Morguard Real Estate Investment Trust
Annual Report 2020

Plain-text annual report

2020 ANNUAL REPORT 2020 ANNUAL REPORT TRUE VALUE TRUE VALUE APPRECIATED APPRECIATED T T I I E E R R D D R R A A U U G G R R O O M M C Q , T N E R U A L - T N I A S , N O I T A V O N N I E C A L P N O , O T N O R O T , T S E W T E E R T S R O O L B 7 7 : R E V O C E H T N O The selected annual financial information in the 2020 Annual Report highlights certain key metrics for the Trust. As a result, this report should be read in conjunction with the Trust’s Consolidated Financial Statements for the year ended December 31, 2020, related Management’s Discussion and Analysis (“MD&A”) and the Annual Information Form (“AIF”). These documents are available on the Trust’s website at www.morguard.com. All continuous disclosure documents required by securities regulators are also filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and can be accessed electronically at www.sedar.com. N O N - I F R S M E A S U R E S The Trust reports its financial results in accordance with IFRS. However, the MD&A also uses certain financial measures that are not defined by IFRS. These measures do not have any standard meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other reporting issuers in similar or different industries. These measures should be considered supplemental in nature, and not as substitutes for related financial information prepared in accordance with IFRS. The Trust’s management uses these measures to aid in assessing the Trust’s underlying core performance and provides these additional measures so that investors may do the same. Management believes that the non-IFRS measures described further in the MD&A (and include NOI, FFO and AFFO), which supplement the IFRS measures, provide readers with a more comprehensive understanding of management’s perspective on the Trust’s operating results and performance. 2 0 2 0 A N N U A L R E P O R T THE ART OF APPRECIATION Canadian commercial real estate has always been a dependable asset class for investors, generating steady returns over the long run. Morguard REIT has built a high-quality diversified Canadian portfolio, appreciated by many. Comprising 47 commercial properties in urban centres in six provinces, our portfolio accounts for 8.3 million square feet of gross leasable area. Our success lies in our approach. We focus on key markets, providing us with stability to withstand a multitude of economic conditions. And Morguard’s network of experienced real estate professionals offers us the skills and knowledge required to identify opportunities, reinvest, re-envision, revitalize and develop our holdings in thriving communities. By monitoring and responding strategically to the marketplace, we ensure value for our unitholders over the long term. It’s a strategy our investors appreciate. T I E R D R A U G R O M 1 LETTER FROM THE CHAIRMAN, PRESIDENT AND CEO Dear Fellow Unitholders, In 2020, the pandemic had a significant impact on the global economy and changed the way we work and shop. Public areas such as commercial spaces were forced to close due to government mandates that were designed to protect both tenants and customers from contracting the coronavirus. There is no denying that this was a challenging time for the Trust. But the Trust has never been about short-term gains or losses or fleeting conditions. Instead, it has been about prudently building a portfolio of assets that has the potential to yield stable returns over the long term. And experience has shown us that our strategy is the right one. When the coronavirus outbreak hit, we mobilized quickly. Our first priority was to take the necessary steps to ensure that our tenants, our employees and our visitors were safe. To help reduce the spread of COVID-19, we eliminated amenities that were deemed to be risky and intensified cleaning in high-touch areas of our properties. We deferred maintenance orders for non-emergency repairs and added additional hand sanitizers on premises for our tenants and their patrons. Our executive and operations teams used the latest technology to keep lines of communications open internally, as well as with our tenants and partners. They were active on social media providing up-to-the-minute reports. They diligently strived to ensure our occupancy levels remained strong, working