FREDERICTON, NB, Feb. 24, 2022 /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, 2021.
"We are pleased with our strong performance for the year," said Michael Zakuta, President and CEO. "Our portfolio of open-air centres dominated by national tenants in the essential needs, value and convenience categories continues to perform well. Leasing activity is robust, and 2021 results exceeded pre-pandemic levels. Our high quality and hard to replace assets leased to strong covenant retailers in a combination of primary, strong secondary and tertiary markets have long been under appreciated. It has taken an unprecedented pandemic to start to highlight their value."
Summary of Selected IFRS Financial Results |
||||||||
(CAD$000s, except percentages) |
Three Months Ended Dec 31, 2021 |
Three Months Ended Dec 31, 2020 |
$ Change |
% Change |
Twelve Months Ended Dec 31, 2021 |
Twelve Months Ended Dec 31, 2020 |
$ |
% Change |
Property rental revenue |
$27,383 |
$26,835 |
$548 |
2.0% |
$110,632 |
$106,898 |
$3,734 |
3.5% |
Net operating income (NOI)(1) |
$17,188 |
$18,137 |
($949) |
(5.2%) |
$71,779 |
$68,750 |
$3,029 |
4.4% |
Net change in fair value of investment properties |
$29,985 |
$2,169 |
$27,816 |
-- |
$58,376 |
($46,891) |
$105,267 |
-- |
Profit (loss) and total comprehensive income (loss) |
$40,735 |
$9,275 |
$31,460 |
-- |
$100,489 |
($14,937) |
$115,426 |
-- |
(1) |
This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures defined here and in Part I and VIII of the Management's Discussion and Analysis ("MD&A") ending December 31, 2021 for more information on each non-GAAP financial measure. |
Quarterly Highlights
- NOI was $17.2 million, down $949 thousand (5.2%) from the same period in 2020, primarily as a result of lower operating expenses in the prior year due to the Canada Emergency Wage Subsidy ("CEWS") received and bad debt recovery in the prior year. These were partially offset by growth in NOI from acquisitions and developments.
- Profit and total comprehensive income for the current quarter was $40.7 million compared to $9.3 million in the prior year. A significant portion of the increase was due to an increase in the fair value of investment properties recorded in Q4 2021 as a result of a decrease in capitalization rates and appraisals obtained.
Annual Highlights
- NOI was $71.8 million, up $3.0 million (4.4%) from the same period in 2020, primarily as a result of growth in NOI from acquisitions and developments, and lease buyout revenues.
- Profit and total comprehensive income for the current year was $100.5 million compared to a loss of $14.9 million in the prior year. A significant portion of the increase was due to an increase in the fair value of investment properties recorded in the current year as a result of a decrease in capitalization rates and appraisals obtained, compared to a decrease in fair value of investment properties recorded in the prior year.
Summary of Selected Non-IFRS Financial Results(1) |
||||||||
(CAD$000s, except percentages, units repurchased and per unit amounts) |
Three Months Ended Dec 31, 2021 |
Three Months Ended Dec 31, 2020 |
$ Change |
% Change |
Twelve Months Ended Dec 31, 2021 |
Twelve Months Ended Dec 31, 2020 |
$ Change |
% Change |
FFO(1) |
$10,771 |
$10,554 |
$217 |
2.1% |
$44,703 |
$36,995 |
$7,708 |
20.8% |
FFO per unit(1) |
$0.105 |
$0.102 |
$0.003 |
2.9% |
$0.434 |
$0.359 |
$0.075 |
20.9% |
FFO payout ratio(1) |
66.9% |
68.3% |
n/a |
(2.0%) |
64.5% |
78.0% |
n/a |
(17.3%) |
AFFO(1) |
$8,198 |
$9,437 |
($1,239) |
(13.1%) |
$37,478 |
$32,604 |
$4,874 |
14.9% |
AFFO per unit(1) |
$0.080 |
$0.092 |
($0.012) |
(13.0%) |
$0.364 |
$0.316 |
$0.048 |
15.2% |
AFFO payout ratio(1) |
87.9% |
76.4% |
n/a |
15.1% |
76.9% |
88.5% |
n/a |
(13.1%) |
Same-asset NOI(1) |
$16,908 |
$17,185 |
($277) |
(1.6%) |
$67,750 |
$66,960 |
$790 |
1.2% |
Normal course issuer bid – units repurchased |
5,775 |
7,700 |
n/a |
n/a |
27,925 |
395,797 |
n/a |
n/a |
Committed occupancy – including non-consolidated investments(2) |
96.5% |
95.7% |
n/a |
0.8% |
||||
Same-asset committed occupancy(3) |
96.0% |
95.3% |
n/a |
0.7% |
||||
