/NOT FOR DISTRIBUTION IN THE
Strategic disposition of non-core property in
124,100 sq ft leased/renewed with a WALT of 3.84 years during Q1-2023
"Despite a challenging operating environment, positive leasing momentum continued in the first quarter of 2023" stated
Q1 Highlights
- Completed the sale of
400 Carlingview Drive ,Toronto, Ontario onMarch 10, 2023 for a sale price of$7,250 . The proceeds of disposition net of costs were$7,006 . - Entered into an unconditional agreement of purchase and sale to dispose of
360 Laurier Avenue ,Ottawa, Ontario ("Laurier Property") for a sale price of$17,500 with closing expected to be on or aboutJune 15, 2023 . - Contractually leased and renewed approximately 124,100 square feet with a weighted average lease term of 3.84 years and a 2.4% increase over expiring base rents.
- Portfolio occupancy of 93% with an average remaining lease term of 4.5 years (91% and 4.3 years including investment properties held for sale).
- Revenue and net operating income ("NOI") decreased 7% and 16%, respectively, compared to Q1-2022 driven by a decrease in Same property NOI ("Same Property NOI").
- During 2022, the REIT received termination income from one tenant at
6925 Century Avenue who downsized a portion of their space effective Q4-2022. Excluding this termination income and the lost revenue associated with the vacant space, Q4-2022 AFFO basic and diluted per Unit would have been$0.11 which is consistent with Q1-2023 results. To date, 60% of this vacancy has been contractually re-leased with rents commencing in the latter half of 2023. - Same property NOI decreased by 16.6% and 15.4% excluding investment properties held for sale due to termination fees received in Q1-2022 along with tenants downsizing on renewal. The decrease in NOI generated from investment properties held for sale was due to the lead tenant vacating the Laurier Property effective
February 2023 . Same Property NOI excluding investment properties held for sale and termination fees decreased 6.6% in Q1-2023. - Funds from operations ("FFO") and adjusted funds from operations ("AFFO") basic and diluted per Unit decreased by
$0.05 to$0.11 as compared to Q1-2022. - Announced a 50% reduction to the monthly cash dividend from
$0.0495 per Unit to$0.02475 per Unit or$0.297 per Unit on an annualized basis ("Distribution Reduction"). The new declared distribution was paid onApril 17, 2023 to Unitholders of record onMarch 31, 2023 . The Distribution Reduction is expected to provide an additional$25 million in cash annually that will be used to improve our capital profile. $58.4 million of Available Funds at the end of Q1-2023.
Subsequent Events
- On
April 12, 2023 , the REIT announced the intention to commence a normal course issuer bid (the "NCIB") subject to the approval of the TSX. The REIT will have the ability to purchase for cancellation up to a maximum of 8,239,557 of its Units representing 10% of the REIT's public float of 82,395,573 Units at a price per Unit equal to the market price at the time of acquisition. The NCIB became effective fromApril 18, 2023 and will remain in place until the earlier ofApril 17, 2024 or the date on which the REIT has purchased the maximum number of Units permitted. - Also on
April 12, 2023 , the REIT announced the suspension of the dividend reinvestment plan ("DRIP") until further notice. As a result Unitholders received distributions in cash effective with the distribution paid onApril 17, 2023 to Unitholders of record onMarch 31, 2023 . - On
April 26, 2023 , the REIT announced that effectiveJune 30, 2023 ,Tracy Sherren , the REIT's President and Chief Financial Officer and President, Canadian Commercial, Starlight Investments, will be retiring from her executive positions at the REIT and Starlight Investments.Ms. Sherren will remain as a trustee of the REIT.Martin Liddell , the current Chief Financial Officer at Starlight Investments, will be appointed as a Chief Financial Officer of the REIT in addition to his positions at Starlight Investments.Chris Bell will continue to act as the President and Chief Investment Officer at Starlight Investments as well as serving as the interim President of the Canadian Commercial division at Starlight Investments.
The REIT's presentation currency is the Canadian dollar. Unless otherwise stated, dollar amounts expressed in this press release are in thousands of dollars.