with tenants to review their situations and consider rent payment solutions when necessary. Thanks to the efforts of our dedicated teams, overall occupancy declined by only 1.4% to 92.1%. Occupancy in our community strip centres and industrial properties stayed strong at 98.3% and 93.3%, respectively. Our enclosed shopping centres saw a decline to 93.1% due to government closures and our office towers to 88.7% due to hard-hit oil and gas producing Alberta. These two segments will need a bit more time to recover. However, I remain optimistic because I believe that our diversification across – and within – asset classes will help us withstand the challenging conditions caused by the pandemic. So will the fact that we have properties located in six provinces across Canada. This diversification has always given us the resiliency we need to withstand economic downturns. G R O S S L E A S A B L E A R E A B Y A S S E T C L A S S In Millions of Square Feet 1 3 2 1 3.39 SF Office 2 4.65 SF Retail 3 0.29 SF Industrial 8.33 SF Total 2 2 0 2 0 A N N U A L R E P O R T N O I In Millions of Dollars 5 . 0 6 1 $ 0 . 7 5 1 $ 1 . 2 5 1 $ 0 . 0 5 1 $ 8 . 3 2 1 $ 16 17 18 19 20 F F O In Millions of Dollars 5 . 3 1 1 $ 8 . 0 0 1 $ 0 . 5 9 $ 9 . 0 9 $ 9 . 6 6 $ 16 17 18 19 20 Through all this, there was some good news. The Trust has a liquidity of $141.9 million and an unencumbered asset pool of $321.9 million, putting it in an excellent position to weather the financial storm that erupted in 2020. The Trust’s financial results for 2020 demonstrate the impact the pandemic had on our bottom line. Our revenues decreased to $253.8 million and our unitholder distributions were reduced to $0.02 per unit in February 2021. Our net operating income (NOI) dipped to $123.8 million from $150 million a year ago and our funds from operations (FFO) were also down, closing the year at $66.9 million. This is truly our chance to seize the day, because it puts the Trust in the situation to capitalize on available opportunities. Over the years, we have managed to build a portfolio of assets that we can use to create value and growth through rezoning – and by adding density. The Trust’s management, supported by Morguard’s management services team, will continue to focus on creating value within its portfolio and delivering stable returns to its unitholders. We will do this by uncovering further opportunities and responding to the ever-changing economic conditions that exist in today’s world. I would like to extend thanks to our valued unitholders, employees and partners. We appreciate the confidence you have placed in us to achieve the long-term growth potential of Morguard REIT. Sincerely, K. Rai Sahi Chairman, President and Chief Executive Officer T I E R D R A U G R O M 3 APPRECIATING PROPERTIES N O , A W A T T O , E F I L D R A D N A T S 4 APPRECIATING PROPERTIES M ost savvy investment analysts agree that quality real estate appreciates over time, particularly properties that are redeveloped or revitalized for the communities in which they are located. It is why there is so much value investing in Morguard REIT. Established over 20 years ago, it has a strong portfolio of 47 top-tier retail, office and industrial properties throughout Canada that is currently valued at $2.5 billion. B A , Y R A G L A C , G N I D L I U B K N A B L A N O I T A N 5 MORGUARD REIT2020 ANNUAL REPORT Y T I L A U Q 6 B A , N O T N O M D E , A Z A L P M U E L O R T E P Morguard REIT’s diverse asset base allows it to achieve stable cash flow consistently over time, by safeguarding it against short-term regional market fluctuations. We have also enjoyed solid performance over the last two decades, by responding to the desires of both our tenants and potential occupants – enhancing, upgrading and developing our properties to meet their needs. Our deep roster of assets provides us with true opportunities for success. We hold single and multi-tenant office properties in major urban centres, neighbourhood and community shopping centres and industrial properties that are all central to the communities in which they reside. Each has the quality, location and amenities required to have an impact on the way people live and work and to ensure steady returns over the long term. 2 0 2 0 A N N U A L R E P O R T T I E R D R A U G R O M N O , A W A T T O , T