FREDERICTON, NB, Aug. 3, 2023
/CNW/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza" or the "REIT")
today announced its financial results for the three and six months
ended June 30, 2023.
"We made significant progress on our robust development program
during the quarter, which will contribute to Plaza's growth going
forward", said Michael Zakuta,
President and CEO. "To fund these projects, provide
additional financial flexibility, and improve the quality of our
portfolio, we sold select non-core assets at attractive
prices. In addition to strong investor demand for our assets,
we are also experiencing strong demand from our tenants, with
continued record committed occupancy and healthy lease renewal
spreads. We remain very optimistic about the future of our
business of defensive retail, focused on essential-needs, value and
convenience offerings."
Summary of Selected
IFRS Financial Results
|
(CAD$000s, except
percentages)
|
Three
Months
Ended
June
30,
2023
|
Three
Months
Ended
June
30,
2022
|
$
Change
|
%
Change
|
Six
Months
Ended
June
30,
2023
|
Six
Months
Ended
June
30,
2022
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
Revenues
|
$28,463
|
$27,754
|
$709
|
2.6 %
|
$56,808
|
$55,658
|
$1,150
|
2.1 %
|
|
|
|
|
|
|
|
|
|
Net property operating
income (NOI)(1)
|
$17,643
|
$17,705
|
($62)
|
(0.3 %)
|
$34,458
|
$34,835
|
($377)
|
(1.1 %)
|
|
|
|
|
|
|
|
|
|
Net change in fair
value of investment properties
|
($827)
|
($6,396)
|
$5,569
|
-
|
$447
|
$6,038
|
($5,591)
|
--
|
|
|
|
|
|
|
|
|
|
Profit and total
comprehensive income for the period
|
$12,985
|
$6,968
|
$6,017
|
-
|
$20,736
|
$32,800
|
($12,064)
|
--
|
|
|
|
|
|
|
|
|
|
(1)
|
This is a non-GAAP
financial measure. Refer to the Non-GAAP Financial Measures
defined here and in Part I and VII of the Management's Discussion
and Analysis ("MD&A") ending June 30, 2023 for more information
on each non-GAAP financial measure.
|
Quarterly Highlights
- NOI was $17.6 million,
consistent with the same period in 2022. The increase in NOI from
acquisitions, developments, and properties transferred to
income-producing in 2022 and 2023 was offset by a decrease in NOI
from properties sold.
- Profit and total comprehensive income for the current
quarter was $13.0 million compared to
$7.0 million in the same period in
the prior year. The increase was mainly due to the change in the
fair value of investment properties. The current quarter change was
driven by minor cost overruns on certain projects.
Year-To-Date Highlights
- NOI was $34.5 million,
down $377 thousand (1.1%) from the
same period in 2022. NOI was impacted by an increase in NOI from
acquisitions, developments and properties transferred to income
producing in 2022 and 2023, offset by an allowance provided to a
tenant in consideration of delayed delivery of premises at a
development property, and a decrease in NOI from properties
sold.
- Profit and total comprehensive income for the current
year to date was $20.7 million
compared to $32.8 million in the same
period in the prior year. The decrease was mainly due to an
increase in the fair value of investment properties of $447 thousand in the current year compared to a
fair value increase of $6.0 million
in the same period in the prior year. The fair value change was
mainly due to more significant fair value increases recognized in
the prior year, compared to more stabilized values this year.
Profit was also impacted by a decrease in the share of profit of
associates relating to the non-cash fair value adjustment of the
underlying properties in the current year, an increase in
administrative expenses and finance costs, an increase in
investment and other income due to higher fees from additional
leasing and development activity, along with changes in non-cash
fair value adjustments relating to interest rate swaps, the Class B
exchangeable LP units, and convertible debentures.
