Reporting Highlights
- Total revenue from real estate properties increased by
$2.4 million , or 1.1% to$218.5 million for the three months endedJune 30, 2020 , compared to$216.1 million for the same period in 2019. - Total revenue from hotel properties decreased by
$56.4 million , or 86.5% to$8.8 million for the three months endedJune 30, 2020 , compared to$65.2 million for the same period in 2019. - Net operating income ("NOI") decreased by
$19.0 million , or 12.6%, to$131.2 million for the three months endedJune 30, 2020 , compared to$150.1 million for the same period in 2019, primarily due to lower NOI from the hotel portfolio and higher bad debt expense. - Net income decreased by
$174.4 million to a net loss of$105.0 million for the three months endedJune 30, 2020 , compared to net income of$69.3 million for the same period in 2019, primarily due to a decrease in net fair value gain of$183.8 million . - Normalized FFO decreased by
$17.4 million , or 29.5% to$41.7 million for the three months endedJune 30, 2020 , compared to$59.1 million for the same period in 2019.
Operational and Balance Sheet Highlights
- The Company recognizes the impact of the novel strain of coronavirus ("COVID-19") has on many of its tenants in
North America and its stakeholders, and is committed in taking measures to protect the health of its employees, tenants and communities. - As at
June 30, 2020 , the Company's total assets were$11.5 billion compared to$11.7 billion as atDecember 31, 2019 . - During the year, occupancy was consistent across all commercial and residential asset classes, supporting the Company's business objective of generating stable and increasing cash flow through its diversified portfolio of real estate assets.
- During the three months ended
June 30, 2020 , the Company financed new and existing mortgages for additional net proceeds of$53.5 million and paid down bank indebtedness in the amount of$80.7 million .
Financial Highlights
Three months ended | Six months ended | |||
(in thousands of dollars, except per common share) | 2020 | 2019 | 2020 | 2019 |
Revenue from real estate properties | ||||
Revenue from hotel properties | 8,831 | 65,199 | 56,636 | 118,826 |
Management and advisory fees | 10,081 | 12,430 | 22,278 | 24,081 |
Interest and other income | 3,516 | 6,525 | 7,558 | 10,924 |
Total revenue | ||||
Revenue from real estate properties | ||||
Revenue from hotel properties | 8,831 | 65,199 | 56,636 | 118,826 |
Property operating expenses | (85,243) | (82,990) | (216,177) | (207,369) |
Hotel operating expenses | (10,891) | (48,157) | (53,427) | (92,671) |
Net operating income | ||||
Net income (loss) attributable to common shareholders | ( | ( | ||
Net income (loss) per common share – basic and diluted | ( | ( | ||
Funds from operations | ||||
FFO per common share – basic and diluted | ||||
Normalized funds from operations | ||||
Normalized FFO per common share – basic and diluted |
OPERATIONAL AND LIQUIDITY UPDATE
The Company recognizes the impact COVID-19 has on many of its tenants in
These are unprecedented times. Everyone has been impacted by the global efforts to reduce the spread of COVID-19. With the guidance of public health authorities, and at the direction of various levels of government,
The
The Company is currently finalizing the application under the CECRA program. The Company's commercial tenant enrolment was 5.6% (based on percentage of second quarter revenue) of which retail tenant enrollment was 9.5%.
On
The Company and associated related party group under common control with the Company, including
Liquidity
The Company has liquidity of approximately
The Company has approximately
The duration and impact of the COVID-19 pandemic is unknown at this time. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial performance and financial position of the Company in future periods.
April -
As at
Asset Class | % Rental | ||||
April | May | June | July | Revenue | |
Residential | 99.1% | 98.4% | 97.2% | 95.3% | 41.7% |
Retail | 54.0% | 50.0% | 54.7% | 64.4% | 28.0% |
Office | 95.3% | 93.6% | 95.7% | 93.9% | 28.9% |
Industrial | 90.2% | 88.8% | 84.2% | 85.1% | 1.4% |
Total | 84.8% | 82.7% | 84.1% | 85.8% | 100.0% |
Operational Update
The following provides an operating update on the Company's portfolio by asset class:
Residential
The Company has halted evictions for non-payment of rent and implemented a rent deferral program for our residential tenants who are financially constrained due to the impact of COVID-19. The Company will also ensure pertinent and timely information regarding government financial support programs is shared with tenants. As at
As at
As at
Retail & Office
Due to non-essential business closure orders issued by the various provinces in
Buildings within the Company's office portfolio have generally remained open during the pandemic, however, due to closure of non-essential businesses and social distancing requirements most our tenants have implemented a work-from-home protocol. The Company has a significant amount of office space leased to government tenants. This will help mitigate the risk of non-payment of rent. Approximately 37% of the Company's office annualized rental revenue is derived from government tenants.
