- Fair value gains on investment properties of $40.3 million in Q1 2022
- $1.03 billion in total assets at
March 31, 2022
- Property revenue up 39.9% in Q1 2022 compared to Q1 2021
- Net operating income1 up 39.5% in Q1 2022 compared
to Q1 2021
- Net income and comprehensive income up $44.9 million in Q1 2022 compared to Q1 2021
- AFFO1 increase of 44.1% in Q1 2022 compared to Q1
2021
- AFFO Payout ratio - Basic1 of 87.0% at March 31, 2022, down from 91.5% at Dec. 31, 2021
- Debt to Gross Book Value1 of 51.2% at March 31, 2022, down from 53.1% at Dec. 31, 2021, and 57.5% at March 31, 2021
- Occupancy rate of 98.5% at March 31,
2022
MONTREAL, May 11, 2022
/CNW/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT")
(TSX: PRV.UN) today reported its financial and operating results
for the three-month period (or "first quarter" or "Q1") ended
March 31, 2022.
"We are pleased with our 2022 first quarter results, having
reached a significant milestone in our growth strategy as an
industrial-focused REIT recording over $1
billion in assets for the first time. We continued the
independent appraisal process of our properties, which has resulted
in further recognition of the value embedded in our high-quality
portfolio," said Jim Beckerleg,
President and CEO, PROREIT.
"Our industrial portfolio, which now represents over 65% of base
rent, delivered strong Same Property NOI1 growth of 5.4%
in the first quarter of 2022, compared to the same period last
year. Retail Same Property NOI1 also increased 4.0% over
the comparative period in 2021. However, our office segment, which
only represents 9.9% of base rent, was negatively impacted in the
quarter by a short-term vacancy in a single-tenant building.
Positively, this space has been fully re-leased as of April 1, 2022 on a 15 year-term, at a higher
rent. Excluding this single vacancy, which accounts for
approximately $0.2 million of lost
NOI1 in the quarter, all segment Same Property NOI
growth was 2.7% higher in the first quarter of 2022 compared to the
same period in 2021.
"Our financial position has continued to strengthen
significantly, and we now expect to reach our target of reducing
our Debt to Gross Book Value1 ratio to below 50%
before year-end. We also ended the quarter with $38 million available under our credit facility.
With no significant mortgage debt coming due in 2022, we have time
to adjust to the rising interest rate environment facing our
economy.
___________________
|
1 This is a
non-IFRS measure. See "Non-IFRS Measures".
|
|
"Our growth outlook remains positive for the remainder of the
year, demand being vigorous, especially in our dominant industrial
sector. We remain fully committed to pursuing strategies that
are accretive to the REIT and therefore to the benefit of our
unitholders," Mr. Beckerleg concluded.
Financial Results
Table 1- Financial
Highlights
(CAD $ thousands except unit, per unit amounts and
unless otherwise stated)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Financial data
|
|
|
Property
revenue
|
$
24,330
|
$
17,390
|
Net operating income
(NOI) (1)
|
$
14,080
|
$
10,093
|
Same Property NOI
(1)
|
$
9,762
|
$
9,678
|
Net income and
comprehensive income
|
$
46,522
|
$
1,634
|
Total assets
|
$
1,032,176
|
$ 636,338
|
Debt to Gross Book
Value (1)
|
51.21%
|
57.49%
|
Interest Coverage Ratio
(1)
|
2.9x
|
2.7x
|
Debt Service Coverage
Ratio (1)
|
1.6x
|
1.6x
|
Debt to Annualized
Adjusted EBITDA Ratio (1)
|
10.2x
|
10.0x
|
Weighted average
interest rate on mortgage debt
|
3.40%
|
3.66%
|
Net cash flows provided
from operating activities
|
$
6,729
|
$
207
|
Funds from Operations
(FFO) (1)
|
$
8,108
|
$
3,878
|
Basic FFO per unit
(1)(2)
|
$
0.1341
|
$
0.0969
|
Diluted FFO per unit
(1)(2)
|
$
0.1321
|
$
0.0946
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
7,813
|
$
5,422
|
Basic AFFO per unit
(1)(2)
|
$
0.1293
|
$
0.1355
|
Diluted AFFO per unit
(1)(2)
|
$
0.1273
|
$
0.1323
|
AFFO Payout Ratio –
Basic (1)
|
87.0%
|
83.0%
|
AFFO Payout Ratio –
Diluted (1)
|
88.4%
|
85.0%
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
(2)
|
Total basic units
consist of trust units of PROREIT and Class B LP Units (as defined
herein). Total diluted units also include deferred trust units and
restricted trust units issued under the REIT's long‑term incentive
plan.
|
PROREIT owned 120 investment properties as at March 31, 2022, compared to 90 properties at the
same time last year. Total assets amounted to $1.03 billion as at March
31, 2022, compared to $636.3
million as at March 31, 2021,
an increase of $395.8 million,
or 62.2%. PROREIT acquired 34 properties and sold four
non-strategic properties during the twelve-month period ended
March 31, 2022.