(1) This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures defined here and in Part I and VIII of the MD&A ending December 31, 2021 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, 2021, FFO per unit increased by $0.003 (2.9%) compared to the prior year. FFO was impacted by an increase in NOI from acquisitions/developments, a decrease in administrative costs due to lower salary expenses and lower travel costs, a decrease in finance costs mainly due to lower mortgage interest, partially offset by a decrease in NOI from same-assets and property disposals. AFFO per unit was $0.012 (13.0%) lower than the prior year due to the changes in FFO noted above along with higher leasing costs in 2021 due to increased leasing activity, which will result in increased revenue in future years, and higher maintenance capital expenditures in the current year as certain elective expenditures were deferred from 2020 to 2021.
- Same-asset NOI decreased by $277 thousand (1.6%) mainly due to the CEWS received in the prior year and bad debt recovery in the prior year.
Excluding the impact of COVID-related bad debt expense and write-offs, lease buyouts and insurance proceeds:
- FFO and AFFO per unit for the quarter would have been 18% and 2% higher than the prior year, respectively.
- Same-asset NOI for the quarter would have been 4% higher than the prior year.
Annual Highlights
- FFO & AFFO: For the twelve months ended December 31, 2021, FFO per unit increased by $0.075 (20.9%) compared to the prior year. FFO was impacted by an increase in NOI from same assets and acquisitions/developments, a decrease in administrative costs due to lower salary expenses and lower travel costs, a decrease in finance costs mainly due to lower mortgage interest, and lease buyout revenue in the current year, partially offset by a decrease in NOI from property disposals. AFFO per unit was $0.048 (15.2%) higher than the prior year due to the changes in FFO noted above, along with higher leasing costs in 2021 due to increased leasing activity, which will result in increased revenue in future years, and higher maintenance capital expenditures in 2021 as certain elective expenditures were deferred from 2020 to 2021.
- Same-asset NOI increased by $790 thousand (1.2%) mainly due to higher same-asset revenue, lower realty tax expense, somewhat offset by lower operating expenses in the prior year from the CEWS received.
Excluding the impact of COVID-related bad debt expense and write-offs, lease buyouts and insurance proceeds:
- FFO per unit for the year would have been 10% higher than the prior year, while AFFO per unit for the year would have been 1% higher than the prior year.
- Same-asset NOI for the year would have been consistent with the prior year. This measure still includes certain other impacts of the COVID-19 pandemic on NOI, such as its impact on occupancy and the timing of re-leasing space in the current year.
COVID-19 Update
Plaza's focus on essential needs, value and convenience retail, as well as our presence in primary and strong secondary markets across a wide geography, has served us well. Despite some uncertainty relating to the future state of COVID-19 whether pandemic or endemic, Plaza's operating environment has improved significantly, and is effectively at pre-pandemic levels, including rent collections.
Q4 2021 |
Q3 2021 |
Q2 2021 |
Q1 2021 |
Q4 2020 |
Q3 2020 |
Q2 2020 |
|||||||
Gross rent collected from tenants |
99.5% |
99.6% |
99.2% |
99.1% |
99.5% |
95.4% |
90.9% |
||||||
CECRA – Federal and Quebec Government contribution |
- |
- |
- |
- |
- |
2.9% |
4.0% |
||||||
Total collections including government contributions under CECRA |
99.5% |
99.6% |
99.2% |
99.1% |
99.5% |
98.3% |
94.9% |
||||||
CECRA – 25% Landlord write-off |
- |
- |
- |
- |
- |
1.0% |
1.5% |
||||||
Rent abated |
- |
- |
0.4% |
0.2% |
0.2% |
0.4% |
2.6% |
||||||
Rent deferred with a definitive repayment schedule |
- |
0.1% |
0.3% |
0.3% |
- |
- |
0.3% |
||||||
Remaining tenant accounts receivable(1) |
0.5% |
0.3% |
0.1% |
0.4% |
0.3% |
0.3% |
0.7% |
||||||
Totals |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
100.0% |
(1) Remaining tenant accounts receivable excludes allowance for doubtful accounts. |
For deferred rent that was to be repaid during 2021, Plaza collected 98.9% of same.
