FREDERICTON, NB, Nov. 10,
2022 /CNW/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza"
or the "REIT") today announced its financial results for the three
and nine months ended September 30,
2022.
"Demand from tenants in the essential needs, value and
convenience categories is very robust, and we are seeing the
results in our historically high committed occupancy", said
Michael Zakuta, President and
CEO. "This demand has also allowed us to continue to improve
the quality of our portfolio by leasing to resilient tenants with
sustainable offerings. Despite the challenges of inflation,
higher interest rates and construction delays, our business is
strong and our outlook positive."
Summary of Selected IFRS Financial
Results
|
(CAD$000s, except percentages)
|
Three
Months
Ended
September 30, 2022
|
Three
Months
Ended
September 30, 2021
|
$
Change
|
%
Change
|
Nine
Months Ended
September 30, 2022
|
Nine
Months Ended
September 30, 2021
|
$ Change
|
% Change
|
|
|
|
|
|
|
|
|
|
Revenues
|
$27,609
|
$26,597
|
$1,012
|
3.8 %
|
$83,267
|
$83,249
|
$18
|
0.2 %
|
|
|
|
|
|
|
|
|
|
Net operating income
(NOI)(1)
|
$18,156
|
$18,079
|
$77
|
0.4 %
|
$52,991
|
$54,591
|
($1,600)
|
(2.9 %)
|
|
|
|
|
|
|
|
|
|
Net change in fair
value of investment properties
|
($4,235)
|
$16,010
|
($20,245)
|
-
|
$1,803
|
$28,391
|
($26,588)
|
--
|
|
|
|
|
|
|
|
|
|
Profit and total
comprehensive income
|
$7,236
|
$27,908
|
($20,672)
|
-
|
$40,036
|
$59,754
|
($19,718)
|
--
|
|
|
|
|
|
|
|
|
|
(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 September
30, 2022 for more information on each non-GAAP financial
measure.
|
Quarterly Highlights
- NOI was $18.2 million, up
$77 thousand (0.4%) from the same
period in 2021, as a result of an increase in NOI from
acquisitions, developments and properties transferred to income
producing in 2021 and 2022, offset by higher same-asset operating
expenses in the current quarter.
- Profit and total comprehensive income for the current
quarter was $7.2 million compared to
$27.9 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 Q3 2022 as a result
of an increase in capitalization rates in the current quarter.
Year-To-Date Highlights
- NOI was $53.0 million,
down $1.6 million (2.9%) from the
same period in 2021, primarily as a result of $3.1 million of lease termination fees received
and included in NOI in the same period in the prior year, partially
offset by an increase in NOI in the current year.
- Profit and total comprehensive income for the current
year to date was $40.0 million
compared to $59.8 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 $1.8 million in the current year compared to a
fair value increase of $28.4 million
in the same period in the prior year. The fair value change was
mainly due to increases in capitalization rates and appraisals
obtained. Profit was also impacted by the lease termination fees
received and included in the prior year, an increase in
administrative expenses, 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
September 30, 2022
|
Three
Months Ended
September 30, 2021
|
$ Change
|
% Change
|
Nine
Months
Ended
September 30, 2022
|
Nine
Months
Ended
September 30, 2021
|
$ Change
|
% Change
|
|
|
|
|
|
|
|
|
|
FFO(1)
|
$10,731
|
$11,324
|
($593)
|
(5.2 %)
|
$31,151
|
$33,932
|
($2,781)
|
(8.2 %)
|
FFO per
unit(1)
|
$0.104
|
$0.110
|
($0.006)
|
(5.5 %)
|
$0.302
|
$0.329
|
($0.027)
|
(8.2 %)
|
FFO payout
ratio(1)
|
67.2 %
|
63.6 %
|
n/a
|
5.7 %
|
69.4 %
|
63.7 %
|
n/a
|
8.9 %
|
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$8,278
|
$9,446
|
($1,168)
|
(12.4 %)
|
$25,660
|
$29,280
|
($3,620)
|
(12.4 %)
|
AFFO per
unit(1)
|
$0.080
|
$0.092
|
($0.012)
|
(13.0 %)
|
$0.249
|
$0.284
|
($0.035)
|
(12.3 %)
|
AFFO payout
ratio(1)
|
87.1 %
|
76.3 %
|
n/a
|
14.1 %
|
84.3 %
|
73.9 %
|
n/a
|
14.1 %
|
|
|
|
|
|
|
|
|
|
Same-asset
NOI(1)
|
$17,957
|
$18,102
|
$145
|
(0.8 %)
|
$52,597
|
$51,856
|
$741
|
1.4 %
|
|
|
|
|
|
|
|
|
|
Normal course issuer
bid – units repurchased
|
7,437
|
7,550
|
n/a
|
n/a
|
12,537
|
22,150
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Committed occupancy –
including non-consolidated investments(2)
|
|
|
|
|
97.2 %
|
96.2 %
|
n/a
|
1.0 %
|
Same-asset committed
occupancy(3)
|
|
|
|
|
97.0 %
|
96.2 %
|
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 September 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 September 30, 2022, FFO per unit decreased by
$0.006 (5.5%) 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 2021 and 2022, offset by a decrease in
same-asset NOI due to the timing of certain operating expenses, an
increase in finance and administrative expenses and insurance
proceeds received in the prior year. AFFO per unit decreased by
$0.012 (13.0%) 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 lease termination fees, insurance
proceeds and COVID-related bad debt expense in the prior period,
FFO and FFO per unit would have been 3% lower than the prior year.
