Plaza Retail REIT Announces First Quarter 2022 Results

FREDERICTON, NB, May 5, 2022 /CNW/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza" or the "REIT") today announced its financial results for the three months ended March 31, 2022.

"Our strong results for the quarter demonstrate the strength of our portfolio of open-air centres, dominated by national tenants in the essential needs, value and convenience categories", said Michael Zakuta, President and CEO.  "Our pipeline of developments and redevelopments is robust, and we are very excited about our future prospects." 

Summary of Selected IFRS Financial Results
(CAD$000s, except percentages)					Three Months Ended March 31, 2022	Three Months Ended March 31, 2021	$  Change	% Change
Revenues					$27,904	$26,708	$1,196	4.5%
Net operating income (NOI)^(1)					$17,130	$16,308	$822	5.0%
Net change in fair value of investment properties					$12,434	$3,098	$9,336	--
Profit and total comprehensive income					$25,832	$12,224	$13,608	--

(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 March 31, 2022 for more information on each non-GAAP financial measure.

Quarterly Highlights

• NOI was $17.1 million, up $822 thousand (5.0%) from the same period in 2021, primarily as a result of lease-up and rent escalations, as well as lower bad debt in the current year.
• Profit and total comprehensive income for the current quarter was $25.8 million compared to $12.2 million in the prior year. The increase was mainly due to an increase in the fair value of investment properties recorded in Q1 2022 as a result of a decrease in capitalization rates and appraisals obtained.

Summary of Selected Non-IFRS Financial Results^(1)
(CAD$000s, except percentages, units repurchased and per unit amounts)					Three Months Ended March 31, 2022	Three Months Ended March 31, 2021	$ Change	% Change
FFO^(1)					$10,156	$9,554	$602	6.3%
FFO per unit^(1)					$0.099	$0.093	$0.006	6.5%
FFO payout ratio^(1)					71.0%	75.4%	n/a	(5.8%)
AFFO^(1)					$9,080	$8,676	$404	4.7%
AFFO per unit^(1)					$0.088	$0.084	$0.004	4.8%
AFFO payout ratio^(1)					79.4%	83.1%	n/a	(4.5%)
Same-asset NOI^(1)					$17,054	$16,606	$448	2.7%
Normal course issuer bid – units repurchased					2,200	7,850	n/a	n/a
Committed occupancy – including non-consolidated investments^(2)					96.3%	95.8%	n/a	0.5%
Same-asset committed occupancy^(3)					96.3%	95.4%	n/a	0.9%

 

⁽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 March 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 March 31, 2022, FFO per unit increased by $0.006 (6.5%) compared to the prior year. FFO was impacted by an increase in NOI, and lower finance costs mainly due to lower mortgage interest. AFFO per unit increased by $0.004 (4.8%) compared to the prior year due to the changes in FFO noted above somewhat offset by higher leasing costs in the current year due to increased leasing activity, which will result in increased revenue in future years.
• Same-asset NOI increased by $448 thousand (2.7%) mainly due to lease-up and rent escalations, as well as lower bad debt expense and write offs in the current year. Excluding the impact of COVID-related bad debt expense, write-offs and lease buyouts, same-asset NOI for the quarter would have been 1% higher than 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 is effectively at pre-pandemic levels, including rent collections.  During Q1 2022, Plaza collected 99.4% of rent to date.  In addition, for previous rent deferrals that were scheduled to be repaid in Q1 2022, Plaza collected 100% 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 March 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 months ended March 31, 2022, compared to the three months ended March 31, 2021 is presented below:

			3 Months Ended March 31, 2022	3 Months Ended March 31,  2021
(000s – except per unit amounts and percentage data)			(unaudited)	(unaudited)
Profit and total comprehensive income for the period attributable to unitholders			$   25,562	$   12,145
Add (deduct):
Incremental leasing costs included in administrative expenses^(7)			339	316
Amortization of debenture issuance costs^(8)			(120)	(103)
Distributions on Class B exchangeable LP units included in finance costs			83	83
Deferred income taxes			966	37
Land lease principal repayments			(194)	(187)
Fair value adjustment to restricted and deferred units			111	82
Fair value adjustment to investment properties			(12,434)	(3,098)
Fair value adjustment to investments^(9)			(2,390)	110
Fair value adjustment to Class B exchangeable LP units			441	429
Fair value adjustment to convertible debentures			160	2,295
Fair value adjustment to interest rate swaps			(2,547)	(2,561)
Fair value adjustment to right-of-use land lease assets			194	187
Equity accounting adjustment^(10)			(186)	(169)
Non-controlling interest adjustment^(6)			171	(12)
Basic FFO^(1)			$     10,156	$     9,554
Add (deduct):
Non-cash revenue – straight-line rent^(5)			115	146
Leasing costs – existing properties^(2) (5)(11)			(1,091)	(818)
Maintenance capital expenditures – existing properties^(2) (5)(12)			(126)	(225)
Non-controlling interest adjustment^(6)			26	19
Basic AFFO^(1)			$      9,080	$     8,676
Basic weighted average units outstanding^(3)			103,004	102,994
Basic FFO per unit^(1)			$      0.099	$     0.093
Basic AFFO per unit^(1)			$      0.088	$     0.084
Gross distributions to unitholders^(4)			$      7,209	$     7,208
Distributions as a percentage of basic FFO^(1)			71.0%	75.4%
Distributions as a percentage of basic AFFO^(1)			79.4%	83.1%
Basic FFO^(1)			$    10,156	$     9,554
Interest on dilutive convertible debentures			770	669
Diluted FFO^(1)			$    10,926	$   10,223
Diluted weighted average units outstanding^(3)			113,897	112,267
Basic AFFO^(1)			$      9,080	$     8,676
Interest on dilutive convertible debentures			770	669
Diluted AFFO^(1)			$      9,850	$     9,345
Diluted weighted average units outstanding^(3)			113,897	112,267
Diluted FFO per unit^(1)			$      0.096	$     0.091
Diluted AFFO per unit^(1)			$      0.086	$     0.083

^(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 March 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 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 $270 thousand for the three months ending March 31, 2022 (March 31, 2021 - $79 thousand) 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)	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 25 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 25 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 the three months ended March 31, 2022 and the entire year-ending December 31, 2021, 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 March 31, 2022 (unaudited)	3 Months Ended March 31, 2021 (unaudited)
Same-asset NOI^(1)				$    17,054	$    16,606
Developments and redevelopments transferred to income producing in 2021 & 2022 ($590 thousand annualized NOI)				57	4
NOI from acquisitions, properties currently under development and redevelopment ($6.3 million annualized NOI)				757	381
Straight-line rent				(115)	(146)
Administrative expenses charged to NOI				(730)	(694)
Lease buyout revenue				105	75
Properties disposed				2	82
Total NOI^(1)				$    17,130	$    16,308

(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, prospects, 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, 2021 and Management's Discussion and Analysis for the three months ended March 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 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, May 6, 2022 at 10:00 a.m. EDT. 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 May 13, 2022. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 052726). 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 March 31, 2022 includes interests in 255 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: [phone]; Michael Zakuta, President & Chief Executive Officer, Plaza Retail REIT, Tel: [phone],