Canadian Net Real Estate Investment Trust (“Canadian Net” or the
“REIT”) (TSX-V: NET.UN) today reported its results for the quarter
ended March 31st, 2024 (“Q1 2024”). The REIT also announced
distributions for the months of July, August and September 2024.
“I'm pleased to share our Q1 2024 results, which
highlight the strength of our portfolio with a solid 100% occupancy
rate and a conservative 57% payout ratio,” said Kevin Henley,
President and CEO. “Our portfolio has performed very well and has
mostly offset the increased interest rate cost due to higher rates
on our 2023 mortgage renewals, translating into a slight 3%
decrease in FFO per unit. Looking forward, our portfolio is
well-positioned and will absorb these costs through rent increases,
capital paydown, and future acquisitions.”
RESULTS FOR Q1 2024
Canadian Net reported that Funds from
operations1 (“FFO”) decreased slightly to $3.1 million, or $0.152
per unit compared to $3.2 million, or $0.157 per unit for the
three-month period ended March 31, 2023 (“Q1 2023”)
Rental income was $6.5 million in Q1 2024, an
increase of 2.0% from Q1 2023. Net Operating Income (“NOI”)1 in Q1
2024 was $4.8 million, a decrease of 1.0% from Q1 2023, primarily
reflecting the year-over-year increase in rental income and offset
by property dispositions.
The REIT generated net income attributable to
unitholders of $1.3 million in Q1 2024 compared to $4.8 million in
Q1 2023.
The change in FFO1 is due to higher interest
charges on mortgage renewals, variable-rate mortgages and credit
facilities. The increase in rental income is due to increases in
base rents and recoverable additional rents of certain existing
properties, partially offset by property dispositions. The decrease
in NOI1 was mainly attributable to the sale of three properties
during 2023. Finally, the variance in net income attributable to
unitholders is primarily attributable to the change in the fair
value of investment properties.
DISTRIBUTIONS
Canadian Net announced that it will make monthly
cash distributions of $0.02875 per unit, representing $0.345 per
unit on an annualized basis, on July 31st, August 30th and
September 30th, 2024, to unitholders of record on July 15th, August
15th and September 13th, 2024, respectively.
The tables below represent other financial
highlights and the reconciliations of certain non-IFRS measures for
Q1 2024 and Q1 2023. This information should be read in conjunction
with the Consolidated Financial Statements and Management’s
Discussion & Analysis (“MD&A”) for the quarters ended March
31st, 2024 and March 31st, 2023.
SUMMARY OF SELECTED FINANCIAL INFORMATION
|
3 months |
|
|
|
|
Periods ended March 31 |
2024 |
|
2023 |
|
Δ |
|
% |
|
Financial info |
|
|
|
|
|
|
|
|
Property rental income |
6,539,597 |
|
6,416,383 |
|
123,214 |
|
2% |
|
Net income (loss) and |
|
|
|
|
|
|
|
|
comprehensive income (loss) |
1,261,106 |
|
4,829,960 |
|
(3,568,854) |
|
(74%) |
|
NOI (1) |
4,818,187 |
|
4,855,944 |
|
(37,757) |
|
(1%) |
|
FFO (1) |
3,126,921 |
|
3,232,775 |
|
(105,854) |
|
- |
|
AFFO (1) |
3,082,021 |
|
3,117,818 |
|
(35,797) |
|
(1%) |
|
EBITDA (1) |
