Canadian Net REIT Announces 2024 Third-Quarter Results
REIT also announces monthly distributions for Q1 2025
MONTRÉAL, Nov. 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 September 30th, 2024 (“Q3 2024”). The REIT also announced distributions for the months of January, February and March 2025.
“We are very pleased with the progress we made in advancing our capital recycling initiatives during the third quarter,” said Kevin Henley, President and CEO. “We successfully sold four more properties and, shortly after the quarter end, announced the acquisition of a single-tenant grocery store, redeploying our capital into an immediately accretive opportunity on an FFO per unit1 basis and further enhancing our portfolio quality. Normalizing for certain non-recurring items, the quarter was in line for the REIT as we remained 100% occupied and further benefited from lower rates. As we look ahead to an increasingly favourable rate environment and solid industry fundamentals, we remain optimistic about our growing pipeline of opportunities.”
RESULTS FOR Q3 2024
Canadian Net reported that Funds from operations1 (“FFO”) decreased to $2.8 million, or $0.137 per unit compared to $3.2 million, or $0.155 per unit for the quarter ended September 30, 2023 (“Q3 2023”). Normalized FFO1 for the quarter, which adds back certain non-recurring items to better reflect operational performance, was $3.0 million, or $0.147 per unit compared to $3.2 million, or $0.155 per unit for Q3 2023.
Rental income was $6.2 million in Q3 2024, a decrease of 3.0% from Q3 2023. Net Operating Income (“NOI”)1 in Q3 2024 was $4.6 million, a decrease of 5.6% from Q3 2023, primarily reflecting a decrease in rental income due to property dispositions as well as straight-line rent adjustments associated with the dispositions.
The REIT generated a net income attributable to unitholders of $13.0 million in Q3 2024 compared to net income of $3.0 million in Q3 2023.
RESULTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2024
Canadian Net reported that FFO1 decreased to $9.1 million, or $0.443 per unit compared to $9.7 million, or $0.473 per unit for the nine-month period ended September 30, 2023. Normalized FFO1 was $9.3 million, or $0.453 per unit compared to $9.7 million, or $0.473 per unit for the same period in 2023.
Rental income was $19.3 million for the nine-month period ended September 30, 2024, stable from the same period in 2023. NOI1 over the nine-month period ended September 30, 2024 was $14.2 million, a decrease of 2.6% from the same period in 2023, primarily reflecting a decrease in rental income due to property dispositions as well as straight-line rent adjustments associated with the dispositions.
The REIT generated a net income attributable to unitholders of $5.3 million for the nine-month period ended September 30, 2024 compared to net income of $13.9 million for the same period last year.
The decrease in FFO1 and Normalized FFO1 is mainly derived from higher interest charges on mortgage renewals, decreases in rental income due to property dispositions and straight-line rent adjustments associated with the property dispositions. The decrease is partially offset by lower interest charges on credit facilities and mortgages associated with property dispositions. The decrease in NOI1 primarily reflects the sale of properties in 2023 and 2024, partially offset by year-over-year increases in rental income. Finally, the variance in net income attributable to unitholders is primarily attributable to the change in the fair value of investment 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 January 31st, February 28th and March 31st, 2025, to unitholders of record on January 15th, February 14th and March 14th, 2025, respectively.
The tables below represent other financial highlights and the reconciliations of certain non-IFRS measures for Q3 2024 and Q3 2023. This information should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion & Analysis (“MD&A”) for the quarters ended September 30th, 2024 and September 30th, 2023.