For the first quarter ended March
31, 2022:
- Property revenue amounted to $24.3
million, an increase of $6.9
million, or 39.9%, compared to $17.4
million for the same prior year period. The increase was
mainly driven by incremental revenues from net acquisition activity
over the last twelve-month period.
- Same Property NOI1 reached $9.8 million, an increase of $0.1 million, or 0.9%, compared to the same prior
year period. Excluding the impact of a temporary vacancy of 29,149
square feet in an office single tenant building in Q1 2022 that has
been re-leased for a 15-year term starting April 1, 2022 (which accounts for approximately
$0.2 million of lost NOI1
in the quarter), Same Property NOI1 increased by 2.7% in
Q1 2022 compared to the same prior year period. The increase was a
result of increased occupancy in the retail asset class,
contractual rent increases and high rental rates on lease renewals
in the industrial segment.
- Net operating income1 amounted to $14.1 million, compared to $10.1 million in the same period in 2021, an
increase of 39.5% mainly driven by the impact of the net property
acquisitions over the last twelve-month period.
- AFFO1 totaled $7.8
million, an increase of $2.4
million, or 44.1%, compared to $5.4
million for the same prior year period, mainly driven by the
impact of the net acquisition activity over the last twelve-month
period.
- AFFO Payout Ratio - Basic1 stood at 87.0% compared
to 83.0% for the same prior year period. The change is mainly
related to the growth of the REIT, including targeted reduction of
Debt to Gross Book Value, maintenance capital expenditures, leasing
costs, and general and administrative expenses, and a one-time
single tenant vacancy in the office segment. Excluding the impact
of the temporary office vacancy, AFFO Payout Ratio –
Basic1 was approximately 85% in Q1 2022.
TABLE 2- Reconciliation of net operating income to net income
and comprehensive income
(CAD $ thousands)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Net operating income
(NOI) (1)
|
14,080
|
10,093
|
General and
administrative expenses
|
1,202
|
1,069
|
Long‑term incentive
plan expense
|
925
|
537
|
Depreciation of
property and equipment
|
89
|
87
|
Amortization of
intangible assets
|
93
|
93
|
Interest and financing
costs
|
4,712
|
3,901
|
Distributions ‑ Class B
LP Units
|
159
|
166
|
Fair value adjustment ‑
Class B LP Units
|
946
|
432
|
Fair value adjustment ‑
investment properties
|
(40,301)
|
1,170
|
Other income
|
(462)
|
(561)
|
Other
expenses
|
195
|
262
|
Debt settlement
costs
|
-
|
1,303
|
Net income and
comprehensive income
|
$
46,522
|
$
1,634
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
For the three months ended March 31,
2022, net income and comprehensive income amounted to
$46.5 million, compared to
$1.6 million during the same prior
year period. The $44.9 million
increase mainly relates to a favourable $41.5 million impact in the non-cash fair
value adjustment on investment properties and a $1.3 million reduction in debt settlement costs
in the first quarter of 2022 compared to the same prior year
period. During the first quarter of 2022, PROREIT updated
independent external appraisals for five properties, resulting in a
fair market value gain of approximately $40.3 million.
________________________
|
1 This is a
non-IFRS measure. See "Non-IFRS Measures".
|
|
Solid Balance
Sheet
PROREIT remains committed to steady improvements to its balance
sheet and liquidity position, including improving its Debt to Gross
Book Value1 Ratio. PROREIT has maintained diversified
debt maturities that are appropriate for the overall debt level of
its portfolio, with no significant term mortgage debt coming due in
2022.
As at March 31, 2022, PROREIT had
$38 million available on its credit
facility. Debt to Gross Book Value1 was 51.2% at
March 31, 2022, down from 57.5% at
the same date last year.
Weighted average interest rate on mortgage debt was 3.40% at
March 31, 2022, compared to 3.66% at
the same date last year.
