"In the fourth quarter of 2023, Artis met a number of operational and strategic benchmarks, which demonstrate the underlying strength of our portfolio and signal to the market the quality of our real estate and our internal management platform," said
UPDATE ON STRATEGIC REVIEW
On
On
Over the past several months, the Special Committee and the Board have been working with the REIT's financial advisors to explore options available to unlock and maximize value for unitholders, including the potential sale of the REIT. In the current market, Artis and its advisors do not believe that there is a buyer prepared to acquire the REIT at a reasonable value relative to management's latest published NAV per unit of
Since the announcement of the strategic review, Artis has completed or entered into unconditional agreements for
The Board remains committed to pursuing strategic alternatives that may be available to the REIT to unlock and maximize value for unitholders, including pursuing near-term opportunities available to Artis to enhance and grow NAV per unit. The work undertaken over the past several months has enabled Artis to properly assess the current environment and options available to the REIT in an effort to create and maximize value for unitholders.
There can be no assurance that the strategic review process will result in the REIT pursuing any transaction. The REIT has not set a timetable for completion of this process and does not intend to disclose further developments unless it determines that disclosure is appropriate or necessary.
2023 ANNUAL HIGHLIGHTS
Portfolio Activity
- Disposed of nine industrial properties, five retail properties, three office properties and a parcel of development land for an aggregate sale price of
$322.4 million . - Entered into unconditional agreements to sell four office properties, one industrial property, one retail property and a portfolio of eight retail properties located in
Canada and one industrial property located in theU.S. for aggregate sale prices of$393.4 million andUS$38.7 million . - Completed the development of
Blaine 35 II, comprising two industrial properties totalling 198,900 square feet, located inthe Twin Cities Area ,Minnesota . The first building was 100.0% committed and the second building was 100.0% occupied upon completion. - Completed the development of
Park Lucero East , an industrial property comprising 561,000 square feet, located in theGreater Phoenix Area ,Arizona . Artis has a 10% ownership interest in this property. - Completed the development of 300 Main, a residential/commercial property located in
Winnipeg, Manitoba .
Balance Sheet and Liquidity
- Utilized the NCIB to purchase 7,473,874 common units at a weighted-average price of
$7.27 and 583,801 preferred units at a weighted-average price of$17.77 . The REIT purchased the maximum number of common units allowed under the NCIB term that expired onDecember 18, 2023 . - Improved Total Debt to Adjusted EBITDA (1) to 7.7 at
December 31, 2023 , compared to 8.3 atDecember 31, 2022 . - Repaid the Series D senior unsecured debentures upon maturity in the amount of
$250.0 million . - Renewed the second tranche of the revolving credit facilities in the amount of
$280.0 million for a two-year term maturing onApril 29, 2025 . - Extended the maturity date of the
$100.0 million non-revolving credit facility for a one-year term maturing onFebruary 6, 2024 and extended the maturity date of the$150.0 million non-revolving credit facility for a one-year term maturing onJuly 18, 2024 . Subsequent to the end of the year, extended the maturing date of the$100.0 million non-revolving credit facility for a two-year term maturingFebruary 6, 2026 .
Financial and Operational
- Same Property NOI (1) in Canadian dollars for 2023 increased 7.6% compared to 2022.
- Maintained strong portfolio occupancy of 90.1% at
December 31, 2023 , unchanged fromDecember 31, 2022 . - Renewals totalling 1,024,276 square feet and new leases totalling 1,163,799 square feet commenced during 2023.
- Weighted-average rental rate on renewals that commenced during 2023 increased 4.8%.
