Plaza Retail REIT Announces First Quarter 2023 Results

FREDERICTON, NB, May 3, 2023 /CNW/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza" or the "REIT") today announced its financial results for the three months ended March 31, 2023.

"In March, we issued $40 million of equity via a bought deal – our first equity issue since 2016 – with the proceeds, combined with proceeds from non-core asset sales, utilized to repay our maturing $47.25 million convertible debentures.  This has re-set our balance sheet, reducing our debt to assets ratio from approximately 56% in December 2022 to 52%, and has provided us with additional flexibility.  This quarter is a building block for future growth – with a record committed occupancy level, healthy renewal spreads, and a robust development pipeline which will contribute incremental income and value over the next two years.", said Michael Zakuta, President and CEO.  "Our business and tenants, focused on essential-needs, value and convenience offerings, remain strong and resilient, and will continue to perform well under all economic conditions."

Summary of Selected IFRS Financial Results
(CAD$000s, except percentages)					Three Months  Ended March 31, 2023	Three Months Ended March 31, 2022	$  Change	% Change
Revenues					$28,345	$27,904	$441	1.6 %
Net operating income (NOI)^(1)					$16,815	$17,130	($315)	(1.8 %)
Net change in fair value of investment properties					$1,274	$12,434	($11,160)	--
Profit and total comprehensive income					$7,751	$25,832	($18,081)	--

(1)	This is a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures defined here and in Part I and VII of the Management's Discussion and Analysis ("MD&A") ending March 31, 2023 for more information on each non-GAAP financial measure.

Quarterly Highlights

• NOI was $16.8 million, down $315 thousand (1.8%) from the same period in 2022, mainly due to an allowance provided to a tenant in consideration of delayed delivery of premises at a development property.
• Profit and total comprehensive income for the current quarter was $7.8 million compared to $25.8 million in the same period in the prior year. The decrease was mainly due to an increase in the fair value of investment properties of $1.3 million in the current quarter compared to a fair value increase of $12.4 million in the same quarter in the prior year. The fair value change year over year was mainly due to more significant fair value increases recognized in the prior year, compared to more stabilized values this year.

Summary of Selected Non-IFRS Financial Results
(CAD$000s, except percentages, units repurchased and per unit amounts)					Three Months Ended March 31, 2023	Three Months Ended March 31, 2022	$ Change	% Change
FFO^(1)					$9,377	$10,156	($779)	(7.7 %)
FFO per unit^(1)					$0.091	$0.099	($0.008)	(8.1 %)
FFO payout ratio^(1)					79.0 %	71.0 %	n/a	11.3 %
AFFO^(1)					$8,129	$9,080	($951)	(10.5 %)
AFFO per unit^(1)					$0.079	$0.088	($0.009)	(10.2 %)
AFFO payout ratio^(1)					91.1 %	79.4 %	n/a	14.7 %
Same-asset NOI^(1)					$16,784	$16,654	$130	0.8 %
Normal course issuer bid – units repurchased					3,855	2,200	n/a	n/a
Committed occupancy – including non-consolidated investments^(2)					97.6 %	96.3 %	n/a	1.3 %
Same-asset committed occupancy^(3)					97.5 %	96.3 %	n/a	1.2 %

⁽¹⁾ This is a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures defined here and in Part I and VII of the MD&A ending March 31, 2023 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, 2023, FFO per unit decreased by $0.008 (8.1%) compared to the same period in the prior year. FFO was impacted by an allowance provided to a tenant in consideration of delayed delivery of premises at a development property, a decrease in NOI from properties disposed, offset by rent escalations and renewals across the portfolio, an increase in finance expenses, an increase in administrative expenses, and an increase in investment and other income. AFFO per unit decreased by $0.009 (10.2%) compared to the same period in the prior year mainly due to the changes in FFO noted above.
• Same-asset NOI increased by $130 thousand (0.8%) due to lease-up and rent escalations in the current quarter.

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 VII of the REIT's Management's Discussion and Analysis as at March 31, 2023, 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, 2023, compared to the three months ended March 31, 2022 is presented below:

(000s – except per unit amounts and percentage data, unaudited)				3 Months Ended March 31, 2023	3 Months Ended March 31, 2022	Change over Prior Period
Profit and total comprehensive income for the period attributable to unitholders				$    7,698	$   25,562
Incremental leasing costs included in administrative expenses^(7)				284	339
Amortization of debenture issuance costs^(8)				(86)	(120)
Distributions on Class B exchangeable LP units included in finance costs				83	83
Deferred income taxes				483	966
Land lease principal repayments				(199)	(194)
Fair value adjustment to restricted and deferred units				(100)	111
Fair value adjustment to investment properties				(1,274)	(12,434)
Fair value adjustment to investments^(9)				662	(2,390)
Fair value adjustment to Class B exchangeable LP units				(369)	441
Fair value adjustment to convertible debentures				545	160
Fair value adjustment to interest rate swaps				1,452	(2,547)
Fair value adjustment to right-of-use land lease assets				199	194
Equity accounting adjustment^(10)				(6)	(186)
Non-controlling interest adjustment^(6)				5	171
FFO^(1)				$    9,377	$  10,156		(779)
FFO change over prior period - %							(7.7 %)
FFO^(1)				$    9,377	$  10,156
Non-cash revenue – straight-line rent^(5)				(55)	115
Leasing costs – existing properties^(2) (5) (11)				(1,105)	(1,091)
Maintenance capital expenditures – existing properties^(12)				(88)	(126)
Non-controlling interest adjustment^(6)				-	26
AFFO^(1)				$    8,129	$    9,080		(951)
AFFO change over prior period - %							(10.5 %)
Weighted average units outstanding – basic^(1)(3)				103,274	103,004
FFO per unit – basic^(1)				$    0.091	$   0.099		(8.1 %)
AFFO per unit – basic^(1)				$    0.079	$   0.088		(10.2 %)
Gross distribution to unitholders^(1)(4)				$    7,407	$   7,209
FFO payout ratio – basic^(1)				79.0 %	71.0 %
AFFO payout ratio – basic^(1)				91.1 %	79.4 %
FFO^(1)				$    9,377	$ 10,156
Interest on dilutive convertible debentures				176	770
FFO – diluted^(1)				$    9,553	$ 10,926		(1,373)
Diluted weighted average units outstanding^(1)(3)				105,805	113,897
AFFO^(1)				$    8,129	$   9,080
Interest on dilutive convertible debentures				176	770
AFFO – diluted^(1)				$    8,305	$   9,850		(1,545)
Diluted weighted average units outstanding^(1)(3)				105,805	113,897
FFO per unit – diluted^(1)				$    0.090	$   0.096		(6.3 %)
AFFO per unit – diluted^(1)				$    0.078	$   0.086		(9.3 %)

^(1)	This is a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures defined here and in Part I and VII of the REIT's MD&A ending March 31, 2023 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 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 $53 thousand for the three months ending March 31, 2023 (March 31, 2022 - $270 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 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 27 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 27 of the MD&A.

Net Property Operating Income (NOI) and Same-Asset Net Property Operating Income (Same-Asset NOI)

(000s)				3 Months Ended March 31,  2023 (unaudited)	3 Months Ended March 31, 2022 (unaudited)
Same-asset NOI^(1)				$    16,784	$    16,654
Developments and redevelopments transferred to income producing in 2022 & 2023 ($2.6 million stabilized NOI)				625	370
NOI from acquisitions, properties currently under development and redevelopment ($7.4 million stabilized NOI)				137	394
Straight-line rent				59	(116)
Administrative expenses charged to NOI				(824)	(729)
Lease termination revenue				-	105
Properties disposed				88	426
Other				(54)	26
Total NOI^(1)				$    16,815	$    17,130

(1)	This is a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures defined here and in Part I and VII of the REIT's MD&A for more information on each non-GAAP financial measure.

Debt to Gross Assets

Debt to gross assets^(1)(000s)			March 31, 2023	December 31, 2022	March 31, 2022
Total debt including land leases^(1)(2)			$     652,741	$     708,697	$    682,147
Less:  land leases			(65,007)	(65,206)	(65,792)
Total debt excluding land leases			$     587,734	$     643,491	$    616,355
Total gross assets			$  1,254,338	$  1,269,011	$ 1,236,430
Less: land leases			(65,007)	(65,206)	(65,792)
Total gross assets excluding land leases			$  1,189,331	$  1,203,805	$ 1,170,638
Debt to gross assets including land leases^(1)			52.0 %	55.8 %	55.2 %
Debt to gross assets excluding land leases^(1)			49.4 %	53.5 %	52.7 %

^(1)	This is a non-GAAP financial measure.  Refer to the Non-GAAP Financial Measures in Part I and VII of this document for more information on each non-GAAP financial measure.
^(2)	Total debt includes current and long-term debt defined for this purpose as mortgage bonds, mortgages payable, derivative liabilities, face value of convertible debentures, non-convertible debentures, notes payable, land lease liabilities and bank indebtedness.

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 that Plaza's business and tenants will continue to perform well under all economic conditions.  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 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; 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; and  others described in Plaza's Annual Information Form for the year ended December 31, 2022 and Management's Discussion and Analysis for the three months ended March 31, 2023 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 the strength and resiliency 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.sedar.com. 

Conference Call

Michael Zakuta, President and CEO, and Jim Drake, CFO, will host a conference call for the investment community on Thursday, May 4, 2023 at 11:30 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 11, 2023. To access the replay, dial 1-416-764-8677 (local Toronto) or 1-888-390-0541 (Passcode: 286540). 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, 2023 includes interests in 246 properties totaling approximately 8.8 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]