3,090,121 |
|
6,632,421 |
|
(3,542,300) |
|
n/a |
|
Adjusted EBITDA (1) |
4,710,759 |
|
4,817,755 |
|
(106,996) |
|
(2%) |
|
Investment properties |
276,395,720 |
|
276,658,661 |
|
(262,941) |
|
- |
|
Adjusted investment properties
(1) |
329,720,701 |
|
329,171,181 |
|
549,520 |
|
- |
|
Total assets |
306,832,564 |
|
304,645,778 |
|
2,186,786 |
|
1% |
|
Mortgages |
129,866,744 |
|
137,007,105 |
|
(7,140,361) |
|
(5%) |
|
Long-term debt |
30,000 |
|
45,000 |
|
(15,000) |
|
(33%) |
|
Current portion of mortgages,
long term-debt and convertible debentures |
19,256,906 |
|
14,050,748 |
|
5,206,158 |
|
37% |
|
Mortgages on investment
properties held for sale |
2,762,860 |
|
3,481,200 |
|
(718,340) |
|
(21%) |
|
Credit facilities |
16,115,000 |
|
15,390,362 |
|
724,638 |
|
5% |
|
Total convertible
debentures |
5,646,673 |
|
8,557,022 |
|
(2,910,349) |
|
(34%) |
|
Total equity |
129,136,416 |
|
121,876,171 |
|
7,260,245 |
|
6% |
|
Weighted average units o/s - basic |
20,532,438 |
|
20,602,732 |
|
(70,294) |
|
- |
|
Amounts on a per unit basis |
|
|
|
|
|
|
|
|
FFO(1) |
0.152 |
|
0.157 |
|
(0.005) |
|
(3%) |
|
AFFO(1) |
0.150 |
|
0.151 |
|
(0.001) |
|
(1%) |
|
Distributions |
0.086 |
|
0.086 |
|
- |
|
- |
|
(1) This
is a non-IFRS financial measure with no standardized IFRS meaning
and may not be comparable to other issuers. Refer to the section
“Non-IFRS financial measures”. |
NON-IFRS FINANCIAL MEASURES
The Trust’s consolidated financial statements
are prepared in accordance with International Financial Reporting
Standards ("IFRS"). In this press release, as a complement to
results provided in accordance with IFRS, the Trust discloses and
discusses certain non-IFRS financial measures: FFO, FFO per unit,
AFFO, AFFO per unit, NOI, and Adjusted Investment Properties. These
non-IFRS measures are not defined by IFRS, do not have a
standardized meaning, and may not be comparable with similar
measures presented by other issuers. Canadian Net has presented
such non-IFRS measures as management of the Trust believes they are
relevant measures of Canadian Net's underlying operating
performance and debt management. Non-IFRS measures should not be
considered as alternatives to net income, cash generated from
(utilized in) operating activities, or comparable metrics
determined in accordance with IFRS as indicators of the Trust's
performance, liquidity, cash flow, and profitability. Information
appearing in this news release is a select summary of results. This
news release should be read in conjunction with the condensed
consolidated financial statements and MD&A for the Trust.
Please refer to the "Non IFRS Financial Measures" section in
Canadian Net’s management's discussion and analysis for the period
ended March 31, 2024, available under Canadian Net's profile on
SEDAR+ at www.sedarplus.com for a full description of these
measures and, where applicable, a reconciliation to the most
directly comparable measure calculated in accordance with IFRS.
Such explanation is incorporated by reference herein.
In addition, below are the reconciling tables
for the non-IFRS measures used in this press release.