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 VIII of the REIT's Management's Discussion and Analysis as at December 31, 2021, 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, 2021, compared to the three and twelve months ended December 31, 2020 is presented below:
3 Months Ended December 31, 2021 |
3 Months Ended 2020 |
12 Months Ended December 31, 2021 |
12 Months Ended December 31, 2020 |
|||||
(000s – except per unit amounts and percentage data) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||
Profit (loss) and total comprehensive income (loss) for the period attributable to unitholders |
$ |
40,735 |
$ |
9,306 |
$ |
99,615 |
$ |
(14,908) |
Add (deduct): |
||||||||
Incremental leasing costs included in administrative expenses(7) |
312 |
244 |
1,384 |
1,465 |
||||
Debenture issuance costs |
- |
- |
370 |
- |
||||
Amortization of debenture issuance costs(8) |
(125) |
(102) |
(464) |
(410) |
||||
Distributions on Class B exchangeable LP units included in finance costs |
84 |
84 |
334 |
334 |
||||
Deferred income taxes |
728 |
1,181 |
699 |
898 |
||||
Land lease principal repayments |
(193) |
(199) |
(760) |
(693) |
||||
Fair value adjustment to restricted and deferred units |
66 |
26 |
280 |
(156) |
||||
Fair value adjustment to investment properties |
(29,985) |
(2,169) |
(58,376) |
46,891 |
||||
Fair value adjustment to investments(9) |
(65) |
3,124 |
(9) |
4,214 |
||||
Fair value adjustment to Class B exchangeable LP units |
262 |
131 |
1,322 |
(1,144) |
||||
Fair value adjustment to convertible debentures |
(930) |
(712) |
1,903 |
(3,429) |
||||
Fair value adjustment to interest rate swaps |
(168) |
(539) |
(2,604) |
3,386 |
||||
Fair value adjustment to right-of-use land lease assets |
193 |
199 |
760 |
693 |
||||
Equity accounting adjustment(9) |
(46) |
112 |
(229) |
291 |
||||
Non-controlling interest adjustment(6) |
(97) |
(132) |
478 |
(437) |
||||
Basic FFO(1) |
$ |
10,771 |
$ |
10,554 |
$ |
44,703 |
$ |
36,995 |
Add (deduct): |
||||||||
Non-cash revenue – straight-line rent(5) |
71 |
15 |
277 |
(402) |
||||
Leasing costs – existing properties(2) (5)(10) |
(1,955) |
(622) |
(5,554) |
(2,508) |
||||
Maintenance capital expenditures – existing properties(2) (5)(11) |
(711) |
(515) |
(2,030) |
(1,509) |
||||
Non-controlling interest adjustment(6) |
22 |
5 |
82 |
28 |
||||
Basic AFFO(1) |
$ |
8,198 |
$ |
9,437 |
$ |
37,478 |
$ |
32,604 |
Basic weighted average units outstanding(3) |
102,982 |
102,968 |
102,986 |
103,048 |
||||
Basic FFO per unit(1) |
$ |
0.105 |
$ |
0.102 |
$ |
0.434 |
$ |
0.359 |
Basic AFFO per unit(1) |
$ |
0.080 |
$ |
0.092 |
$ |
0.364 |
$ |
0.316 |
Gross distributions to unitholders(4) |
$ |
7,208 |
$ |
7,208 |
$ |
28,832 |
$ |
28,846 |
Distributions as a percentage of basic FFO(1) |
66.9% |
68.3% |
64.5% |
78.0% |
||||
Distributions as a percentage of basic AFFO(1) |
87.9% |
76.4% |
76.9% |
88.5% |
||||
Basic FFO(1) |
$ |
10,771 |
$ |
10,554 |
$ |
44,703 |
$ |
36,995 |
Interest on dilutive convertible debentures |
788 |
684 |
3,125 |
2,720 |
||||
Diluted FFO(1) |
$ |
11,559 |
$ |
11,238 |
$ |
47,828 |
$ |
39,715 |
Diluted weighted average units outstanding(3) |
113,875 |
112,241 |
113,879 |
112,321 |
||||
Basic AFFO(1) |
$ |
8,198 |
$ |
9,437 |
$ |
37,478 |
$ |
32,604 |
Interest on dilutive convertible debentures |
788 |
684 |
3,125 |
2,416 |
||||
Diluted AFFO(1) |
$ |
8,986 |
$ |
10,121 |
$ |
40,603 |
$ |
35,020 |
Diluted weighted average units outstanding(3) |
113,875 |
112,241 |
113,879 |
111,410 |
||||
Diluted FFO per unit(1) |
$ |
0.102 |
$ |
0.100 |
$ |
0.420 |
$ |
0.354 |
