FREDERICTON, NB, Feb. 23,
2023 /CNW/ - Plaza Retail REIT (TSX: PLZ.UN)
("Plaza" or the "REIT") today announced its financial results for
the three months and year ended December 31,
2022.
"We finished 2022 with record occupancy levels, and our most
robust development pipeline ever. Our focus coming into 2023 is to
execute and deliver these new developments. The demand from leading
national retailers remains very strong and pre-leasing for these
projects is progressing well. The successful completion of these
developments will contribute incremental income and value over the
next two years," said Michael
Zakuta, President and CEO. "Our essential-needs, value and
convenience offerings remain resilient, and will continue to
perform well under all economic conditions. "
Summary of Selected
IFRS Financial Results
|
(CAD$000s, except
percentages)
|
Three Months Ended December
31, 2022
|
Three Months Ended December
31, 2021
|
$ Change
|
% Change
|
Twelve Months
Ended December
31, 2022
|
Twelve Months
Ended
December
31, 2021
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
Revenues
|
$27,978
|
$27,383
|
$595
|
2.2 %
|
$111,245
|
$110,632
|
$613
|
0.6 %
|
|
|
|
|
|
|
|
|
|
Net operating income
(NOI)(1)
|
$17,590
|
$17,188
|
$402
|
2.3 %
|
$70,581
|
$71,779
|
($1,198)
|
(1.7 %)
|
|
|
|
|
|
|
|
|
|
Net change in fair
value of
investment properties
|
$6,384
|
$29,985
|
($23,601)
|
-
|
$8,187
|
$58,376
|
($50,189)
|
--
|
|
|
|
|
|
|
|
|
|
Profit and total
comprehensive
income
|
$14,185
|
$40,735
|
($26,550)
|
-
|
$54,221
|
$100,489
|
($46,268)
|
--
|
|
|
|
|
|
|
|
|
|
(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 December 31, 2022 for more information
on each non-GAAP financial measure.
|
Quarterly Highlights
- NOI was $17.6 million, up
$402 thousand (2.3%) 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, and an increase in same-asset NOI due
to lease-up and rent escalations.
- Profit and total comprehensive income for the current
quarter was $14.2 million compared to
$40.7 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 $6.4
million in the current quarter compared to a fair value
increase of $30.0 million in the same
quarter in the prior year. The fair value change year over year was
mainly due to an increase in stabilized NOI, a decrease in
capitalization rates and appraisals obtained in the current
quarter.
Year-To-Date Highlights
- NOI was $70.6 million,
down $1.2 million (1.7%) from the
same period in 2021, primarily as a result of $3.2 million of lease termination revenue
received and included in NOI in the prior year, partially offset by
an increase in NOI from acquisitions, developments and properties
transferred to income producing properties in 2021 and 2022, and an
increase in same-asset NOI due to lease-up and rent
escalations.
- Profit and total comprehensive income for the current
year to date was $54.2 million
compared to $100.5 million in the
prior year. The decrease was mainly due to an increase in the fair
value of investment properties of $8.2
million in the current year compared to a fair value
increase of $58.4 million in the
prior year. The fair value change was mainly due to changes in
stabilized NOI, capitalization rates and appraisals obtained.
Profit was also impacted by the lease termination revenue received
and included in the prior year, an increase in finance and
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 December
31, 2022
|
Three
Months
Ended
December
31, 2021
|
$
Change
|
%
Change
|
Twelve
Months
Ended
December
31, 2022
|
Twelve
Months
Ended
December
31, 2021
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
FFO(1)
|
$10,232
|
$10,771
|
($539)
|
(5.0 %)
|
$41,383
|
$44,703
|
($3,320)
|
(7.4 %)
|
FFO per
unit(1)
|
$0.099
|
$0.105
|
($0.006)
|
(5.7 %)
|
$0.402
|
$0.434
|
($0.032)
|
(7.4 %)
|
FFO payout
ratio(1)
|
70.4 %
|
66.9 %
|
n/a
|
5.2 %
|
69.7 %
|
64.5 %
|
n/a
|
8.1 %
|
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$7,526
|
$8,198
|
($672)
|
(8.2 %)
|
$33,186
|
$37,478
|
($4,292)
|
(11.5 %)
|
AFFO per
unit(1)
|
$0.073
|
$0.080
|
($0.007)
|
(8.7 %)
|
$0.322
|
$0.364
|
($0.042)
|
(11.5 %)
|
AFFO payout
ratio(1)
|
95.8 %
|
87.9 %
|
n/a
|
9.0 %
|
86.9 %
|
76.9 %
|
n/a
|
13.0 %
|
|
|
|
|
|
|
|
|
|
Same-asset
NOI(1)
|
$17,415
|
$17,110
|
$305
|
1.8 %
|
$69,726
|
$68,677
|
$1,049
|
1.5 %
|
|
|
|
|
|
|
|
|
|
Normal course issuer
bid –
units
repurchased
|
6,205
|
5,775
|
n/a
|
n/a
|
18,742
|
27,925
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Committed occupancy
–
including
non-consolidated
investments(2)
|
|
|
|
|
97.5 %
|
96.5 %
|
n/a
|
1.0 %
|
Same-asset
committed
occupancy(3)
|
|
|
|
|
97.4 %
|
96.0 %
|
n/a
|
1.5 %
|
|
|
|
|
|
|
|
|
|
(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 MD&A ending December 31, 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 December 31, 2022, FFO per unit decreased by
$0.006 (5.7%) 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, an increase in same-asset NOI
mainly due to an increase in rental revenue from lease-up and rent
escalations, offset by an increase in finance and administrative
expenses. AFFO per unit decreased by $0.007 (8.7%) compared to the same period in the
prior year mainly due to the changes in FFO noted above.