Reconciliation of Investment Properties to Adjusted
Investment Properties
As at March 31 |
2024 |
2023 |
|
Δ |
Investment Properties |
|
|
|
|
Developed properties |
276,395,720 |
276,658,661 |
|
- |
|
Investment properties held for sale |
5,078,232 |
6,118,209 |
|
(17%) |
|
Joint Venture
Ownership(1) |
|
|
|
|
Developed properties |
45,582,774 |
43,398,769 |
|
5% |
|
Properties under development |
2,663,975 |
2,995,542 |
|
(11%) |
|
Adjusted Investment
Properties(2) |
329,720,701 |
329,171,181 |
|
- |
|
(1)
Represents Canadian Net’s proportionate share |
(2) This is a
non-IFRS financial measure with no standardized IFRS meaning and
may not be comparable to other issuers. Refer to the section
“Non-IFRS financial measures” |
Results of Operations
|
3 months |
|
|
|
Periods ended March 31 |
2024 |
|
2023 |
|
Δ |
|
Rental Income |
6,539,597 |
|
6,416,383 |
|
123,214 |
|
Operating expenses |
(1,721,410) |
|
(1,560,439) |
|
(160,971) |
|
Net Operating Income(1) |
4,818,187 |
|
4,855,944 |
|
(37,757) |
|
Share of net income (loss)
from |
|
|
|
investments in joint ventures |
212,937 |
|
1,010,392 |
|
(797,455) |
|
Increase/(decrease) in fair
values |
|
|
|
of investment properties |
(1,429,609) |
|
1,121,818 |
|
(2,551,427) |
|
Unit-based compensation |
(245,177) |
|
(217,481) |
|
(27,696) |
|
Administrative expenses |
(270,697) |
|
(272,722) |
|
2,025 |
|
Financial expenses |
(1,824,535) |
|
(1,667,991) |
|
(156,544) |
|
Net income (loss) |
|
|
|
attributable to unitholders |
1,261,106 |
|
4,829,960 |
|
(3,568,854) |
|
FFO(1) |
3,126,921 |
|
3,232,775 |
|
(3%) |
|
FFO per
unit(1) |
0.152 |
|
0.157 |
|
(3%) |
|
Weighted avg. units o/s |
|
|
|
Basic |
20,532,438 |
|
20,602,732 |
|
(70,294) |
|
(1) This
is a non-IFRS financial measure that does not have any standardized
IFRS meaning and as such may not be comparable to other issuers.
Refer to section “Non-IFRS financial measures” |
Reconciliation of Net Income to Funds
from Operations
|
3 months |
|
Periods ended March 31 |
2024 |
|
2023 |
|
Δ |
Net income (loss) attributable |
|
|
|
to unitholders |
1,261,106 |
|
4,829,960 |
|
(3,568,854) |
|
Δ in value of investment
properties |
1,429,609 |
|
(1,121,818) |
|
2,551,427 |
|
Δ in value of investment |
|
|
|
properties in joint ventures |
197,530 |
|
(555,174) |
|
752,704 |
|
Unit-based compensation |
245,177 |
|
217,481 |
|
27,696 |
|
Δ fair value adjustments on
derivative |
|
|
|
financial instruments |
(6,501) |
|
(137,674) |
|
131,173 |
|
FFO(1) |
3,126,921 |
|
3,232,775 |
|
(3%) |
|
FFO per unit(1) |
0.152 |
|
0.157 |
|
(3%) |
|
Distributions |
1,770,629 |
|
1,777,031 |
|
(6,402) |
|
Distributions per unit |
0.086 |
|
0.086 |
|
- |
|
FFO per unit(1) - after
distributions |
0.066 |
|
0.071 |
|
(7%) |
|
Distributions as a % of FFO(1) |
57% |
|
55% |
|
2% |
|
Weighted avg. units o/s |
|
|
|
Basic |
20,532,438 |
|
20,602,732 |
|
(70,294) |
|
(1) This
is a non-IFRS financial measure with no standardized IFRS meaning
and may not be comparable to other issuers. Refer to the section
“Non-IFRS financial measures |
Adjusted Funds from Operations
|
3 months |
|
Periods ended March 31 |
2024 |
|
2023 |
|
Δ |
FFO (1) |
3,126,921 |
|
3,232,775 |
|
(105,854) |
|
Straight-line rent
adjustment(2) |
(36,583) |
|
(99,994) |
|
63,411 |
|
Maintenance/cap-ex on |
|
|
|
existing properties |
(8,317) |
|
(14,963) |
|
6,646 |
|
AFFO(1) |
3,082,021 |
|
3,117,818 |
|
(1%) |
|
AFFO
per unit(1) |
0.150 |
|
0.151 |
|
(1%) |
|
Distributions per unit |
0.086 |
|
0.086 |
|
- |
|
AFFO
per unit(1) - after distributions |
0.064 |
|
0.065 |
|
(2%) |
|
Distributions as a % of AFFO(1) |
57% |
|
57% |
|
- |
