Plaza Retail REIT Announces Third Quarter 2023 Results

FREDERICTON, NB, Nov. 9, 2023 /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, 2023.

"We continue to make progress on our development program and substantially completed two significant projects during the quarter", said Michael Zakuta, president and CEO. "Tenant demand from grocery and other essential needs, value and convenience retailers, remains very strong. We are seeing the impact, with increasing lease renewal spreads and high committed occupancy. Our core tenants are performing well, our portfolio is resilient, and we remain confident in our business."

Summary of Selected IFRS Financial Results
(CAD$000s, except percentages)	Three Months Ended September 30, 2023	Three Months Ended September 30, 2022	$ Change	% Change	Nine Months Ended September 30, 2023	Nine Months Ended September 30, 2022	$ Change	% Change

Revenues	$28,294	$27,609	$685	2.5 %	$85,102	$83,267	$1,835	2.2 %

Net property operating income (NOI)⁽¹⁾	$18,460	$18,156	$304	1.7 %	$52,918	$52,991	($73)	(0.1 %)

Net change in fair value of investment properties	($10,919)	($4,235)	($6,684)	-	($10,472)	$1,803	($12,275)	--

Profit and total comprehensive income for the period	$3,355	$7,236	($3,881)	-	$24,091	$40,036	($15,945)	--

(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, 2023 for more information on each non-GAAP financial measure.

Quarterly Highlights

NOI was $18.5 million, up $304 thousand (1.7%) with the same period in 2022. The increase in NOI is from rent escalations in same-asset properties, acquisitions, developments, and properties transferred to income-producing in 2022 and 2023 was partially offset by a decrease in NOI from properties sold.
Profit and total comprehensive income for the current quarter was $3.4 million compared to $7.2 million in the same period in the prior year. The decrease was mainly due to the change in the fair value of investment properties due to an increase in capitalization rates.

Year-To-Date Highlights

NOI was $52.9 million consistent with the same period in 2022. NOI was impacted by an increase in NOI from same-asset, acquisitions, developments and properties transferred to income producing in 2022 and 2023, offset by an allowance provided to a tenant in consideration of delayed delivery of premises at a development property, and a decrease in NOI from properties sold.
Profit and total comprehensive income for the current year to date was $24.1 million compared to $40.0 million in the same period in the prior year. The decrease was mainly due to a decrease in the fair value of investment properties of $10.5 million in the current year compared to a fair value increase of $1.8 million in the same period in the prior year. The fair value change was mainly due to an increase in capitalization rates. Profit was also impacted an increase in administrative expenses and finance costs, an increase in investment and other income from development activity, along with changes in non-cash fair value adjustments relating to share of profit from associates, 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, 2023	Three Months Ended September 30, 2022	$ Change	% Change	Nine Months Ended September 30, 2023	Nine Months Ended September 30, 2022	$ Change	% Change

FFO⁽¹⁾	$11,392	$10,731	$661	6.2 %	$31,458	$31,151	$307	1.0 %
FFO per unit⁽¹⁾	$0.102	$0.104	($0.002)	(1.9 %)	$0.289	$0.302	($0.013)	(4.3 %)
FFO payout ratio⁽¹⁾	68.5 %	67.2 %	n/a	1.9 %	73.2 %	69.4 %	n/a	5.5 %

AFFO⁽¹⁾	$9,424	$8,278	$1,146	13.8 %	$25,360	$25,660	($300)	(1.2 %)
AFFO per unit⁽¹⁾	$0.085	$0.080	$0.005	6.3 %	$0.233	$0.249	($0.016)	(6.4 %)
AFFO payout ratio⁽¹⁾	82.8 %	87.1 %	n/a	(4.9 %)	90.8 %	84.3 %	n/a	7.7 %

Same-asset NOI⁽¹⁾	$17,877	$17,385	$492	2.8 %	$51,527	$50,879	$648	1.3 %

Normal course issuer bid – units repurchased	8,054	7,437	n/a	n/a	19,627	12,537	n/a	n/a

