WINNIPEG, MB, May 26, 2022
/CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV:
LRT.UN) today reported its operating results for the quarter ended
March 31, 2022. The following
comments in regard to the financial position and operating results
of LREIT should be read in conjunction with interim management's
discussion & analysis – quarterly highlights and the interim
financial statements for the quarter ended March 31, 2022, which may be obtained from the
SEDAR website at www.sedar.com.
ANALYSIS OF OPERATING RESULTS
Analysis of Loss and
Comprehensive Loss
|
|
Three Months Ended
March 31
|
|
|
|
|
Increase
(Decrease)
in Income
|
|
2022
|
2021
|
Amount
|
%
|
|
|
|
|
|
Rentals from investment
properties
|
$
4,680,532
|
$
4,275,535
|
$
404,997
|
9%
|
Property operating
costs
|
(3,429,506)
|
(3,243,590)
|
(185,916)
|
(6)%
|
Net operating
income (NOI)
|
1,251,026
|
1,031,945
|
219,081
|
21%
|
|
|
|
|
|
Interest
income
|
44,401
|
43,179
|
1,222
|
3%
|
Interest
expense
|
(2,957,216)
|
(3,193,980)
|
236,764
|
7%
|
Trust
expense
|
(574,726)
|
(313,485)
|
(261,241)
|
(83)%
|
|
|
|
|
|
Loss before the
following
|
(2,236,515)
|
(2,432,341)
|
195,826
|
8%
|
|
|
|
|
|
Fair value
adjustments
|
(849,392)
|
(7,640,568)
|
6,791,176
|
89%
|
Gain on extinguishment
of Series G Debentures
|
19,797,489
|
-
|
19,797,489
|
100%
|
|
Income (loss) before
discontinued operations
|
16,711,582
|
(10,072,909)
|
26,784,491
|
266%
|
|
|
|
|
|
Loss from discontinued
operations
|
(493,016)
|
(498,338)
|
5,322
|
1%
|
|
Income (loss) and
comprehensive income (loss)
|
$
16,218,566
|
$
(10,571,247)
|
$
26,789,813
|
253%
|
Overall Results
LREIT completed Q1-2022 with income and comprehensive income of
$16.2 million, compared to a loss and
comprehensive loss of $10.6 million
during Q1-2021, representing an increase in income and
comprehensive income of $26.8
million. The increase mainly reflects a $19.8 million gain on extinguishment of Series G
debentures; a $6.8 million decrease
in the loss relating to fair value adjustments; and a $0.4 million increase in rentals from investment
properties; partially offset by a $0.3
million increase in trust expense, mainly due to an increase
in professional fees.
On February 11, 2022, the holders
of the outstanding Series G Debentures ("Debentureholders") voted
in favour of an extraordinary resolution approving the exchange of
the Series G Debentures for trust units in the capital of LREIT
(the "Trust Units"). The exchange transaction was completed on
February 24, 2022 pursuant to which
the Series G Debentures, in the aggregate principal amount
outstanding of $24.9 million, and all
accrued or unpaid interest owing thereon in the amount of
$8.2 million, were exchanged for
659.9 million Trust Units. The Trust Units had a fair value of
$13.2 million and debt in the
aggregate amount of $33.0 million was
extinguished, resulting in a gain of $19.8
million. On March 3, 2022, the
Series G Debentures were formally delisted from the TSX Venture
Exchange (TSX‑V).
The decrease in loss due to fair value adjustments is mainly due
to the comparatively high losses from fair value adjustments
recognized during Q1-2021. In Q1-2021, losses from fair value
adjustments, in the amount of $7.6
million, mainly reflect a decrease in the carrying value of
the Fort McMurray properties as a
result of a reduction in normalized rent potential and an increase
in normalized property operating costs. The normalized rent
potential was reduced to reflect the rental rates that were
considered to be achievable in the Fort
McMurray market and the normalized operating costs were
increased to reflect the impact of a further hardening of the
insurance market on normalized insurance premiums. In Q1-2022,
losses from fair value adjustments, in the amount of $0.8 million, reflect a decrease in the carrying
value of the investment properties based on new external market
data that resulted in an increase in the long term vacancy
assumptions used in the valuation of the properties in the
Fort McMurray properties
segment.
The increase in rental revenues primarily reflects a
$0.4 million or 11% increase in the
Fort McMurray properties segment,
mainly due to a $0.4 million decrease
in vacancy loss as the average occupancy of the Fort McMurray properties segment increased
from 75% during Q1-2021 to 83% during Q1-2022.
Divestiture
On March 15, 2022, Woodland Park
was sold for $13.2 million and the
net sales proceeds, after accounting for selling costs and standard
closing adjustments in the amount of $0.4
million, were $12.8 million.
The property was under the control of the Receiver appointed by the
Court of Queen's Bench of Alberta
on February 28, 2019 and, as a
result, information disclosed with respect to the sale of Woodland
Park is based on information released by the Receiver and
management's estimates. During Q1-2022, a portion of the net
sales proceeds were used to repay an estimated $12.4 million of debt formerly secured by the
property, inclusive of the full repayment of the Receiver's
borrowings in the amount of $1.0
million. The remaining proceeds will be used to pay
additional fees and disbursements of the Receiver and counsel to
the Receiver with any further remaining amount being paid to the
lender that held the loan formerly secured by the property.
The deficit between the net sales proceeds applied to the loan
previously secured by the property and the balance of debt
outstanding is estimated to be $15.8
million. The deficit may result in a claim against
LREIT by the lender pursuant to the mortgage guarantee provided by
LREIT at the time of the original execution of the first mortgage
loan. Such a claim would be unsecured and subordinate to the
Trust's existing secured debt, inclusive of any amounts outstanding
with respect to the revolving loan facility from 2668921 Manitoba
Ltd. and any amounts advanced by 2668921 Manitoba Ltd. or its
affiliates.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the
TSX Venture Exchange under the symbol LRT.UN (Trust Units). For
further information on LREIT, please visit our website at
www.lreit.com.
This press release contains certain statements that could be
considered as forward-looking information. The
forward-looking information is subject to certain risks and
uncertainties, which could result in actual results differing
materially from the forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as the term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
SOURCE Lanesborough Real Estate Investment Trust