First Quarter of Fiscal 2024 Highlights
- Property revenue increased by 1.7% in Q1 year-over-year
- Net operating income (NOI) was up 1.9% in Q1 year-over-year
- Same property NOI* was up 7.8% in Q1 year-over-year
- Sale of three non-core properties for gross proceeds of
$26.1 million in Q1 - Entered into binding agreements in Q1 for the sale of two non-core retail properties, which are expected to close in Q2, for gross proceeds of
$7.0 million - 55.6% of gross leasable area ("GLA") maturing in 2024 renewed at average spread of 33.5%
- Occupancy rate at 97.7% at
March 31, 2024 (including committed space) - Total debt (current and non-current) of
$493.6 million atMarch 31, 2024 , a decrease of$25.1 million , compared to$518.7 million at the same date last year - Adjusted Debt to Gross Book Value* was 49.5% at
March 31, 2024 , compared to 50.2% atDecember 31, 2023 $39.5 million in available credit facility and$11.6 million in cash atMarch 31, 2024
"PROREIT started the year on solid footing, continuing to reap the benefits of our stated strategy to focus on the industrial sector. In the first quarter of 2024, we delivered 7.8% Same Property NOI* growth year-over-year for our industrial assets, mainly driven by robust lease renewal spreads and rental steps," said Gordon G. Lawlor, President and CEO, PROREIT.
"In the quarter, we further optimized our portfolio with the disposition of three non-core properties for gross proceeds of
"Our successful property sales in the first quarter also allowed us to reduce total debt year-over-year by
"Leasing activities have been very positive. We have now renewed or replaced 55.6% of GLA maturing in 2024 at a positive average spread of 33.5% for the entire portfolio, including a robust 47.7% positive average spread for the industrial sector. We are also pleased to have signed a 15-year lease with a new quality international tenant starting in
"While our occupancy rate was strong at 97.7%, it was temporarily impacted by transitional vacancies in a few industrial properties which are experiencing strong leasing momentum.
"Finally, we are pleased to have published our third Sustainability Report. As we adapt to evolving stakeholder expectations, we maintained our focus on sustainable business objectives and the implementation of additional best practices. We are proud of our achievements over the past year and are committed to continuing to improve as we move forward on our ESG journey.
"With 2024 well underway, we will continue to focus on recycling capital and further increasing our footprint in the attractive industrial sector as the market stabilizes. We will pursue this strategy while managing our balance sheet and allocating capital prudently to the benefit of our unitholders and, ultimately, all our stakeholders," concluded Mr. Lawlor.
* Measures followed by the suffix "*" in this press release are non-IFRS measures. See "Non-IFRS Measures". |
Financial Results
Table 1- Financial Highlights
(CAD $ thousands except unit, per unit amounts and unless otherwise stated) | 3 Months | 3 Months |
Financial data | ||
Property revenue | $ 25,702 | $ 25,278 |
Net operating income (NOI) | $ 14,822 | $ 14,540 |
Same Property NOI (1) | $ 14,522 | $ 13,477 |
Net income (loss) and comprehensive income (loss) | $ (9,452) | $ 13,048 |
Net income (loss) and comprehensive income (loss) per Unit - Basic (2) | $ (0.1560) | $ 0.2057 |
Net income (loss) and comprehensive income (loss) per Unit - Diluted (2) | $ (0.1549) | $ 0.2028 |
Total assets | $ 1,001,575 | $ 1,054,881 |
Total debt | $ 493,624 | $ 518,668 |
Total debt to total assets | 49.3 % | 49.2 % |
Adjusted Debt to Gross Book Value (1) | 49.5 % | 49.2 % |
Interest Coverage Ratio (1) | 2.5x | 2.7x |
Debt Service Coverage Ratio (1) | 1.6x | 1.6x |
Adjusted Debt to Annualized Adjusted EBITDA Ratio (1) | 9.0x | 9.6x |
Weighted average interest rate on mortgage debt | 3.89 % | 3.70 % |
Net cash flows provided from operating activities | $ 9,743 | $ 10,582 |
Funds from Operations (FFO) (1) | $ 7,722 | $ 4,948 |
Basic FFO per unit (1)(2) | $ 0.1274 | $ 0.0819 |
Diluted FFO per unit (1)(2) | $ 0.1266 | $ 0.0805 |
Adjusted Funds from Operations (AFFO) (1) | $ 7,441 | $ 7,814 |
Basic AFFO per unit (1)(2) | $ 0.1228 | $ 0.1293 |
Diluted AFFO per unit (1)(2) | $ 0.1220 | $ 0.1271 |
AFFO Payout Ratio – Basic (1) | 91.6 % | 87.0 % |
AFFO Payout Ratio – Diluted (1) | 92.2 % | 88.5 % |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