N E R U A L . T S N O , A W A T T O , E C A L P E G A T I R E H 8 2 0 2 0 A N N U A L R E P O R T T I E R D R A U G R O M Working alongside the network of real estate professionals within Morguard management services team, we have the financial acumen, strength and drive to actively identify commercial real estate opportunities and diversify our tenant base. A commitment to enhancing our portfolio through prudent capital management combined with a focus on developing our existing properties in growth markets throughout Canada that offer real potential. This is why our unitholders have grown to appreciate that we strive to deliver the most consistent returns possible, year after year. N O , E G D I R B M A C , E R T N E C E G D I R B M A C APPRECIATING APPRECIATING OUR LEGACY OUR LEGACY Our measured, conservative approach has earned us the respect of Our measured, conservative approach has earned us the respect of investors. Our diversified portfolio is made up of high-quality properties investors. Our diversified portfolio is made up of high-quality properties that are located in important, prospering Canadian communities. And it is that are located in important, prospering Canadian communities. And it is diversified both in terms of asset class and location. Historically, the Trust diversified both in terms of asset class and location. Historically, the Trust has identified opportunities for creating value within its existing holdings has identified opportunities for creating value within its existing holdings through redevelopment. And our shareholders appreciate that we have through redevelopment. And our shareholders appreciate that we have managed to generate stable returns over the years by re-envisioning our managed to generate stable returns over the years by re-envisioning our assets in response to the communities that surround them. assets in response to the communities that surround them. $2.9B $2.9B REAL ESTATE ASSETS REAL ESTATE ASSETS S S N N O O I I T T I I S S I I U U Q Q C C A A H H G G U U O O R R H H T T H H T T W W O O R R G G $1.2B $1.2B REAL ESTATE ASSETS REAL ESTATE ASSETS T H E P O W E R O F T H E P O W E R O F A S T R O N G P O R T F O L I O A S T R O N G P O R T F O L I O “ To maximize “ To maximize performance we performance we invested a total of invested a total of $17.4M in several $17.4M in several key locations.” key locations.” E N D U R I N G E N D U R I N G “ We have always “ We have always believed in taking believed in taking the long view. the long view. Diversify. Invest. Diversify. Invest. Strengthen.” Strengthen.” S S E E I I T T R R E E P P O O R R P P N N A A I I D D A A N N A A C C 9 9 4 4 S S E E C C N N I I V V O O R R P P 6 6 N N I I D D E E T T A A C C O O L L 3 3 0 0 0 0 2 2 5 5 0 0 0 0 2 2 0 0 1 1 0 0 2 2 4 4 1 1 0 0 2 2 6 6 1 1 0 0 2 2 9 9 1 1 0 0 2 2 9 9 1 1 0 0 2 2 9 9 1 1 0 0 2 2 0 0 2 2 0 0 2 2 N N U U . . T T R R M M : : X X S S T T 8 8 9 9 9 9 1 1 10 C Q , T N E R U A L - T N I A S , N O I T A V O N N I E C A L P 11 MORGUARD REIT2020 ANNUAL REPORT Y T I L I B A T P A D A B A , Y R A G L A C , W S T E E R T S D R 3 5 0 5 We also have existing centres that have the space to add additional entertainment or service retail or to be transformed into distribution or warehousing facilities that are becoming increasingly important as online shopping grows in popularity. The space in our office buildings is not being used to full capacity due to COVID-19 work-from-home legislation. However, this will change as the pandemic subsides and we create value by responding to the needs of the larger business community – creating spaces that work for them and performing renovations and building upgrades that will attract new tenants. 