Post by
incomedreamer11 on Apr 29, 2022 8:49am
TD comments
Event Q1/22 results and forecast update.
Impact: NEUTRAL FFO/unit (f.d.) of $0.20 was -31% vs. Q1/21, and a penny below our estimate (consensus: $0.22).
AFFO/unit of $0.13 was $0.02 below our estimate.
The quarter benefited from $0.6mm of lease cancellation income, which was offset by $0.6mm of bad debt expense (nil forecast). SPNOI was +0.4%. Retail SPNOI was +8%, driven by the enclosed mall portfolio, although this was partially offset by a 6% decline in the office portfolio.
Portfolio occupancy was +60bps y/y, as a 170bps increase in retail was partially offset by a 100bps decline in the office portfolio. Q/q occupancy was +20bps, with office +50bps, while retail was effectively flat, despite the normal decline that follows the conclusion of holiday activities (e.g. pop-ups). Despite the impact of Omicron on the quarter, the REIT reported a 60% q/q decline in bad debts to $0.6mm, which represents a normalized level. Rent collections have also effectively returned to pre-pandemic levels.
We see upside for Morguard's enclosed mall and office portfolios as the operating environment for the two asset classes begins to normalize. Management noted that the majority of the weakness in its retail portfolio is concentrated in its two Ontario malls. Given the good progress seen at its other enclosed retail properties (increasing traffic), which are located in western Canada, where lockdowns were less restrictive, we are optimistic that the Ontario assets can follow suit.
Leasing. Roughly one-third of the remaining 2022 retail maturities represent large/ anchor tenants, which have already renewed or are expected to renew. The vast majority of the remaining maturities is also expected to renew. In its office portfolio, the REIT has already renewed, or is expected to renew 154,000sf, or ~57%, of remaining 2022 expiries with government tenants.
Forecast. Our AFFO/unit estimates declined ~4%, largely reflecting the resumption of normalized maintenance capex activities. Our $9.40 NAV/unit estimate is unchanged.
TD Investment Conclusion Although operations appear to be stabilizing, we do not see any meaningful nearterm catalysts that would help close the valuation gap versus its peers. We are maintaining our HOLD recommendation and but increasing our target price to $6.50
Comment by
flamingogold on Apr 29, 2022 9:43am
Quick summary: Target Price increased to $6.50 1. Rent collections returned to pre-pandemic levels 2. Mall/office environment normalizing 3. Majority of office/mall leases renewed/expected to renew