Key Performance Indicators
Three months ended | ||
2023 | 2022 | |
Number of properties | 46 | 46 |
Portfolio GLA | 4,950,300 sf | 4,799,700 sf |
Occupancy | 91 % | 96 % |
Remaining weighted average lease term | 4.3 years | 4.3 years |
Revenue from government and credit rated tenants | 80 % | 76 % |
Revenue | $ 33,858 | $ 36,327 |
NOI (1) | 18,638 | 22,194 |
Net income and comprehensive income | 6,995 | 14,909 |
Same Property NOI (1) | 20,037 | 24,034 |
FFO (1) | $ 10,743 | $ 14,776 |
FFO per Unit - basic (1) | 0.11 | 0.16 |
FFO per Unit - diluted (1) | 0.11 | 0.16 |
AFFO (1) | $ 10,581 | $ 14,617 |
AFFO per Unit - basic (1) | 0.11 | 0.16 |
AFFO per Unit - diluted (1) | 0.11 | 0.16 |
AFFO payout ratio - diluted (1) | 111 % | 94 % |
Distributions declared | $ 11,695 | $ 13,680 |
Operating Results
Q1-2023 revenue and NOI decreased 7% and 16%, respectively when compared to the same period in 2022. The main contributor was the decrease in termination income and lower revenue from a tenant in the REIT's GTA portfolio that downsized a portion of their space effective Q4-2022 combined with a 101,200 square feet lease expiry in Q1-2023 at the Laurier Property. The decrease was partially offset by termination income received from the tenant at the property disposed of in Q1-2023 and NOI from an acquisition completed in Q3-2022.
The REIT's FFO and AFFO decreased
This is a non-IFRS financial measure. Refer to the Non-IFRS financial measures section below. |
Q1-2023 FFO and AFFO basic and diluted per Unit were lower by
Same Property NOI(1)
As at | |||||||||
Occupancy(2) | 2023 | 2022 | NOI(2) | Q1 2023 | Q1 2022 | Variance | Variance % | ||
94.4 % | 96.9 % | $ 3,518 | $ 3,486 | $ 32 | 0.9 % | ||||
98.7 % | 100.0 % | 1,273 | 1,259 | 14 | 1.1 % | ||||
85.5 % | 82.4 % | 791 | 1,075 | (284) | (26.4) % | ||||
96.2 % | 98.1 % | 1,680 | 1,759 | (79) | (4.5) % | ||||
93.2 % | 96.4 % | 11,835 | 15,006 | (3,171) | (21.1) % | ||||
Total | 93.1 % | 95.3 % | $ 19,097 | $ 22,585 | $ (3,488) | (15.4) % |
Q1-2023 Same Property NOI decreased 16.6% and 15.4% excluding investment properties held for sale when compared to Q1-2022.
Property occupancy in
Ontario Same Property NOI decreased mainly due to termination fees received in Q1-2022 relating to a tenant in the REIT's GTA portfolio that downsized a portion of their space effective
Same Property NOI excluding investment properties held for sale and termination fees decreased 6.6% in Q1-2023.
