Canadian Net REIT Announces 2023 Fourth-Quarter Results
MONTRÉAL, March 19, 2024 (GLOBE NEWSWIRE) -- Canadian Net Real Estate Investment Trust (“Canadian Net” or the “REIT”) (TSX-V: NET.UN) today reported its results for the quarter ended December 31st, 2023 (“Q4 2023”). The REIT also announced distributions for the months of April, May and June 2024.
"We are pleased to present our results today. Despite the challenges faced in the real estate market throughout 2023, Canadian Net maintained its strong performance," stated Kevin Henley, President and CEO. "We successfully maintained our FFO per unit, 100% occupancy rate, and one of the lowest payout ratio in the REIT sector at 54%. With the acquisition market staying subdued, we initiated a capital recycling strategy, divesting three properties at values exceeding IFRS values. Looking ahead to 2024, we anticipate a gradual recovery in the acquisition market, while our focus remains on capital recycling and enhancing liquidity. Canadian Net has long been a consolidator of essential services, single tenant triple net retail properties, and we remain committed to positioning the REIT advantageously to seize upcoming opportunities."
RESULTS FOR Q4 2023
Canadian Net reported Funds from operations1 (“FFO”) of 3.3 million or $0.162 for Q4 2023, consistent with the fourth quarter of 2022 (“Q4 2022”).
Rental income was $7.2 million in Q4 2023, an increase of 2.8% from the three-month period ended December 31, 2022 (“Q4 2022”). Net Operating Income (“NOI”)1 in Q4 2023 was $4.9 million, consistent with Q4 2022, primarily reflecting the year-over-year increase in rental income which was partially offset by property dispositions.
The REIT generated net income attributable to unitholders of $4.3 million in Q4 2023 compared to a loss of $9.3 million in Q4 2022.
RESULTS FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2023
Canadian Net reported FFO1 of $13.1 million, or $0.635 per unit1 compared to $13.0 million, or $0.636 per unit for the twelve-month period ended December 31, 2022.
Rental income was $26.6 million for the twelve-month period ended December 31, 2023, an increase of 7.4% from the same period in 2022. NOI1 for the twelve-month period ended December 31, 2023, was $19.4 million, an increase of 5.8% from the same period in 2022, primarily reflecting the year-over-year increase in rental income and partially offset by property dispositions.
The REIT generated net income attributable to unitholders of $18.2 million for the twelve-month period ended December 31, 2023 compared to a loss of $6.5 million for the same period in 2022.
The change in FFO1 is mainly derived from the addition of rental revenues of newly acquired properties and contractual rent step-ups, which was offset by higher interest charges on mortgage renewals, variable rate mortgages and credit facilities. The increases in rental income and NOI1 were due to the addition of new properties and increases in rent from existing properties, partially offset by the sale of the Timmins, Trois-Rivière and Dartmouth properties. Finally, the variance in net income attributable to unitholders is primarily attributable to the change in fair value of investment properties, in addition to the impact of NOI1 from newly acquired properties, partially offset by interest on mortgages associated with said properties.
DISTRIBUTIONS
Canadian Net announced that it will make monthly cash distributions of $0.02875 per unit, representing $0.345 per unit on an annualized basis, on April 30th, May 31st and June 28th, 2024, to unitholders of record on April 15th, May 15th and June 14th, 2024, respectively.
The tables below represent other financial highlights and the reconciliations of certain non-IFRS measures for Q4 2023 and Q4 2022. This information should be read in conjunction with the Audited Consolidated Financial Statements and Management’s Discussion & Analysis (“MD&A”) for the quarters ended December 31st, 2023 and December 31st, 2022.