Summary of Selected
Non-IFRS Financial Results
|
(CAD$000s,
except
percentages, units
repurchased and per unit
amounts)
|
Three
Months
Ended
June
30,
2023
|
Three
Months
Ended
June
30,
2022
|
$
Change
|
%
Change
|
Six
Months
Ended
June
30,
2023
|
Six
Months
Ended
June
30,
2022
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
FFO(1)
|
$10,689
|
$10,264
|
$425
|
4.1 %
|
$20,066
|
$20,420
|
($354)
|
(1.7 %)
|
FFO per
unit(1)
|
$0.096
|
$0.100
|
($0.004)
|
(4.0 %)
|
$0.187
|
$0.198
|
($0.011)
|
(5.6 %)
|
FFO payout
ratio(1)
|
73.0 %
|
70.2 %
|
n/a
|
4.0 %
|
75.8 %
|
70.6 %
|
n/a
|
7.4 %
|
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$7,807
|
$8,302
|
($495)
|
(6.0 %)
|
$15,936
|
$17,382
|
($1,446)
|
(8.3 %)
|
AFFO per
unit(1)
|
$0.070
|
$0.081
|
($0.011)
|
(13.6 %)
|
$0.148
|
$0.169
|
($0.021)
|
(12.4 %)
|
AFFO payout
ratio(1)
|
100.0 %
|
86.8 %
|
n/a
|
15.2 %
|
95.5 %
|
83.0 %
|
n/a
|
15.1 %
|
|
|
|
|
|
|
|
|
|
Same-asset
NOI(1)
|
$17,104
|
$17,068
|
$36
|
0.2 %
|
$33,690
|
$33,517
|
$173
|
0.5 %
|
|
|
|
|
|
|
|
|
|
Normal course issuer
bid –
units repurchased
|
7,718
|
2,990
|
n/a
|
n/a
|
11,573
|
5,100
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Committed occupancy
–
including non-consolidated
investments(2)
|
|
|
|
|
97.6 %
|
96.6 %
|
n/a
|
1.0 %
|
Same-asset
committed
occupancy(3)
|
|
|
|
|
97.4 %
|
96.6 %
|
n/a
|
0.8 %
|
|
|
|
|
|
|
|
|
|
(1) This is
a non-GAAP financial measure. Refer to the Non-GAAP Financial
Measures defined here and in Part I and VII of the MD&A ending
June 30, 2023 for more information on each non-GAAP financial
measure.
(2)
Excludes properties under development.
(3)
Same-asset committed occupancy excludes properties under
development and non-consolidated investments.
|
Quarterly Highlights
- FFO & AFFO: For the three months ended June 30, 2023, FFO per unit decreased by
$0.004 (4.0%) compared to the same
period in the prior year. FFO was impacted by an increase in NOI
from acquisitions, developments and properties transferred to
income producing in 2022 and 2023, an increase in investment and
other income due to higher fees from additional leasing and
development activity, offset by an increase in administrative
expenses, and a decrease in NOI from properties sold. AFFO per unit
decreased by $0.011 (13.6%) compared
to the same period in the prior year due to the changes in FFO
noted above, as well as increased leasing costs from additional
leasing activity, and increased maintenance capital
expenditures.
- Same-asset NOI increased by $36
thousand, 0.2% due to lease-up and rent escalations over the
same period in the prior year, partially offset by an increase in
operating expenses.
Year-To-Date Highlights
- FFO & AFFO: For the six months ended June 30, 2023, FFO per unit decreased by
$0.011, 5.6% compared to the same
period in the prior year. FFO was impacted by an increase in
same-asset NOI due to rent escalations and renewals across the
portfolio, an increase in NOI from acquisitions, developments and
properties transferred to income producing properties in 2022 and
2023, an increase in investment and other income due to higher fees
from additional leasing and development activity, offset by an
allowance provided to a tenant in consideration of delayed delivery
of premises at a development property, an increase in finance and
administrative expenses, and a decrease in NOI from properties
sold. AFFO per unit decreased by $0.021 (12.4%) compared to the same period in the
prior year due to the changes in FFO noted above, as well as
increased leasing costs from additional leasing activity, and
increased maintenance capital expenditures.
