Plaza Retail REIT Announces 2023 Results

Feb 26, 2024

FREDERICTON, NB, Feb. 26, 2024 /CNW/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza" or the "REIT") today announced its financial results for the quarter and year ended December 31, 2023.

"Looking back at 2023, I would like to highlight some of our accomplishments: 1) Plaza continued to deliver and launch new developments; 2) we successfully completed an equity issuance; 3) the REIT was successful in selling certain non-core assets; and 4) we realized record high leasing renewal spreads", said Michael Zakuta, president and CEO. "Looking forward, we are well positioned to put the headwinds that have impacted real estate behind us and take advantage of strong demand for essential needs retailers targeting non-discretionary spending."

Summary of Selected IFRS Financial Results

 

(CAD$000s, except percentages)

Three

Months

Ended

December

31, 2023

Three

Months

Ended

December

31, 2022

$

Change

%

Change

Twelve

 Months

Ended

December

31, 2023

Twelve

 Months

Ended

December

31, 2022

$ 

Change

%

Change










Revenues

$28,962

$27,978

$984

3.5 %

$114,064

$111,245

$2,819

2.5 %










Net property operating income
(NOI)(1)

$17,436

$17,590

($154)

(0.9 %)

$70,354

$70,581

($227)

(0.3 %)










Net change in fair value of
investment properties

($9,497)

$6,384

($15,881)

-

($19,969)

$8,187

($28,156)

--










Profit (loss) and total
comprehensive income for the
period

($3,779)

$14,185

($17,964)

-

$20,312

$54,221

($33,909)

--










(1)

This is a non-GAAP financial measure.  Refer to  Part I of Plaza's Management's Discussion and Analysis for the year ended December 31, 2023 (also referred to herein as the "MD&A") under the heading "Non-GAAP Financial Measures", Part VII of the MD&A under the heading "Explanation of Non-GAAP Financial Measures", and below under "Non-GAAP Financial Measures" for more information.

Quarterly Highlights

  • NOI was $17.4 million, down $154 thousand (0.9%) with the same period in 2022. The decrease in NOI is from an increase in operating expenses, and a decrease in NOI from properties sold in 2022 and 2023, partially offset by rent escalations in same-asset properties, acquisitions, developments, and properties transferred to income-producing in 2022 and 2023.
  • Profit (loss) and total comprehensive income for the current quarter was a loss of $3.8 million compared to profit of $14.2 million in the same period in the prior year. The decrease was mainly due to the change in the non-cash fair value of investment properties due to an increase in capitalization rates, along with changes in the non-cash fair value adjustments to share of profit from associates, interest rate swaps, the Class B exchangeable LP units, and convertible debentures.

Year-To-Date Highlights

  • NOI was $70.4 million, down $227 thousand (0.3%) with the same period in 2022. NOI was impacted by an increase in operating expenses, 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, offset by an increase in NOI from same-asset, acquisitions, developments and properties transferred to income producing in 2022 and 2023.
  • Profit and total comprehensive income for the current year to date was $20.3 million compared to $54.2 million in the same period in the prior year. The decrease was mainly due to a decrease in the non-cash fair value of investment properties of $20.0 million in the current year compared to a fair value increase of $8.2 million in the prior year. The fair value change was mainly due to an increase in capitalization rates. Profit was also impacted by 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

December

31, 2023

Three

Months

Ended

December

31, 2022

$ 

Change

%

Change

Twelve

Months

Ended

December

31, 2023

Twelve

Months

Ended

December

31, 2022

$

Change

%

Change










FFO(1)

$10,062

$10,232

($170)

(1.7 %)

$41,520

$41,383

$137

0.3 %

FFO per unit(1)

$0.090

$0.099

($0.009)

(9.1 %)

$0.379

$0.402

($0.023)

(5.7 %)

FFO payout ratio(1)

77.6 %

70.4 %

n/a

10.2 %

74.2 %

69.7 %

n/a

6.5 %










AFFO(1)

$6,573

$7,526

($953)

(12.7 %)

$31,933

$33,186

($1,253)

(3.8 %)

AFFO per unit(1)

$0.059

$0.073

($0.014)

(19.2 %)

$0.292

$0.322

($0.030)

(9.3 %)

AFFO payout ratio(1)

118.8 %

95.8 %

n/a

24.0 %

96.5 %

86.9 %

n/a

11.0 %










Same-asset NOI(1)