SUMMARY OF SELECTED FINANCIAL INFORMATION
| 12 months | ||||||||
| Periods ended December 31 | 2023 | 2022 | Δ | % | ||||
| Financial info | ||||||||
| Property rental income | 26,550,527 | 24,729,024 | 1,821,503 | 7% | ||||
| Net income (loss) and | ||||||||
| comprehensive income (loss) | 18,221,826 | (6,493,632) | 24,715,458 | (381%) | ||||
| NOI (1) | 19,431,563 | 18,372,314 | 1,059,249 | 6% | ||||
| FFO (1) | 13,059,460 | 13,039,054 | 20,406 | - | ||||
| AFFO (1) | 11,723,180 | 12,152,784 | (429,604) | (4%) | ||||
| EBITDA (1) | 25,493,840 | (226,479) | 25,720,319 | n/a | ||||
| Adjusted EBITDA (1) | 19,764,765 | 18,693,878 | 1,070,887 | 6% | ||||
| Investment properties | 277,842,384 | 275,425,158 | 2,417,226 | 1% | ||||
| Adjusted investment properties (1) | 331,142,874 | 326,897,963 | 4,244,911 | 1% | ||||
| Total assets | 308,350,346 | 303,059,853 | 5,290,493 | 2% | ||||
| Mortgages | 134,689,255 | 135,680,946 | (991,691) | (1%) | ||||
| Long-term debt | 30,000 | 45,000 | (15,000) | (33%) | ||||
| Current portion of mortgages and long term-debt | 13,804,643 | 16,516,785 | (2,712,142) | (16%) | ||||
| Mortgages on investment properties held for sale | 2,780,439 | 3,498,066 | (717,627) | (21%) | ||||
| Credit facilities | 15,965,362 | 15,725,362 | 240,000 | 2% | ||||
| Total convertible debentures | 7,436,529 | 8,635,474 | (1,198,945) | (14%) | ||||
| Total equity | 129,487,381 | 118,687,767 | 10,799,614 | 9% | ||||
| Weighted average units o/s - basic | 20,566,316 | 20,514,719 | 51,597 | - | ||||
| Amounts on a per unit basis | ||||||||
| FFO(1) | 0.635 | 0.636 | (0.001) | - | ||||
| AFFO(1) | 0.570 | 0.592 | (0.022) | (4%) | ||||
| Distributions | 0.345 | 0.340 | 0.005 | 1% | ||||
| (1) This is a non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the section “Non-IFRS financial measures”. | ||||||||
NON-IFRS FINANCIAL MEASURES
The Trust’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). In this press release, as a complement to results provided in accordance with IFRS, the Trust discloses and discusses certain non-IFRS financial measures: FFO, FFO per unit, AFFO, AFFO per unit, NOI, and Adjusted Investment Properties. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning, and may not be comparable with similar measures presented by other issuers. Canadian Net has presented such non-IFRS measures as management of the Trust believes they are relevant measures of Canadian Net's underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities, or comparable metrics determined in accordance with IFRS as indicators of the Trust's performance, liquidity, cash flow, and profitability. Information appearing in this news release is a select summary of results. This news release should be read in conjunction with the condensed consolidated financial statements and MD&A for the Trust. Please refer to the "Non IFRS Financial Measures" section in Canadian Net’s management's discussion and analysis for the period ended December 31, 2023, available under Canadian Net's profile on SEDAR+ at www.sedarplus.com for a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS. Such explanation is incorporated by reference herein.
In addition, below are the reconciling tables for the non-IFRS measures used in this press release.
Reconciliation of Investment Properties to Adjusted Investment Properties
| As at December 31 | 2023 | 2022 | Δ | |||
| Investment Properties | ||||||
| Developed properties | 277,842,384 | 275,425,158 | 1% | |||
| Investment properties held for sale | 5,035,094 | 5,868,069 | (14%) | |||
| Joint Venture Ownership(1) | ||||||
| Developed properties | 45,765,604 | 42,886,822 | 7% | |||
| Properties under development | 2,499,792 | 2,717,914 | (8%) | |||
| Adjusted Investment Properties(2) | 331,142,874 | 326,897,963 | 1% | |||
| (1) Represents Canadian Net’s proportionate share | ||||||
| (2) This is a non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the section “Non-IFRS financial measures” | ||||||
Results of Operations
| 3 months | 12 months | ||||||||||||
| Periods ended December 31 | 2023 | 2022 | Δ | 2023 | 2022 | Δ | |||||||
| Rental Income | 7,249,338 | 7,052,983 | 196,355 | 26,550,527 | 24,729,024 | 1,821,503 | |||||||
| Operating expenses | (2,360,559) | (2,174,702) | (185,857) | (7,118,964) | (6,356,710) | (762,254) | |||||||
