PRV.UN Pro Real Estate Investment Trust

• 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.

"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

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

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.

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.

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 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.

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

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.

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.

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)

Reconciliation of AFFO and FFO to net income and comprehensive income

Reconciliation of Adjusted EBITDA to net income and comprehensive income

Calculation of Debt to Annualized Adjusted EBITDA Ratio

Calculation of the Interest Coverage Ratio

Calculation of the Debt Service Coverage Ratio

Calculation of Gross Book Value and Debt to Gross Book Value

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.

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