Canadian Net REIT Announces its Results for the Quarter Ended September 30, 2022, an Increase in its Per Unit Distributions for 2023 and Q1 2023 Monthly Distributions
MONTRÉAL, Nov. 21, 2022 (GLOBE NEWSWIRE) -- (TSX-V: NET.UN) Canadian Net Real Estate Investment Trust (“Canadian Net” or the “Trust”) announces its results for the quarter ended September 30th, 2022, an increase in its per unit distributions for an 11th consecutive year, and monthly distributions for the months of January, February and March 2023.
Jason Parravano, President and CEO says: “I am pleased to share our results this quarter, which demonstrate the strength and resilience of our portfolio. Despite a challenging macro-environment, highlighted by higher interest rates and inflation, we continue to deliver per unit FFO accretion which has permitted us to once again, and for an 11th consecutive year, raise our distribution headed into 2023. This will mark a cumulative 176% increase in our per unit distribution rate since we began distributing in 2012.”
RESULTS
For the quarter ended September 30th, 2022, Canadian Net reported funds from operations per unit1 ("FFO per unit") of $0.163 compared to $0.145 per unit for the quarter ended September 30th, 2021, an increase of 12%. Funds from Operations1 (“FFO”) was $3,347,120, an increase of 20% relative to $2,790,255 in Q3 2021.
During Q3 2022, the Trust’s property rental income was $6,369,404 compared to $4,885,412 in Q3 2021, an increase of 30%. Net Operating Income1 (“NOI”) was $4,773,698 compared to $3,725,787 in Q3 2021, an increase of 28%.
Canadian Net also recorded a loss attributable to unitholders of $540,958 compared to a net income of $11,192,478 in Q3 2021.
For the nine-month period ended September 30th, 2022, Canadian Net reported FFO per unit1 of $0.474 compared to $0.434 per unit for the same period in 2021, an increase of 9%. FFO1 was $9,709,595, an increase of 24% relative to $7,820,191 for the nine-month period ended September 30th, 2021.
During the period, the Trust’s property rental income was $17,676,041 compared to $14,020,771 for the same period in 2021, an increase of 26%. NOI1 was $13,494,033 compared to $10,417,458 for the same period in 2021, an increase of 30%.
Canadian Net also recorded a net income attributable to unitholders of $2,816,358 compared to $17,636,921 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 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
Starting in January 2023, the annual distribution will go from $0.34 to $0.345 per unit, representing an increase of 1.5%. With this increase, Canadian Net’s distributions have increased 176% since its first distributions in 2012, representing a compounded annual growth rate of 9.7%.
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 January 31st, February 28th and March 31st, 2023, to unitholders of record on January 13th, February 15th and March 15th, 2023, respectively.
The tables below represent other financial highlights as well as the reconciliations of certain non-IFRS measures for the periods ended September 30th, 2022, and its comparative period. This information should be read in conjunction with the Consolidated Financial Statements and MD&A for the quarter ended September 30th, 2022, and the Consolidated Financial Statements and MD&A for the quarter ended September 30th, 2021.