2 0 2 0 A N N U A L R E P O R T T I E R D R A U G R O M As always, we will focus on the long term and opportunities that exist to strengthen our diversified portfolio of retail, office and industrial real estate. We will meet the needs of our tenants and reinvest in our properties to help ensure our ongoing marketability. Appreciating where you are and what you need to do to be exactly where you want to be. This is how you build a high-quality, diverse real estate portfolio that delivers consistent value over time. And how we have effectively managed to earn the appreciation of our unitholders, year after year. B A , N O T N O M D E , E C A L P A I T O C S 2020 FINANCIAL AND OPERATING HIGHLIGHTS The pandemic outbreak triggered a challenging period for all, including Morguard REIT. But we were able to demonstrate the strength and resilience that exists in our portfolio due to our diversification. We continued to collect rents and maintained relatively good occupancy given the circumstances of 2020. We at Morguard REIT mobilized a crisis management team that was committed to maintaining a safe environment for our tenants, employees and visitors. And we implemented measures to help reduce the spread of COVID-19. Our business strategy has positioned us effectively for the long run. Having a long-term focus, means that we can follow the most prudent path, rather than implement short-term measures that may not be in our best interests in the future. Our diversified portfolio spreads our risk across asset types and regions, minimizing the impact unexpected events may have on our revenue. And our ongoing efforts to strengthen and maintain our relationships with our tenants, means that we are there for them when times are tough, building goodwill that will serve to maintain their ongoing patronage when conditions improve. Equally important, we are able to maintain a steady income stream during economic downturns thanks to our long-term leases and varied expiration dates. The Trust has provided stable dividends for 10 years. However, in April 2020, it was announced that distributions would be reduced to $0.04 per unit from $0.08 per unit effective as of May 2020, due to the economic situation. A further reduction was announced in February 2021 to $0.02 per unit. This retained cashflow will provide the REIT with enhanced flexibility, putting it in an excellent position to meet the needs of the continuing development program and other capital priorities. This will ultimately serve to improve the value and quality of the portfolio, and result in an enhanced future FFO. D I S T R I B U T I O N S – P ER U N I T In Dollars 6 9 . 0 $ 6 9 . 0 $ 6 9 . 0 $ 6 9 . 0 $ 4 6 . 0 $ 16 17 18 19 20 R E A L E S TAT E P O R T F O L I O R E S U LT S The Trust is a closed-ended real estate trust that owns a diversified portfolio of 20 retail assets, 23 office assets and four industrial properties located in the following six Canadian provinces: B.C., Alberta, Saskatchewan, Manitoba, Ontario and Quebec. Our portfolio of 47 properties has a book value of $2.5 billion with approximately 8.3 million square feet of leasable space. 14  N O I BY A S S E T C L A S S 1 48% Office 2 50% Retail 3 2% Industrial 1 2 3 N O I BY P ROV I N C E 17% British Columbia 29% Alberta 6% Saskatchewan 9% Manitoba 34% Ontario 5% Quebec Our portfolio is diversified across both asset classes and regions, providing us with resiliency against fluctuating market conditions. Our office assets consist of single and multi-tenant properties in major urban centres. Our retail assets are dominant regional enclosed shopping centres as well as neighbourhood and community shopping centres. And our industrial properties include warehousing facilities. Our net operating income for the year decreased by 17.5% due to closures as a result of the pandemic as well as new structured arrangements. O P ER AT I O N S M A N AG EM EN T When the pandemic outbreak occurred, the Trust implemented measures to help reduce the spread of the virus. We intensified our cleaning efforts, added hand sanitizer, posted health and safety practices and eliminated amenities deemed to be risky. We partnered with our tenants to determine what support they required and how we could assist them. We made use of the government assistance that was available and launched new marketing programs called “New Days, New Ways” that helped ensure that employees and tenants felt safe in their offices and retail outlets. Collections were down in all asset classes – especially enclosed retail – due to the pandemic. However, we worked with tenants to review their situation and consider rent deferrals as necessary. We were supportive of small business retail tenants, some of whom, were open for business. We were fortunate because our strong government presence in our office tenancy mitigated the risk of non-payment for this asset class. 