Morguard Real Estate Investment Trust (MRT-UN) Q4 2025 earnings summary

Executive summary

• Fourth quarter and full-year results reflected continued softness in the office segment, stable retail performance, and a diversified portfolio of 45 properties totaling 8.1 million square feet with overall occupancy at 85.1%.

• Revenue from real estate properties declined 7.7% year-over-year to $239.3 million for 2025, with net operating income down 13.0% to $111.8 million and a net loss of $16.6 million, a significant improvement from the $58.8 million loss in 2024.

• Funds from operations (FFO) fell 21.1% to $46.5 million, and adjusted funds from operations (AFFO) dropped 67.0% to $11.4 million, reflecting lower NOI and higher normalized maintenance expenditures.

• Retail fundamentals remain positive despite the loss of The Bay as a tenant, with strong occupancy in community strip centers and robust sales and traffic at enclosed malls.

• Net operating income for Q4 declined to CAD 29.1 million from CAD 33.5 million in 2024, mainly due to Penn West Plaza.

Financial highlights

• Net operating income decreased mainly due to lower revenue at Penn West Plaza after the expiry of a major lease and the sale of Heritage Towne Centre.

• Fair value losses on real estate properties were $61.6 million, down from $114.4 million in 2024, driven by higher office vacancy and capitalization rate expansion.

• Interest expense declined 5.8% to $63.5 million due to lower rates on variable and renewed fixed debt.

• One-time property tax refund contributed CAD 3.8 million to annual net operating income.

• Cash provided by operating activities fell 26.8% to $40.4 million, while cash used in investing activities rose due to lower proceeds from property sales.

Outlook and guidance

• Retail results expected to remain stable in 2026, with continued positive fundamentals and new retail developments underway.

• Office segment anticipated to experience ongoing softness in 2026 due to vacancies, but increased interest in office leasing tours may lead to future deals.

• NOI from repurposed HBC space at St. Laurent expected in 2026, with Sears space NOI contribution anticipated in 2027.

• Canadian economic growth is expected to remain slow in 2026, with ongoing trade tensions and moderate consumer spending impacting business investment and confidence.

• Renewal spreads for 2025 were about 5% for malls and 9% for strip centers, with similar trends expected in 2026.