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
BALANCE SHEET AND LIQUIDITY
The REIT's balance sheet metrics are as follows:
2023 | 2022 | ||||
Total investment properties | $ 3,066,841 | $ 3,683,571 | |||
Unencumbered assets | 1,567,001 | 2,034,409 | |||
NAV per unit (1) | 13.96 | 17.38 | |||
Total Debt to GBV (1) | 50.9 % | 48.5 % | |||
Total Debt to Adjusted EBITDA (1) | 7.7 | 8.3 | |||
Adjusted EBITDA interest coverage ratio (1) | 1.93 | 2.98 | |||
Unencumbered assets to unsecured debt (1) | 1.62 | 1.54 | |||
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
At
Liquidity and capital resources may be impacted by financing activities, portfolio acquisition, disposition and development activities or debt repayments occurring subsequent to
FINANCIAL AND OPERATIONAL RESULTS
Three months | Year ended | ||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||
Revenue | $ 80,892 | $ 94,102 | (14.0) % | $ 335,837 | $ 372,512 | (9.8) % | |||
Net operating income | 45,352 | 52,377 | (13.4) % | 184,017 | 209,980 | (12.4) % | |||
Net loss | (86,837) | (128,301) | (32.3) % | (332,068) | (5,294) | 6,172.5 % | |||
Total comprehensive (loss) income | (116,270) | (147,659) | (21.3) % | (364,399) | 105,537 | (445.3) % | |||
Distributions per common unit | 0.15 | 0.31 | (51.6) % | 0.60 | 0.76 | (21.1) % | |||
FFO (1) (2) | $ 27,275 | $ 34,690 | (21.4) % | $ 120,539 | $ 163,189 | (26.1) % | |||
FFO per unit - diluted (1) (2) | 0.25 | 0.30 | (16.7) % | 1.08 | 1.38 | (21.7) % | |||
FFO payout ratio (1) (3) | 60.0 % | 50.0 % | 10.0 % | 55.6 % | 43.5 % | 12.1 % | |||
AFFO (1) (2) | $ 15,418 | $ 21,307 | (27.6) % | $ 69,998 | $ 110,950 | (36.9) % | |||
AFFO per unit - diluted (1) (2) | 0.14 | 0.18 | (22.2) % | 0.63 | 0.94 | (33.0) % | |||
AFFO payout ratio (1) (3) | 107.1 % | 83.3 % | 23.8 % | 95.2 % | 63.8 % | 31.4 % |
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
(2) The REIT also calculates FFO and AFFO, adjusted for the impact of the realized gain (loss) on equity securities. Refer to FFO and AFFO section of Artis's 2023 Annual MD&A. |
(3) FFO payout ratio and AFFO payout ratio are calculated excluding the Special Distribution declared in |
Artis reported portfolio occupancy of 90.1% at
Artis's portfolio has a stable lease expiry profile with 45.2% of gross leasable area expiring in 2028 or later. Weighted-average in-place rents for the total portfolio are
Current | Monthly | 2024 | 2025 | 2026 | 2027 | 2028 & later | Total | ||||||||
Expiring square footage | 10.0 % | 0.3 % | 11.3 % | 9.8 % | 12.3 % | 11.1 % | 45.2 % | 100.0 % | |||||||
In-place rents | N/A | N/A | $ 15.15 | ||||||||||||
Market rents | N/A | N/A | $ 14.89 |
UPCOMING WEBCAST AND CONFERENCE CALL
A conference call with management will be held on
Alternatively, you may access the simultaneous webcast by following the link from our website at https://www.artisreit.com/investor-link/conference-calls/. Prior to the webcast, you may follow the link to confirm you have the right software and system requirements.
If you cannot participate on
CAUTIONARY STATEMENTS
This press release contains forward-looking statements within the meaning of applicable Canadian securities laws. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements include, among others, statements with respect to potential sales of retail, office and industrial assets, the REIT's NCIB and its objective to pursue various opportunities available to the REIT to grow NAV per unit and the strategies to pursue such objective. Without limiting the foregoing, the words "outlook", "objective", "expects", "anticipates", "intends", "estimates", "projects", "believes", "plans", "seeks", and similar expressions or variations of such words and phrases suggesting future outcomes or events, or which state that certain actions, events or results ''may'', ''would'', "should" or ''will'' occur or be achieved are intended to identify forward-looking statements. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.
Forward-looking statements are based on a number of factors and assumptions which are subject to numerous risks and uncertainties, which have been used to develop such statements, but which may prove to be incorrect. Although Artis believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Assumptions have been made regarding, among other things: the general stability of the economic and political environment in which Artis operates, treatment under governmental regulatory regimes, securities laws and tax laws, the ability of Artis and its service providers to obtain and retain qualified staff, equipment and services in a timely and cost efficient manner, currency, exchange and interest rates, global economics and financial markets.