Operating Performance
At March 31, 2022, PROREIT's portfolio totaled 120
properties aggregating 6.6 million square feet with a weighted
average lease term of 4.6 years. Approximately 68.5% of leases
maturing in 2022 are renewed at a positive average spread of 11.9%.
Occupancy rate remains strong at 98.5% as at March 31, 2022,
slightly up from 98.2% a year earlier.
The industrial segment accounted for 79% of GLA and 65% of base
rent at March 31, 2022.
Distributions
Distributions to unitholders of $0.0375 per trust unit of the REIT were declared
monthly during the three months ended March
31, 2022, representing distributions of $0.45 per unit on an annual basis.
Equivalent distributions are paid on the Class B limited
partnership units of PRO REIT Limited Partnership ("Class B LP
Units"), a subsidiary of the REIT.
Investor Conference Call and
Webcast Details
PROREIT will hold a conference call to discuss its first quarter
2022 results on May 12, 2022, at 10:30
a.m. EDT. There will be a question period reserved for
financial analysts. To access the conference call, please dial
888-664-6383 or 416-764-8650 or 514-225-6995. A recording of the
call will be available until May 19,
2022 by dialing 888-390-0541 or 416-764-8677
Access code: 540791#
The conference call will also be accessible via live webcast on
PROREIT's website at www.proreit.com or at
https://produceredition.webcasts.com/starthere.jsp?ei=1542302&tp_key=4a668ab6d9
Annual Meeting of
Unitholders
PROREIT will host its annual meeting on June 7, 2022, at 11:00
a.m. at the Ritz-Carlton Hotel, Room Ritz and Carlton, 1228
Sherbrooke Street West in Montreal,
Quebec.
______________________
|
1 This is a
non-IFRS measure. See "Non-IFRS Measures".
|
|
About PROREIT
PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate
investment trust established pursuant to a declaration of trust
under the laws of the Province of Ontario. Founded in 2013, PROREIT owns a
portfolio of high-quality commercial real estate properties in
Canada, with a strong industrial
focus in robust secondary markets.
Non-IFRS Measures
PROREIT's consolidated financial statements are prepared in
accordance with International Reporting Standards ("IFRS"), as
issued by the International Accounting Standards Board. In addition
to reported IFRS measures, industry practice is to evaluate real
estate entities giving consideration, in part, to certain non-IFRS
financial measures, non-IFRS ratios and other specified financial
measures (collectively, "non-IFRS measures"). In this press
release, as a complement to results provided in accordance with
IFRS, PROREIT discloses and discusses (i) certain non-IFRS
financial measures, including: adjusted earnings before interest,
tax, depreciation and amortization ("Adjusted EBITDA"); annualized
adjusted earnings before interest, tax, depreciation and
amortization ("Annualized Adjusted EBITDA"); adjusted funds from
operations ("AFFO"); funds from operations ("FFO"); gross book
value ("Gross Book Value"); net operating income ("NOI"); Same
Property NOI; and (ii) certain non-IFRS ratios, including: AFFO
Payout Ratio – Basic; AFFO Payout Ratio – Diluted; Basic AFFO per
Unit; Diluted AFFO per Unit; Basic AFFO per Unit; Diluted FFO per
Unit; Debt to Gross Book Value; Debt Service Coverage Ratio;
Interest Coverage Ratio; Debt to Annualized Adjusted EBTIDA Ratio.
These non-IFRS measures are not defined by IFRS and do not have a
standardized meaning under IFRS. PROREIT's method of calculating
these non-IFRS measures may differ from other issuers and may not
be comparable with similar measures presented by other income
trusts. PROREIT has presented such non-IFRS measures and ratios as
management believes they are relevant measures of PROREIT's
underlying operating and financial performance. For information on
the most directly comparable IFRS measures, composition of the
non-IFRS measures, a description of how PROREIT uses these measures
and an explanation of how these measures provide useful information
to investors, refer to the "Non-IFRS Measures" section of PROREIT's
management's discussion and analysis for the three months ended
March 31, 2022, dated May 11, 2022 (the "Q1 MD&A"), available on
PROREIT's SEDAR profile at www.sedar.com, which is incorporated by
reference into this press release. As applicable, the
reconciliations for each non-IFRS measure are outlined below.