15 MORGUARD REIT2020 ANNUAL REPORT 2 0 2 0 F I N A N C I A L A N D O P E R AT I N G H I G H L I G H T S Our occupancy levels dipped slightly versus a year ago for the retail and office classes due to the pandemic, but our industrial occupancy increased slightly, as warehousing became even more vital. RENTA L RE V ENUE A ND OCCUPA NCY D E C E M B E R 3 1, 2 0 2 0 A S S E T C L A S S Office Industrial Retail – Community Strip Retail – Enclosed D E V EL O P M EN T R E N TA L R E V E N U E O C C U PA N C Y 43% 1% 15% 41% 88.7% 93.3% 98.3% 93.1% We are re-envisioning some of our assets, redefining spaces, bringing in new tenants and responding to the needs of the communities in which they are located. At Pine Centre Mall in Prince George, B.C., the first phase of the redevelopment of the former Sears premises is complete. The new wing consists of approximately 76,000 square feet of redeveloped GLA. In addition, the former Lowe’s premises has been re-tenanted with a new 38,850 square foot grocery store with expected completion in 2022. Capital improvements are being undertaken at The Centre in Saskatoon and Heritage Place in Ottawa. C A P I TA L M A N AG EM EN T The Trust is in an excellent liquidity position to successfully ride through the pandemic and to maintain its continuing development priorities that will improve the value and quality of its portfolio. The Trust had liquidity of $141.9 million as well as an unencumbered asset pool of $321.9 million in order to raise necessary capital, if applicable. It can also reduce exposure through refinancing, with the current average mortgage rate sitting at 3.8%. L I Q U I D I T Y A N D U N EN C U M B ER ED A S S E T S In Millions of Dollars 1 $141.9 Liquidity 2 $321.9 Unencumbered Assets 1 2 16 F I N A N C I A L R E S U LT S Due to the pandemic, 2020 was a challenging year for Morguard REIT. Revenue from its real estate properties decreased by 7% to $253.8 million. This, due primarily to increased vacancy, failed tenants, restructured arrangements, reduced recoveries of operating costs and rent relief provided to tenants. Property operating expenses decreased due to lower repair and maintenance expenses as work was deferred to minimize the risk of spreading the virus. Collections decreased as some tenants were unable to fulfil their rent obligations. However, some rent payment solutions were implemented that will involve an exchange of rights or an additional lease term that will benefit the Trust in the long run. F I N A N C I A L H I G H L I G H T S I N T H O U S A N D S O F D O L L A R S , E X C E P T P E R U N I T A M O U N T S AS AT DECEMBER 31 2016 2017 2018 2019 2020 Revenue from real estate properties $280,726 $278,754 $276,473 $273,074 $253,764 Net operating income $160,500 $157,025 $152,078 $149,961 $123,778 Fair value losses on real estate properties $(51,643) $(31,225) $(18,602) $(73,850) $(419,766) Net (loss)/income $57,207 $67,306 $73,015 $14,840 $(357,419) Funds from operations $113,500 $100,766 $94,992 $90,894 $66,924 Adjusted funds from operations $87,091 $74,983 $69,394 $66,063 $51,564 Net (loss)/income – basic Net (loss)/income – diluted Funds from operations – basic Funds from operations – diluted $0.94 $0.93 $1.87 $1.81 Adjusted funds from operations – basic $1.43 Adjusted funds from operations – diluted $1.41 $1.11 $1.05 $1.66 $1.57 $1.24 $1.20 Cash Distributions per unit $0.96 $0.96 $1.20 $1.12 $1.56 $1.48 $1.14 $1.12 $0.96 $0.24 $0.24 $1.50 $1.43 $1.09 $1.07 $0.96 ($5.75) ($5.75) $1.08 $1.06 $0.83 $0.83 $0.64 Payout ratio – Adjusted funds from operations 67.1% 77.4% 84.2% 88.1% 77.1% Weighted average number of units as at year-end (in thousands) – Basic 60,750 60,622 60,705 60,711 62,108 17 MORGUARD REIT2020 ANNUAL REPORT 2 0 2 0 F I N A N C I A L A N D O P E R AT I N G H I G H L I G H T S BALANCE SHEETS I N T H O U S A N D S O F C A N A D I A N D O L L A R S A S AT D E C E M B E R 3 1 A S S E T S Non-current assets Real estate properties Right-of-use asset Equity-accounted investment Current assets Amounts receivable Prepaid expenses and other Cash 2 0 2 0 2 0 19 $2,499,955 242 20,496 2,520,693 27,756 637 8,647 37,040 $2,892,103 324 23,705 2,916,132 14,314 1,112 5,783 21,209 Total assets $2,557,733 $2,937,341 L I A B I L I T I E S A N D U N I T H O L D E R S ’ E Q U I T Y Non-current liabilities Mortgages payable Convertible debentures Lease liabilities Accounts payable and accrued liabilities Current