- Same-asset NOI increased by $173
thousand (0.5%) due to lease-up and rent escalations over
the same period in the prior year, partially offset by an increase
in operating expenses.
FFO and AFFO per unit, for both the three and six months ended
June 30, 2023, were also impacted by
the issue of 8.548 million trust units in March
2023.
Non-GAAP Financial Measures
This press release
contains certain non-GAAP financial measures including FFO, AFFO
and same-asset NOI. These measures are commonly used by entities in
the real estate industry as useful metrics for measuring
performance. However, they do not have a standardized meaning
prescribed by IFRS and are not necessarily comparable to similar
measures presented by other publicly traded entities. These
measures should be considered as supplemental in nature and not as
a substitute for related financial information prepared in
accordance with IFRS. For further explanation of non-GAAP measures
and their usefulness in assessing Plaza's performance, please refer
to the section "Basis of Presentation" in Part I and the section
"Explanation of Non-GAAP Measures" in Part VII of the REIT's
Management's Discussion and Analysis as at June 30, 2023, which can be found on Plaza's
website at www.plaza.ca and on SEDAR at www.sedar.com.
The following tables reconcile the non-GAAP measures FFO, AFFO,
and NOI to the most comparable IFRS measures.
Funds from Operations (FFO) and Adjusted Funds from
Operations (AFFO)
Plaza's summary of FFO and AFFO for the three and six months
ended June 30, 2023, compared to the
three and six months ended June 30,
2022 is presented below:
(000s – except per
unit amounts and percentage data,
unaudited)
|
3 Months
Ended
June 30,
2023
|
3 Months
Ended
June 30,
2022
|
Change
over
Prior
Period
|
6 Months
Ended
June 30,
2023
|
6 Months
Ended
June 30,
2022
|
Change
over
Prior
Period
|
Profit and total
comprehensive income for the period
attributable to unitholders
|
$
12,936
|
$
7,024
|
|
$
20,634
|
$
32,586
|
|
Incremental leasing
costs included in administrative expenses(7)
|
453
|
532
|
|
737
|
871
|
|
Amortization of
debenture issuance costs(8)
|
(19)
|
(121)
|
|
(105)
|
(241)
|
|
Distributions on Class
B exchangeable LP units included
in finance costs
|
81
|
84
|
|
164
|
167
|
|
Deferred income
taxes
|
(459)
|
(305)
|
|
24
|
661
|
|
Land lease principal
repayments
|
(200)
|
(194)
|
|
(399)
|
(388)
|
|
Fair value adjustment
to restricted and deferred units
|
(56)
|
(269)
|
|
(156)
|
(158)
|
|
Fair value adjustment
to investment properties
|
827
|
6,396
|
|
(447)
|
(6,038)
|
|
Fair value adjustment
to investments(9)
|
(90)
|
833
|
|
572
|
(1,557)
|
|
Fair value adjustment
to Class B exchangeable LP units
|
(232)
|
(1,072)
|
|
(601)
|
(631)
|
|
Fair value adjustment
to convertible debentures
|
(753)
|
(883)
|
|
(208)
|
