2020, most retailers are waiting for clarification on the extent of the economic crisis before settling deferral terms. The federal government has also introduced legislation to assist landlords and small businesses with their rent obligations during the COVID-19 pandemic.
Hotels
The Company has undertaken significant steps to mitigate the operational and financial impacts from emergency measures enacted to combat the COVID-19 pandemic. As at August 5, 2020, of the Company's 38 hotels, 31 are currently open for business at reduced occupancy levels and are serving guests in compliance with government health guidelines. The temporary closure of seven hotels allows the Company to minimize any financial impact and to consolidate operations at certain hotels within the same sub-market. The Company's hotel asset class represents less than 10% of total NOI and less than 5% of total assets.
Net Income (Loss)
Net loss for the three months ended June 30, 2020, was $105.0 million compared to net income of $69.3 million in 2019. The decrease in net income of $174.4 million for the three months ended June 30, 2020, was primarily due to the following:
Net Operating Income
NOI decreased by $19.0 million, or 12.6%, during the three months ended June 30, 2020, to $131.2 million, compared to $150.1 million generated in 2019, and is further analyzed by asset type below.
Three months ended | Six months ended June 30 | |||
(in thousands of dollars) | 2020 | 2019 | 2020 | 2019 |
Multi-suite residential | $62,117 | $52,273 | $120,749 | $103,349 |
Retail | 27,067 | 35,045 | 60,901 | 71,856 |
Office | 32,102 | 33,857 | 66,862 | 67,584 |
Industrial | 1,616 | 2,456 | 3,572 | 4,604 |
Hotels | (2,060) | 17,042 | 3,209 | 26,155 |
Adjusted NOI | 120,842 | 140,673 | 255,293 | 273,548 |
IFRIC 21 adjustment – multi-suite residential | 8,901 | 8,083 | (18,755) | (16,075) |
IFRIC 21 adjustment – retail | 1,431 | 1,389 | (2,763) | (2,754) |
NOI | $131,174 | $150,145 | $233,775 | $254,719 |
Adjusted NOI for the three months ended June 30, 2020, decreased by $19.8 million, or 14.1% to $120.8 million, compared to $140.7 million in 2019 primarily due to the following:
Funds From Operations
For the three months ended June 30, 2020, the Company recorded FFO of $48.9 million ($4.35 per common share), compared to $62.3 million ($5.52 per common share) in 2019. The decrease in FFO of $13.4 million is mainly due to the following:
The change in foreign exchange rate had a positive impact on FFO of $0.5 million ($0.05 per common share).
Normalized FFO for the three months ended June 30, 2020, was $41.7 million, or $3.71 per common share, versus $59.1 million, or $5.24 per common share, for the same period in 2019, which represents a decrease of $17.4 million, or 29.5%. Normalized FFO is computed as FFO adjusted for the impact of non-recurring items net of tax.
Third Quarter Dividend
The Board of Directors of Morguard Corporation announced that the third quarterly, eligible dividend of 2020 in the amount of $0.15 per common share will be paid on September 30, 2020, to shareholders of record at the close of business on September 15, 2020.
The Company's unaudited condensed consolidated financial statements for the three months ended June 30, 2020, 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 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 June 30, 2020 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 $20.1 billion. As at August 5, 2020, Morguard owns a diversified portfolio of 204 multi-suite residential, retail, office, industrial and hotel properties comprised of 17,638 residential suites, approximately 16.9 million square feet of commercial leasable space and 5,758 hotel rooms. Morguard also currently owns a 59.6% interest in Morguard Real Estate Investment Trust and a 44.8% 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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