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Canadian Net REIT Announces Its Results for the Year Ended December 31, 2022, and Q2 2023 Monthly Distributions

Written by Customer Service on . Posted in Earnings Releases And Operating Results.

MONTRÉAL, March 22, 2023 (GLOBE NEWSWIRE) — (TSX-V: NET.UN) Canadian Net Real Estate Investment Trust (“Canadian Net” or the “Trust”) announces its results for the year ended December 31st, 2022, and monthly distributions for the months of April, May and June 2023.

Jason Parravano, President and CEO says: “It is my pleasure to share with you our 2022 results, which demonstrate another great year of per unit FFO growth. Despite a turbulent year, we managed to complete 10 acquisitions to help propel our results. Going into 2023, we remain diligent as we navigate a more volatile interest rate environment, as well as other macroeconomic headwinds. Our focus is to optimize our existing properties in order to deliver consistent results for our unit holders.”

RESULTS

For the quarter ended December 31st, 2022, Canadian Net reported funds from operations per unit1 (“FFO per unit”) of $0.162 compared to $0.147 per unit for the quarter ended December 31st, 2021, an increase of 10%. Funds from Operations1 (“FFO”) was $3,329,459, an increase of 12% relative to $2,971,560 in Q4 2021.

During Q4 2022, the Trust’s property rental income was $7,052,983 compared to $4,932,753 in Q4 2021, an increase of 43%. Net Operating Income1 (“NOI”) was $4,878,281 compared to $3,904,277 in Q4 2021, an increase of 25%.

Canadian Net also recorded a loss attributable to unitholders of $9,309,990 compared to a net income of $7,453,246 in Q4 2021.

For the twelve-month period ended December 31st, 2022, Canadian Net reported FFO per unit1 of $0.636 compared to $0.581 per unit for the same period in 2021, an increase of 9%. FFO1 was $13,039,054, an increase of 21% relative to $10,791,751 for the twelve-month period ended December 31st, 2021.

During the period, the Trust’s property rental income was $24,729,024 compared to $18,953,524 for the same period in 2021, an increase of 30%. NOI1 was $18,372,314 compared to $14,321,735 for the same period in 2021, an increase of 28%.

Canadian Net also recorded a net loss attributable to unitholders of $6,493,632 compared to net income of $25,090,167 for the same period in 2021.

The FFO1 increase was primarily due to the impact of the newly acquired properties, partially offset by interest on mortgages associated with said properties and higher interest rates on existing variable-rate mortgages and credit facilities. On the rental income and NOI1 sides, the increases can be explained by the impact of the newly acquired properties. Finally, the net income variance can be attributed to the impact of NOI1 from newly acquired properties, partially offset by interest on mortgages associated with said properties, as well as the change in the fair value of investment properties.

____________
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”.

DISTRIBUTIONS

Canadian Net announces that it will make monthly cash distributions of $0.02875 per unit, representing $0.345 per unit on an annualized basis, on April 28th, May 31st and June 30th, 2023, to unitholders of record on April 14th, May 15th and June 15th, 2023, respectively.

The tables below represent other financial highlights as well as the reconciliations of certain non-IFRS measures for the periods ended December 31st, 2022, and its comparative period. This information should be read in conjunction with the Audited Consolidated Financial Statements and MD&A for the quarter ended December 31st, 2022, and the Audited Consolidated Financial Statements and MD&A for the quarter ended December 31st, 2021.

