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.
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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