Debt and Liquidity
December 31,2022 | ||
Indebtedness to GBV ratio (1) | 59.8 % | 59.3 % |
Interest coverage ratio (1) | 2.80 | 3.00 x |
Indebtedness - weighted average fixed interest rate (1) | 3.63 % | 3.54 % |
Indebtedness - weighted average term to maturity (1) | 3.14 years | 3.27 years |
At the end of Q1-2023, the REIT had access to Available Funds(1) of
As at
About the REIT
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of
The REIT is focused on growing its portfolio principally through acquisitions across
(1) This is a non-IFRS financial measure. Refer to the Non-IFRS financial measures section below. |
(2) Excludes investment properties held for sale. |
Non-IFRS measures
Certain terms used in this press release such as FFO, AFFO, FFO and AFFO payout ratios, NOI, Same Property NOI, indebtedness ("Indebtedness"), gross book value ("GBV"), Indebtedness to GBV ratio, net earnings before interest, tax, depreciation and amortization and fair value gain (loss) on financial instruments and investment properties ("Adjusted EBITDA"), interest coverage ratio and Available Funds are not measures defined by International Financial Reporting Standards ("IFRS") as prescribed by the
Reconciliation of Non-IFRS financial measures
The following tables reconcile the non-IFRS financial measures to the comparable IFRS measures for the three months ended
NOI
The following table calculates the REIT's net operating income, a non-IFRS financial measure:
Three months ended | ||||
2023 | 2022 | |||
Revenue | $ | 33,858 | $ | 36,327 |
Expenses: | ||||
Property operating costs | (9,907) | (9,071) | ||
Realty taxes | (5,313) | (5,062) | ||
NOI | $ | 18,638 | $ | 22,194 |
Same Property NOI
Same Property NOI is measured as the net operating income for the properties owned and operated by the REIT for the current and comparative period. The following table reconciles the REIT's Same Property NOI to NOI:
Three months ended | ||||
2023 | 2022 | |||
Number of properties | 45 | 45 | ||
Revenue | $ | 32,289 | $ | 36,152 |
Expenses: | ||||
Property operating | (9,547) | (9,023) | ||
Realty taxes | (5,120) | (5,040) | ||
$ | 17,622 | $ | 22,089 | |
Add: | ||||
Amortization of leasing costs and tenant inducements | 2,028 | 1,565 | ||
Straight-line rent | 387 | 380 | ||
Same Property NOI | $ | 20,037 | $ | 24,034 |
Less: | ||||
Investment properties held for sale | (940) | (1,449) | ||
Same Property NOI excluding investment properties held for sale | $ | 19,097 | $ | 22,585 |
Reconciliation to condensed consolidated interim financial statements: | ||||
Acquisitions, dispositions and investment properties held for sale | 1,345 | 1,566 | ||
Amortization of leasing costs and tenant inducements | (2,037) | (1,578) | ||
Straight-line rent | 233 | (379) | ||
NOI | $ | 18,638 | $ | 22,194 |
FFO and AFFO
The following table reconciles the REIT's FFO and AFFO to net income and comprehensive income, for the three months ended
Three months ended | ||||
2023 | 2022 | |||
Net income and comprehensive income | $ | 6,995 | $ | 14,909 |
Add (deduct): | ||||
Fair value adjustment of Unit-based compensation | (299) | (124) | ||
Fair value adjustment of investment properties | 6,472 | 1,670 | ||
Fair value adjustment of Class B LP Units | (5,861) | (755) | ||
Transaction costs on sale of investment property | 244 | — | ||
Distributions on Class B LP Units | 313 | 449 | ||
Unrealized loss (gain) on change in fair value of derivative instruments | 842 | (2,951) | ||
Amortization of leasing costs and tenant inducements | 2,037 | 1,578 | ||
FFO | $ | 10,743 | $ | 14,776 |
Add (deduct): | ||||
Unit-based compensation expense | 168 | 265 | ||
Amortization of financing costs | 380 | 376 | ||
Rent supplement | 743 | — | ||
Amortization of mortgage discounts | (9) | (13) | ||
Instalment note receipts | 14 | 17 | ||
Straight-line rent | (233) | 379 | ||
Capital reserve | (1,225) | (1,183) | ||
AFFO | $ | 10,581 | $ | 14,617 |
FFO per Unit: | ||||
Basic | $ | 0.11 | $ | 0.16 |
Diluted | $ | 0.11 | $ | 0.16 |
AFFO per Unit: | ||||
Basic | $ | 0.11 | $ | 0.16 |
Diluted | $ | 0.11 | $ | 0.16 |
AFFO payout ratio: | ||||
Basic | 110% % | 94 % | ||
Diluted | 111% % | 94 % | ||
Distributions declared | $ | 11,695 | $ | 13,680 |
Weighted average Units outstanding (000s): | ||||
Basic | 94,474 | 92,052 | ||
Add: | ||||
Unit options and Incentive Units | 23 | 548 | ||
Diluted | 94,497 | 92,600 |
Indebtedness to GBV Ratio
The table below calculates the REIT's Indebtedness to GBV ratio as at
|
| |||
Total assets | $ | 1,437,297 | $ | 1,450,315 |
Deferred financing costs | 6,805 | 7,070 | ||
GBV | $ | 1,444,102 | $ | 1,457,385 |
Mortgages payable | 843,136 | 846,689 | ||
Credit Facility | 17,400 | 14,400 | ||
Unamortized financing costs and mark to market mortgage adjustments | 3,524 | 3,745 | ||
Indebtedness | $ | 864,060 | $ | 864,834 |
Indebtedness to GBV | 59.8 % | 59.3 % |
Adjusted EBITDA
