RetiredCEO wrote: The IFRS write downs have been heavy, especially in malls. Not limited to just MRT. This is especially the case for malls which are not Class A. MRT IFRS is obviously much closer to realistic today, than 2019. There is still further write downs possible, but unlikely to that extent. As the economy recovers, the more likely IFRS values will too, or at least not go down. IFRS is a standard, and isn't up to MRT to guess. So these numbers can be viewed as accurate but you still need to see the whole picture, which includes forecast, trending, and properties not evaluated recently.
The issue with MRT is its ability to refinance their mall mortgages. That is what is dragging MRT down. You will read in the USA that banks are not refinancing malls, or if they are, it's at a tiny fraction to IFRS value. Some companies are approaching bankruptcy because of this. This is similar to Canada. MRT has stated this in their financials also. They may need to pay down the principal on renewal and that will drastically limit their liquidity. MRTs access to capital is very limited as I'm about to explain.
Now I've down digging into Morguard Corp., the parent company, also. They are who I would expect to bail out MRT in case of a serious issue. Morguard is breaching covenants with the banks. They have broke their hotel covenants, and are creeping up to their Depenture covenants, but still has a bit of wiggle room there. The debt is immediately due if they breach the debt covenants, which likely would put them in immediate bankruptcy. At this point unlikely (less than 5% is my guess), but is something to watch over the next few quarters if the trend does not reverse. Morguard Corp. might not be able to rescue MRT in case of a serious liquidity issue. Their last round of Depenture offerings were at high interest rates in a near zero rate environment. This shows their ability to raise further capital is going to be expensive, and may not be possible to the extent to rescue MRT as they have their own issues they need to address.
Having said all this, there is a small piggy bank which I believe they are going to tap into but not big enough to be a rescue. Morguard Corp. owns $57 Million in Plaza REIT. While not going to tip the scales, I am going to anticipate Plaza is going to organize a buyback on open market that will allow Morguard to dump these units. Complete speculation, but its my guess this could be organized.
This is the part that investors of MRT do not like to hear. MRT is likely to recover in time. It's unit price is cheap. However, there is a serious risk they are at an early stage of a snowball. It might melt, or materialize into a serious credit issue. This is why the price of MRT is suppressed. As shown by the unit price, investors are in a wait and see mode, or are selling out slowly. My view is that there is upside potential, but today, you can buy high quality REITs with at or near investment grade credit ratings, trading at similar NAV discounts or are trading at substantial discounts to their previous pre covid trading price range. Quality REITs often do trade above NAV. (HR.UN, D.UN, REI.UN, AP.UN, FCR.UN are some examples). These companies have near zero risk and are beginning the recovery right now. The REIT-Opening is happening.
Putting your hard earn money at risk when you could invest with little risk and similar returns is not my strategy. Buy the best. Once the best have recovered, maybe take some risk then, but there is no need to take risk today when you don't need to.
The market agrees as shown in the unit price. For those that want to hate me, dont. Block me if you don't value my contributions. This is not financial advice.
I wish everyone a successful 2021. This is not a competition and I hope MRT and everyone's holdings make them a lot of money.
15Stanmore wrote: At December 31, 2019 the audited FS of MRT.UN reported a unit holder's equity or $1,537 million and 60,735,539 units issued and outstanding, for a Net FMV per unit of $25.32. Total assets were $2,937 million and liabilities were $1,399 million.
The shares closed on December 31, 2019 at $11.79, a 53% discount to its apparent audited FMV.
At December 31, 2020 the audited FS of MRT.UN reported a unit holder's equity or $1,158 million and 64,125,215 units issued and outstanding, for a Net FMV per unit of $18.05. Total assets were $2,558 million and liabilities were $1,400 million.
The shares closed on December 31, 2019 at $5.39, a 70% discount to its apparent audited FMV.
This would appear to be an unsupportable discount, especially when compared to other Canadian REITs many of whom trade at a modest 5% to 10% discount, and some who trade at a premium (TNT.UN for example, currently trading at an 8% premium).
On the other hand, the earnings generated by the FMV assets appear to be significantly below industry standards. Does this suggest the current FMV calculations of the properties are vastly overstated, even after being written down by $420 million (about 14%) at the end of 2020.
I would normally be interested in buying a security trading at a 70% discount to its fair value, as time should see it revert to something closer to its true value and hence reward a patient investor. I am not sure it applies in this circumstance with its persistent history of oversized discounts to FMV.
Can anyone help?