| Net Operating Income(1) | 4,888,779 | 4,878,281 | 10,498 | 19,431,563 | 18,372,314 | 1,059,249 | |||||||
| Share of net income (loss) from | |||||||||||||
| investments in joint ventures | 1,187,923 | (1,835,735) | 3,023,658 | 3,077,438 | (900,504) | 3,977,942 | |||||||
| Increase/(decrease) in fair values | |||||||||||||
| of investment properties | 437,292 | (10,388,173) | 10,825,465 | 4,319,072 | (16,741,220) | 21,060,292 | |||||||
| Unit-based compensation | (114,500) | (95,441) | (19,059) | (541,875) | (602,617) | 60,742 | |||||||
| Administrative expenses | (258,971) | (218,504) | (40,467) | (1,020,738) | (891,206) | (129,532) | |||||||
| Financial expenses | (1,790,431) | (1,653,357) | (137,074) | (7,037,539) | (5,733,338) | (1,304,201) | |||||||
| Deferred income taxes | (6,095) | 2,939 | (9,034) | (6,095) | 2,939 | (9,034) | |||||||
| Net income (loss) | |||||||||||||
| attributable to unitholders | 4,343,997 | (9,309,990) | 13,653,987 | 18,221,826 | (6,493,632) | 24,715,458 | |||||||
| FFO(1) | 3,335,581 | 3,329,459 | - | 13,059,460 | 13,039,054 | - | |||||||
| FFO per unit(1) | 0.162 | 0.162 | - | 0.635 | 0.636 | - | |||||||
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,528,502 | 20,592,733 | (64,231) | 20,566,316 | 20,514,719 | 51,597 | |||||||
| (1) This is a non-IFRS financial measure that does not have any standardized IFRS meaning and as such may not be comparable to other issuers. Refer to section “Non-IFRS financial measures” | |||||||||||||
Reconciliation of Net Income to Funds from Operations
| 3 months | 12 months | ||||||||||||
| Periods ended December 31 | 2023 | 2022 | Δ | 2023 | 2022 | Δ | |||||||
| Net income (loss) attributable | |||||||||||||
| to unitholders | 4,343,997 | (9,309,990) | 13,653,987 | 18,221,826 | (6,493,632) | 24,715,458 | |||||||
| Δ in value of investment properties | (437,292) | 10,388,173 | (10,825,465) | (4,319,072) | 16,741,220 | (21,060,292) | |||||||
| Δ in value of investment | |||||||||||||
| properties in joint ventures | (684,851) | 2,299,667 | (2,984,518) | (1,185,278) | 2,718,206 | (3,903,484) | |||||||
| Unit-based compensation | 114,500 | 95,441 | 19,059 | 541,875 | 602,617 | (60,742) | |||||||
| Δ fair value adjustments on derivative | |||||||||||||
| financial instruments | (21,168) | (148,393) | 127,225 | (224,725) | (539,069) | 314,344 | |||||||
| Accretion of lease payments | - | - | - | - | 7,483 | (7,483) | |||||||
| Income taxes | 20,395 | 4,561 | 15,834 | 24,834 | 2,229 | 22,605 | |||||||
| FFO(1) | 3,335,581 | 3,329,459 | - | 13,059,460 | 13,039,054 | - | |||||||
| FFO per unit(1) | 0.162 | 0.162 | - | 0.635 | 0.636 | - | |||||||
| Distributions | 1,770,629 | 1,748,368 | 22,261 | 7,095,010 | 6,966,904 | 128,106 | |||||||
| Distributions per unit | 0.086 | 0.085 | 1% | 0.345 | 0.340 | 1% | |||||||
| FFO per unit(1) - after distributions | 0.076 | 0.077 | - | 0.290 | 0.296 | (2%) | |||||||
| Distributions as a % of FFO(1) | 53% | 53% | - | 54% | 53% | 1% | |||||||
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,528,502 | 20,592,733 | (64,231) | 20,566,316 | 20,514,719 | 51,597 | |||||||
| (1) This is a non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the section “Non-IFRS financial measures” | |||||||||||||
Adjusted Funds from Operations
| 3 months | 12 months | ||||||||||||
| Periods ended December 31 | 2023 | 2022 | Δ | 2023 | 2022 | Δ | |||||||
| FFO (1) | 3,335,581 | 3,329,459 | 6,122 | 13,059,460 | 13,039,054 | 20,406 | |||||||
| Amortization of finance charges | |||||||||||||
| included in interest expense | - | - | - | - | - | - | |||||||
| Straight-line rent adjustment(2) | (53,466) | (113,612) | 60,146 | (347,316) | (475,892) | 128,576 | |||||||
| Maintenance/cap-ex on | |||||||||||||
| existing properties(3) | (164,469) | (241,330) | 76,861 | (988,964) | (410,378) | (578,586) | |||||||
| AFFO(1) | 3,117,646 | 2,974,517 | 5% | 11,723,180 | 12,152,784 | (4%) | |||||||
| AFFO per unit(1) | 0.152 | 0.144 | 5% | 0.570 | 0.592 | (4%) | |||||||
| Distributions per unit | 0.086 | 0.085 | 1% | 0.345 | 0.340 | 2% | |||||||
| AFFO per unit(1) - after distributions | 0.066 | 0.059 | 10% | 0.225 | 0.252 | (11%) | |||||||
| Distributions as a % of AFFO(1) | 57% | 59% | (2%) | 61% | 57% | 4% | |||||||
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,528,502 | 20,592,733 | (64,231) | 20,566,316 | 20,514,719 | 51,597 | |||||||