SUMMARY OF SELECTED FINANCIAL INFORMATION

 12 months 
Periods ended December 312022 2021 Δ%
Financial info     
Property rental income24,729,024 18,953,524 5,775,500 30% 
Net income (loss) and     
comprehensive income (loss)(6,493,632) 25,090,167 (31,583,799) (126%) 
NOI (1)18,372,314 14,321,735 4,050,579 28% 
FFO (1)13,039,054 10,791,751 2,247,303 21% 
AFFO (1)12,152,784 10,033,624 2,119,160 21% 
EBITDA (1)(226,479) 29,653,605 (29,880,084) (101%) 
Adjusted EBITDA (1)18,693,878 14,946,751 3,747,127 25% 
Investment properties275,425,158 252,947,654 22,477,504 9% 
Adjusted investment properties (1)326,897,963 298,465,593 28,432,370 10% 
Total assets303,059,853 278,165,686 24,894,167 9% 
Mortgages135,680,946 121,549,841 14,131,105 12% 
Long-term debt45,000 60,000 (15,000) (25%) 
Current portion of mortgages and long term-debt16,516,785 11,796,018 4,720,767 40% 
Mortgages on investment properties held for sale3,498,066 – 3,498,066 n/a 
Credit facilities15,725,362 2,885,000 12,840,362 445% 
Total convertible debentures8,635,474 8,416,510 218,964 3% 
Total equity118,687,767 129,814,467 (11,126,700) (9%) 
Weighted average units o/s – basic20,514,719 18,575,569 1,939,150 10% 
Amounts on a per unit basis     
FFO(1)0.636 0.581 0.055 9% 
AFFO(1)0.592 0.540 0.052 10% 
Distributions0.340 0.300 0.040 13% 
(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, 2022, available under Canadian Net’s profile on SEDAR at www.sedar.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 312022 2021 Δ
Investment Properties     
Developed properties275,425,158 252,947,654 9% 
Investment properties held for sale5,868,069 – n/a
Joint Venture Ownership(1)     
Developed properties42,886,822 42,374,347 1% 
Properties under development2,717,914 3,143,592 (14%) 
Adjusted Investment Properties(2)326,897,963 298,465,593 10% 
(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 312022 2021  Δ 2022 2021  Δ
Rental Income7,052,983 4,932,753 2,120,230  24,729,024 18,953,524 5,775,500 
Operating costs(2,174,702) (1,028,476) (1,146,226)  (6,356,710) (4,631,789) (1,724,921) 
Net Operating Income(1)4,878,281 3,904,277 974,004  18,372,314 14,321,735 4,050,579 
Share of net income (loss) from       
investments in joint ventures(1,835,735) 1,100,189 (2,935,924)  (900,504) 2,966,517 (3,867,021) 
Increase/(decrease) in fair values       
of investment properties(10,388,173) 3,354,091 (13,742,264)  (16,741,220) 13,356,401 (30,097,621) 
Realized gain on disposition of       
investment properties– 57,674 (57,674)  – 57,674 (57,674) 
Unit-based compensation(95,441) (49) (95,392)  (602,617) (308,595) (294,022) 
Administrative expenses(218,504) (192,252) (26,252)  (891,206) (811,390) (79,816) 
Financial expenses(1,653,357) (625,316) (1,028,041)  (5,733,338) (4,346,807) (1,386,531) 
Deferred income taxes2,939 (145,368) 148,307  2,939 (145,368) 148,307 
Net income       
and comprehensive income(9,309,990) 7,453,246 (16,763,236)  (6,493,632) 25,090,167 (31,583,799) 
FFO(1)3,329,459 2,971,560 12%  13,039,054 10,791,751 21% 
FFO per unit(1)0.162 0.147 10%  0.636 0.581 9% 
Weighted avg. units o/s       
Basic20,592,733 20,193,078 399,655  20,514,719 18,575,569 1,939,150 
(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”