Diluted AFFO per unit(1) |
$ |
0.079 |
$ |
0.090 |
$ |
0.357 |
$ |
0.314 |
(1) |
This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures defined here and in Part I and VIII of the REIT's MD&A ending December 31, 2021 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 expenditures at equity-accounted investments. |
(6) |
The non-controlling interest ("NCI") adjustment, includes adjustments required to translate the profit (loss) and total comprehensive income attributable to NCI of $874 thousand for the year ending December 31, 2021 (December 31, 2020 - $29 thousand loss) 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 and 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) |
Relates to the unrealized change in fair value adjustments which are excluded from FFO in accordance with RealPAC's definition of FFO. |
(10) |
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 26 of the MD&A. |
(11) |
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 26 of the MD&A. |
Net Property Operating Income (NOI) And Same-Asset Net Property Operating Income (Same-Asset NOI)
Same-asset categorization refers to those properties which were owned and operated by Plaza for both the entire years ended December 31, 2021 and December 31, 2020 and excludes non-consolidated investments and partial year results from certain assets due to timing of acquisition, development, redevelopment or disposition.
(000s) |
3 Months Ended December 31, 2021 (unaudited) |
3 Months Ended December 31, 2020 (unaudited) |
12 Months Ended December 31, 2021 (unaudited) |
12 Months Ended December 31, 2020 (unaudited) |
|||||
Same-asset NOI(1) |
$ |
16,908 |
$ |
17,185 |
$ |
67,750 |
$ |
66,960 |
|
Developments and redevelopments transferred to income producing in 2020 & 2021 ($2.2 million annualized NOI) |
445 |
316 |
1,761 |
1,015 |
|||||
NOI from acquisitions, properties currently under development and redevelopment ($6.6 million annualized NOI) |
535 |
444 |
2,146 |
1,178 |
|||||
Straight-line rent |
(70) |
(14) |
(277) |
402 |
|||||
Administrative expenses charged to NOI |
(755) |
(309) |
(3,054) |
(2,613) |
|||||
Lease buyout revenue |
120 |
534 |
3,217 |
722 |
|||||
Properties disposed |
5 |
(19) |
236 |
1,086 |
|||||
Total NOI(1) |
$ |
17,188 |
$ |
18,137 |
$ |
71,779 |
$ |
68,750 |
|
(1) This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures defined here and in Part I and VIII 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, strategy, 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 or implied by forward-looking statements contained in this press release, including but not limited to general economic and market factors, the duration and full impacts of COVID-19, and those described in Plaza's Annual Information Form for the year ended December 31, 2020 and Management's Discussion and Analysis for the year ended December 31, 2021 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 that development and redevelopment opportunities continue to be available and can be completed within reasonable timeframes and at reasonable costs, and that tenant demand for space in such projects 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 25, 2022 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 4, 2022. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 035111). 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, 2021 includes interests in 257 properties totaling approximately 8.7 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
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
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