The Company is working with all tenants to review their circumstances and to consider rent deferrals as necessary and are being especially supportive of small business retail tenants. Deferrals are being considered on a case-by- case basis. As at
Hotels
The Company has undertaken significant steps to mitigate the operational and financial impacts from emergency measures enacted to combat the COVID-19 pandemic. As at
Net Income (Loss)
Net loss for the three months ended
- A decrease in net operating income of
$19.0 million primarily due to lower NOI from the hotel portfolio due to hotel closures and reduced occupancies. In addition, lower NOI from the retail and office portfolio was mainly caused by higher bad debt expense, partially offset by an increase in multi-suite residential NOI and from the net impact of acquisitions and dispositions. Included in NOI is a provision for CEWS which partially offset the overall decline in NOI; - An increase in interest expense of
$2.1 million , mainly due to higher interest on Unsecured Debentures and interest on bank indebtedness, partially offset by lower interest on loans payable and other; - A decrease in property management and corporate expense of
$6.1 million , primarily due to a provision for CEWS, partially offset by an increase in non-cash compensation expense related to the Company's Stock Appreciation Rights ("SARs") plan; - An increase in non-cash net fair value loss of
$183.8 million , mainly due to a net fair loss recorded on the Company's real estate properties and an increase in fair value loss on Morguard Residential REIT Units, partially offset by an increase in fair market value gain on the Company's marketable securities; and - An increase in income tax recovery (current and deferred) of
$25.3 million .
Net Operating Income
NOI decreased by
Three months ended | Six months ended | |||
(in thousands of dollars) | 2020 | 2019 | 2020 | 2019 |
Multi-suite residential | ||||
Retail | 27,067 | 35,045 | 60,901 | 71,856 |
Office | 32,102 | 33,857 | 66,862 | 67,584 |
Industrial | 1,616 | 2,456 | 3,572 | 4,604 |
Hotels | (2,060) | 17,042 | 3,209 | 26,155 |
Adjusted NOI | 120,842 | 140,673 | 255,293 | 273,548 |
IFRIC 21 adjustment – multi-suite residential | 8,901 | 8,083 | (18,755) | (16,075) |
IFRIC 21 adjustment – retail | 1,431 | 1,389 | (2,763) | (2,754) |
NOI |
Adjusted NOI for the three months ended
- An increase in the Canadian residential portfolio of
$3.3 million primarily resulting from an increase of$1.5 million from rental rate growth and lower operating expenses and an increase of$1.7 million due a provision for CEWS; - An increase in
U.S. residential NOI ofUS$3.9 million primarily from an increase ofUS$2.9 million due to the acquisition of the remaining 51% interest in Marquee at Block 37 and consolidation of its equity investment interest during the fourth quarter of 2019 and from rental rate growth and lower operating expenses; - A decrease of
$7.8 million mainly in Canadian retail properties resulting from a decrease of$7.8 million due to bad debt expense stemming from closure of non-essential businesses from the impact of COVID-19 and from the 25% landlord portion of the CECRA program, as well as lower recoveries of operating expenses and lower basic rent and a decrease in lease cancellation fees of$1.3 million , partially offset by an increase of$1.3 million relating to a provision for CEWS; - A decrease in the office portfolio of
$1.8 million , primarily due to a decrease of$3.6 million resulting from bad debt expense stemming from the impact of COVID-19 and from the 25% landlord portion of the CECRA program, as well as lower basic rent, parking revenue and a decrease of$1.4 million due to a rental abatement at a single tenant property located inCalgary, Alberta , partially offset by the acquisition of two properties during 2019, which resulted in an increase of$2.3 million and an increase of$1.1 million relating to a provision for CEWS; - A decrease in the hotel portfolio of
$19.1 million primarily due to a decrease of$23.6 million due to hotel closures, lower occupancy and lower revenue per available room due to current economic conditions experienced in all provinces as a result of the COVID-19 pandemic, partially offset by an increase of$4.5 million due to a provision for CEWS; and - An increase of
$2.8 million due to the change in theU.S. dollar foreign exchange rate.
Funds From Operations
For the three months ended
- A decrease in Adjusted NOI of
$19.8 million , primarily due to lower Adjusted NOI from the hotel portfolio due to hotel closures and reduced occupancies from the impact of COVID-19. In addition, lower Adjusted NOI from the retail and office portfolio was mainly due to higher bad debt expense, which was partially offset by higher Adjusted NOI from the residential portfolio, the net impact of acquisitions and dispositions and a provision for CEWS. - A decrease in management and advisory fees of
$2.3 million primarily due to lower property management and leasing fees earned compared to 2019; - A decrease in interest and other income of
$3.0 million mainly due to lower income earned from investments; - An increase in interest expense of
$2.1 million , mainly due to higher interest on Unsecured Debentures and interest on bank indebtedness, partially offset by lower interest on loans payable and other; - A decrease in property management and corporate expenses of
$6.1 million , primarily due to a provision for CEWS, partially offset by an increase in non-cash compensation expense related to the Company's SARs plan; - A decrease in current income taxes of
$0.8 million ; - A decrease in the non-controlling interests' share of FFO of
$4.2 million ; - An increase in non-controlling interest at Morguard Residential REIT of
$1.8 million ; and - An increase in unrealized changes in the fair value of the Company's marketable securities of
$6.7 million .
The change in foreign exchange rate had a positive impact on FFO of
Normalized FFO for the three months ended
Third Quarter Dividend
The Board of Directors of
The Company's unaudited condensed consolidated financial statements for the three months ended
Non-IFRS Measures
The Company's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). The following measures, NOI, Adjusted NOI, Comparative NOI, FFO and Normalized FFO (collectively, the "non-IFRS measures") as well as other measures discussed elsewhere in this press release, do not have a standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers in similar or different industries. The Company uses these measures to better assess the Company's underlying performance and financial position and provides these additional measures so that investors may do the same. Details on non-IFRS measures are set out in the Company's Management's Discussion and Analysis for the three months ended
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