WINNIPEG, MB, March 21,
2024 /CNW/ - Lanesborough Real Estate Investment
Trust ("LREIT") (TSXV: LRT.UN) today reported its operating results
for the year ended December 31, 2023.
The following comments in regard to the financial position and
operating results of LREIT should be read in conjunction with
management's discussion & analysis, annual report and the
financial statements for the year ended December 31, 2023, which may be obtained from the
SEDAR+ website at www.sedarplus.ca.
ANALYSIS OF OPERATING RESULTS
Analysis of Income
(Loss) and Comprehensive Income (Loss)
|
|
Year Ended December
31
|
|
|
|
|
Increase
(Decrease)
in Income
|
|
2023
|
2022
|
Amount
|
%
|
|
|
|
|
|
Rentals from
investment properties
|
$ 13,192,263
|
$ 17,848,025
|
$
(4,655,762)
|
(26) %
|
Rental loss insurance
proceeds (reversal of proceeds)
|
(43,049)
|
(790,734)
|
747,685
|
95 %
|
Property operating
costs
|
(9,296,184)
|
(13,078,969)
|
3,782,785
|
29 %
|
Net operating
income (NOI)
|
3,853,030
|
3,978,322
|
(125,292)
|
(3) %
|
Interest
income
|
86,145
|
62,849
|
23,296
|
37 %
|
Interest
expense
|
(10,231,247)
|
(11,390,280)
|
1,159,033
|
10 %
|
Trust
expense
|
(1,036,536)
|
(1,510,694)
|
474,158
|
31 %
|
Loss before the
following
|
(7,328,608)
|
(8,859,803)
|
1,531,195
|
17 %
|
Loss on sale of
investments and investment property
|
(145,452)
|
-
|
(145,452)
|
- %
|
Fair value
adjustments
|
5,695,994
|
15,283,441
|
(9,587,447)
|
(63) %
|
Gain on
extinguishment of Series G Debentures
|
-
|
19,797,489
|
(19,797,489)
|
(100) %
|
Income (loss)
before discontinued operations
|
(1,778,066)
|
26,221,127
|
(27,999,193)
|
(107) %
|
Loss from
discontinued operations
|
(5,917,847)
|
(2,324,993)
|
(3,592,854)
|
(155) %
|
Income (loss) and
comprehensive income (loss)
|
$
(7,695,913)
|
$ 23,896,134
|
$
(31,592,047)
|
(132) %
|
Overall Results
LREIT completed 2023 with a loss and comprehensive loss of
$7.7 million, compared to an income
and comprehensive income of $23.9
million during 2022, representing a decrease in income and
comprehensive income of $31.6
million. The decrease mainly reflects a $19.8 million gain on extinguishment of Series G
Debentures recognized in 2022, a $9.6
million decrease related to fair value adjustments, a
$3.6 million increase in loss from
discontinued operations and a $0.9
million decrease in the net operating income ("NOI") of the
investment properties and investment properties held for sale,
partially offset by a $1.2 million
decrease in interest expense and a $0.7
million decrease in reversal of rental loss insurance
proceeds.
The gain on extinguishment of the Series G Debentures was the
result of the exchange transaction completed on February 24, 2022 pursuant to which the Series G
Debentures, in the aggregate principal amount outstanding of
$24.8 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.
The decrease from fair value adjustments reflects a $5.7 million gain from fair value adjustments
during 2023, compared to a $15.3
million gain from fair value adjustments during 2022. The
gain from fair value adjustments during 2023 reflects an increase
in the carrying value of the Fort
McMurray properties segment, which is mainly due to an
increase in the normalized revenue considered to be achievable in
the Fort McMurray rental market as
a result of the favourable occupancy and rental rate trends. The
gain from fair value adjustments recognized during 2022 mainly
reflected an increase in the carrying value of the Fort McMurray properties segment, primarily as
a result of changes made to key valuation assumptions to
incorporate information obtained from external appraisals received
during the year and in recognition of the favourable occupancy
trend.
The increase in loss from discontinued operations is primarily
due to a $3.4 million impairment
adjustment resulting from the impact of a reduction in the NOI that
is considered to be achievable in the Saskatchewan seniors' residence market on the
valuation of Chateau St. Michael's. The reduction in the NOI that
is considered to be achievable is the result of the sustained
operating losses of the property and increased uncertainty with
respect to the economic viability of the property in the
post‑pandemic operating environment for the market.
The decrease in the NOI of the investment properties and
investment properties held for sale is mainly due to a $1.3 million decrease in NOI of the investment
properties held for sale, which is primarily due to the sales of
Laird's Landing, Lakewood Apartments and Westhaven Manor on
January 31, 2023, partially offset by
a $0.5 million increase in the NOI of
the Fort McMurray properties
segment.
The increase in the NOI of the Fort
McMurray properties segment reflects increases in the
average occupancy rate, which increased from 93% during 2022 to 96%
during 2023 and the average monthly rental rate, which increased
$35 or 3% from $1,361 during 2022 to $1,396 during 2023.
The decrease in interest expense is mainly due to the assumption
of mortgage loan debt, in the aggregate principal amount of
$22.9 million, by the purchaser upon
completion of the sales of Laird's Landing, Lakewood Apartments and
Westhaven Manor on January 31, 2023.
The decrease in interest expense from the sale of the properties
was partially offset by an increase in the weighted average
interest rate on the Trust's variable interest rate mortgage loans,
which increased from 9.7% in 2022 to 10.4% in 2023.
The decrease in the reversal of rental loss insurance proceeds
is mainly due to the Trust recording provisions of $0.2 million during 2023, in comparison to
$0.8 million during 2022 with respect
to the appeal of rental loss insurance proceeds originally awarded
by the Alberta Court of King's
Bench under the legal claim launched by the Trust against the
insurers of the 2016 Fort McMurray wildfire. During 2023, the Trust
paid $1.0 million in settlement of
the appeal ruling.
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