MMI INVESTOR UPDATE – APRIL 9TH, 2020
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
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.
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.
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.