Morguard Real Estate Investment Trust (MRT-UN) Q1 2025 earnings summary

Executive summary

• Revenue from real estate properties declined 6.3% year-over-year to $60.3 million for Q1 2025, with net operating income down 16.8% to $25.7 million, mainly due to Penn West Plaza lease reset, higher bad debt, and retail tenant failures.

• Net loss narrowed to $11.7 million from $36.8 million in Q1 2024, primarily due to lower fair value losses on real estate properties.

• Funds from operations (FFO) per unit fell 33.3% year-over-year to $0.14, and adjusted funds from operations (AFFO) per unit dropped 91.7% to $0.01, reflecting higher maintenance expenditures and lower NOI.

• Occupancy rates at quarter-end were 93.7% for retail, 79.7% for office, and 91.9% for industrial, with total portfolio occupancy at 87.7%.

• Leasing efforts at Penn West Plaza achieved 80% occupancy (including future commitments), and community strip centers maintained 99% occupancy with strong same-asset NOI growth.

Financial highlights

• Net operating income declined to CAD 25.7 million from CAD 30.9 million year-over-year, mainly due to Penn West Plaza lease reset, increased bad debt, and asset sales.

• Fair value losses on real estate properties were $20.9 million, down from $50.2 million year-over-year.

• Interest expense decreased by nearly CAD 900,000 due to lower gross debt and interest rates.

• Total assets stood at $2.17 billion as of March 31, 2025, with total gross debt at $1.24 billion and total equity at $869.6 million.

• Cash provided by operating activities dropped 67.5% year-over-year to $2.0 million, mainly due to lower NOI and higher leasing costs.

Outlook and guidance

• Management expects a CAD 15 million downturn in Penn West Plaza NOI for 2025, with recovery anticipated in 2026 as inducements expire and new leases commence.

• The Bay, a major tenant, filed for creditor protection in March 2025, with liquidation sales ongoing at two locations; the Trust earns about $1.5 million annually from The Bay, and the impact is expected to be felt in Q2 2025.

• Management continues to focus on tenant retention, cost control, and targeted development projects to support long-term growth.

• Ongoing positive leasing conversations and continued focus on building value for unitholders.