(723)
|
|
Fair value adjustment
to interest rate swaps
|
(1,980)
|
(1,678)
|
|
(528)
|
(4,225)
|
|
Fair value adjustment
to right-of-use land lease assets
|
200
|
194
|
|
399
|
388
|
|
Equity accounting
adjustment(10)
|
(19)
|
(114)
|
|
(25)
|
(300)
|
|
Non-controlling
interest adjustment(6)
|
-
|
(163)
|
|
5
|
8
|
|
FFO(1)
|
$
10,689
|
$
10,264
|
$
425
|
$
20,066
|
$
20,420
|
$
(354)
|
FFO change over
prior period - %
|
|
|
4.1 %
|
|
|
(1.7 %)
|
|
|
|
|
|
|
|
FFO(1)
|
$
10,689
|
$
10,264
|
|
$
20,066
|
$
20,420
|
|
Non-cash revenue –
straight-line rent(5)
|
44
|
19
|
|
(11)
|
134
|
|
Leasing costs –
existing properties(2) (5) (11)
|
(2,336)
|
(1,760)
|
|
(3,441)
|
(2,851)
|
|
Maintenance capital
expenditures – existing properties(12)
|
(590)
|
(234)
|
|
(678)
|
(360)
|
|
Non-controlling
interest adjustment(6)
|
-
|
13
|
|
-
|
39
|
|
AFFO(1)
|
$
7,807
|
$ 8,302
|
$
(495)
|
$
15,936
|
$
17,382
|
$(1,446)
|
AFFO change over
prior period - %
|
|
|
(6.0 %)
|
|
|
(8.3 %)
|
|
|
|
|
|
|
|
Weighted average units
outstanding – basic(1)(3)
|
111,530
|
103,005
|
|
107,407
|
103,005
|
|
FFO per unit –
basic(1)
|
$
0.096
|
$ 0.100
|
(4.0 %)
|
$
0.187
|
$ 0.198
|
(5.6 %)
|
AFFO per unit –
basic(1)
|
$
0.070
|
$ 0.081
|
(13.6 %)
|
$
0.148
|
$ 0.169
|
(12.4 %)
|
|
|
|
|
|
|
|
Gross distribution to
unitholders(1)(4)
|
$
7,807
|
$
7,210
|
|
$
15,214
|
$
14,419
|
|
FFO payout ratio –
basic(1)
|
73.0 %
|
70.2 %
|
|
75.8 %
|
70.6 %
|
|
AFFO payout ratio –
basic(1)
|
100.0 %
|
86.8 %
|
|
95.5 %
|
83.0 %
|
|
|
|
|
|
|
|
|
FFO(1)
|
$
10,689
|
$
10,264
|
|
$
20,066
|
$
20,420
|
|
Interest on dilutive
convertible debentures
|
178
|
779
|
|
354
|
1,550
|
|
FFO –
diluted(1)
|
$
10,867
|
$
11,043
|
$
(176)
|
$
20,420
|
$
21,970
|
$(1,550)
|
Diluted weighted
average units outstanding(1)(3)
|
114,060
|
113,899
|
|
109,938
|
113,898
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$
7,807
|
$ 8,302
|
|
$
15,936
|
$
17,382
|
|
Interest on dilutive
convertible debentures
|
178
|
779
|
|
354
|
1,550
|
|
AFFO –
diluted(1)
|
$
7,985
|
$
9,081
|
$(1,096)
|
$
16,290
|
$
18,932
|
$(2,642)
|
Diluted weighted
average units outstanding(1)(3)
|
114,060
|
113,899
|
|
109,938
|
113,898
|
|
|
|
|
|
|
|
|
FFO per unit –
diluted(1)
|
$
0.095
|
$
0.097
|
(2.1 %)
|
$
0.186
|
$ 0.193
|
(3.6 %)
|
AFFO per unit –
diluted(1)
|
$
0.070
|
$
0.080
|
(12.5 %)
|
$
0.148
|
$ 0.166
|
(10.8 %)
|
(1)
|
This is a non-GAAP
financial measure. Refer to the Non-GAAP Financial Measures
defined here and in Part I and VII of the REIT's MD&A ending
June 30, 2023 for more information on each non-GAAP financial
measure.
|
(2)
|
Based on
actuals.
|
(3)
|
Includes Class B
exchangeable LP units.
|
(4)
|
Includes distributions
on Class B exchangeable LP units.
|
(5)
|
Includes proportionate
share of revenue and expenditures at equity-accounted
investments.
