MMI INVESTOR UPDATE – June 15TH, 2020

 

This will be our last COVID Investor Update as we feel confident that all our MMI assets are in the clear (for now) in terms of tenant arrears/failures. Rest assured that we monitor all of our assets very closely and are in constant contact with our tenants. We will likely use this platform again to communicate with all of you in the event we have any concerns we wish to relay.  In time like these, communication is the key to ensuring smooth operations of all our properties.

 

We are happy to report that we have restarted investor disbursements. We are still being very judicious as to the amount of funds disbursed and again, are constantly monitoring for any tenant issues. Look for your respective Q2 disbursement cheques on most properties within the next few days. Regular quarterly reporting for every MMI property will be sent out on or about July 15th.

 

Tenant Rents

We are delighted to report that we have collected 91% of all MMI rents.  Of special mention, we are also pleased to inform 1290 Kenaston Investors that we have collected all of the arrears.

 

For those Investors involved with 180 Roslyn, once again, all tenants have paid rent for June.  We currently have three vacancies, but several applications have been recently received, meaning we expect to be at 100% occupancy by the end of this month.  Government rent freeze has been extended to June 30th.  It is still unclear whether we can back date our rent increases once the freeze is lifted, but we are in constant contact with the RTB and will react quickly once the regulations become clearer.

 

See Tenant Rent Summary

 

Federal Government Commercial Rent Program

We have just over 160 landlords in our Cushman & Wakefield | Stevenson management portfolio and have submitted only 8 applications.  To date, we have not been approved and the process is extremely cumbersome.   We still believe that for most properties, including all MMI properties, the best way to grant rent relief is through direct negotiations.

 

MMI Opportunity Fund II

We continue to work on the timing and structure of Opportunity Fund 2 LP and hope to launch in early September.

 

Feel free to reach out to myself, Chris Macsymic or Rob Davidson if you have any questions, concerns or if you would simply like to chat about the market.

MMI INVESTOR UPDATE – May 12TH, 2020

 

Tenant Rents

Overall, our MMI portfolio performed very well once again in May with only a marginal increase in accounts receivables ($40,150.09). Our Property Management team is working hard to collect arrears and is communicating regularly with all of our tenants regarding collections. We continue to educate all of our tenants on all government programs in place so that they can continue to pay rent in the future and cover any arrears.

 

For those investors with interest in 180 Roslyn, all tenants paid rent in April.  For May we have two tenants that haven’t paid, but we expect payments before the end of the month. Our monthly GRP is $118,000 and we have collected $116,000 to date. We believe we will soon have 100% rent collected for both April and May.  We continue to monitor the rent freeze regulations and hope to be able to initiate our planned 4% increase in short order for renewing tenants.

See Tenant Rent Summary

 

Cash Reserves

As mentioned in our last report on April 9th, we are being very judicious on property expenses and all mortgage deferrals continue to build cash in all property accounts.  As we see it today, we expect to be able to resume regular owner disbursements (on a case by case basis as cash is available) by the end of Q3.

 

Federal Government Commercial Rent Program

As you are all aware, on April 24th the Federal Government announced a commercial rent relief program called Canada Emergency Commercial Rent Assistance (CECRA).  There are limited details at the moment but you can click here  to see the info. One has to wonder what the point was in announcing this program in the third week of the month with limited details.  It has caused mass confusion with Landlords and Tenants alike but we are following closely and will provide updates on our site as they become available.

 

Here is an excerpt from the Government of Canada site:

We reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19.

 

The program will provide forgivable loans to qualifying commercial property owners to cover 50% of three-monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.

 

The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.

 

Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations. It is expected that CECRA will be operational by mid-May, and further details will be announced soon.

 

Capital Markets Update

Overall flow of capital for any new real estate loan is still very limited and most Lenders are only writing new business with clients that they already have relationships with and even then, are looking for more security on the sponsor.  Non-recourse financing may be a thing of the past at least for the next several months.  We have provided an article from one of our mortgage partners, Canada ICI, which illustrates the “new normal” for commercial lending.  The article was published in April, and we believe that commercial lending has already improved slightly since the time this article was written. It does help illustrate the impact within the credit markets and the questions lenders are asking of borrowers.

 

See Analysis from Canada ICI

 

Cushman & Wakefield | Stevenson

We are very proud to be part of the global engine of Cushman & Wakefield who are leading the world in recovery readiness. Likewise, we too here in Winnipeg are plugged in and have our own resources to help business get back to work.

 

See Cushman & Wakefield’s COVID-19 corporate insights here

 

From a brokerage perspective, we are delighted to report that our client-facing brokerage teams are experiencing more activity overall.  One of the best indicators to economic activity in any City is velocity.  Who is looking for space and are they prepared to execute?  We remain very optimistic that completed transaction levels will return to “normal” within the next several months limited only by the severity and frequency of corona virus “flare-ups” and the anticipated 2nd and 3rd waves.

 

CW Stevenson manages +/-4.0MM sq. ft of commercial real estate and as of today’s date, +/-75% of all rent has been collected which is down from 80% from last month. We expect to surpass April’s collections given the many requests for rent deferments. We continue to update our tenant toolkit to help them explore all of the options available to them.

See the Tenant Toolkit here

 

Our office is still closed this month and we expect to be until at least early June.  We have not laid off any staff to date and are very proud of the hard work and dedication all our staff have exhibited during these times.

 

New MMI Website

We are very close to the launch of our new MMI Asset Management website. It has taken a lot longer than anticipated to build the site but I am sure you will be impressed.

 

New MMI Employee

We are please to announce that we have hired Judy Pisiak as our dedicated Controller for all accounting functions at MMI. Judy will be responsible for day-to-day accounting and administration, and financial statement preparation for all MMI-managed properties. She will also look after MMI Asset Management itself – a total of 22 different entities. She will be an integral part of the MMI management team, and will also participate in budgeting, and cash flow management for each of the entities.