AFFO and AFFO per unit adjusted for these same items would have
been 9.7% lower than the prior year.
- Same-asset NOI decreased by $145
thousand (0.8%) mainly due to timing of certain operating
expenses in the current quarter, somewhat offset by an increase in
rental revenue from lease-up and rent escalations.
Year-To-Date Highlights
- FFO & AFFO: For the nine months ended September 30, 2022, FFO per unit decreased by
$0.027 (8.2%) 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 properties in 2021 and 2022, an increase in
same-asset NOI, offset by the $3.1
million of lease termination fees received and included in
the prior year, an increase in administrative costs and insurance
proceeds received in the prior year. AFFO per unit decreased by
$0.035 (12.3%) 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 impact of lease termination fees, insurance
proceeds and COVID-related bad debt expense in the prior year, FFO
and FFO per unit would have been 2% higher than the prior year.
AFFO and AFFO per unit adjusted for these same items would have
been 1% lower than the same period in the prior year.
- Same-asset NOI increased by $741
thousand (1.4%) mainly due to lease-up and rent escalations,
as well as lower bad debt expense in the current year, more than
offsetting the increase in operating expenses.
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 September 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 nine months
ended September 30, 2022, compared to
the three and nine months ended September
30, 2021 is presented below:
(000s – except per
unit amounts and percentage data, unaudited)
|
3 Months
Ended
September
30, 2022
|
3 Months
Ended
September
30, 2021
|
Change over
Prior Period
|
9 Months
Ended
September
30, 2022
|
9 Months
Ended
September
30, 2021
|
Change over
Prior Period
|
Profit and total
comprehensive income for the period attributable to
unitholders
|
$7,151
|
$27,756
|
|
$39,737
|
$58,880
|
|
Incremental leasing
costs included in administrative expenses(7)
|
335
|
322
|
|
1,206
|
1,072
|
|
Debenture issuance
costs
|
-
|
24
|
|
-
|
370
|
|
Amortization of
debenture issuance costs(8)
|
(121)
|
(118)
|
|
(362)
|
(339)
|
|
Distributions on Class
B exchangeable LP units included in finance costs
|
83
|
83
|
|
250
|
250
|
|
Deferred income
taxes
|
(619)
|
(73)
|
|
42
|
(29)
|
|
Land lease principal
repayments
|
(195)
|
(190)
|
|
(583)
|
(567)
|
|
Fair value adjustment
to restricted and deferred units
|
(88)
|
(25)
|
|
(246)
|
214
|
|
Fair value adjustment
to investment properties
|
4,235
|
(16,010)
|
|
(1,803)
|
(28,391)
|
|
Fair value adjustment
to investments(9)
|
413
|
(133)
|
|
(1,144)
|
56
|
|
Fair value adjustment
to Class B exchangeable LP units
|
(322)
|
(119)
|
|
(953)
|
1,060
|
|
Fair value adjustment
to convertible debentures
|
(237)
|
(31)
|
|
(960)
|
2,833
|
|
Fair value adjustment
to interest rate swaps
|
(41)
|
(361)
|
|
(4,266)
|
(2,436)
|
|
Fair value adjustment
to right-of-use land lease assets
|
195
|
190
|
|
583
|
567
|
|
Equity accounting
adjustment(10)
|
(29)
|
(28)
|
|
(329)
|
(183)
|
|
Non-controlling
interest adjustment(6)
|
(29)
|
37
|
|
(21)
|
575
|
|
FFO(1)
|
$10,731
|
$11,324
|
(593)
|
$31,151
|
$33,932
|
(2,781)
|
FFO change over
prior period - %
|
|
|
(5.2 %)
|
|
|
(8.2 %)
|
|
|
|
|
|
|
|
FFO(1)
|
$10,731
|
$11,324
|
|
$31,151
|
$33,932
|
|
Non-cash revenue –
straight-line rent(5)
|
(15)
|
31
|
|
119
|
206
|
|
Leasing costs –
existing properties(2) (5)(11)
|
(1,687)
|
(1,325)
|
|
(4,538)
|
(3,599)
|
|
Maintenance capital
expenditures – existing properties(2) (5)(12)
|
(790)
|
(589)
|
|
(1,150)
|
(1,319)
|
|
Non-controlling
interest adjustment(6)
|
39
|
5
|
|
78
|
60
|
|
AFFO(1)
|
8,278
|
9,446
|
(1,168)
|
25,660
|
29,280
|
(3,620)
|
