FREDERICTON, NB, Aug. 3, 2022
/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, 2022.
"We continue to realize positive results and growth from our
portfolio of open-air centres, dominated by national tenants in the
essential needs, value and convenience categories," said
Michael Zakuta, President and CEO.
"In the current environment of rising interest rates, we will
benefit from our conservative approach to debt financing, supported
by our very resilient tenant base. With a balanced debt maturity
ladder that consists of mostly fixed-rate debt and nominal floating
rate exposure, we are well-positioned."
Summary of Selected
IFRS Financial Results
|
(CAD$000s, except
percentages)
|
Three
Months
Ended
June
30,
2022
|
Three
Months
Ended
June
30,
2021
|
$
Change
|
%
Change
|
Six
Months
Ended
June 30,
2022
|
Six
Months
Ended
June 30,
2021
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
Revenues
|
$27,754
|
$29,944
|
($2,190)
|
(7.3 %)
|
$55,658
|
$56,652
|
($994)
|
(1.8 %)
|
|
|
|
|
|
|
|
|
|
Net operating income
(NOI)(1)
|
$17,705
|
$20,204
|
($2,499)
|
(12.4 %)
|
$34,835
|
$36,512
|
($1,677)
|
(4.6 %)
|
|
|
|
|
|
|
|
|
|
Net change in fair
value of
investment properties
|
($6,396)
|
$9,283
|
($15,679)
|
-
|
$6,038
|
$12,381
|
($6,343)
|
--
|
|
|
|
|
|
|
|
|
|
Profit and total
comprehensive
income
|
$6,968
|
$19,622
|
($12,654)
|
-
|
$32,800
|
$31,846
|
$954
|
--
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2022 for more information on
each non-GAAP financial measure.
|
Quarterly Highlights
- NOI was $17.7 million,
down $2.5 million (12.4%) from the
same period in 2021, primarily as a result of $3 million of lease buyouts in NOI in the same
period in the prior year, offset by an increase in NOI in the
current quarter.
- Profit and total comprehensive income for the current
quarter was $7.0 million compared to
$19.6 million in the same period in
the prior year. The decrease was mainly due to a decrease in the
fair value of investment properties recorded in Q2 2022 as a result
of an increase in capitalization rates in the current quarter.
Year-To-Date Highlights
- NOI was $34.8 million,
down $1.7 million (4.6%) from the
same period in 2021, primarily as a result of $3.1 million of lease buyouts in NOI in the same
period in the prior year, offset by an increase in NOI in the
current year.
- Profit and total comprehensive income for the current
year to date was $32.8 million
compared to $31.8 million in the same
period in the prior year. The increase was mainly due to an
increase in the fair value of investment properties of $6.0 million in the current year compared to a
fair value increase of $12.4 million
in the same period in the prior year mainly due to changes in
capitalization rates and appraisals obtained. Profit was also
impacted by the increase in NOI, an increase in the share of profit
of associates relating to the non-cash fair value adjustment of the
underlying properties in the current year, and 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,
2022
|
Three
Months
Ended
June 30,
2021
|
$
Change
|
%
Change
|
Six
Months
Ended
June
30,
2022
|
Six
Months
Ended
June
30,
2021
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
FFO(1)
|
$10,264
|
$13,054
|
($2,790)
|
(21.4 %)
|
$20,420
|
$22,608
|
($2,188)
|
(9.7 %)
|
FFO per
unit(1)
|
$0.100
|
$0.127
|
($0.027)
|
(21.3 %)
|
$0.198
|
$0.220
|
($0.022)
|
(10.0 %)
|
FFO payout
ratio(1)
|
70.2 %
|
55.2 %
|
n/a
|
27.2 %
|
70.6 %
|
63.8 %
|
n/a
|
10.7 %
|
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$8,302
|
$11,158
|
($2,856)
|
(25.6 %)
|
$17,382
|
$19,834
|
($2,452)
|
(12.4 %)
|
AFFO per
unit(1)
|
$0.081
|
$0.108
|
($0.027)
|
(25.0 %)
|
$0.169
|
$0.193
|
($0.024)
|
(12.4 %)
|
AFFO payout
ratio(1)
|
86.8 %
|
64.6 %
|
n/a
|
34.4 %
|
83.0 %
|
72.7 %
|
n/a
|
14.2 %
|
|
|
|
|
|
|
|
|
|
Same-asset
NOI(1)
|
$17,642
|
$17,221
|
$421
|
2.4 %
|
$34,690
|
$33,808
|
$882
|
2.6 %
|
|
|
|
|
|
|
|
|
|
Normal course issuer
bid – units
repurchased
|
2,900
|
6,750
|
n/a
|
n/a
|
5,100
|
14,600
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Committed occupancy –
including
non-consolidated investments(2)
|
|
|
|
|
96.6 %
|
95.9 %
|
n/a
|
0.7 %
|
Same-asset committed
occupancy(3)
|
|
|
|
|
96.6 %
|
95.5 %
|
n/a
|
1.2 %
|
|
|
|
|
|
|
|
|
|
(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, 2022 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, 2022, FFO per unit decreased by
$0.027 (21.3%) compared to the same
period in the prior year. FFO was impacted by the $3 million of lease buyouts in the same period in
the prior year, offset by an increase in NOI, and lower finance
costs mainly due to lower interest expense. AFFO per unit decreased
by $0.027 (25.0%) compared to the
same period in the prior year due to the changes in FFO noted above
as well as higher leasing costs in the current period due to
increased leasing activity, which will result in increased revenue
going forward. Excluding the impact of the prior period lease
buyouts, and COVID-related bad debt expense, FFO and FFO per unit
would have been 3% higher than the prior year. AFFO and AFFO per
unit adjusted for these same items would have been 3% higher than
the prior year.