$17,004

$16,935

$69

0.4 %

$68,531

$67,814

$717

1.1 %










Normal course issuer bid –

units repurchased

8,030

6,205

n/a

n/a

27,657

18,742

n/a

n/a










Committed occupancy –

including non-consolidated

investments(2)





97.0 %

97.5 %

n/a

(0.5 %)

Same-asset committed

occupancy(3)





96.6 %

97.4 %

n/a

(0.8 %)










(1) This is a non-GAAP financial measure.  Refer to Part I of the MD&A under the heading "Non-GAAP Financial Measures", Part VII of the MD&A under the heading "Explanation of Non-GAAP Financial Measures", and below under "Non-GAAP Financial Measures" for more information.

(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, 2023, FFO per unit decreased by $0.009 (9.1%) 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, and a decrease in finance costs, offset by a decrease in investment and other income, an increase in administrative expenses, and a decrease in NOI from properties sold. AFFO per unit decreased by $0.014 (19.2%) compared to the same period in the prior year mainly due to the changes in FFO noted above, as well as increased maintenance capital expenditures.
  • Same-asset NOI increased by $69 thousand, (0.4%) due to rent escalations and renewals across the portfolio over the same period in the prior year, partially offset by an increase in operating expenses.

Year-To-Date Highlights

  • FFO & AFFO: For the twelve months ended December 31, 2023, FFO per unit decreased by $0.023 (5.7%) compared to 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, 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 $0.030 (9.3%) compared to the prior year due to the changes in FFO noted above, as well as increased maintenance capital expenditures and leasing costs. Increased leasing costs are the result of leasing activity and repositioning of certain properties to improve the quality of the tenancy across the portfolio. Excluding the leasing costs related to these repositionings, AFFO for the twelve months ended December 31, 2023 would have increased 2.2% on a dollar basis and decreased (3.8%) on a per unit basis.
  • Same-asset NOI increased by $717 thousand (1.1%) due to rent escalations and renewals across the portfolio over the same period in the prior year, partially offset by an increase in operating expenses.

FFO and AFFO per unit, for both the three and twelve months ended December 31, 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 "Non-GAAP Financial Measures" in Part I and the section "Explanation of Non-GAAP Measures" in Part VII of the REIT's Management's Discussion and Analysis for the year ended December 31, 2023, which can be found on Plaza's website at www.plaza.ca and on SEDAR+ at www.sedarplus.ca.

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, 2023, compared to the three and twelve months ended December 31, 2022 is presented below:

(000s – except per unit amounts and percentage data,

unaudited)

3 Months

Ended

December

31, 2023

3 Months

Ended

December

31, 2022

Change

over

Prior

Period

12 Months

Ended

December

31, 2023

12 Months

Ended

December

31, 2022

Change

over

Prior

Period

Profit and total comprehensive income for the period

attributable to unitholders

$   (3,822)

$  14,154


$   20,187

$  53,891


Incremental leasing costs included in administrative

expenses(7)

316

285


1,372

1,491


Amortization of debenture issuance costs(8)

(18)

(121)


(141)

(483)


Distributions on Class B exchangeable LP units included

in finance costs - operations

81

84


326

334


Deferred income taxes

192

(46)


73

(4)


Right-of-use land lease principal repayments

(203)

(197)


(804)

(780)


Fair value adjustment to restricted and deferred units

32

206


(351)

(40)


Fair value adjustment to investment properties

9,497

(6,384)


19,969

(8,187)


Fair value adjustment to investments(9)

(1,323)

1,095


(1,202)

(49)


Fair value adjustment to Class B exchangeable LP units

81

667


(936)

(286)


Fair value adjustment to convertible debentures

441

267


(217)

(693)


Fair value adjustment to interest rate swaps

3,418

2


1,404

(4,264)


Fair value adjustment to right-of-use land lease assets

203

197


804

780


Impairment of notes receivable – fair value component

1,024

-


1,024

-


Equity accounting adjustment(10)

137

2


79

(327)


Non-controlling interest adjustment(6)

6

21


(67)

-


FFO(1)

$ 10,062

$  10,232

$  (170)

$  41,520

$  41,383

$     137

FFO change over prior period - %



(1.7 %)



0.3 %








FFO(1)

$ 10,062

$  10,232


$  41,520

$  41,383


Non-cash revenue – straight-line rent(5)

(33)

(88)


(60)

31


Leasing costs – existing properties(2) (5) (11)

