Lanesborough REIT REPORTS 2023 YEAR END RESULTS

WINNIPEG, MB, March 21, 2024 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV: LRT.UN) today reported its operating results for the year ended December 31, 2023. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with management's discussion & analysis, annual report and the financial statements for the year ended December 31, 2023, which may be obtained from the SEDAR+ website at www.sedarplus.ca.

ANALYSIS OF OPERATING RESULTS

Analysis of Income (Loss) and Comprehensive Income (Loss)
	Year Ended December 31
			Increase (Decrease) in Income
	2023	2022	Amount	%
Rentals from investment properties	$      13,192,263	$      17,848,025	$         (4,655,762)	(26) %
Rental loss insurance proceeds (reversal of proceeds)	(43,049)	(790,734)	747,685	95 %
Property operating costs	(9,296,184)	(13,078,969)	3,782,785	29 %
Net operating income (NOI)	3,853,030	3,978,322	(125,292)	(3) %
Interest income	86,145	62,849	23,296	37 %
Interest expense	(10,231,247)	(11,390,280)	1,159,033	10 %
Trust expense	(1,036,536)	(1,510,694)	474,158	31 %
Loss before the following	(7,328,608)	(8,859,803)	1,531,195	17 %
Loss on sale of investments and investment property	(145,452)	-	(145,452)	- %
Fair value adjustments	5,695,994	15,283,441	(9,587,447)	(63) %
Gain on extinguishment of Series G Debentures	-	19,797,489	(19,797,489)	(100) %
Income (loss) before discontinued operations	(1,778,066)	26,221,127	(27,999,193)	(107) %
Loss from discontinued operations	(5,917,847)	(2,324,993)	(3,592,854)	(155) %
Income (loss) and comprehensive income (loss)	$      (7,695,913)	$      23,896,134	$       (31,592,047)	(132) %

Overall Results

LREIT completed 2023 with a loss and comprehensive loss of $7.7 million, compared to an income and comprehensive income of $23.9 million during 2022, representing a decrease in income and comprehensive income of $31.6 million. The decrease mainly reflects a $19.8 million gain on extinguishment of Series G Debentures recognized in 2022, a $9.6 million decrease related to fair value adjustments, a $3.6 million increase in loss from discontinued operations and a $0.9 million decrease in the net operating income ("NOI") of the investment properties and investment properties held for sale, partially offset by a $1.2 million decrease in interest expense and a $0.7 million decrease in reversal of rental loss insurance proceeds.

The gain on extinguishment of the Series G Debentures was the result of the exchange transaction completed on February 24, 2022 pursuant to which the Series G Debentures, in the aggregate principal amount outstanding of $24.8 million, and all accrued or unpaid interest owing thereon in the amount of $8.2 million, were exchanged for 659.9 million Trust Units. The Trust Units had a fair value of $13.2 million and debt in the aggregate amount of $33.0 million was extinguished, resulting in a gain of $19.8 million.

The decrease from fair value adjustments reflects a $5.7 million gain from fair value adjustments during 2023, compared to a $15.3 million gain from fair value adjustments during 2022. The gain from fair value adjustments during 2023 reflects an increase in the carrying value of the Fort McMurray properties segment, which is mainly due to an increase in the normalized revenue considered to be achievable in the Fort McMurray rental market as a result of the favourable occupancy and rental rate trends. The gain from fair value adjustments recognized during 2022 mainly reflected an increase in the carrying value of the Fort McMurray properties segment, primarily as a result of changes made to key valuation assumptions to incorporate information obtained from external appraisals received during the year and in recognition of the favourable occupancy trend.

The increase in loss from discontinued operations is primarily due to a $3.4 million impairment adjustment resulting from the impact of a reduction in the NOI that is considered to be achievable in the Saskatchewan seniors' residence market on the valuation of Chateau St. Michael's. The reduction in the NOI that is considered to be achievable is the result of the sustained operating losses of the property and increased uncertainty with respect to the economic viability of the property in the post‑pandemic operating environment for the market.

The decrease in the NOI of the investment properties and investment properties held for sale is mainly due to a $1.3 million decrease in NOI of the investment properties held for sale, which is primarily due to the sales of Laird's Landing, Lakewood Apartments and Westhaven Manor on January 31, 2023, partially offset by a $0.5 million increase in the NOI of the Fort McMurray properties segment.

The increase in the NOI of the Fort McMurray properties segment reflects increases in the average occupancy rate, which increased from 93% during 2022 to 96% during 2023 and the average monthly rental rate, which increased $35 or 3% from $1,361 during 2022 to $1,396 during 2023.

The decrease in interest expense is mainly due to the assumption of mortgage loan debt, in the aggregate principal amount of $22.9 million, by the purchaser upon completion of the sales of Laird's Landing, Lakewood Apartments and Westhaven Manor on January 31, 2023. The decrease in interest expense from the sale of the properties was partially offset by an increase in the weighted average interest rate on the Trust's variable interest rate mortgage loans, which increased from 9.7% in 2022 to 10.4% in 2023.

The decrease in the reversal of rental loss insurance proceeds is mainly due to the Trust recording provisions of $0.2 million during 2023, in comparison to $0.8 million during 2022 with respect to the appeal of rental loss insurance proceeds originally awarded by the Alberta Court of King's Bench under the legal claim launched by the Trust against the insurers of the 2016 Fort McMurray wildfire. During 2023, the Trust paid $1.0 million in settlement of the appeal ruling.

ABOUT LREIT

LREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol LRT.UN (Trust Units). For further information on LREIT, please visit our website at www.lreit.com.

This press release contains certain statements that could be considered as forward-looking information.  The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements. 

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Lanesborough Real Estate Investment Trust

Gino Romagnoli, Chief Executive Officer, or Arni Thorsteinson, Vice-Chair, Tel: [phone], Fax: [phone], Email: [email protected]