liabilities Mortgages payable Convertible debentures Lease liabilities Accounts payable and accrued liabilities Morguard loan payable Bank indebtedness Total liabilities Unitholders’ equity $918,256 — 10,862 5,230 934,348 204,464 172,805 131 40,910 18,000 29,417 465,727 1,400,075 1,157,658 $2,557,733 $902,708 170,753 10,993 4,550 1,089,004 165,640 — 123 47,448 32,500 65,158 310,869 1,399,873 1,537,468 $2,937,341 18 STATEMENTS OF (LOSS)/INCOME AND COMPREHENSIVE (LOSS)/INCOME I N T H O U S A N D S O F C A N A D I A N D O L L A R S , E X C E P T P E R U N I T A M O U N T S F O R T H E Y E A R E N D E D D E C E M B E R 3 1 Revenue from real estate properties Property operating costs Property operating expenses Property taxes Property management fees Interest expense General and administrative Amortization expense Other income Fair value losses on real estate properties Net (loss)/income from equity-accounted investment 2 0 2 0 $253,764 (74,171) (47,822) (7,993) 123,778 (56,376) (3,587) (82) — (419,766) (1,386) 2 0 19 $273,074 (66,800) (47,266) (9,047) 149,961 (58,006) (4,271) (83) 45 (73,850) 1,044 Net (loss)/income and comprehensive (loss)/income ($357,419) $14,840 N E T ( L O S S ) / I N C O M E P E R U N I T Basic Diluted ($5.75) ($5.75) $0.24 $0.24 19 MORGUARD REIT2020 ANNUAL REPORT 2 0 2 0 F I N A N C I A L A N D O P E R AT I N G H I G H L I G H T S STATEMENT OF UNITHOLDERS’ EQUITY I N T H O U S A N D S O F C A N A D I A N D O L L A R S , E X C E P T N U M B E R O F U N I T S NUMBER OF UNITS ISSUE OF UNITS RETAINED EARNINGS EQUITY COMPONENT OF CONVERTIBLE DEBENTURES CONTRIBUTED SURPLUS TOTAL UNITHOLDERS’ EQUITY Unitholders’ equity, January 1, 2019 60,694,053 $612,183 $961,773 $4,594 $1,864 $1,580,414 Net income Distributions to unitholders Issue of units – DRIP1 — — 41,486 — — 497 14,840 (57,786) (497) — — — — — — 14,840 (57,786) — Unitholders’ equity, December 31, 2019 60,735,539 612,680 918,330 4,594 1,864 1,537,468 Repurchase of units Net loss Distributions to unitholders Issue of units – DRIP1 (197,300) (1,944) — — — — 3,586,976 18,174 991 (357,419) (21,438) (18,174) — — — — — — — — (953) (357,419) (21,438) — Unitholders’ equity, December 31, 2020 64,125,215 $628,910 $522,290 $4,594 $1,864 $1,157,658 1. Distribution Reinvestment Plan (“DRIP”). 20 STATEMENTS OF CASH FLOWS I N T H O U S A N D S O F C A N A D I A N D O L L A R S F O R T H E Y E A R E N D E D D E C E M B E R 3 1 O P E R AT I N G A C T I V I T I E S Net (loss)/income Add items not affecting cash Distributions from equity-accounted investment, net Additions to tenant incentives and leasing commissions Net change in non-cash operating assets and liabilities Cash provided by operating activities F I N A N C I N G A C T I V I T I E S Proceeds from new mortgages Financing costs on new mortgages Repayment of mortgages Repayments on maturity Principal instalment repayments Payment of lease liabilities, net Repayment of bank indebtedness, net Decrease in Morguard loan receivable (Repayment of)/proceeds from Morguard loan payable, net Distributions to unitholders Units repurchased for cancellation Cash used in financing activities I N V E S T I N G A C T I V I T I E S Capital expenditures on real estate properties Expenditures on properties under development Proceeds from sale of real estate properties, net Cash used in investing activities Net change in cash Cash, beginning of period Cash, end of period 2 0 2 0 2 0 19 ($357,419) $14,840 424,830 1,823 (3,490) (18,825) 46,919 205,665 (783) (113,818) (37,348) (123) (35,741) — (14,500) (21,438) (953) (19,039) (9,650) (22,166) 6,800 (25,016) 2,864 5,783 $8,647 76,324 2,085 (3,955) 64 89,358 140,892 (667) (145,892) (34,237) (116) (2,502) 10,000 32,500 (57,786) — (57,808) (18,515) (33,818) 15,914 (36,419) (4,869) 10,652 $5,783 21 MORGUARD REIT2020 ANNUAL REPORT 2020 REAL ESTATE PORTFOLIO Morguard REIT is a diversified portfolio of office, retail and industrial properties located in six provinces across Canada. We are committed to identifying opportunities that further enhance our commercial real estate portfolio and diversifying our tenant base. RETAIL PROPERTIES PROPERTY CITY PROV. OWNERSHIP INTEREST (%) TOTAL AREA (SF) OWNERSHIP AREA (SF) OCCU- PANCY (%) TOP TENANTS Burquitlam Plaza Coquitlam BC 100 68,000 68,000 Pine Centre Mall•2 Prince George BC 100 446,500 446,500 95 99 