 

MMI Opportunity Fund II

We see tremendous opportunity coming to our market and in order to capitalize and produce great returns for our Investors we will commence a capital raise for a new fund in Late Q2 – early Q3 of this year. This new fund will be another Opportunity fund with specific details to be announced in the coming weeks.

 

Thank you once again for entrusting us with your real estate investments and we look forward to meeting you all again soon to discuss any of your questions or concerns. We hope to have a date for our annual AGM announced as soon as it is safe to do so. If we are unable to all meet prior to the end of June 2020, we are working on a Town Hall format where we can get together online.

 

Feel free to reach out to myself, Chris Macsymic or Rob Davidson if you have any questions, concerns or if you would simply like to chat about the market.

MMI INVESTOR UPDATE – APRIL 9TH, 2020

 

Tenant Rents

Overall, our portfolio of is performing very well under the circumstances with limited tenant arrears to date. We are tracking any and all tenant asks and their respective capacity to pay rent very closely. Below, you can see a summary of all properties where tenants did not pay rent in April. We continue to work with all of our tenants to ensure they are taking advantage of the programs in place so that they can continue to pay rent in the future and cover any tenant arrears. As we move forward through this pandemic, rent payment will be increasingly difficult for some tenants but we remain committed to assisting them.

 

For those investors with interest in 180 Roslyn, we only have two tenants who missed April 1 rent payments, but we are working with both and believe the rent can be collected. Also of note, we anticipate renewals to have decent increases at +/- 4% once the provincial government removes the current freeze.

See Tenant Rent Summary

 

Cash Reserves

As I am sure you can all appreciate “cash is king” right now and our plan is to build as much cash as possible in all our assets for the next several months. This means owner disbursements will be suspended until at least the end of 3rd quarter. We are watching our cash reserves monthly at each property and will be providing regular updates to investors as necessary. At this time, we do not anticipate any cash calls for any MMI properties. Acting as prudent asset managers, we will resume our scheduled disbursement time frames once we feel it is reasonable to do so.

 

Mortgage Deferrals

We have also applied for, and have received, mortgage deferral in various amounts for most properties which will also help build our cash reserves over the coming months   Please see the mortgage update below, which illustrates what deferral has been granted from each lender and for which properties.

See Mortgage Deferral Summary

 

Capital Markets Update

Overall flow of capital for any new real estate loan is very limited, however, we have seen a few exceptions recently on re-financing.  For example, we are just about to sign off on a mortgage renewal for 67 Scurfield at +/-3.5% fixed for 5 years on a 25 year am at 70% LTV from Canadian Western Bank.

 

There is some money available from select lenders but most have closed the doors for any new loans as massive tenant arrears and potential tenant failure rates are too difficult to price and predict right now.

 

Overnight lending rates and prime rates have fallen substantially over the past few months and one would think that would translate into the same reduction in commercial lending.  It’s actually the reverse as underwriters have increased the “risk premium” to any deal (if they will lend at all) thereby making the rates considerably higher than they were even 4 week ago.  5% plus on a new loan if you can find it.

 

We found an interesting analysis from our Structured Finance team from Cushman & Wakefield in Toronto which illustrates the issue with spreads at the moment. The good news is that post pandemic from a Capital Markets perspective (think Q4), we expect to see some very attractive lending deals as the markets come back to life and banks have a better idea where their pricing models will be.

See Analysis from Cushman & Wakefield

 

Cushman & Wakefield | Stevenson

As we are part of the Global Cushman & Wakefield family we are plugged into their resources and networks ensuring we have the most accurate and up to date information out there.

See Cushman & Wakefield’s COVID-19 corporate insights here

From a brokerage perspective there are still some deals happening, but often delayed or postponed which will lead to transaction volumes being reduced for CWS in the short term. It’s too early to know the total impact this will have on the overall fiscal year of 2020.

 

CW Stevenson manages +/-4.0MM sq. ft of commercial management and as of today’s date, +/-85% of all rent has been collected. Tenants have been provided with an online toolkit of resources to help them explore all of the options available to them.

See the CW Stevenson Tenant Toolkit here.

The CW Stevenson maintenance department has been extremely busy inspecting all buildings and all vacancies, disinfecting properties and also helping the community where possible. As some of you may have heard on CJOB this past weekend,  #ActsOfMainteNICE is a grassroots kindness campaign. The maintenance team is now helping with deliveries, pick-ups, and other good deeds while they are on their regular routes. They have delivered hampers to hungry families, dropped off donations of sanitizer to community organizations like Ndinawe and Main Street Project, and even delivered toilet paper to those in need.

See some of the latest #ActsOfMainteNICE

All of the employees at CW Stevenson have done a fantastic job making sure we remain open for business and help our clients throughout this time.

 

Looking Ahead

We are committed to keeping all our investors informed.  Our next update will likely be in early May once we have received rent payments. When the market returns to “normal” in the next few months, there will be massive economic growth around the globe, so naturally we are excited to see what opportunities will be available to us as real estate investors here in Winnipeg and throughout Western Canada.  We expect to be out in the market soon with a new Opportunity Fund that will allow us the ability to capitalize on these opportunities.

 

Thank you for entrusting us with your real estate investments and we look forward to meeting you all again soon to discuss any of your questions or concerns.  We hope to have a date for our annual AGM announced as soon as it is safe to do so.  If we are unable to all meet prior to the end of June 2020, we are working on a Town Hall format where we can get together online.

 

Feel free to reach out to myself, Chris Macsymic or Rob Davidson if you have any questions, concerns or if you would simply like to chat about the market or anything else.

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