|
(6)
|
The non-controlling
interest ("NCI") adjustment, includes adjustments required to
translate the profit and total comprehensive income (loss)
attributable to NCI of $49 thousand and $102 thousand for the three
and six months ending June 30, 2023, respectively (June 30, 2022 –
($56) thousand and $214 thousand, respectively) to FFO and AFFO for
the NCI.
|
(7)
|
Incremental leasing
costs included in administrative expenses include leasing costs of
salaried leasing staff directly attributed to signed leases that
would otherwise be capitalized if incurred from external
sources. These costs are excluded from FFO in accordance with
RealPAC's definition of FFO.
|
(8)
|
Amortization of
debenture issuance costs is deducted on a straight-line basis over
the remaining term of the related convertible debentures, in
accordance with RealPAC.
|
(9)
|
Fair value adjustment
to investments relate to the unrealized change in fair value of
equity accounted entities which are excluded from FFO in accordance
with RealPAC's definition of FFO.
|
(10)
|
Equity accounting
adjustment for interest rate swaps includes the change in non-cash
fair value adjustments relating to interest rate swaps held by
equity accounted entities, which are excluded from FFO in
accordance with RealPAC's definition of FFO.
|
(11)
|
Leasing costs –
existing properties include internal and external leasing costs
except to the extent that leasing costs relate to development
projects, in accordance with RealPAC's definition of AFFO.
See the Gross Capital Additions Including Leasing Fees note on page
28 of the MD&A.
|
(12)
|
Maintenance capital
expenditures – existing properties include expenditures related to
sustaining and maintaining existing space, in accordance with
RealPAC's definition of AFFO. See the Gross Capital Additions
Including Leasing Fees note on page 28 of the MD&A.
|
Net Property Operating Income (NOI) and Same-Asset Net
Property Operating Income (Same-Asset NOI)
(000s)
|
3
Months
Ended
June
30,
2023
(unaudited)
|
3 Months
Ended
June 30,
2022
(unaudited)
|
6
Months
Ended
June
30,
2023
(unaudited)
|
6 Months
Ended
June 30,
2022
(unaudited)
|
Same-asset
NOI(1)
|
$
17,104
|
$
17,068
|
$
33,690
|
$
33,517
|
Developments and
redevelopments transferred to income
producing in 2022 & 2023 ($3.9 million stabilized
NOI)
|
856
|
693
|
1,642
|
1,359
|
NOI from acquisitions,
properties currently under development
and redevelopment ($6.4 million stabilized NOI)
|
499
|
328
|
428
|
445
|
Straight-line
rent
|
(44)
|
(19)
|
11
|
(134)
|
Administrative expenses
charged to NOI
|
(1,107)
|
(983)
|
(1,931)
|
(1,712)
|
Lease termination
revenue
|
-
|
-
|
-
|
105
|
Properties
disposed
|
196
|
607
|
531
|
1,217
|
Other
|
139
|
11
|
87
|
38
|
Total
NOI(1)
|
$
17,643
|
$
17,705
|
$
34,458
|
$
34,835
|
|
|
|
|
|
|
(1)
|
This is a non-GAAP
financial measure. Refer to the Non-GAAP Financial Measures
defined here and in Part I and VII of the REIT's MD&A for more
information on each non-GAAP financial measure.