SUMMARY OF SELECTED FINANCIAL INFORMATION
| 9 months | ||||||||
| Periods ended September 30 | 2024 | 2023 | Δ | % | ||||
| Financial info | ||||||||
| Property rental income | 19,337,096 | 19,301,189 | 35,907 | – | ||||
| Net income (loss) and comprehensive income (loss) | 5,315,339 | 13,877,829 | (8,562,490 | ) | (62 | %) | ||
| NOI (1) | 14,166,312 | 14,542,784 | (376,472 | ) | (3 | %) | ||
| FFO (1) | 9,102,645 | 9,723,879 | (621,234 | ) | (6 | %) | ||
| Normalized FFO (1)(2) | 9,310,559 | 9,723,879 | (413,320 | ) | (4 | %) | ||
| AFFO (1) | 8,658,851 | 8,605,534 | 53,317 | 1 | % | |||
| EBITDA (1) | 10,670,478 | 19,321,643 | (8,651,165 | ) | (45 | %) | ||
| Adjusted EBITDA (1) | 13,739,618 | 14,735,879 | (996,261 | ) | (7 | %) | ||
| Investment properties | 267,378,220 | 279,046,583 | (11,668,363 | ) | (4 | %) | ||
| Adjusted investment properties (1) | 317,006,824 | 330,887,338 | (13,880,514 | ) | (4 | %) | ||
| Total assets | 293,510,295 | 307,161,232 | (13,650,937 | ) | (4 | %) | ||
| Mortgages | 126,895,706 | 134,038,836 | (7,143,130 | ) | (5 | %) | ||
| Long-term debt | – | 30,000 | (30,000 | ) | (100 | %) | ||
| Current portion of mortgages, long term-debt and convertible debentures | 16,136,371 | 15,003,476 | 1,132,895 | 8 | % | |||
| Mortgages on investment properties held for sale | – | 2,797,546 | (2,797,546 | ) | (100 | %) | ||
| Credit facilities | 11,170,000 | 17,470,362 | (6,300,362 | ) | (36 | %) | ||
| Total convertible debentures | 5,753,739 | 7,264,514 | (1,510,775 | ) | (21 | %) | ||
| Total equity | 129,426,184 | 126,914,012 | 2,512,172 | 2 | % | |||
| Weighted average units o/s – basic | 20,551,554 | 20,579,058 | (27,504 | ) | – | |||
| Amounts on a per unit basis | ||||||||
| FFO(1) | 0.443 | 0.473 | (0.030 | ) | (6 | %) | ||
| Normalized FFO(1)(2) | 0.453 | 0.473 | (0.020 | ) | (4 | %) | ||
| AFFO(1) | 0.421 | 0.418 | 0.003 | 1 | % | |||
| Distributions | 0.259 | 0.259 | – | – | ||||
| (1) This is a non-IFRS financial measure with no standardized IFRS meaning and may not be comparable to other issuers. Refer to the sections “Non-IFRS financial measures”. (2) Normalized FFO adds back one-time sales tax expense related to input tax credits previously claimed on certain payments as well as related interest and penalties and mortgage early repayment fees. Refer to sections “Non-IFRS financial measures” and “Risks related to certain tax matters section” in the Trust’s MD&A. | ||||||||
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, Normalized FFO, FFO per unit, Normalized 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 September 30, 2024, available under Canadian Net’s profile on SEDAR+ at www.sedarplus.ca 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 September 30 | 2024 | 2023 | Δ | |||
| Investment Properties | ||||||
| Developed properties | 267,378,220 | 279,046,583 | (4 | %) | ||
| Investment properties held for sale | – | 4,825,309 | (100 | %) | ||
| Joint Venture Ownership(1) | ||||||
| Developed properties | 47,075,565 | 44,997,909 | 5 | % | ||
| Properties under development | 2,553,039 | 2,017,537 | 27 | % | ||
| Adjusted Investment Properties(2) | 317,006,824 | 330,887,338 | (4 | %) | ||
| (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 | 9 months | ||||||||||||
| Periods ended September 30 | 2024 | 2023 | Δ | 2024 | 2023 | Δ | |||||||
| Rental Income | 6,203,561 | 6,398,506 | (194,945 | ) | 19,337,096 | 19,301,189 | 35,907 | ||||||
| Operating expenses | (1,650,928 | ) | (1,577,084 | ) | (73,844 | ) | (5,170,784 | ) | (4,758,405 | ) | (412,379 | ) | |
| Net Operating Income(1) | 4,552,633 | 4,821,422 | (268,789 | ) | 14,166,312 | 14,542,784 | (376,472 | ) | |||||
| Share of net income (loss) from investments in joint ventures | 1,866,458 | 491,824 | 1,374,634 | 1,577,879 | 1,889,515 | (311,636 | ) | ||||||