- Same-asset NOI increased by $305
thousand (1.8%) mainly due to lease-up and rent escalations
in the current quarter.
Year-To-Date Highlights
- FFO & AFFO: For the twelve months ended December 31, 2022, FFO per unit decreased by
$0.032 (7.4%) 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 $3.2
million of lease termination revenue received and included
in the prior year, an increase in finance and administrative
expenses and insurance proceeds received in the prior year. AFFO
per unit decreased by $0.042 (11.5%)
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 revenue, insurance proceeds and COVID-related bad debt
expense in the prior year, FFO and FFO per unit would have been
consistent with the prior year. AFFO and AFFO per unit adjusted for
these same items would have been 3% lower than the same period in
the prior year.
- Same-asset NOI increased by $1.0
million (1.5%) 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 December 31, 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 twelve months
ended December 31, 2022, compared to
the three and twelve months ended December
31, 2021 is presented below:
(000s – except per
unit amounts and
percentage data, unaudited)
|
3 Months
Ended
December
31, 2022
|
3 Months
Ended
December
31, 2021
|
Change
over
Prior
Period
|
12 Months
Ended
December
31, 2022
|
12 Months
Ended
December
31, 2021
|
Change
over
Prior
Period
|
Profit and total
comprehensive income for the
period attributable to unitholders
|
$
14,154
|
$
40,735
|
|
$
53,891
|
$
99,615
|
|
Incremental leasing
costs included in administrative
expenses(7)
|
285
|
312
|
|
1,491
|
1,384
|
|
Debenture issuance
costs
|
-
|
-
|
|
-
|
370
|
|
Amortization of
debenture issuance costs(8)
|
(121)
|
(125)
|
|
(483)
|
(464)
|
|
Distributions on Class
B exchangeable LP units
included in finance costs
|
84
|
84
|
|
334
|
334
|
|
Deferred income
taxes
|
(46)
|
728
|
|
(4)
|
699
|
|
Land lease principal
repayments
|
(197)
|
(193)
|
|
(780)
|
(760)
|
|
Fair value adjustment
to restricted and deferred
units
|
206
|
66
|
|
(40)
|
280
|
|
Fair value adjustment
to investment properties
|
(6,384)
|
(29,985)
|
|
(8,187)
|
(58,376)
|
|
Fair value adjustment
to investments(9)
|
1,095
|
(65)
|
|
(49)
|
(9)
|
|
Fair value adjustment
to Class B exchangeable LP
units
|
667
|
262
|
|
(286)
|
1,322
|
|
Fair value adjustment
to convertible debentures
|
267
|
(930)
|
|
(693)
|
1,903
|
|
Fair value adjustment
to interest rate swaps
|
2
|
(168)
|
|
(4,264)
|
(2,604)
|
|
Fair value adjustment
to right-of-use land lease
assets
|
197
|
193
|
|
780
|
760
|
|
Equity accounting
adjustment(10)
|
2
|
(46)
|
|
(327)
|
(229)
|
|
Non-controlling
interest adjustment(6)
|
21
|
(97)
|
|
-
|
478
|
|
FFO(1)
|
$
10,232
|
$
10,771
|
(539)
|
$
41,383
|
$
44,703
|
(3,320)
|
FFO change over
prior period - %
|
|
|
(5.0 %)
|
|
|
(7.4 %)
|
|
|
|
|
|
|
|
FFO(1)
|
$
10,232
|
$
10,771
|
|
$
41,383
|
$
44,703
|
|
Non-cash revenue –
straight-line rent(5)
|
(88)
|
71
|
|
31
|
277
|
|
Leasing costs –
existing properties(2) (5) (11)
|
(2,006)
|
(1,955)
|
|
(6,544)
|
(5,554)
|
|
Maintenance capital
expenditures – existing
properties(12)
|
(638)
|
(711)
|
|
(1,788)
