Plaza Retail REIT Announces 2022 Results

Feb 23, 2023

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

For further information: Jim Drake, Chief Financial Officer, Plaza Retail REIT, Tel: 902-483-4064; Michael Zakuta, President & Chief Executive Officer, Plaza Retail REIT, Tel: 514-457-7007