Bosley’s Pet Food Plus, CIBC, Dollarama, Shoppers Drug Mart B.C. Liquor, Dollarama, Shoppers Drug Mart, Sport Chek, Winners Shelbourne Plaza Victoria Airdrie Co-op Centre Airdrie Airdrie RONA Centre Heritage Towne Centre Airdrie Calgary BC AB AB AB 100 57,000 57,000 100 A&W, Fairway Market, Liquor Distribution Branch, Scotiabank, TD Canada Trust 100 70,000 70,000 100 100 100 44,000 131,000 44,000 131,000 100 100 Co-Op Grocery Store, Co-Op Liquor Store, Orangetheory Fitness, TD Canada Trust Lubexx, Peavey Mart, Tim Hortons Ashley Furniture, Dollarama, Perfect Home, Urban Barn Prairie Mall•3 Parkland Mall•3 The Centre•3 Shoppers Mall•2 Grande Prairie AB 50 263,000 131,500 Red Deer AB 100 444,500 444,500 Saskatoon SK 100 497,000 497,000 Brandon MB 100 361,000 361,000 Charleswood Centre Winnipeg MB 100 123,000 123,000 94 89 95 92 97 Ardene, Dollarama, Marshalls, Shoppers Drug Mart, Urban Planet Ardene, Dollarama, GoodLife Fitness, Sketchers, Staples, The Keg Steakhouse, Walmart, Winners Ardene, Best Buy, Cineplex, Saskatoon Co-op Food Store, Shoppers Drug Mart, Sport Chek Ardene, Capitol Theatre, GoodLife Fitness, Shoppers Drug Mart, Sobeys Extra, Sport Chek Boston Pizza, Dollarama, Liquor Mart, Safeway, Shoppers Drug Mart Southdale Centre Winnipeg MB 100 175,500 175,500 94 Bank of Montreal, Dollarama, Pharma Plus, Walmart Aurora Centre Aurora ON 100 304,000 304,000 Cambridge Centre•1 Cambridge ON 100 650,000 650,000 99 90 Market Square Kanata Wonderland Corners London ON ON 100 68,000 68,000 100 100 46,500 46,500 100 Kingsbury Centre Mississauga ON 100 70,000 70,000 100 Hampton Park Plaza Ottawa St. Laurent•2 Ottawa Woodbridge Square Vaughan ON ON ON 100 102,000 102,000 100 797,500 797,500 96 95 50 112,000 56,000 100 Canadian Tire, Cineplex Odeon, GoodLife Fitness, Petsmart, Sobeys Cambridge Ice Centre, Galaxy, Hudson’s Bay, Indigo, Mark’s Work Warehouse, Marshalls, Sport Chek Anytime Fitness, Farm Boy, LCBO, TD Canada Trust, Taco Bell Congee Chan, Swiss Chalet, Sugar Marmalade, The Alley Bubble Tea, YMCA of Western Ontario Buduchnist Credit Union, Cordi Bakery, Longo’s, Pump On Rathburn, Shoppers Drug Mart East Side Mario’s, Food Basics, Ontario Breast Screening Program, Pharma Plus, Scotiabank GoodLife Fitness, Hudson’s Bay, Intact Financial, Shoppers Drug Mart, Sport Chek, Willis College Cucina Bella, Moose & Firkin, Nations Fresh Foods, Scotiabank, Wellmedica Total Retail 4,830,500 4,643,000 C E R T I F I C AT I O N S •1 BOMA Platinum •2 BOMA Gold •3 BOMA Certified 22 OFFICE PROPERTIES PROPERTY CITY PROV. OWNERSHIP INTEREST (%) TOTAL AREA (SF) OWNERSHIP AREA (SF) OCCU- PANCY (%) TOP TENANTS 111 Dunsmuir•3 •6 Chancery Place•3 Seymour Place 207 and 215 9th Avenue SW•5 •6 505 3rd Street SW•6 7315 8th Street NE Centre 810 Citadel West National Bank Building Deerport Centre•4 Duncan Building•4 Petroleum Plaza•2 •4 Scotia Place•2 *•3 301 Laurier Avenue 525 Coventry Green Valley Office Park•4 Heritage Place•4 St. Laurent Business Centre•4 Standard Life •4 Time Square•4 200 Yorkland•4 77 Bloor Street West•1 •3 •5 •7 Place Innovation•3 •4 Total Office C E R T I F I C AT I O N S Vancouver BC 100 222,000 222,000 92 Vancouver BC 100 142,500 142,500 100 Fatburger, Ricky’s All Day Grill, Stantec Consulting Ltd, Wood Canada Limited Boston Pizza, Min of Citizen’s Serv, Studeo 55 Fitness Inc, Victoria’s Health Inc Victoria Calgary Calgary Calgary Calgary Calgary Calgary Calgary Calgary Edmonton BC AB AB AB AB AB AB AB AB AB 100 100 235,500 636,500 235,500 636,500 50 142,000 71,000 100 100 100 100 100 100 50 19,500 77,500 78,500 49,000 81,000 43,500 19,500 77,500 78,500 49,000 81,000 43,500 304,000 152,000 Ottawa Ottawa Ottawa Ottawa Ottawa Ottawa Ottawa Toronto Toronto ON ON ON ON ON ON ON ON ON Saint-Laurent QC 50 100 100 123,000 123,000 50 217,000 108,500 100 50 100 88,500 378,000 111,000 88,500 189,000 111,000 100 150,500 150,500 50 50 396,000 198,000 896,000 448,000 5,025,000 3,393,500 100 Ministry of Citizens’ Service 98 78 — 90 Downtown Dental, Obsidian Energy Ltd, Sukiyaki House Restaurant Bank of China, Canadian Energy Pipeline Association, Morguard Investments Ltd, Strike Group LP Canadian Cattle Identification Agency, CIMA Canada Inc, Skyplan Services Limited 100 CH2M Hill Canada Limited 43 100 100 98 Arcardis Canada Inc., Plexina Inc, Topcon Positioning Systems Inc, Pentagon Freight Services