AFFO change over
prior period - %
|
|
|
(12.4 %)
|
|
|
(12.4 %)
|
|
|
|
|
|
|
|
Weighted average units
outstanding - basic(3)
|
103,000
|
102,980
|
|
103,003
|
102,986
|
|
FFO per unit -
basic(1)
|
$
0.104
|
$
0.110
|
(5.5 %)
|
$
0.302
|
$
0.329
|
(8.2 %)
|
AFFO per unit -
basic(1)
|
$
0.080
|
$
0.092
|
(13.0 %)
|
$
0.249
|
$
0.284
|
(12.3 %)
|
|
|
|
|
|
|
|
Gross distributions to
unitholders(4)
|
$
7,209
|
$
7,207
|
|
$
21,628
|
$
21,624
|
|
FFO payout ratio -
basic(1)
|
67.2 %
|
63.6 %
|
|
69.4 %
|
63.7 %
|
|
AFFO payout ratio -
basic(1)
|
87.1 %
|
76.3 %
|
|
84.3 %
|
73.9 %
|
|
|
|
|
|
|
|
|
FFO(1)
|
$
10,731
|
$
11,324
|
|
$
31,151
|
$
33,932
|
|
Interest on dilutive
convertible debentures
|
788
|
788
|
|
2,337
|
2,337
|
|
FFO -
diluted(1)
|
$
11,519
|
$
12,112
|
(593)
|
$
33,488
|
$
36,269
|
(2,781)
|
Diluted weighted
average units outstanding(3)
|
113,893
|
113,874
|
|
113,896
|
113,880
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$
8,278
|
$
9,446
|
|
$
25,660
|
$
29,280
|
|
Interest on dilutive
convertible debentures
|
788
|
788
|
|
2,337
|
2,337
|
|
AFFO -
diluted(1)
|
$
9,066
|
$
10,234
|
(1,168)
|
$
27,997
|
$
31,617
|
(3,620)
|
Diluted weighted
average units outstanding(3)
|
113,893
|
113,874
|
|
113,896
|
113,880
|
|
|
|
|
|
|
|
|
FFO per unit -
diluted(1)
|
$
0.101
|
$
0.106
|
(4.7 %)
|
$
0.294
|
$
0.318
|
(7.5 %)
|
AFFO per unit -
diluted(1)
|
$
0.080
|
$
0.090
|
(11.1 %)
|
$
0.246
|
$
0.278
|
(11.5 %)
|
(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
September 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 $85 thousand and $299 thousand for the three
and nine months ending September 30, 2022, respectively (September
30, 2021 - $152 thousand and $874 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
29 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 29 of the MD&A.
|
Net Property Operating Income (NOI) and Same-Asset Net
Property Operating Income (Same-Asset NOI)
(000s)
|
3 Months
Ended
September 30,
2022
(unaudited)
|
3 Months
Ended
September
30,
2021
(unaudited)
|
9 Months
Ended
September 30,
2022
(unaudited)
|
9 Months
Ended
September
30,
2021
(unaudited)
|
Same-asset
NOI(1)
|
$
17,957
|
$
18,102
|
$
52,597
|
$
51,856
|
Developments and
redevelopments transferred to income producing in 2021 & 2022
($2.0 million stabilized NOI)
|
513
|
340
|
1,459
|
671
|
NOI from acquisitions,
properties currently under development and redevelopment ($4.9
million stabilized NOI)
|
448
|
274
|
1,408
|
1,002
|
Straight-line
rent
|
16
|
(31)
|
(116)
|
(206)
|
Administrative expenses
charged to NOI
|
(806)
|
(733)
|
(2,539)
|
(2,276)
|
Lease termination
revenue
|
12
|
-
|
117
|
3,098
|
Properties
disposed
|
16
|
127
|
65
|
446
|
Total NOI(1)
|
$
18,156
|
$
18,079
|
$
52,991
|
$
54,591
|
|
|
|
|
|
|
(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, outlook,
condition and the environment in which it operates.
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 projected
by forward-looking statements contained in this press release,
including but not limited to any unforeseen impacts from new or
renewed pandemic conditions and 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;
and others described in Plaza's Annual Information Form for
the year ended December 31, 2021 and
Management's Discussion and Analysis for the nine months ended
September 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 Friday, November 11,
2022 at 1:30 p.m. EST. 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 November 18,
2022. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 721972).
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 September 30, 2022 includes interests in 253
properties totaling approximately 8.9 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