(1,965)

(2,006)


(7,138)

(6,544)


Maintenance capital expenditures – existing properties(12)

(1,518)

(638)


(2,419)

(1,788)


Non-controlling interest adjustment(6)

27

26


30

104


AFFO(1)

$   6,573

$    7,526

$  (953)

$  31,933

$  33,186

$(1,253)

AFFO change over prior period - %



(12.7 %)



(3.8 %)








Weighted average units outstanding – basic(1)(3)

111,527

102,993


109,485

103,001


FFO per unit – basic(1)

$   0.090

$    0.099

(9.1 %)

$    0.379

$    0.402

(5.7 %)

AFFO per unit – basic(1)

$   0.059

$    0.073

(19.2 %)

$    0.292

$    0.322

(9.3 %)








Gross distribution to unitholders(1)(4)

$   7,806

$    7,208


$  30,826

$  28,836


FFO payout ratio – basic(1)

77.6 %

70.4 %


74.2 %

69.7 %


AFFO payout ratio – basic(1)

118.8 %

95.8 %


96.5 %

86.9 %









FFO(1)

$ 10,062

$  10,232


$  41,520

$  41,383


Interest on dilutive convertible debentures

180

788


715

3,125


FFO – diluted(1)

$ 10,242

$  11,020

$ (778)

$  42,235

$  44,508

$(2,273)

Diluted weighted average units outstanding(1)(3)

114,058

113,886


112,015

113,894









AFFO(1)

$   6,573

$    7,526


$  31,933

$  33,186


Interest on dilutive convertible debentures

-

788


715

3,125


AFFO – diluted(1)

$   6,573

$    8,314

$(1,741)

$  32,648

$  36,311

$(3,663)

Diluted weighted average units outstanding(1)(3)

111,527

113,886


112,015

113,894









FFO per unit – diluted(1)

$   0.090

$    0.097

(7.2 %)

$    0.377

$    0.391

(3.6 %)

AFFO per unit – diluted(1)

$   0.059

$    0.073

(19.2 %)

$    0.291

$    0.319

(8.8 %)

(1)

This is a non-GAAP financial measure.  Refer to Part I of the MD&A under the heading "Non-GAAP Financial Measures", Part VII of the MD&A under the heading "Explanation of Non-GAAP Financial Measures", and below under "Non-GAAP Financial Measures" for more information.

(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 $43 thousand and $125 thousand for the three and twelve months ending December 31, 2023, respectively (December 31, 2022 – $31 thousand and $330 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 28 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 28 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,

2023

(unaudited)

3 Months

Ended

December 31,

2022

(unaudited)

12 Months

Ended

December 31,

 2023

(unaudited)

12 Months

Ended

December 31,

2022

(unaudited)

Same-asset NOI(1)

$   17,004

$   16,935

$   68,531

$   67,814

Developments and redevelopments transferred to income

producing in 2022 & 2023 ($6.2 million stabilized NOI)

1,190

708

4,351

2,924

NOI from acquisitions, properties currently under development

and redevelopment ($4.6 million stabilized NOI)

223

97

564

517

Straight-line rent

17

88

60

(31)

Administrative expenses charged to NOI

(939)

(835)

(3,768)

(3,372)

Lease termination revenue

-

28

-

145

Properties disposed

3

629

601

2,557

Other

(62)

(60)

15

27

Total NOI(1)

$   17,436

$   17,590

$    70,354

$   70,581







(1)

This is a non-GAAP financial measure.  Refer to Part I of the MD&A under the heading "Non-GAAP Financial Measures", Part VII of the MD&A under the heading "Explanation of Non-GAAP Financial Measures", and below under "Non-GAAP Financial Measures" for more information.

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 and continuation of strong retailer demand.  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 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 impacts on the business, operations and financial condition of the REIT, its tenants and the economy in general; and others described in Plaza's Annual Information Form for the year ended December 31, 2022 and Management's Discussion and Analysis for the twelve months ended December 31, 2023 which can be obtained on the REIT's website at www.plaza.ca or on SEDAR+ at www.sedarplus.ca. 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.sedarplus.ca.

Conference Call

Michael Zakuta, President and CEO, and Jim Drake, CFO, will host a conference call for the investment community on Monday, February 26, 2024 at 10:00 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 March 4, 2024. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 419586#). 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, 2023 includes interests in 232 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 with a focus on the essential needs, value and convenience market segments. 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