Canada RCMP National Bank of Canada Alberta Infrastructure, M. Shewchuk & S. Withanachchi Prof Corp, Vision Travel APEGA, Bank of Nova Scotia, Duncan and Craig, Grant Thornton 73 82 50 98 65 83 97 95 The Ottawa Hospital, The Ottawa Fertility Centre, AD Dynamics, Canadian Physiotherapy Association Public Services and Procurement Canada, The Dominion of Canada General Insurance, Winners Positive Venture Group, CBI Limited Partnership Public Services and Procurement Canada Public Services and Procurement Canada, BBB Urban Developments Ottawa, Embassy of Kuwait AG Simpson Automotive Inc, Ferring Inc, Investors Group, Versa Systems Ltd, Vertex Data LP Avana Capital Corporation, Harry Rosen, Realstar Management, The Toronto Dominion Bank, Sephora Bombardier Inc, AJW Technique, Accedian Networks Inc, Amdocs, Ciena Canada Inc Edmonton AB 20 565,000 113,000 55 26,000 42,500 13,000 42,500 19 Moores The Suit People 100 Assent Compliance Inc •1 LEED Gold •2 LEED Silver •3 BOMA Gold •4 BOMA Silver •5 Wired Gold •6 Energy Star Certified •7 RHF Accessibility – BOMA Toronto * Pending INDUSTRIAL PROPERTIES PROPERTY 1875 Leslie CITY PROV. OWNERSHIP INTEREST (%) TOTAL AREA (SF) OWNERSHIP AREA (SF) OCCU- PANCY (%) TOP TENANTS Toronto ON 100 52,000 52,000 82 Body and Soul Fitness Corp, Goose and Firkin, 2041-2151 McCowan Toronto 279 Yorkland 285 Yorkland Total Industrial Total Toronto Toronto ON ON ON 100 197,000 197,000 95 Movie Poster Warehouse, Poolmaster Canada Every Green International Inc, Louise Kool & Galt, Paragon Industrial Photographic, TuxMat 100 100 18,000 25,000 18,000 25,000 100 100 Arz Fine Foods Express Ltd The Mitchell Partnership Inc 292,000 292,000 10,147,500 8,328,500 23 MORGUARD REIT2020 ANNUAL REPORT CORPORATE INFORMATION TRUSTEES OFFICERS K. Rai Sahi Chairman, President and Chief Executive Officer Andrew Tamlin Chief Financial Officer Beverley G. Flynn Senior Vice President, General Counsel and Secretary Paul Miatello Senior Vice President Angela Sahi Senior Vice President Michael A.J. Catford 1, 2, 3 Real Estate Consultant Bart S. Munn 1, 2 Corporate Director Timothy J. Murphy Partner, McMillan LLP K. Rai Sahi Chairman and Chief Executive Officer Morguard Corporation Antony K. Stephens 1, 3 Corporate Director Donald W. Turple Real Estate Consultant Timothy J. Walker 1, 2, 3 Corporate Director 1 Independent Trustee 2 Audit Committee 3 Human Resources and Governance Committee INVESTOR INFORMATION Head Office Morguard REIT 55 City Centre Drive Suite 1000 Mississauga, ON L5B 1M3 T 905-281-4800 or 1-800-928-6255 info@morguard.com Transfer Agent Computershare Trust Company 1-800-564-6253 www.computershare.com Investor Relations Visit our website at www.morguard.com or view our filings on SEDAR at www.sedar.com. Listing Toronto Stock Exchange For additional information, contact: Andrew Tamlin Chief Financial Officer Beverley G. Flynn Senior Vice President, General Counsel and Secretary T 905-281-4800 info@morguard.com Symbol MRT.UN MRT.DB Eligibility RRSP RRIF DPSP RPP TFSA Auditors Ernst & Young LLP Principal Bankers Bank of Montreal, Toronto-Dominion Bank 24 j i : n g s e D i m o c . c n s n o i t a c n u m m o c p m u i MORGUARD REIT (TSX:MRT.UN) Morguard Real Estate Investment Trust is a closed-end trust listed on the Toronto Stock Exchange (TSX) under the symbol MRT.UN. The Trust had total real estate assets of $2.5 billion as at December 31, 2020. The mandate of the Trust is to accumulate a Canadian portfolio of high-quality real estate assets – then actively manage the portfolio to generate steady, dependable returns for unitholders, through a stable and increasing cash flow. This offers the potential for long-term capital appreciation. The Trust owns a diversified real estate portfolio of 47 commercial properties consisting of 8.3 million square feet of gross leasable area located in six provinces. The real estate portfolio primarily includes well-located, high-quality office properties in major urban centres, large enclosed full-scale regional shopping malls that are dominant in their respective markets, neighbourhood and community shopping centres and a small group of industrial properties. MORGUARD REAL ESTATE INVESTMENT TRUST 55 City Centre Drive Suite 1000 Mississauga, ON L5B 1M3 905-281-4800 MORGUARD.COM Update FSC Logo 

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