|
(2,030)
|
|
Non-controlling
interest adjustment(6)
|
26
|
22
|
|
104
|
82
|
|
AFFO(1)
|
$
7,526
|
$
8,198
|
(672)
|
$
33,186
|
$
37,478
|
(4,292)
|
AFFO change over
prior period - %
|
|
|
(8.2 %)
|
|
|
(11.5 %)
|
|
|
|
|
|
|
|
Weighted average units
outstanding – basic(3)
|
102,993
|
102,982
|
|
103,001
|
102,986
|
|
FFO per unit –
basic(1)
|
$
0.099
|
$
0.105
|
(5.7 %)
|
$
0.402
|
$
0.434
|
(7.4 %)
|
AFFO per unit –
basic(1)
|
$
0.073
|
$
0.080
|
(8.7 %)
|
$
0.322
|
$
0.364
|
(11.5 %)
|
|
|
|
|
|
|
|
Gross distribution to
unitholders(4)
|
$
7,208
|
$
7,208
|
|
$
28,836
|
$
28,832
|
|
FFO payout ratio –
basic(1)
|
70.4 %
|
66.9 %
|
|
69.7 %
|
64.5 %
|
|
AFFO payout ratio –
basic(1)
|
95.8 %
|
87.9 %
|
|
86.9 %
|
76.9 %
|
|
|
|
|
|
|
|
|
FFO(1)
|
$
10,232
|
$
10,771
|
|
$
41,383
|
$
44,703
|
|
Interest on dilutive
convertible debentures
|
788
|
788
|
|
3,125
|
3,125
|
|
FFO –
diluted(1)
|
$
11,020
|
$
11,559
|
(539)
|
$
44,508
|
$
47,828
|
(3,320)
|
Diluted weighted
average units outstanding(3)
|
113,886
|
113,875
|
|
113,894
|
113,879
|
|
|
|
|
|
|
|
|
AFFO(1)
|
$
7,526
|
$
8,198
|
|
$
33,186
|
$
37,478
|
|
Interest on dilutive
convertible debentures
|
788
|
788
|
|
3,125
|
3,125
|
|
AFFO –
diluted(1)
|
$
8,314
|
$
8,986
|
(672)
|
$
36,311
|
$
40,603
|
(4,292)
|
Diluted weighted
average units outstanding(3)
|
113,886
|
113,875
|
|
113,894
|
113,879
|
|
|
|
|
|
|
|
|
FFO per unit –
diluted(1)
|
$
0.097
|
$
0.102
|
(4.9 %)
|
$
0.391
|
$
0.420
|
(6.9 %)
|
AFFO per unit –
diluted(1)
|
$
0.073
|
$
0.079
|
(7.6 %)
|
$
0.319
|
$
0.357
|
(10.6 %)
|
|
|
|
|
|
|
|
(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 December
31, 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 $31 thousand and $330 thousand for the three
and twelve months ending December 31, 2022, respectively (December
31, 2021 - nil 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
December
31,
2022
(unaudited)
|
3 Months
Ended
December 31,
2021
(unaudited)
|
12
Months
Ended
December
31,
2022
(unaudited)
|
12 Months
Ended
December 31,
2021
(unaudited)
|
Same-asset
NOI(1)
|
$
17,415
|
$
17,110
|
$
69,726
|
$
68,677
|
Developments and
redevelopments transferred to income
producing in 2021 & 2022 ($2.5 million stabilized
NOI)
|
562
|
305
|
1,987
|
943
|
NOI from acquisitions,
properties currently under development
and redevelopment ($5.4 million stabilized NOI)
|
365
|
304
|
1,807
|
1,422
|
Straight-line
rent
|
88
|
(70)
|
(31)
|
(277)
|
Administrative expenses
charged to NOI
|
(835)
|
(739)
|
(3,379)
|
(3,025)
|
Lease termination
revenue
|
28
|
119
|
145
|
3,217
|
Properties
disposed
|
50
|
159
|
326
|
822
|
Other
|
(83)
|
-
|
-
|
-
|
Total
NOI(1)
|
$
17,590
|
$
17,188
|
$
70,581
|
$
71,779
|
|
|
|
|
|
(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 twelve months ended
December 31, 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, February 24, 2023 at 2:00 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 March 3, 2023.
To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 353222).
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
December 31, 2022 includes interests
in 251 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