Non-IFRS measures should not be considered as alternatives to net
income, cash flows provided by operating activities, cash and cash
equivalents, total assets, total equity, or comparable metrics
determined in accordance with IFRS as indicators of PROREIT's
performance, liquidity, cash flow, and profitability.
Reconciliation of Same Property NOI to net operating income
(as reported in the consolidated financial statements)
(CAD $ thousands)
|
|
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Property
revenue
|
|
|
$
24.330
|
$
17,390
|
Property operating
expenses
|
|
|
10,250
|
7,297
|
NOI (net operating
income) as reported in the financial statements
(1)
|
|
|
14,080
|
10,093
|
Straight-line rent
adjustment
|
|
|
(118)
|
(125)
|
NOI after
straight-line rent adjustment (1)
|
|
|
13,962
|
9,968
|
|
|
|
|
|
NOI (1)
sourced from:
|
|
|
|
|
Acquisitions
|
|
|
(4,200)
|
-
|
Dispositions
|
|
|
-
|
(290)
|
Same Property NOI
(1)
|
|
|
$
9,762
|
$
9,678
|
Number of same properties
|
|
|
86
|
86
|
|
|
(1)
|
Non-IFRS measure. See
"Non‑IFRS Measures".
|
Reconciliation of AFFO and FFO to net income and
comprehensive income
(CAD $ thousands except unit, per unit amounts and
unless otherwise stated)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
December 31
2021
|
3 Months
Ended
March 31
2021
|
Net income and comprehensive income for the
period
|
$
46,522
|
$
65,041
|
$
1,634
|
Add:
|
|
|
|
Long‑term
incentive plan
|
689
|
157
|
383
|
Distributions ‑ Class B LP Units
|
159
|
164
|
166
|
Fair
value adjustment ‑ investment properties
|
(40,301)
|
(58,620)
|
1,170
|
Fair
value adjustment ‑ Class B LP Units
|
946
|
89
|
432
|
Amortization of intangible assets
|
93
|
93
|
93
|
FFO (1)
|
$
8,108
|
$
6,924
|
$
3,878
|
Deduct:
|
|
|
|
Straight‑line rent adjustment
|
$
(118)
|
$
(119)
|
$
(125)
|
Maintenance capital expenditures
|
(279)
|
(192)
|
(64)
|
Stabilized leasing costs
|
(392)
|
(387)
|
(166)
|
|
|
|
|
Add:
|
|
|
|
Long‑term
incentive plan
|
236
|
683
|
154
|
Amortization of financing costs
|
258
|
304
|
442
|
Debt
settlement costs
|
-
|
141
|
1,303
|
AFFO (1)
|
$
7,813
|
$
7,354
|
$
5,422
|
Basic FFO per Unit
(1)(2)
|
$
0.1341
|
$
0.1158
|
$
0.0969
|
Diluted FFO per Unit
(1)(2)
|
$
0.1321
|
$
0.1136
|
$
0.0946
|
Basic AFFO per Unit
(1)(2)
|
$
0.1293
|
$
0.1230
|
$
0.1355
|
Diluted AFFO per Unit
(1)(2)
|
$
0.1273
|
$
0.1206
|
$
0.1323
|
Distributions declared per Unit and Class B LP
unit
|
$
0.1125
|
$
0.1125
|
$
0.1125
|
AFFO Payout Ratio – Basic
(1)
|
87.0%
|
91.5%
|
83.0%
|
AFFO Payout Ratio – Diluted
(1)
|
88.4%
|
93.3%
|
85.0%
|
Basic weighted average number of units
(2)(3)
|
60,447,230
|
59,786,374
|
40,023,023
|
Diluted weighted average number of units
(2)(3)
|
61,394,385
|
60,964,929
|
40,972,173
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
(2)
|
FFO and AFFO per unit
is calculated as FFO or AFFO divided by the total of the weighted
number of basic or diluted units, added to the weighted average
number of Class B LP Units outstanding during the
period.
|
(3)
|
Total basic units
consist of trust units of the REIT and Class B LP Units. Total
diluted units also includes deferred trust units and restricted
trust units issued under the REIT's long‑term incentive
plan.