| Increase/(decrease) in fair values of investment properties | 9,045,962 | (99,885 | ) | 9,145,847 | (3,413,037 | ) | 3,881,780 | (7,294,817 | ) | ||||
| Unit-based compensation | (312,572 | ) | (97,327 | ) | (215,245 | ) | (715,537 | ) | (427,375 | ) | (288,162 | ) | |
| Administrative expenses | (424,847 | ) | (232,944 | ) | (191,903 | ) | (960,487 | ) | (761,767 | ) | (198,720 | ) | |
| Financial expenses | (1,756,825 | ) | (1,846,142 | ) | 89,317 | (5,339,791 | ) | (5,247,108 | ) | (92,683 | ) | ||
| Net income (loss) attributable to unitholders | 12,970,809 | 3,036,948 | 9,933,861 | 5,315,339 | 13,877,829 | (8,562,490 | ) | ||||||
| FFO(1) | 2,808,963 | 3,181,261 | (12 | %) | 9,102,645 | 9,723,879 | (6 | %) | |||||
| FFO per unit(1) | 0.137 | 0.155 | (12 | %) | 0.443 | 0.473 | (6 | %) | |||||
| Normalized FFO(1)(2) | 3,016,877 | 3,181,261 | (5 | %) | 9,310,559 | 9,723,879 | (4 | %) | |||||
| Normalized FFO per unit(1)(2) | 0.147 | 0.155 | (5 | %) | 0.453 | 0.473 | (4 | %) | |||||
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,561,060 | 20,531,490 | 29,570 | 20,551,554 | 20,579,058 | (27,504 | ) | ||||||
| (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” (2) Normalized FFO adds back one-time sales tax expense related to input tax credits previously claimed on certain payments as well as related interest and penalties and mortgage early repayment fees. Refer to sections “Non-IFRS financial measures” and “Risks related to certain tax matters section” in the Trust’s MD&A. | |||||||||||||
Reconciliation of Net Income to Funds from Operations
| 3 months | 9 months | ||||||||||||
| Periods ended September 30 | 2024 | 2023 | Δ | 2024 | 2023 | Δ | |||||||
| Net income (loss) attributable to unitholders | 12,970,809 | 3,036,948 | 9,933,861 | 5,315,339 | 13,877,829 | (8,562,490 | ) | ||||||
| Δ in value of investment properties | (9,045,962 | ) | 99,885 | (9,145,847 | ) | 3,413,037 | (3,881,780 | ) | 7,294,817 | ||||
| Δ in value of investment properties in joint ventures | (1,436,284 | ) | (18,222 | ) | (1,418,062 | ) | (325,597 | ) | (500,427 | ) | 174,830 | ||
| Unit-based compensation | 312,572 | 97,327 | 215,245 | 715,537 | 427,375 | 288,162 | |||||||
| Δ fair value adjustments on derivative financial instruments | 6,454 | (34,677 | ) | 41,131 | (18,300 | ) | (203,557 | ) | 185,257 | ||||
| Income taxes | 1,374 | – | 1,374 | 2,629 | 4,439 | (1,810 | ) | ||||||
| FFO(1) | 2,808,963 | 3,181,261 | (12 | %) | 9,102,645 | 9,723,879 | (6 | %) | |||||
| Sales tax expense(2) | 117,150 | – | 117,150 | 117,150 | – | 117,150 | |||||||
| Mortgage early repayment fee | 90,764 | – | 90,764 | 90,764 | – | 90,764 | |||||||
| Normalized FFO(1)(3) | 3,016,877 | 3,181,261 | (5 | %) | 9,310,559 | 9,723,879 | (4 | %) | |||||
| FFO per unit(1) | 0.137 | 0.155 | (12 | %) | 0.443 | 0.473 | (6 | %) | |||||
| Normalized FFO per unit(1) | 0.147 | 0.155 | (5 | %) | 0.453 | 0.473 | (4 | %) | |||||
| Distributions | 1,773,437 | 1,770,629 | 2,808 | 5,317,702 | 5,324,382 | (6,680 | ) | ||||||
| Distributions per unit | 0.086 | 0.086 | – | 0.259 | 0.259 | – | |||||||
| FFO per unit(1) – after distributions | 0.051 | 0.069 | (26 | %) | 0.184 | 0.214 | (14 | %) | |||||
| Normalized FFO per unit(1) – after distributions | 0.061 | 0.069 | (12 | %) | 0.194 | 0.214 | (9 | %) | |||||
| Distributions as a % of FFO(1) | 63 | % | 55 | % | 8 | % | 58 | % | 55 | % | 3 | % | |
| Distributions as a % of Normalized FFO(1) | 59 | % | 55 | % | 4 | % | 57 | % | 55 | % | 2 | % | |
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,561,060 | 20,531,490 | 29,570 | 20,551,554 | 20,579,058 | (27,504 | ) | ||||||