- Same-asset NOI increased by $421
thousand (2.4%) mainly due to lease-up and rent escalations,
as well as lower bad debt expense in the current period and lower
operating expense due to timing of operational projects.
Year-To-Date Highlights
- FFO & AFFO: For the six months ended June 30, 2022, FFO per unit decreased by
$0.022 (10.0%) compared to the same
period in the prior year. FFO was impacted by the $3.1 million of lease buyouts in the prior year,
offset by an increase in NOI, and lower finance costs mainly due to
lower interest expense. AFFO per unit decreased by $0.024 (12.4%) compared to the same period in the
prior year due to the changes in FFO noted above as well as higher
leasing costs in the current year due to increased leasing
activity, which will result in increased revenue going forward.
Excluding the prior year impact of lease buyouts, and COVID-related
bad debt expense, FFO and FFO per unit would have been 5% higher
than the prior year. AFFO and AFFO per unit adjusted for these same
items would have been 4% higher than the same period in the prior
year.
- Same-asset NOI increased by $882
thousand (2.6%) mainly due to lease-up and rent escalations,
as well as lower bad debt expense in the current year and lower
operating expense due to timing of operational projects.
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, 2022, 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, 2022, compared to the
three and six months ended June 30,
2021 is presented below:
|
3 Months
Ended
June
30,
2022
|
3 Months
Ended
June 30,
2021
|
6
Months
Ended
June
30,
2022
|
6 Months
Ended
June 30,
2021
|
(000s – except per
unit amounts and percentage data)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
Profit and total
comprehensive income for the period
attributable to unitholders
|
$
7,024
|
$
18,979
|
$
32,586
|
$
31,124
|
Add
(deduct):
|
|
|
|
|
Incremental leasing
costs included in administrative expenses(7)
|
532
|
434
|
871
|
750
|
Debenture issuance
costs
|
-
|
346
|
-
|
346
|
Amortization of
debenture issuance costs(8)
|
(121)
|
(118)
|
(241)
|
(221)
|
Distributions on Class
B exchangeable LP units included in
finance costs
|
84
|
84
|
167
|
167
|
Deferred income
taxes
|
(305)
|
7
|
661
|
44
|
Land lease principal
repayments
|
(194)
|
(190)
|
(388)
|
(377)
|
Fair value adjustment
to restricted and deferred units
|
(269)
|
157
|
(158)
|
239
|
Fair value adjustment
to investment properties
|
6,396
|
(9,283)
|
(6,038)
|
(12,381)
|
Fair value adjustment
to investments(9)
|
833
|
79
|
(1,557)
|
189
|
Fair value adjustment
to Class B exchangeable LP units
|
(1,072)
|
750
|
(631)
|
1,179
|
Fair value adjustment
to convertible debentures
|
(883)
|
569
|
(723)
|
2,864
|
Fair value adjustment
to interest rate swaps
|
(1,678)
|
486
|
(4,225)
|
(2,075)
|
Fair value adjustment
to right-of-use land lease assets
|
194
|
190
|
388
|
377
|
Equity accounting
adjustment(10)
|
(114)
|
14
|
(300)
|
(155)
|
Non-controlling
interest adjustment(6)
|
(163)
|
550
|
8
|
538
|
Basic
FFO(1)
|
$
10,264
|
$
13,054
|
$
20,420
|
$
22,608
|
Add
(deduct):
|
|
|
|
|
Non-cash revenue –
straight-line rent(5)
|
19
|
29
|
134
|
175
|
Leasing costs –
existing properties(2) (5)(11)
|
(1,760)
|
(1,457)
|
(2,851)
|
(2,275)
|
Maintenance capital
expenditures – existing properties(2) (5)(12)
|
(234)
|
(504)
|
(360)
|
(729)
|
Non-controlling
interest adjustment(6)
|
13
|
36
|
39
|
55
|
Basic
AFFO(1)
|
$ 8,302
|
$
11,158
|
$
17,382
|
$
19,834
|
Basic weighted average
units outstanding(3)
|
103,005
|
102,987
|
103,005
|
102,990
|
Basic FFO per
unit(1)
|
$ 0.100
|
$ 0.127
|
$ 0.198
|