|
Weighted avg. units o/s |
|
|
|
Basic |
20,532,438 |
|
20,602,732 |
|
(70,294) |
|
(1) This
is a non-IFRS financial measure with no standardized IFRS meaning
and may not be comparable to other issuers. Refer to the section
“Non-IFRS financial measures”(2) Adjusted for the proportionate
share of equity-accounted investments |
Reconciliation of Net Income to EBITDA
|
3 months |
|
|
|
Periods ended March 31 |
2024 |
|
2023 |
|
Δ |
|
Net income attributable |
|
|
|
to unitholders |
1,261,106 |
|
4,829,960 |
|
(3,568,854) |
|
Net interest expense |
1,829,015 |
|
1,802,461 |
|
26,554 |
|
EBITDA(1) |
3,090,121 |
|
6,632,421 |
|
(3,542,300) |
|
Δ in value of investment
properties |
1,429,609 |
|
(1,121,818) |
|
2,551,427 |
|
Δ in value of investment |
|
|
|
properties in joint ventures |
197,530 |
|
(555,174) |
|
752,704 |
|
Δ in value of convertible
debentures |
(6,501) |
|
(137,674) |
|
131,173 |
|
Adjusted EBITDA(1) |
4,710,759 |
|
4,817,755 |
|
(2%) |
|
Interest expense |
1,921,664 |
|
1,887,873 |
|
33,791 |
|
Principal repayments |
1,120,044 |
|
1,156,744 |
|
(36,700) |
|
Debt
service requirements |
3,041,708 |
|
3,044,617 |
|
- |
|
Interest coverage ratio based on adjusted EBITDA(1) |
2.5x |
|
2.6x |
|
(0.1x) |
|
Debt
service coverage based on adjusted EBITDA(1) |
1.5x |
|
1.6x |
|
(0.1x) |
|
(1) This
is a non-IFRS financial measure that does not have any standardized
IFRS meaning and as such may not be comparable to other issuers.
Refer to section “Non-IFRS financial measures” |
EARNINGS WEBCASTCanadian Net
will host a webcast on May 22, 2024, at 9:00 a.m. (EDT) to discuss
the results.
The link to join the webcast is the following:
https://edge.media-server.com/mmc/p/cbq7xfet
About Canadian Net – Canadian
Net Real Estate Investment Trust is an open-ended trust that
acquires and owns high-quality triple net and management-free
commercial real estate properties.
Forward-Looking Statements -
This press release contains forward-looking statements and
information as defined by applicable securities laws. Canadian Net
warns the reader that actual events may differ materially from
current expectations due to known and unknown risks, uncertainties
and other factors that could cause actual results to differ
materially from the results anticipated in such statements. Among
these include the risks related to economic conditions, the risks
associated with the local real estate market, the dependence on the
financial condition of tenants, the uncertainties related to real
estate activities, the changes in interest rates, the availability
of financing in the form of debt or equity, the effects related to
the adoption of new IFRS standards, as well as other risks and
factors described from time to time in the documents filed by
Canadian Net with securities regulators, including the management
report. Canadian Net does not update or modify its forward-looking
statements even if future events occur or for any other reason
unless required by law or any regulatory authority.
Neither the TSX Venture Exchange Inc. nor its
Regulatory Services Provider (as that term is defined in the Policy
of the TSX Venture Exchange and its Regulatory Services Provider)
accepts any responsibility for the adequacy or accuracy of this
release.
The March 31st, 2024, financial statements and
management discussion & analysis of Canadian Net may be viewed
on SEDAR at www.sedar.com.
For further information please contact Kevin
Henley at (450) 536-5328.
1 Non-IFRS financial measure with no standardized IFRS meaning
and may not be comparable to other issuers. Refer to the section
“Non-IFRS financial measures”.