Morguard Real Estate Investment Trust (MRT-UN) Q2 2025 earnings summary

Executive summary

• Revenue from real estate properties declined 9.0% year-over-year for Q2 2025 and 7.6% for the six months ended June 30, 2025, reflecting lower rental income, property dispositions, and major lease expiries.

• Net operating income (NOI) dropped 19.4% year-over-year to $25.7 million for Q2 2025, mainly due to Panama Plaza rent reset, lower office revenue, and increased vacancy costs.

• Net loss improved to $1.7 million in Q2 2025 from $2.2 million in Q2 2024, primarily due to reduced fair value losses.

• Funds from operations (FFO) and adjusted funds from operations (AFFO) both declined significantly year-over-year, with AFFO per unit dropping over 90%.

• 2025 is anticipated as a challenging year due to market rent resets and tenant failures, with partial recovery expected in 2026.

Financial highlights

• Q2 2025 revenue: $58.3 million (Q2 2024: $64.0 million); six months: $118.6 million (2024: $128.4 million).

• Q2 2025 NOI: $25.7 million (Q2 2024: $31.8 million); six months: $51.4 million (2024: $62.7 million).

• Interest expense decreased by $1.3 million for the quarter and over $2 million for the six-month period, driven by lower variable rates.

• Liquidity at quarter-end was $72 million, down from $81 million at the end of 2024.

• $11 million in fair value losses recorded for the quarter, reflecting minor changes across asset classes.

Outlook and guidance

• Management expects a $15 million downturn in NOI from Panama Plaza for 2025, with partial recovery anticipated in 2026 as inducements expire and new leases commence.

• Management continues to focus on tenant retention and cost control amid challenging office and retail markets.

• The Bay's creditor protection and lease disclaimers present ongoing uncertainty for retail income.

• Development projects are underway to enhance long-term value, including remerchandising and residential expansion.

• 2025 is expected to remain challenging, but the downturn is projected to be limited, with optimism for retail leasing fundamentals.