|
Reconciliation of Adjusted EBITDA to net income and
comprehensive income
(CAD $ thousands)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Net income and
comprehensive income
|
$
46,522
|
$
1,634
|
Interest and financing
costs
|
4,712
|
3,901
|
Depreciation of
property and equipment
|
89
|
87
|
Amortization of
intangible assets
|
93
|
93
|
Fair value adjustment ‑
Class B LP Units
|
946
|
432
|
Fair value adjustment ‑
investment properties
|
(40,301)
|
1,170
|
Distributions ‑ Class B
LP Units
|
159
|
166
|
Straight‑line
rent
|
(118)
|
(125)
|
Long‑term incentive
plan expense
|
925
|
537
|
Debt settlement
costs
|
-
|
1,303
|
Adjusted EBITDA (1)
|
$
13,027
|
$
9,198
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
Calculation of Debt to Annualized Adjusted EBITDA
Ratio
(CAD $ thousands)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Debt, excluding
unamortized financing costs
|
$
507,856
|
$
352,803
|
Credit facility,
excluding unamortized financing costs
|
22,000
|
14,000
|
Debt and credit
facility, excluding unamortized financing costs
|
$
529,856
|
$
366,803
|
|
|
|
Adjusted EBITDA
(1)
|
13,037
|
9,198
|
Annualized Adjusted EBITDA
(1)
|
$
52,148
|
$
36,792
|
Debt to Annualized Adjusted EBITDA Ratio
(1)
|
10.2x
|
10.0x
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
Calculation of the Interest Coverage Ratio
(CAD $ thousands)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Adjusted EBITDA
(1)
|
$
13,027
|
$
9,198
|
Interest expense
|
$
4,448
|
$
3,453
|
Interest Coverage Ratio
(1)
|
2.9x
|
2.7x
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
Calculation of the Debt Service Coverage Ratio
(CAD $ thousands)
|
3 Months
Ended
March 31
2022
|
3 Months
Ended
March 31
2021
|
Adjusted EBITDA
(1)
|
$
13,027
|
$
9,198
|
Interest expense
|
4,448
|
3,453
|
Principal
repayments
|
3,589
|
2,457
|
Debt Service Requirements
|
$
8,037
|
$
5,910
|
Debt Service Coverage Ratio
(1)
|
1.6x
|
1.6x
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
Calculation of Gross Book Value and Debt to Gross Book
Value
(CAD $ thousands except unit, per unit amounts and
unless otherwise stated)
|
Mar 31
2022
|
Dec 31
2021
|
Mar 31
2021
|
Total assets, including
investment properties stated at fair value
|
$
1,032,176
|
$
989,963
|
$
636,338
|
Accumulated
depreciation on property and equipment and intangible
assets
|
2,450
|
2,268
|
1,719
|
Gross Book Value
(1)
|
1,034,626
|
992,231
|
638,057
|
Debt, excluding
unamortized financing costs
|
507,856
|
511,445
|
352,803
|
Credit facility,
excluding unamortized financing costs
|
22,000
|
15,000
|
14,000
|
Debt
|
$
529,856
|
$
526,445
|
$
366,803
|
Debt to Gross Book
Value (1)
|
51.21%
|
53.06%
|
57.49%
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS Measures".
|
Forward-Looking
Statements
This press release contains forward-looking statements and
forward-looking information (collectively, "forward-looking
statements") within the meaning of applicable securities
legislation, including statements relating to certain expectations,
projections, growth plans and other information related to REIT's
business strategy and future plans. Forward-looking statements are
based on a number of assumptions and are subject to a number of
risks and uncertainties, many of which are beyond PROREIT's
control, that could cause actual results and events to differ
materially from those that are disclosed in or implied by such
forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to the execution
by PROREIT of its growth strategy and the future financial and
operating performance of PROREIT. PROREIT's objectives and
forward-looking statements are based on certain assumptions,
including that (i) PROREIT will receive financing on favourable
terms; (ii) the future level of indebtedness of PROREIT and its
future growth potential will remain consistent with the REIT's
current expectations; (iii) there will be no changes to tax laws
adversely affecting PROREIT's financing capacity or operations;
(iv) the impact of the current economic climate and the current
global financial conditions on PROREIT's operations, including its
financing capacity and asset value, will remain consistent with
PROREIT's current expectations; (v) the performance of PROREIT's
investments in Canada will proceed
on a basis consistent with PROREIT's current expectations; and (vi)
capital markets will provide PROREIT with readily available access
to equity and/or debt.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT does not
undertake to update any such forward-looking information whether as
a result of new information, future events or otherwise, except as
required by law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form and "Risk and Uncertainties" in PROREIT's
management's discussion and analysis for the three months ended
March 31, 2022, which are available
under PROREIT's profile on SEDAR at www.sedar.com.
SOURCE PROREIT