|
Debt to Gross Assets
Debt to gross
assets(1) (000s)
|
|
June
30,
2023
|
December 31,
2022
|
June 30,
2022
|
Total debt including
land leases(1)(2)
|
|
$
657,013
|
$
708,697
|
$
692,892
|
Less: land
leases
|
|
(64,807)
|
(65,206)
|
(65,598)
|
Total debt excluding
land leases
|
|
$
592,206
|
$
643,491
|
$
627,294
|
|
|
|
|
|
Total gross assets
excluding derivative asset
|
|
$
1,257,355
|
$ 1,265,882
|
$ 1,244,353
|
Less: land
leases
|
|
(64,807)
|
(65,206)
|
(65,598)
|
Total gross assets
excluding land leases
|
|
$
1,192,548
|
$ 1,200,676
|
$ 1,178,755
|
Debt to gross assets
including land leases(1)
|
|
52.3 %
|
56.0 %
|
55.7 %
|
Debt to gross assets
excluding land leases(1)
|
|
49.7 %
|
53.6 %
|
53.2 %
|
|
|
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(1)
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This is a non-GAAP
financial measure. Refer to the Non-GAAP Financial Measures
in Part I and VII of the REIT's MD&A for more information on
each non-GAAP financial measure.
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(2)
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Total debt includes
current and long-term debt defined for this purpose as mortgage
bonds, mortgages payable, derivative liabilities, face value of
convertible debentures, non-convertible debentures, notes payable,
land lease liabilities and bank indebtedness.
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Cautionary Statements Regarding Forward-looking
Information
This press release contains forward-looking
statements relating to Plaza's operations, prospects, outlook,
condition and the environment in which it operates, including with
respect to Plaza's outlook or expectations regarding the future of
its business. Forward-looking statements are not future
guarantees of future performance and involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Plaza to be materially
different from any future results, performance or achievements
expressed, implied or projected by forward-looking statements
contained in this press release, including but not limited to
impacts on the business, operations and financial condition of the
REIT, its tenants and the economy in general; changes in economic,
retail, capital market, or debt market conditions, including
recessions and changes in, or the extent of changes in, interest
rates and the rate of inflation; supply chain constraints;
competitive real estate conditions; any unforeseen impacts from new
or renewed pandemic conditions and others described in
Plaza's Annual Information Form for the year ended December 31, 2022 and Management's Discussion and
Analysis for the six months ended June 30,
2023 which can be obtained on the REIT's website at
www.plaza.ca or on SEDAR at www.sedar.com. Forward-looking
statements are based on a number of expectations and assumptions
made in light of management's experience and perceptions of
historical trends and current conditions, including that progress
continues on Plaza's development program, the strength of Plaza's
tenant base, that tenant demand for space continues and that Plaza
is able to lease or re-lease space at anticipated rents.
Although based upon information currently available to management
and what management believes are reasonable expectations and
assumptions, there can be no assurances that forward-looking
statements will prove to be accurate. Readers, therefore, should
not place undue reliance on any forward-looking statements. Plaza
undertakes no obligation to publicly update any such statements,
except as required by law. These cautionary statements qualify all
forward-looking statements contained in this press
release.
Further Information
Information appearing in this
press release is a select summary of results. A more detailed
analysis of the REIT's financial and operating results is included
in the REIT's Management's Discussion and Analysis and Consolidated
Financial Statements, which can be found on the REIT's website at
www.plaza.ca or on SEDAR at www.sedar.com.
Conference Call
Michael
Zakuta, President and CEO, and Jim Drake, CFO, will
host a conference call for the investment community on Friday, August 4, 2023 at 10:00 a.m. EDT.
The call-in numbers for participants are 1-416-764-8659 (local
Toronto) or 1-902-704-0254 (local
Halifax) or 1-888-664-6392 (toll
free, within North America).
A replay of the call will be available until August 11,
2023. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 259361).
The audio replay will also be available for download on the REIT's
website for 90 days following the conference call.
About Plaza
Plaza is an open-ended real estate
investment trust and is a leading retail property owner and
developer, focused on Ontario,
Quebec and Atlantic Canada. Plaza's portfolio at
June 30, 2023 includes interests in
234 properties totaling approximately 8.8 million square feet
across Canada and additional lands
held for development. Plaza's portfolio largely consists of
open-air centres and stand-alone small box retail outlets and is
predominantly occupied by national tenants. For more information,
please visit www.plaza.ca.
SOURCE Plaza Retail REIT