(2) | Total basic units consist of trust units of the REIT and Class B LP Units (as defined herein). Total diluted units also includes deferred trust units and restricted trust units issued under the REIT's long-term incentive plan. |
At
For the first quarter ended
- Property revenue amounted to
$25.7 million in Q1 2024, an increase of$0.4 million or 1.7%, compared to$25.3 million for the same prior year period. The increase was mainly due to contractual increases in rent and higher rental rates on lease renewals and new leases, offset by the decrease in the number of properties in the portfolio. - Net operating income (NOI) amounted to
$14.8 million for the quarter, compared to$14.5 million in Q1 2023, an increase of$0.3 million or 1.9%, which was mainly driven by the same factors impacting property revenue described above. - Same Property NOI*, which represented all 120 properties in the portfolio, reached
$14.5 million for the quarter, an increase of$1.0 million or 7.8%, compared to the same quarter last year. The increase was largely a result of contractual increases in rent and higher rental rates on lease renewals and new leases across all asset classes, along with higher occupancy rates in the office asset class, offset by the slight decrease in occupancy in the industrial asset class. - Net cash flows provided from operating activities for the quarter was
$9.7 million , compared to$10.6 million for Q1 2023. - AFFO* totaled
$7.4 million for the quarter, down slightly from$7.8 million for Q1 2023. - AFFO Payout Ratio – Basic* stood at 91.6% for the quarter, compared to 87.0% for Q1 2023, the increase was primarily driven by the reduction in the number of properties owned and higher interest expense and leasing costs, partially offset by contractual increases in rent and higher rental rates on lease renewals.
TABLE 2- Reconciliation of net operating income to net income and comprehensive income
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Net operating income | 14,822 | 14,540 |
General and administrative expenses | 1,385 | 3,518 |
Long-term incentive plan expense | 1,358 | 581 |
Depreciation of property and equipment | 148 | 105 |
Amortization of intangible assets | 61 | 93 |
Interest and financing costs | 5,793 | 5,131 |
Distributions - Class B LP Units | 152 | 157 |
Fair value adjustment - Class B LP Units | 975 | (28) |
Fair value adjustment - investment properties | 13,275 | (7,651) |
Fair value adjustment - derivative financial instrument | 1,505 | – |
Other income | (1,034) | (835) |
Other expenses | 478 | 421 |
Debt settlement costs | 178 | – |
Net income (loss) and comprehensive income (loss) | $ (9,452) | $ 13,048 |
For the three months ended
Sustained Operating Environment
At
The occupancy rate of the portfolio was 97.7% as at March 31, 2024 (including committed space), compared to 98.6% at the same date last year. The decrease in occupancy rate is mainly due to a few vacancies in industrial properties where management is currently experiencing strong leasing momentum.
The weighted average in‐place rent for industrial properties at
At
In addition, for a tenant expiry in
Portfolio Transactions
In the first quarter of 2024, PROREIT completed the sales of three non-core properties for total gross proceeds of
On
On
Also in the first quarter, PROREIT entered into binding agreements for the sale of two non-core retail properties, for gross proceeds of
The first agreement was entered into on
The second agreement was entered into on
At
Financial Position
At
Total debt (current and non-current) was
The
Debt to Gross Book Value* was 49.5% at
Sustainability
PROREIT released its 2023 Sustainability Report on
Distributions
Distributions to unitholders of
On
Strategy
PROREIT remains focused on the successful execution of its strategy for growth by expanding the portfolio organically and through disciplined acquisition, while optimizing its balance sheet and capital allocation. Management continues to evaluate acquisition opportunities under strict criteria, while also implementing its capital recycling program to move assets away from non-core properties to increase holdings in quality industrial properties in strong secondary markets. In the medium-term, PROREIT is targeting a goal of $2 billion in assets, 90% industrial base rent and 45% Adjusted Debt to Gross Book Value* in the next three to five years. These targets are based on the REIT's current business plan and strategies and are not intended to be a forecast of future results. See "Forward-Looking Statements".
