Morguard Real Estate Investment Trust (MRT-UN) Q2 2024 earnings summary

Executive summary

• Revenue from real estate properties rose 3.5% year-over-year to $64.0 million for Q2 2024 and 1.4% to $128.4 million for the six months ended June 30, 2024.

• Net operating income for Q2 2024 increased 4.5% year-over-year to $31.8 million, with strong growth in same-store NOI across all asset classes, especially enclosed malls.

• Net loss for Q2 2024 widened to $2.2 million from $1.8 million in Q2 2023, mainly due to higher interest expense and fair value losses.

• FFO for Q2 2024 was $14.1 million, down 5.8% year-over-year, with AFFO per unit down 14.3% and FFO per unit (basic) at $0.22.

• Distributions per unit remained stable at $0.06 for Q2 and $0.12 for the six months, with a payout ratio of 50% of AFFO.

Financial highlights

• Same asset NOI increased 3.9% for the quarter and 4.6% for the six-month period.

• Fair value losses on real estate properties were $16.2 million in Q2 2024, with six-month losses rising 80.4% to $66.5 million.

• Interest expense increased 15.8% year-over-year to $17.2 million in Q2 2024, driven by higher rates and mortgage rollover costs.

• Sales per square foot in enclosed malls grew 4% year-over-year.

• Net loss per unit (basic and diluted) was ($0.03) for Q2 2024, unchanged from Q2 2023.

Outlook and guidance

• Operating capital needs are expected to remain elevated due to higher construction and tenant inducement costs.

• New EIFEL tax rules effective 2024 will limit interest deductibility, increasing taxable income allocated to unitholders.

• Expects a CAD 14–15 million decrease in NOI in 2025 due to lease-up and vacancy costs at Penn West Plaza, with a projected CAD 5 million improvement in 2026 as lease-up stabilizes.

• Positive leasing momentum expected to continue, with most large tenants expected to renew.