Committed occupancy – including non-consolidated investments⁽²⁾					97.2 %	97.2 %	n/a	-
Same-asset committed occupancy⁽³⁾					96.9 %	97.0 %	n/a	(0.1 %)

⁽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, 2023 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, 2023, FFO per unit decreased by $0.002 (1.9%) compared to the same period in the prior year. FFO was impacted by an increase in NOI from same-asset, acquisitions, developments and properties transferred to income producing in 2022 and 2023, an increase in investment and other income mainly due to higher fees from additional development activity, offset by an increase in administrative expenses, and a decrease in NOI from properties sold. AFFO per unit increased by $0.005 (6.3%) compared to the same period in the prior year mainly due to the changes in FFO noted above.
Same-asset NOI increased by $492 thousand, (2.8%) due to lease-up and rent escalations over the same period in the prior year, partially offset by an increase in operating and realty tax expenses.

Year-To-Date Highlights

FFO & AFFO: For the nine months ended September 30, 2023, FFO per unit decreased by $0.013 (4.3%) compared to the same period in the prior year. FFO was impacted by an increase in NOI from same-asset, acquisitions, developments and properties transferred to income producing properties in 2022 and 2023, an increase in investment and other income mainly due to higher fees from development activity, offset by an allowance provided to a tenant in consideration of delayed delivery of premises at a development property, an increase in finance and administrative expenses, and a decrease in NOI from properties sold. AFFO per unit decreased by $0.016 (6.4%) compared to the same period in the prior year due to the changes in FFO noted above, as well as increased leasing costs.
Same-asset NOI increased by $648 thousand (1.3%) due to lease-up and rent escalations over the same period in the prior year, partially offset by an increase in operating and realty tax expenses.

FFO and AFFO per unit, for both the three and nine months ended September 30, 2023, were also impacted by the issue of 8.548 million trust units in March 2023.

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, 2023, 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, 2023, compared to the three and nine months ended September 30, 2022 is presented below:

(000s – except per unit amounts and percentage data, unaudited)	3 Months Ended September 30, 2023	3 Months Ended September 30, 2022	Change over Prior Period	9 Months Ended September 30, 2023	9 Months Ended September 30, 2022	Change over Prior Period
Profit and total comprehensive income for the period attributable to unitholders	$ 3,375	$ 7,151		$ 24,009	$ 39,737
Incremental leasing costs included in administrative expenses⁽⁷⁾	319	335		1,056	1,206
Amortization of debenture issuance costs⁽⁸⁾	(18)	(121)		(123)	(362)
Distributions on Class B exchangeable LP units included in finance costs	81	83		245	250
Deferred income taxes	(143)	(619)		(119)	42
Land lease principal repayments	(202)	(195)		(601)	(583)
Fair value adjustment to restricted and deferred units	(227)	(88)		(383)	(246)
Fair value adjustment to investment properties	10,919	4,235		10,472	(1,803)
Fair value adjustment to investments⁽⁹⁾	(451)	413		121	(1,144)
Fair value adjustment to Class B exchangeable LP units	(416)	(322)		(1,017)	(953)
Fair value adjustment to convertible debentures	(450)	(237)		(658)	(960)
Fair value adjustment to interest rate swaps	(1,486)	(41)		(2,014)	(4,266)
Fair value adjustment to right-of-use land lease assets	202	195		601	583
Equity accounting adjustment⁽¹⁰⁾	(33)	(29)		(58)	(329)
Non-controlling interest adjustment⁽⁶⁾	(78)	(29)		(73)	(21)
FFO⁽¹⁾	$ 11,392	$ 10,731	$ 661	$ 31,458	$ 31,151	$ 307
*FFO change over prior period - %*			6.2 %			1.0 %