Artis is subject to significant risks and uncertainties which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied in these forward-looking statements. Such risk factors include, but are not limited to, tax matters, credit, market, currency, operational, liquidity and funding risks, real property ownership, geographic concentration, current economic conditions, strategic initiatives, pandemics and other public health events, debt financing, interest rate fluctuations, foreign currency, tenants, SIFT rules, other tax-related factors, illiquidity, competition, reliance on key personnel, future property transactions, general uninsured losses, dependence on information technology systems, cyber security, environmental matters and climate change, land and air rights leases, public markets, market price of common units, changes in legislation and investment eligibility, availability of cash flow, fluctuations in cash distributions, nature of units and legal rights attaching to units, preferred units, debentures, dilution, unitholder liability, failure to obtain additional financing, potential conflicts of interest, developments, trustees and risks and uncertainties regarding strategic alternatives including the terms of their availability, whether they will be available at all and the effects of their implementation.
For more information on the risks, uncertainties and assumptions that could cause Artis's actual results to materially differ from current expectations, refer to the section entitled "Risk Factors" of Artis's 2023 Annual Information Form for the year ended
Artis cannot assure investors that actual results will be consistent with any forward-looking statements and Artis assumes no obligation to update or revise such forward-looking statements to reflect actual events or new circumstances other than as required by applicable securities laws. All forward-looking statements contained in this press release are qualified by this cautionary statement.
NOTICE WITH RESPECT TO NON-GAAP & SUPPLEMENTARY FINANCIAL MEASURES DISCLOSURE
In addition to reported IFRS measures, certain non-GAAP and supplementary financial measures are commonly used by Canadian real estate investment trusts as an indicator of financial performance. "GAAP" means the generally accepted accounting principles described by the CPA Canada Handbook - Accounting, which are applicable as at the date on which any calculation using GAAP is to be made. Artis applies IFRS, which is the section of GAAP applicable to publicly accountable enterprises.
Non-GAAP measures and ratios include Same Property Net Operating Income ("Same Property NOI"), Funds From Operations ("FFO"), Adjusted Funds from Operations ("AFFO"), FFO per Unit AFFO per Unit, FFO Payout Ratio, AFFO Payout Ratio, NAV per Unit, Total Debt to GBV, Adjusted EBITDA Interest Coverage Ratio and Total Debt to Adjusted EBITDA.
Supplementary financial measures includes unencumbered assets to unsecured debt.
Management believes that these measures are helpful to investors because they are widely recognized measures of Artis's performance and provide a relevant basis for comparison among real estate entities.
These non-GAAP and supplementary financial measures are not defined under IFRS and are not intended to represent financial performance, financial position or cash flows for the period, nor should any of these measures be viewed as an alternative to net income, cash flow from operations or other measures of financial performance calculated in accordance with IFRS.
The above measures are not standardized financial measures under the financial reporting framework used to prepare the financial statements of Artis. Readers should be further cautioned that the above measures as calculated by Artis may not be comparable to similar measures presented by other issuers. Refer to the Notice With Respect to Non-GAAP & Supplementary Financial Measures Disclosure of Artis's 2023 Annual MD&A, which is incorporated by reference herein, for further information (available on SEDAR+ at www.sedarplus.ca or Artis's website at www.artisreit.com).
The reconciliation for each non-GAAP measure or ratio and other supplementary financial measures included in this Press Release is outlined below.