The table below reconciles the REIT's adjusted EBITDA to net income and comprehensive income for the twelve month period ended
Twelve months ended | |||||
2023 | 2022 | ||||
Net income and comprehensive income | $ | 8,618 | $ | 56,193 | |
Add (deduct): | |||||
Interest expense | 29,800 | 27,360 | |||
Fair value adjustment of Unit-based compensation | (755) | 392 | |||
Transaction costs on sale of investment property | 244 | 623 | |||
Fair value adjustment of investment properties | 46,727 | (6,897) | |||
Fair value adjustment of Class B LP Units | (9,696) | 951 | |||
Distributions on Class B LP Units | 1,537 | 1,829 | |||
Unrealized loss on change in fair value of derivative instruments | (1,651) | (4,333) | |||
Amortization of leasing costs, tenant inducements, mortgage premium and financing costs | 8,730 | 7,685 | |||
Adjusted EBITDA | $ | 83,554 | $ | 83,803 |
Interest Coverage Ratio
The table below calculates the REIT's interest coverage ratio for the 12 month period ended
Twelve months ended | ||||
2022 | 2022 | |||
Adjusted EBITDA | $ | 83,554 | $ | 83,803 |
Interest expense | 29,800 | 27,360 | ||
Interest coverage ratio | 2.80 x | 3.06 x |
Available Funds
The table below calculates the REIT's Available Funds as at
|
| |||
Cash | $ | 7,793 | $ | 9,501 |
Undrawn Credit Facility | 50,600 | 53,600 | ||
Available Funds | $ | 58,393 | $ | 63,101 |
Forward-looking Statements
Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to future results, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry and may include statements regarding the financial position, business strategy, budgets, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. In some cases, forward-looking information can be identified by such terms as "may", "might", "will", "could", "should", "would", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "goal", "project", "predict", "forecast", "potential", "continue", "likely", or the negative thereof or other similar expressions suggesting future outcomes or events.
Forward-looking statements involve known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and priorities may not be achieved. A variety of factors, many of which are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: risks and uncertainties related to the trust units of the REIT ("Units"); risks related to the REIT and its business; fluctuating interest rates and general economic conditions, including increased levels of inflation; credit, market, operational and liquidity risks generally; occupancy levels and defaults, including the failure to fulfill contractual obligations by tenants; lease renewals and rental increases; the ability to re-lease and find new tenants for vacant space; the timing and ability of the REIT to acquire or sell certain properties; the ongoing effects of COVID-19 and work-from-home flexibility initiatives on the business, operations and financial condition of the REIT and its tenants, as well as on consumer behavior and the economy in general, including the ability to enforce leases, perform capital expenditure work, increase rents, raise capital through the issuance of Units or other securities of the REIT and obtain mortgage financing on the REIT's properties (the "properties"). The foregoing is not an exhaustive list of factors that may affect the REIT's forward-looking statements. Other risks and uncertainties not presently known to the REIT could also cause actual results or events to differ materially from those expressed in its forward-looking statements. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance actual results will be consistent with such forward-looking statements.
Information contained in forward-looking statements is based upon certain material assumptions applied in drawing a conclusion or making a forecast or projection, including management's perception of historical trends, current conditions and expected future developments, as well as other considerations believed to be appropriate in the circumstances. There can be no assurance regarding: (a) the ongoing effects of COVID-19 and work-from-home initiatives on the REIT's business, operations and performance, including the performance of its Units; (b) the REIT's ability to mitigate any impacts related to fluctuating interest rates, inflation and the after effects of COVID-19 including the shift to hybrid working; (c) the factors, risks and uncertainties expressed above in regards to the post COVID-19 environment on the commercial real estate industry and property occupancy levels; (d) credit, market, operational, and liquidity risks generally; (e) the availability of investment opportunities for growth in
The forward-looking statements made relate only to events or information as of the date on which the statements are made in this MD&A. Except as specifically required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
SOURCE
© Canada Newswire, source