Reconciliation Of Net Income to Funds From Operations

 3 months  12 months 
Periods ended December 312022 2021  Δ 2022 2021  Δ
Net income (loss) attributable       
to unitholders(9,309,990) 7,453,246 (16,763,236)  (6,493,632) 25,090,167 (31,583,799) 
Δ in value of investment properties10,388,173 (3,354,091) 13,742,264  16,741,220 (13,356,401) 30,097,621 
Δ in value of investment       
properties in joint ventures2,299,667 (642,015) 2,941,682  2,718,206 (1,258,966) 3,977,172 
Unit based compensation95,441 49 95,392  602,617 308,595 294,022 
Δ fair value adjustments on derivative       
financial instruments(148,393) (564,707) 416,314  (539,069) (91,487) (447,582) 
Interest on the lease liability– 7,383 (7,383)  7,483 28,936 (21,453) 
Income taxes4,561 154,868 (150,307)  2,229 154,080 (151,851) 
Realized (gain) loss on sale of       
investment properties– (57,674) 57,674  – (57,674) 57,674 
Realized (gain) loss on sale of investment       
properties in joint ventures– (25,499) 25,499  – (25,499) 25,499 
FFO(1)3,329,459 2,971,560 12%  13,039,054 10,791,751 21% 
FFO per unit(1)0.162 0.147 10%  0.636 0.581 9% 
Distributions1,748,368 1,513,944 234,424  6,966,904 5,577,658 1,389,246 
Distributions per unit0.085 0.075 13%  0.340 0.300 13% 
FFO per unit(1) – after distributions0.077 0.072 6%  0.296 0.281 5% 
Distributions per unit as a % of       
FFO per unit(1)53% 51% 2%  53% 52% 1% 
Weighted avg. units o/s       
Basic20,592,733 20,193,078 399,655  20,514,719 18,575,569 1,939,150 
(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 312022 2021  Δ  2022 2021  Δ 
FFO (1)3,329,459 2,971,560 357,899  13,039,054 10,791,751 2,247,303 
Amortization of finance charges             
included in interest expense– – –  – – – 
Straight-line rent adjustment(2)(113,612) (152,640) 39,028  (475,892) (599,960) 124,068 
Maintenance/cap-ex on       – – – 
existing properties(3)(241,330) (19,301) (222,029)  (410,378) (158,167) (252,211) 
Leasing costs on existing properties– – –  – – – 
Debt extinguishment penalties– – –  – – – 
AFFO(1)2,974,517 2,799,619 6%  12,152,784 10,033,624 21% 
AFFO per unit(1)0.144 0.139 4%  0.592 0.540 10% 
Distributions per unit0.085 0.075 13%  0.340 0.300 13% 
AFFO per unit(1) – after distributions0.059 0.064 (7%)  0.252 0.240 5% 
Distributions per unit(1) as a % of             
AFFO per unit(1)59% 54% 5%  57% 56% 1% 
Weighted avg. units o/s             
Basic20,592,733 20,193,078 399,655  20,514,719 18,575,569 1,939,150 
(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 2022 includes a charge of approximately $188,000 for the expansion of a property, which will generate additional income


Reconciliation of Net Income to EBITDA

 3 months
    12 months
   
Periods ended December 312022 2021  Δ  2022 2021  Δ 
Net income attributable             
to unitholders(9,309,990) 7,453,246 (16,763,236)  (6,493,632) 25,090,167 (31,583,799) 
Net interest expense1,798,956 1,186,697 612,259  6,262,620 4,431,479 1,831,141 
Interest on the lease liability– (7,383) 7,383  (7,483) (28,936) 21,453 
Income taxes4,561 154,868 (150,307)  2,229 154,080 (151,851) 
Other financial charges2,794 3,326 (532)  9,787 6,815 2,972 
EBITDA(1)(7,503,679) 8,790,754 (16,294,433)  (226,479) 29,653,605 (29,880,084) 
Δ in value of investment properties10,388,173 (3,354,091) 13,742,264  16,741,220 (13,356,401) 30,097,621 
Δ in value of investment             
properties in joint ventures2,299,667 (642,015) 2,941,682  2,718,206 (1,258,966) 3,977,172 
Δ in value of convertible debentures(148,393) (649,916) 501,523  (465,889) (377,068) (88,821) 
Δ in value of warrants– 85,209 (85,209)  (73,180) 285,581 (358,761) 
Adjusted EBITDA(1)5,035,768 4,229,941 19%  18,693,878 14,946,751 25% 
Interest expense1,888,160 1,061,279 826,881  6,582,923 4,393,839 2,189,084 
Principal repayments1,124,398 891,573 232,825  4,374,378 3,315,890 1,058,488 
Debt service requirements3,012,558 1,952,852 54%  10,957,301 7,709,729 42% 
Interest coverage ratio based on adjusted EBITDA(1)2.7x 4.0x (1.3x)  2.8x 3.4x (0.6x) 
Debt service coverage based on adjustediEBITDA(1)1.7x 2.2x (0.5x)  1.7x 1.9x (0.2x) 
(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”


EARNINGS WEBCAST
Canadian Net will host a webcast on March 23rd, 2023, at 10:00 am (EST) in order to discuss the results.

The link to join the webcast is the following: https://edge.media-server.com/mmc/p/cxgnnv3r

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 to 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 31th, 2022, financial statements and management discussion & analysis of Canadian Net may be viewed on SEDAR at www.sedar.com.

For further information please contact Jason Parravano at (450) 536-5328.

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