NAV per Unit
|
| ||
Unitholders' equity | $ 1,716,332 | $ 2,229,159 | |
Less face value of preferred equity | (197,951) | (212,547) | |
NAV attributable to common unitholders | 1,518,381 | 2,016,612 | |
Total number of diluted units outstanding: | |||
Common units | 107,950,866 | 115,409,234 | |
Restricted units | 477,077 | 440,617 | |
Deferred units | 323,224 | 203,430 | |
108,751,167 | 116,053,281 | ||
NAV per unit | $ 13.96 | $ 17.38 |
Total Debt to GBV
|
| ||
Total assets | $ 3,735,030 | $ 4,553,913 | |
Add: accumulated depreciation | 11,786 | 10,585 | |
Gross book value | 3,746,816 | 4,564,498 | |
Secured mortgages and loans | 911,748 | 864,698 | |
Preferred shares liability | 928 | 950 | |
Carrying value of debentures | 199,630 | 449,091 | |
Credit facilities | 794,164 | 901,159 | |
Total debt | $ 1,906,470 | $ 2,215,898 | |
Total debt to GBV | 50.9 % | 48.5 % |
Unencumbered Assets to Unsecured Debt
|
| ||
Unencumbered assets | $ 1,567,001 | $ 2,034,409 | |
Unencumbered assets in properties held under joint venture arrangements | 47,243 | 50,557 | |
Total unencumbered assets | 1,614,244 | 2,084,966 | |
Senior unsecured debentures | 199,630 | 449,091 | |
Unsecured credit facilities | 794,164 | 901,159 | |
Total unsecured debt | $ 993,794 | $ 1,350,250 | |
Unencumbered assets to unsecured debt | 1.62 | 1.54 |
Adjusted EBITDA Interest Coverage Ratio
Three months ended | Year ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net loss | $ (86,837) | $ (128,301) | $ (332,068) | $ (5,294) | |||
Add (deduct): | |||||||
Tenant inducements amortized to revenue | 6,177 | 6,301 | 24,595 | 25,405 | |||
Straight-line rent adjustments | (509) | (424) | (2,554) | (1,379) | |||
Depreciation of property and equipment | 311 | 312 | 1,226 | 1,254 | |||
Net loss (income) from equity accounted investments | 1,804 | 28,196 | 57,385 | (74,659) | |||
Distributions from equity accounted investments | 1,373 | 734 | 4,346 | 4,166 | |||
Interest expense | 32,816 | 29,013 | 121,876 | 89,437 | |||
Strategic review expenses | 28 | — | 207 | — | |||
Fair value loss on investment properties | 119,803 | 156,533 | 344,286 | 178,431 | |||
Fair value (gain) loss on financial instruments | (12,201) | (18,075) | 41,730 | 21,130 | |||
Foreign currency translation (gain) loss | (3,880) | (1,583) | (6,932) | 6,683 | |||
Income tax expense (recovery) | 3,067 | (5,894) | (5,605) | 14,355 | |||
Adjusted EBITDA | 61,952 | 66,812 | 248,492 | 259,529 | |||
Interest expense | 32,816 | 29,013 | 121,876 | 89,437 | |||
Add (deduct): | |||||||
Amortization of financing costs | (797) | (787) | (3,401) | (3,177) | |||
Amortization of above- and below-market mortgages, net | 84 | 234 | 778 | 896 | |||
Adjusted interest expense | $ 32,103 | $ 28,460 | $ 119,253 | $ 87,156 | |||
Adjusted EBITDA interest coverage ratio | 1.93 | 2.35 | 2.08 | 2.98 |
Total Debt to Adjusted EBITDA
|
| ||
Secured mortgages and loans | $ 911,748 | $ 864,698 | |
Preferred shares liability | 928 | 950 | |
Carrying value of debentures | 199,630 | 449,091 | |
Credit facilities | 794,164 | 901,159 | |
Total debt | 1,906,470 | 2,215,898 | |
Quarterly Adjusted EBITDA | 61,952 | 66,812 | |
Annualized Adjusted EBITDA | 247,808 | 267,248 | |
Total Debt to Adjusted EBITDA | 7.7 | 8.3 |
Same Property NOI
Year ended | Year ended | ||||||||||||
% Change | % Change | ||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||
Net operating income | $ 45,352 | $ 52,377 | $ 184,017 | $ 209,980 | |||||||||
Add (deduct) net operating income from: | |||||||||||||
Joint venture arrangements | 3,116 | 1,548 | 11,123 | 8,886 | |||||||||
Dispositions and unconditional dispositions | (6,215) | (14,943) | (9,174) | (40,569) | |||||||||
(Re)development properties | 340 | 227 | (2,716) | (6,634) | |||||||||
Lease termination income adjustments | (101) | (374) | (135) | (1,289) | |||||||||
Other | (51) | 76 | 301 | 172 | |||||||||
(2,911) | (13,466) | (601) | (39,434) | ||||||||||
Straight-line rent adjustments (1) | (699) | (804) | (2,697) | (3,045) | |||||||||
Tenant inducements amortized to revenue (1) | 5,922 | 5,532 | 24,220 | 22,969 | |||||||||
Same Property NOI | $ 47,664 | $ 43,639 | $ 4,025 | 9.2 % | $ 204,939 | $ 190,470 | 7.6 % |
(1) Includes joint venture arrangements.