$
0.220
|
Basic AFFO per
unit(1)
|
$ 0.081
|
$ 0.108
|
$ 0.169
|
$
0.193
|
Gross distributions to
unitholders(4)
|
$ 7,210
|
$ 7,209
|
$
14,419
|
$
14,417
|
Distributions as a
percentage of basic FFO(1)
|
70.2 %
|
55.2 %
|
70.6 %
|
63.8 %
|
Distributions as a
percentage of basic AFFO(1)
|
86.8 %
|
64.6 %
|
83.0 %
|
72.7 %
|
|
|
|
|
|
Basic
FFO(1)
|
$
10,264
|
$
13,054
|
$
20,420
|
$
22,608
|
Interest on dilutive
convertible debentures
|
779
|
779
|
1,550
|
1,550
|
Diluted
FFO(1)
|
$
11,043
|
$
13,833
|
$
21,970
|
$
24,158
|
Diluted weighted
average units outstanding(3)
|
113,899
|
113,880
|
113,898
|
113,883
|
Basic
AFFO(1)
|
$
8,302
|
$
11,158
|
$
17,382
|
$
19,834
|
Interest on dilutive
convertible debentures
|
779
|
779
|
1,550
|
1,550
|
Diluted
AFFO(1)
|
$
9,081
|
$
11,937
|
$
18,932
|
$
21,384
|
Diluted weighted
average units outstanding(3)
|
113,899
|
113,880
|
113,898
|
113,883
|
Diluted FFO per
unit(1)
|
$
0.097
|
$ 0.121
|
$ 0.193
|
$
0.212
|
Diluted AFFO per
unit(1)
|
$
0.080
|
$ 0.105
|
$ 0.166
|
$
0.188
|
|
|
|
|
|
|
|
(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, 2022 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 ($56) thousand and $214 thousand for the
three and six months ending June 30, 2022, respectively (June 30,
2021 - $643 thousand and $722 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 and
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
27 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 27 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,
2022
(unaudited)
|
3 Months
Ended
June 30,
2021
(unaudited)
|
6
Months
Ended
June
30,
2022
(unaudited)
|
6 Months
Ended
June 30
2021,
(unaudited)
|
Same-asset
NOI(1)
|
$
17,642
|
$
17,221
|
$
34,690
|
$
33,808
|
Developments and
redevelopments transferred to income
producing in 2021 & 2022 ($590 thousand annualized
NOI)
|
120
|
4
|
185
|
(3)
|
NOI from acquisitions,
properties currently under development
and redevelopment ($6.3 million annualized NOI)
|
965
|
683
|
1,721
|
1,064
|
Straight-line
rent
|
(17)
|
(29)
|
(132)
|
(175)
|
Administrative expenses
charged to NOI
|
(1,000)
|
(846)
|
(1,730)
|
(1,541)
|
Lease buyout
revenue
|
-
|
3,023
|
105
|
3,098
|
Properties
disposed
|
(5)
|
148
|
(4)
|
261
|
Total
NOI(1)
|
$
17,705
|
$
20,204
|
$
34,835
|
$
36,512
|
|
|
|
|
|
(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.
|
Cautionary Statements Regarding
Forward-looking Information
This press release contains forward-looking statements relating
to Plaza's operations, prospects, condition and the environment in
which it operates, including that Plaza will benefit from its
approach to debt financing in the current environment, supported by
its tenant base. 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 or implied by forward-looking statements contained in
this press release, including but not limited to the duration and
full impacts of COVID-19 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; and those
described in Plaza's Annual Information Form for the year ended
December 31, 2021 and Management's
Discussion and Analysis for the six months ended June 30, 2022 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
the strength and resiliency of Plaza's tenant base and that tenant
demand for space continues. 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 Thursday, August 4,
2022 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,
2022. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 439673).
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,
2022 includes interests in 253 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