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its first quarter results for Fiscal 2024 on
The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or at https://app.webinar.net/DlA8L05OvJ1
Annual Meeting of Unitholders
PROREIT will host its annual meeting on
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
For more information on PROREIT, please visit the website at: https://proreit.com.
Non-IFRS Measures
PROREIT's consolidated financial statements are prepared in accordance with International Reporting Standards ("IFRS"), as issued by the
As a complement to results provided in accordance with IFRS, PROREIT discloses and discusses in this press release (i) certain non-IFRS financial measures, including: Adjusted Debt, adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA"); adjusted funds from operations ("AFFO"); annualized adjusted earnings before interest, tax, depreciation and amortization ("Annualized Adjusted EBITDA"); funds from operations ("FFO"); gross book value ("Gross Book Value"); and Same Property NOI and (ii) certain non-IFRS ratios, including: Adjusted Debt to Annualized Adjusted EBITDA Ratio; Adjusted Debt to Gross Book Value; AFFO Payout Ratio – Basic; AFFO Payout Ratio – Diluted; Basic AFFO per Unit; Diluted AFFO per Unit; Basic FFO per Unit; Diluted FFO per Unit; Debt Service Coverage Ratio; and Interest Coverage 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 or issuers. 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 financial measure disclosed in the primary financial statements of the REIT, 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
Table 3 - Reconciliation of Same Property NOI to net operating income (as reported in the consolidated financial statements)
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Property revenue | $ 25,702 | $ 25,278 |
Property operating expenses | 10,880 | 10,738 |
Net operating income (NOI) as reported in the financial statements | 14,822 | 14,540 |
Straight-line rent adjustment | (142) | (121) |
NOI after straight-line rent adjustment | 14,680 | 14,419 |
NOI sourced from: | ||
Dispositions | (158) | (942) |
Same Property NOI (1) | $ 14,522 | $ 13,477 |
Number of same properties | 120 | 120 |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 4 - 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 2024 | 3 Months Ended 2023 |
Net income and comprehensive income for the period | $ (9,452) | $ 13,048 |
Add: | ||
Long-term incentive plan | 1,206 | (671) |
Distributions - Class B LP Units | 152 | 157 |
Fair value adjustment - investment properties | 13,275 | (7,651) |
Fair value adjustment - Class B LP Units | 975 | (28) |
Fair value adjustment - derivative financial instrument | 1,505 | – |
Amortization of intangible assets | 61 | 93 |
FFO (1) | $ 7,722 | $ 4,948 |
Deduct: | ||
Straight-line rent adjustment | $ (142) | $ (121) |
Maintenance capital expenditures | (63) | (185) |
Stabilized leasing costs | (888) | (506) |
Add: | ||
Long-term incentive plan | 152 | 1,252 |
Amortization of financing costs | 389 | 186 |
Accretion expense - Convertible Debentures | 93 | – |
Debt settlement costs | 178 | – |
CEO Succession plan costs | – | 2,240 |
AFFO (1) | $ 7,441 | $ 7,814 |
Basic FFO per unit (1)(2) | $ 0.1274 | $ 0.0819 |
Diluted FFO per unit (1)(2) | $ 0.1266 | $ 0.0805 |
Basic AFFO per unit (1)(2) | $ 0.1228 | $ 0.1293 |
Diluted AFFO per unit (1)(2) | $ 0.1220 | $ 0.1271 |
Distributions declared per | $ 0.1125 | $ 0.1125 |
AFFO Payout Ratio – Basic (1) | 91.6 % | 87.0 % |
AFFO Payout Ratio – Diluted (1) | 92.2 % | 88.5 % |
Basic weighted average number of units (2)(3) | 60,606,896 | 60,447,230 |
Diluted weighted average number of units (2)(3) | 61,015,319 | 61,469,854 |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
(2) | FFO and AFFO per unit is calculated as FFO or AFFO, as the case may be, divided by the total of the weighted average number of basic or diluted units, as applicable, 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. |
