Morguard Real Estate Investment 5 25 convertible unsecured subordinated debentures T.MRT.UN

FMV of MRT.UN properties

[15Stanmore]

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?

[Shirtlessnomore]

Correct, it's ridiculous! For this to not be at least 8 - 9 bucks is crazy town. I'm holding it cant stay down here.

[wheeloffortune]

The problem is if I type in TMX MRT.UN, key data says EPS = -5.75.   It is bleeding serious cash.  PRV.UN EPS -=+0.45, DIVY=7.45 and it's an $8 stock trading at $6 (a much better deal).  The mismanagement at MRT.UN hasn't changed for years.  There are so many way better REITs out there that pay a better divy, are still at discount and are not bleeding serious cash

[Shirtlessnomore]

Yes I am saying it cant happen here! MRC has a JURRASIC stake here, the same will not happen. Why would MRC allow properties to be sold at a huge discount and throw all their years of accumulation in the dumpster? Simple answer is it's not going to happen, even at the "huge discount" you speak of the stock is still undervalued. They have enormous equity no matter how you look at it

[wheeloffortune]

Why would they throw it in the dumpster?  Because they are loosing $5.75 a share.  PRV.un is actually making 45 cents a share, not loosing $5.75 a share.  I doubt you're going to keep collecting 5% when it's loosing $5.75 a share.  It's horribly mismanaged.  BTW- Partners REIT also had a majority stake owned by insiders--it didn't change a damn thing: they

[Shirtlessnomore]

Just take into consideration what is going on in the world right now, this is not happening during just any "normal" year, everything has been upside down, is it going to go back to normal? Of course it is but every single reit has done some form of accounting changes to accommodate for all of this, for example writing down properties in their portfolio is a classic move done many times

[Shirtlessnomore]

I should also add that PRV.UN is a completely different reit who invests in gas stations fast food and strip plazas all of which have remained open, that's why they recovered so fast, the dividend was cut as well and remains at the cut level, PRV.UN has done nothing since it hit 6 bucks, I know because I sold it and watch it daily, 6.00 -6.15 for weeks maybe months now. [/quote]

[Shirtlessnomore]

Just to back this up, November 26th 2020 PRV.UN hit 5.97, closed yesterday at 5.04 so almost 4 months of diddly squat. PRV.UN had a low of around 2.60 during this, the gravy has been made. I had some, it was delicious. [/quote]

[Capharnaum]

While I don't own MRT, your first two sentences aren't accurate. There is no direct link between EPS and cash. You can have a really negative EPS and still have positive cashflow. You can also have positive EPS and have negative cashflow. To explain this, last year, despite lower collections and everything, MRT generated $0.73 per share in cash flows from operations. While PRV hasn't

[MTLfinecity]

Thanks for mentioning Partners REIT. I like to study failed companies.  I'll lay out some reasons why I think MRT.UN is very different from PAR.UN (delisted, went private, they did not bankrupt)  1. PAR.UN had a leverage ratio of 60%. MRT. UN has way lower ratio (sorry, too lazy to open FS to find the acutal ratio lmao, it's Saturday, cheers)  2. PAR had  only a total

[RetiredCEO]

This post has been removed in accordance with Community Policy

[15Stanmore]

Thank you RetiredCEO, I very much appreciate your thoughtful and thought provoking posting. It covers the issue very nicely and has provided a different perspective to consider. Please keep up the helpful input and sharing of your knowledge. Cheers, S

[Shirtlessnomore]

Retired, I do as well appreciate your input and always have although I have a couple of questions that you seem to leave out on some of your posts around stockhouse, for one the $15m cash savings a year here with the dividend cut and the other thing is you have mentioned nothing about a simple equity raise which would be an easy solution, of course not great for shareholders but it's another

[RetiredCEO]

This post has been removed in accordance with Community Policy

[HermannHaller]

Morguard is 'creeping up to their Depenture covenants' what??? What debenture covenants are you talking about? Morguard may have a few hotels offside, as Temple did when they bought it, but I don't see them having a problem with banks or debt. I don't even think debentures have covenants. Please explain your comment.

[RetiredCEO]

This post has been removed in accordance with Community Policy

[Shirtlessnomore]

This below if necessary would easily be accommodated, it is a pandemic and the last year has been a circus, a waiver from lenders would be guaranteed if covid continues on. Point being there are many options and the lockdowns and nonsense will be gone, this isnt a permanent situation that we are living in and if it is all your reits will have a tough go forward as well as most other sectors. This

[Copperrun]

Exactly I have 6 commercial businesses and 70% of the lenders called me and asked if I wanted a deferral. I'm sure they were offered it also

[Shirtlessnomore]

Agree, some folks are treating the last 12 months as if they were "the norm" going forward and it's not, there are many new ideas and new money waiting to pounce on new businesses to take advantage of peoples needs to get out and live, we have never lived in a more demanding society than we did prior to this virus, that is just bottled up and waiting to boom, they want stuff right

[flamingogold]

shirtless, I happen to agreee. You are arguing against recency bias.... where what is occuring now will be the future forevermore. Remember 9/11 no one thought people would fly again, yet what followed was the greatest two decades for aviation both in consumer travel and commercial jet orders. 2008 financial crisis where global residental real estate was crushed, only to be followed by record

[Shirtlessnomore]

Well said flamingo, cheers, also I will add and nothing against retired as he is a smart man and can read a balance sheet far better than I, but he most certainly has an agenda with his HR.UN holding and I think he has moved alot of the money from the REITs he owned in the past there, for example mr.un and sot.un not sure he ever owned this but maybe. He is recruiting lol. Which is fine but

[Shirtlessnomore]

I should maybe give an explanation to my previous post, you see retired has a post that he has put on reddit about REITs furthermore it has outlined his 3 top picks in order with #1 being HR.UN. this is why he has moved everything into these 3 baskets, I imagine he is hoping for a rally not unlike weve seen from reddit users, which is fine with me because its had a nice rally that ironically has

[Copperrun]

most went up decent I'm also in ap.un and it has been running also. There is way more upside to mrt than any other ones. but I'm a person that buys the fear ap.un also I think these all will recover.

[Copperrun]

Do you know what a parent company is? You do know even if a parent company goes down it does not mean the other one will go down. The rights will be sold off yes but does not effect the company itself They dont own the company just have controlling interest in it

[HermannHaller]

Thanks for the clarification. I guess 'creeping up' is subjective. They would need to see their interest costs rise about 25% to be offside on the interest coverage ratio. You didn't detail the other covenants, but those are not even in the ballpark: Max debt to assets covenant of 65% compared to 47.6% actual. They also have over $1 billion in unencumbered assets. I have no worries

[Malpeque2]

I think MRT has taken the largest hits to FMV  "BY FAR" in 2020 of any REIT in Canada I have looked at.   It is required by IFRS,  BUT  the NOI and cap rate assumptions by these different REIT's in Canada are varyied.    CAp rates are the highest for mall retail.   Grocery/Strip retail appears to be doing fine like industrial and