Morguard Real Estate Investment Trust Announces 2025 Second Quarter Results

Executive Summary

• Morguard Real Estate Investment Trust reported its 2025 Second Quarter Results, showing a net loss of $1.7 million for the three months ended June 30, 2025, compared to a loss of $2.2 million in the prior year period.
• Revenue from real estate properties decreased by 9.0% to $58.3 million for the quarter, driven largely by lower revenue at Penn West Plaza due to the expiry of the Obsidian Energy lease and rent resets, as well as increased bad debt expenses.
• Funds from operations (FFO) declined significantly, with basic FFO dropping 34.3% to $9.3 million and adjusted FFO plummeting 97.3% to $0.2 million, reflecting higher normalized productive capacity maintenance expenditures and lower rental income.

Key Details

• Revenue:
  • Three Months Ended June 30, 2025: $58,301 (down 9.0% from $64,046 in 2024).
  • Six Months Ended June 30, 2025: $118,648 (down 7.6% from $128,444 in 2024).
• Net Operating Income (NOI):
  • Three Months Ended June 30, 2025: $25,661 (down 19.4% from $31,832 in 2024).
  • Six Months Ended June 30, 2025: $51,361 (down 18.1% from $62,737 in 2024).
• Net Loss:
  • Three Months Ended June 30, 2025: ($1,698) vs ($2,226) in 2024.
  • Six Months Ended June 30, 2025: ($13,363) vs ($39,001) in 2024.
• Funds from Operations (FFO):
  • Basic FFO (3 months): $9,269 (down 34.3% from $14,108).
  • Basic FFO (6 months): $18,431 (down 33.0% from $27,527).
  • Diluted FFO (3 months): $11,350 (down 29.9% from $16,189).
  • Diluted FFO (6 months): $22,570 (down 28.7% from $31,666).
• Adjusted Funds from Operations (AFFO):
  • Basic AFFO (3 months): $217 (down 97.3% from $8,033).
  • Basic AFFO (6 months): $1,024 (down 93.4% from $15,442).
  • Diluted AFFO (3 months): $2,298 (down 77.3% from $10,114).
  • Diluted AFFO (6 months): $5,163 (down 73.6% from $19,581).
• Per Unit Metrics (Three Months Ended June 30, 2025):
  • Net Loss – Basic: ($0.03).
  • FFO – Basic: $0.14 (down from $0.22).
  • FFO – Diluted: $0.13 (down from $0.19).
  • AFFO – Basic: $— (down from $0.12).
  • AFFO – Diluted: $— (down from $0.12).
• Fair Value Adjustments:
  • Total fair value losses on real estate properties for the three months ended June 30, 2025, were ($10,683), compared to ($16,242) in 2024.
  • Office segment recorded a loss of ($5,927) for the quarter.
  • Retail – enclosed regional centres recorded a loss of ($1,505).
  • Industrial segment recorded a gain of $600.
• Operational Drivers for NOI Decline:
  • Penn West Plaza: Decrease in NOI due to lower revenue of $7.7 million stemming from the expiry of the Obsidian Energy lease on February 1, 2025, and the reset of above-market rents ($5.0 million basic rent decrease, $1.8 million vacancy costs, $0.9 million tenant recoveries).
  • Retail: Decrease in enclosed regional centres NOI due to $1.0 million increase in bad debt expense (including Comark Holdings Inc. and The Hudson's Bay Company) and $0.6 million decrease in percentage rent. Community strip centres NOI decreased due to the sale of Heritage Towne Centre in Q2 2024.
  • Office: Single-/dual-tenant buildings NOI decreased due to $0.4 million lower basic rent, $0.7 million increased vacancy costs (BC property tenant downsizing), and $0.7 million lower lease cancellation fees (Quebec property).
  • Industrial: NOI increased 28.1% for the quarter due to increased basic rent and occupancy.
• Expenses:
  • Property operating expenses increased 1.8% to $18.3 million for the quarter, primarily due to higher repairs and maintenance in the enclosed mall asset class.
  • Interest expense decreased 7.3% to $15.983 million, primarily due to lower interest rates on variable and new fixed rate debt, partially offset by an $8.6 million increase in overall debt levels.
  • Normalized productive capacity maintenance expenditures (PCME) for the three months ended June 30, 2025, were $8.75 million, up 40.0% from $6.25 million in 2024.

Notable Quotes

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