Table 5 - Reconciliation of Adjusted EBITDA to net income and comprehensive income
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Net income and comprehensive income | $ (9,452) | $ 13,048 |
Interest and financing costs | 5,793 | 5,131 |
Depreciation of property and equipment | 148 | 105 |
Amortization of intangible assets | 61 | 93 |
Fair value adjustment - Class B LP Units | 975 | (28) |
Fair value adjustment - investment properties | 13,275 | (7,651) |
Fair value adjustment - derivative financial instrument | 1,505 | – |
Distributions - Class B LP Units | 152 | 157 |
Straight-line rent | (142) | (121) |
Long-term incentive plan expense | 1,358 | 581 |
Debt settlement costs | 178 | – |
CEO succession plan costs | – | 2,240 |
Adjusted EBITDA (1) | $ 13,851 | $ 13,555 |
Annualized Adjusted EBITDA (1) | $ 55,404 | $ 54,220 |
(1)Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 6 - Calculation of Adjusted Debt to Annualized Adjusted EBITDA Ratio
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Adjusted Debt (1) | $ 497,117 | $ 520,864 |
Adjusted EBITDA (1) | $ 13,851 | $ 13,555 |
Annualized Adjusted EBITDA (1) | $ 55,404 | $ 54,220 |
Adjusted Debt to Annualized Adjusted EBITDA Ratio (1) | 9.0x | 9.6x |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 7 - Calculation of the Interest Coverage Ratio
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Adjusted EBITDA (1) | $ 13,851 | $ 13,555 |
Interest expense | ||
Interest Coverage Ratio (1) | 2.5x | 2.7x |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 8 - Calculation of the Debt Service Coverage Ratio
(CAD $ thousands) | 3 Months Ended 2024 | 3 Months Ended 2023 |
Adjusted EBITDA (1) | $ 13,851 | $ 13,555 |
| 5,474 | 5,021 |
Principal repayments | 3,219 | 3,340 |
Debt Service Requirements | ||
Debt Service Coverage Ratio (1) | 1.6x | 1.6x |
(1) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 9 - Calculation of Adjusted Debt
(CAD $ thousands) | 2024 | 2023 |
Debt (non-current and current portion) as reported in the financial statements | $ 493,624 | $ 518,668 |
Reconciling items: | ||
Unamortized financing costs | 4,721 | 2,196 |
Cumulative accretion expense - Convertible Debenture (1) | (310) | – |
Cumulative fair value adjustment - derivative financial instrument (1) | (918) | – |
Adjusted Debt (2) | $ 497,117 | $ 520,864 |
(1) | Represents the cumulative amounts since issuance of the convertible debentures of the REIT on |
(2) | Represents a non-IFRS measure. See "Non-IFRS Measures". |
Table 10 - Calculation of Gross Book Value and Adjusted Debt to Gross Book Value
(CAD $ thousands unless otherwise stated) | 2024 | 2023 |
Total assets, including investment properties stated at fair value | $ 1,001,575 | $ 1,054,881 |
Accumulated depreciation on property and equipment and intangible assets | 3,409 | 3,251 |
Gross Book Value (1) | 1,004,984 | 1,058,132 |
Adjusted Debt (1) | $ 497,117 | $ 520,864 |
Adjusted Debt to Gross Book Value (1) | 49.5 % | 49.2 % |
(1) | Represents a 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, the future financial and operating performance of PROREIT, the medium-term goals of the REIT, the expected renewal of mortgages and the terms thereof and the anticipated reduction of interest rates. 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
The medium-term goals of the REIT disclosed under "Strategy" are based on the REIT's current business plan and strategies and are not intended to be a forecast of future results. The medium-term goals contemplate the REIT's historical growth and certain assumptions including but not limited to (i) current global capital market conditions, (ii) access to capital, (iii) interest rate exposure, (iv) availability of high-quality industrial properties for acquisitions, (v) dispositions of retail and office properties, and (vi) capacity to finance acquisitions on an accretive basis.
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
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