| (1) This is a non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the section “Non-IFRS financial measures” | |||||||||||||
| (2) Adjusted for the proportionate share of equity-accounted investments (3) The maintenance/cap-ex on existing properties for 2023 includes a charge of $805,000 that will generate additional income for the Trust | |||||||||||||
Reconciliation of Net Income to EBITDA
| 3 months | 12 months | ||||||||||||
| Periods ended December 31 | 2023 | 2022 | Δ | 2023 | 2022 | Δ | |||||||
| Net income attributable | |||||||||||||
| to unitholders | 4,343,997 | (9,309,990) | 13,653,987 | 18,221,826 | (6,493,632) | 24,715,458 | |||||||
| Net interest expense | 1,807,805 | 1,798,956 | 8,849 | 7,247,180 | 6,262,620 | 984,560 | |||||||
| Accretion of lease payments | - | - | - | - | (7,483) | 7,483 | |||||||
| Income taxes | 20,395 | 4,561 | 15,834 | 24,834 | 2,229 | 22,605 | |||||||
| Other financial charges | - | 2,794 | (2,794) | - | 9,787 | (9,787) | |||||||
| EBITDA(1) | 6,172,197 | (7,503,679) | 13,675,876 | 25,493,840 | (226,479) | 25,720,319 | |||||||
| Δ in value of investment properties | (437,292) | 10,388,173 | (10,825,465) | (4,319,072) | 16,741,220 | (21,060,292) | |||||||
| Δ in value of investment | |||||||||||||
| properties in joint ventures | (684,851) | 2,299,667 | (2,984,518) | (1,185,278) | 2,718,206 | (3,903,484) | |||||||
| Δ in value of convertible debentures | (21,168) | (148,393) | 127,225 | (224,725) | (465,889) | 241,164 | |||||||
| Δ in value of warrants | - | - | - | - | (73,180) | 73,180 | |||||||
| Adjusted EBITDA(1) | 5,028,886 | 5,035,768 | - | 19,764,765 | 18,693,878 | 6% | |||||||
| Interest expense | 1,897,508 | 1,888,160 | 9,348 | 7,640,203 | 6,582,923 | 1,057,280 | |||||||
| Principal repayments | 1,176,301 | 1,124,398 | 51,903 | 4,602,073 | 4,374,378 | 227,695 | |||||||
| Debt service requirements | 3,073,809 | 3,012,558 | 2% | 12,242,276 | 10,957,301 | 12% | |||||||
| Interest coverage ratio based on adjusted EBITDA(1) | 2.7x | 2.7x | - | 2.6x | 2.8x | (0.2x) | |||||||
| Debt service coverage based on adjusted EBITDA(1) | 1.6x | 1.7x | (0.1x) | 1.6x | 1.7x | (0.1x) | |||||||
| (1) This is a non-IFRS financial measure that does not have any standardized IFRS meaning and as such may not be comparable to other issuers. Refer to section “Non-IFRS financial measures” | |||||||||||||
EARNINGS WEBCAST
Canadian Net will host a webcast on March 20, 2024, at 9:00 a.m. (EST) in order to discuss the results.
The link to join the webcast is the following: https://edge.media-server.com/mmc/p/mzccgufk
About Canadian Net – Canadian Net Real Estate Investment Trust is an open-ended trust that acquires and owns high-quality triple net and management-free commercial real estate properties.
Forward-Looking Statements - This press release contains forward-looking statements and information as defined by applicable securities laws. Canadian Net warns the reader that actual events may differ materially from current expectations due to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated in such statements. Among these include the risks related to economic conditions, the risks associated with the local real estate market, the dependence on the financial condition of tenants, the uncertainties related to real estate activities, the changes in interest rates, the availability of financing in the form of debt or equity, the effects related to the adoption of new IFRS standards, as well as other risks and factors described from time to time in the documents filed by Canadian Net with securities regulators, including the management report. Canadian Net does not update or modify its forward-looking statements even if future events occur or for any other reason unless required by law or any regulatory authority.
Neither the TSX Venture Exchange Inc. nor its Regulatory Services Provider (as that term is defined in the Policy of the TSX Venture Exchange and its Regulatory Services Provider) accepts any responsibility for the adequacy or accuracy of this release.
The December 31st, 2023, financial statements and management discussion & analysis of Canadian Net may be viewed on SEDAR+ at www.sedarplus.com.
For further information please contact Kevin Henley at (450) 536-5328.
1 Non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the section “Non-IFRS financial measures”.