| (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) Sales tax expense related to input tax credits previously claimed on certain payments as well as related interest and penalties. Refer to Risks related to certain tax matters section. (3) Normalized FFO adds back one-time sales tax expense related to input tax credits previously claimed on certain payments as well as related interest and penalties and mortgage early repayment fees. Refer to sections “Non-IFRS financial measures” and “Risks related to certain tax matters section” in the Trust’s MD&A. | |||||||||||||
Adjusted Funds from Operations
| 3 months | 9 months | ||||||||||||
| Periods ended September 30 | 2024 | 2023 | Δ | 2024 | 2023 | Δ | |||||||
| FFO (1) | 2,808,963 | 3,181,261 | (372,298 | ) | 9,102,645 | 9,723,879 | (621,234 | ) | |||||
| Straight-line rent adjustment(2) | 8,696 | (83,913 | ) | 92,609 | (87,864 | ) | (293,850 | ) | 205,986 | ||||
| Maintenance/cap-ex on existing properties(3) | (91,592 | ) | (321,235 | ) | 229,643 | (355,930 | ) | (824,495 | ) | 468,565 | |||
| AFFO(1) | 2,726,067 | 2,776,113 | (2 | %) | 8,658,851 | 8,605,534 | 1 | % | |||||
| AFFO per unit(1) | 0.133 | 0.135 | (2 | %) | 0.421 | 0.418 | 1 | % | |||||
| Distributions per unit | 0.086 | 0.086 | – | 0.259 | 0.259 | – | |||||||
| AFFO per unit(1) – after distributions | 0.047 | 0.049 | (4 | %) | 0.162 | 0.159 | 2 | % | |||||
| Distributions as a % of AFFO(1) | 65 | % | 64 | % | 1 | % | 62 | % | 62 | % | – | ||
| Weighted avg. units o/s | |||||||||||||
| Basic | 20,561,060 | 20,531,490 | 29,570 | 20,551,554 | 20,579,058 | (27,504 | ) | ||||||
| (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 2024 includes a charge of $118,890 (2023: $489,000) that will generate additional income for the Trust | |||||||||||||
Reconciliation of Net Income to EBITDA
| 3 months | 9 months | ||||||||||||
| Periods ended September 30 | 2024 | 2023 | Δ | 2024 | 2023 | Δ | |||||||
| Net income (loss) attributable to unitholders | 12,970,809 | 3,036,948 | 9,933,861 | 5,315,339 | 13,877,829 | (8,562,490 | ) | ||||||
| Net interest expense | 1,748,390 | 1,877,370 | (128,980 | ) | 5,352,510 | 5,439,375 | (86,865 | ) | |||||
| Income taxes | 1,374 | – | 1,374 | 2,629 | 4,439 | (1,810 | ) | ||||||
| EBITDA(1) | 14,720,573 | 4,914,318 | 9,806,255 | 10,670,478 | 19,321,643 | (8,651,165 | ) | ||||||
| Δ in value of investment properties | (9,045,962 | ) | 99,885 | (9,145,847 | ) | 3,413,037 | (3,881,780 | ) | 7,294,817 | ||||
| Δ in value of investment properties in joint ventures | (1,436,284 | ) | (18,222 | ) | (1,418,062 | ) | (325,597 | ) | (500,427 | ) | 174,830 | ||
| Δ in value of convertible debentures | 6,454 | (34,677 | ) | 41,131 | (18,300 | ) | (203,557 | ) | 185,257 | ||||
| Adjusted EBITDA(1) | 4,244,781 | 4,961,304 | (14 | %) | 13,739,618 | 14,735,879 | (7 | %) | |||||
| Interest expense | 1,834,160 | 1,963,877 | (129,717 | ) | 5,659,707 | 5,742,695 | (82,988 | ) | |||||
| Principal repayments | 1,222,083 | 1,105,286 | 116,797 | 3,506,413 | 3,425,772 | 80,641 | |||||||
| Debt service requirements | 3,056,243 | 3,069,163 | – | 9,166,120 | 9,168,467 | – | |||||||
| Interest coverage ratio based on adjusted EBITDA(1) | 2.3x | 2.5x | (0.2x | ) | 2.4x | 2.6x | (0.2x | ) | |||||
| Debt service coverage based on adjusted EBITDA(1) | 1.4x | 1.6x | (0.2x | ) | 1.5x | 1.6x | (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 November 20, 2024, at 9:00 a.m. (EST) to discuss the results.
The link to join the webcast is the following: https://edge.media-server.com/mmc/p/6gb3pv5b
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 September 30th, 2024, financial statements and management discussion & analysis of Canadian Net may be viewed on SEDAR+ at www.sedarplus.ca.
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”.