FFO and AFFO
Three months ended | Year ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net loss | $ (86,837) | $ (128,301) | $ (332,068) | $ (5,294) | |||
Add (deduct): | |||||||
Tenant inducements amortized to revenue | 6,177 | 6,301 | 24,595 | 25,405 | |||
Incremental leasing costs | 456 | 368 | 2,274 | 2,695 | |||
Distributions on preferred shares treated as interest expense | 63 | 63 | 249 | 240 | |||
Remeasurement component of unit-based compensation | (34) | (435) | (1,433) | (1,725) | |||
Strategic review expenses | 28 | — | 207 | — | |||
Adjustments for equity accounted investments | 4,381 | 29,211 | 66,862 | (62,140) | |||
Fair value loss on investment properties | 119,803 | 156,533 | 344,286 | 178,431 | |||
Fair value (gain) loss on financial instruments | (12,201) | (18,075) | 41,730 | 21,130 | |||
Foreign currency translation (gain) loss | (3,880) | (1,583) | (6,932) | 6,683 | |||
Deferred income tax expense (recovery) | 2,990 | (6,315) | (6,206) | 13,620 | |||
Preferred unit distributions | (3,671) | (3,077) | (13,025) | (15,856) | |||
FFO | $ 27,275 | $ 34,690 | $ 120,539 | $ 163,189 | |||
Add (deduct): | |||||||
Amortization of recoverable capital expenditures | $ (1,985) | $ (2,393) | $ (7,403) | $ (8,180) | |||
Straight-line rent adjustments | (509) | (424) | (2,554) | (1,379) | |||
Non-recoverable property maintenance reserve | (400) | (850) | (2,200) | (4,150) | |||
Leasing costs reserve | (7,500) | (7,900) | (30,400) | (31,900) | |||
Adjustments for equity accounted investments | (1,463) | (1,816) | (7,984) | (6,630) | |||
AFFO | $ 15,418 | $ 21,307 | $ 69,998 | $ 110,950 |
FFO and AFFO Per Unit
Three months ended | Year ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Basic units | 107,947,620 | 115,781,374 | 111,294,362 | 117,932,876 | |||
Add: | |||||||
Restricted units | 443,082 | 399,997 | 402,558 | 356,076 | |||
Deferred units | 322,874 | 202,914 | 281,001 | 180,635 | |||
Diluted units | 108,713,576 | 116,384,285 | 111,977,921 | 118,469,587 |
Three months ended | Year ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
FFO per unit: | |||||||
Basic | $ 0.25 | $ 0.30 | $ 1.08 | $ 1.38 | |||
Diluted | 0.25 | 0.30 | 1.08 | 1.38 | |||
AFFO per unit: | |||||||
Basic | $ 0.14 | $ 0.18 | $ 0.63 | $ 0.94 | |||
Diluted | 0.14 | 0.18 | 0.63 | 0.94 |
FFO and AFFO Payout Ratios
Three months ended | Year ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Distributions per common unit | $ 0.15 | $ 0.15 | $ 0.60 | $ 0.60 | |||
FFO per unit - diluted | 0.25 | 0.30 | 1.08 | 1.38 | |||
FFO payout ratio | 60.0 % | 50.0 % | 55.6 % | 43.5 % | |||
Distributions per common unit | $ 0.15 | $ 0.15 | $ 0.60 | $ 0.60 | |||
AFFO per unit - diluted | 0.14 | 0.18 | 0.63 | 0.94 | |||
AFFO payout ratio | 107.1 % | 83.3 % | 95.2 % | 63.8 % |
ABOUT
Artis is a diversified Canadian real estate investment trust with a portfolio of industrial, office and retail properties in
SOURCE
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