FFO⁽¹⁾	$ 11,392	$ 10,731		$ 31,458	$ 31,151
Non-cash revenue – straight-line rent⁽⁵⁾	(16)	(15)		(27)	119
Leasing costs – existing properties^{(2) (5) (11)}	(1,732)	(1,687)		(5,173)	(4,538)
Maintenance capital expenditures – existing properties⁽¹²⁾	(223)	(790)		(901)	(1,150)
Non-controlling interest adjustment⁽⁶⁾	3	39		3	78
AFFO⁽¹⁾	$ 9,424	$ 8,278	$ 1,146	$ 25,360	$ 25,660	$ (300)
*AFFO change over prior period - %*			13.8 %			(1.2 %)

Weighted average units outstanding – basic⁽¹⁾⁽³⁾	111,530	103,000		108,797	103,003
FFO per unit – basic⁽¹⁾	$ 0.102	$ 0.104	(1.9 %)	$ 0.289	$ 0.302	(4.3 %)
AFFO per unit – basic⁽¹⁾	$ 0.085	$ 0.080	6.3 %	$ 0.233	$ 0.249	(6.4 %)

Gross distribution to unitholders⁽¹⁾⁽⁴⁾	$ 7,806	$ 7,209		$ 23,020	$ 21,628
FFO payout ratio – basic⁽¹⁾	68.5 %	67.2 %		73.2 %	69.4 %
AFFO payout ratio – basic⁽¹⁾	82.8 %	87.1 %		90.8 %	84.3 %

FFO⁽¹⁾	$ 11,392	$ 10,731		$ 31,458	$ 31,151
Interest on dilutive convertible debentures	179	788		533	2,337
FFO – diluted⁽¹⁾	$ 11,571	$ 11,519	$ 52	$ 31,991	$ 33,488	$(1,497)
Diluted weighted average units outstanding⁽¹⁾⁽³⁾	114,060	113,893		111,327	113,896

AFFO⁽¹⁾	$ 9,424	$ 8,278		$ 25,360	$ 25,660
Interest on dilutive convertible debentures	179	788		533	2,337
AFFO – diluted⁽¹⁾	$ 9,603	$ 9,066	$ 537	$ 25,893	$ 27,997	$(2,104)
Diluted weighted average units outstanding⁽¹⁾⁽³⁾	114,060	113,893		111,327	113,896

FFO per unit – diluted⁽¹⁾	$ 0.101	$ 0.101	-	$ 0.287	$ 0.294	(2.4 %)
AFFO per unit – diluted⁽¹⁾	$ 0.084	$ 0.080	5.0 %	$ 0.233	$ 0.246	(5.3 %)

⁽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, 2023 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 ($20) thousand and $82 thousand for the three and nine months ending September 30, 2023, respectively (September 30, 2022 – $85 thousand and $299 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 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 September 30, 2023 (unaudited)	3 Months Ended September 30, 2022 (unaudited)	9 Months Ended September 30, 2023 (unaudited)	9 Months Ended September 30, 2022 (unaudited)
Same-asset NOI⁽¹⁾	$ 17,877	$ 17,385	$ 51,527	$ 50,879
Developments and redevelopments transferred to income producing in 2022 & 2023 ($4.4 million stabilized NOI)	1,312	767	3,199	2,252
NOI from acquisitions, properties currently under development and redevelopment ($6.0 million stabilized NOI)	147	106	341	420
Straight-line rent	22	16	43	(119)
Administrative expenses charged to NOI	(898)	(825)	(2,829)	(2,537)
Lease termination revenue	-	12	-	117
Properties disposed	-	648	561	1,893
Other	-	47	76	86
Total NOI⁽¹⁾	$ 18,460	$ 18,156	$ 52,918	$ 52,991

(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, including with respect to Plaza's outlook or expectations regarding the future of its business. 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 or projected by forward-looking statements contained in this press release, including but not limited to 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; any unforeseen impacts from new or renewed pandemic conditions and others described in Plaza's Annual Information Form for the year ended December 31, 2022 and Management's Discussion and Analysis for the nine months ended September 30, 2023 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 that progress continues on Plaza's development program, the strength of Plaza's tenant base, that tenant demand for space continues and that Plaza is able to lease or re-lease space at anticipated rents. 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 10, 2023 at 11:00 a.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 17, 2023. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 030879#). 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, 2023 includes interests in 233 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

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