SUMMARY OF SELECTED FINANCIAL INFORMATION
| 9 months | ||||||
| Periods ended September 30 | 2022 | 2021 | Δ | % | ||
| Financial info | ||||||
| Property rental income | 17,676,041 | 14,020,771 | 3,655,270 | 26% | ||
| Net income and comprehensive income | 2,816,358 | 17,636,921 | (14,820,563) | (84%) | ||
| NOI (1) | 13,494,033 | 10,417,458 | 3,076,575 | 30% | ||
| FFO (1) | 9,709,595 | 7,820,191 | 1,889,404 | 24% | ||
| AFFO (1) | 9,178,267 | 7,234,005 | 1,944,262 | 27% | ||
| EBITDA (1) | 7,277,200 | 20,862,849 | (13,585,649) | (65%) | ||
| Adjusted EBITDA (1) | 13,658,110 | 10,716,808 | 2,941,302 | 27% | ||
| Investment properties | 291,358,184 | 225,342,146 | 66,016,038 | 29% | ||
| Adjusted investment properties (1) | 338,203,870 | 268,241,443 | 69,962,427 | 26% | ||
| Total assets | 315,184,668 | 254,507,121 | 60,677,547 | 24% | ||
| Mortgages | 135,331,955 | 108,234,779 | 27,097,176 | 25% | ||
| Long-term debt | 45,000 | 60,000 | (15,000) | (25%) | ||
| Current portion of mortgages and long term-debt | 21,187,436 | 10,675,435 | 10,512,001 | 98% | ||
| Credit facilities | 16,435,362 | - | 16,435,362 | n/a | ||
| Total convertible debentures | 8,442,262 | 8,228,420 | 213,842 | 3% | ||
| Total equity | 129,746,124 | 123,207,391 | 6,538,733 | 5% | ||
| Weighted average units o/s - basic | 20,488,429 | 18,030,472 | 2,457,957 | 14% | ||
| Amounts on a per unit basis | ||||||
| FFO(1) | 0.474 | 0.434 | 0.040 | 9% | ||
| AFFO(1) | 0.448 | 0.401 | 0.047 | 12% | ||
| Distributions | 0.255 | 0.225 | 0.030 | 13% | ||
| (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”. | ||||||
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 September 30, 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 September 30 | 2022 | 2021 | Δ | |
| Investment Properties | ||||
| Developed properties | 291,358,184 | 225,342,146 | 29% | |
| Joint Venture Ownership(1) | ||||
| Developed properties | 43,999,121 | 39,222,865 | 12% | |
| Properties under development | 2,846,565 | 3,676,432 | (23%) | |
| Adjusted Investment Properties(2) | 338,203,870 | 268,241,443 | 26% | |
| (1) Represents Canadian Net’s proportionate share | ||||
| (2) 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” | ||||
Results of Operations
| 3 months | 9 months | |||||||||
| Periods ended September 30 | 2022 | 2021 | Δ | 2022 | 2021 | Δ | ||||
| Rental Income | 6,369,404 | 4,885,412 | 1,483,992 | 17,676,041 | 14,020,771 | 3,655,270 | ||||
| Operating costs | (1,595,706) | (1,159,625) | (436,081) | (4,182,008) | (3,603,313) | (578,695) | ||||
| Net Operating Income(1) | 4,773,698 | 3,725,787 | 1,047,911 | 13,494,033 | 10,417,458 | 3,076,575 | ||||
| Share of net income (loss) from investments in joint ventures | (119,309) | 1,760,905 | (1,880,214) | 935,231 | 1,866,328 | (931,097) | ||||
| Increase/(decrease) in fair values of investment properties | (3,295,446) | 6,794,914 | (10,090,360) | (6,353,047) | 10,002,310 | (16,355,357) | ||||
| Financial expenses | 1,561,826 | 885,608 | 676,218 | 4,079,981 | 3,721,491 | 358,490 | ||||
| Administrative expenses | 222,210 | 205,425 | 16,785 | 672,702 | 619,138 | 53,564 | ||||
| Unit-based compensation | 115,865 | (1,905) | 117,770 | 507,176 | 308,546 | 198,630 | ||||
| Net income and comprehensive income | (540,958) | 11,192,478 | (11,733,436) | 2,816,358 | 17,636,921 | (14,820,563) | ||||
| FFO(1) | 3,347,120 | 2,790,255 | 20% | 9,709,595 | 7,820,191 | 24% | ||||
| FFO per unit(1) | 0.163 | 0.145 | 12% | 0.474 | 0.434 | 9% | ||||
| Weighted avg. units o/s Basic | 20,592,733 | 19,186,564 | 1,406,169 | 20,488,429 | 18,030,472 | 2,457,957 | ||||
| (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 | 9 months | ||||||||
| Periods ended September 30 | 2022 | 2021 | Δ | 2022 | 2021 | Δ | |||
| Net income attributable to unitholders | (540,958) | 11,192,478 | (11,733,436) | 2,816,358 | 17,636,921 | (14,820,563) | |||
| Δ in value of investment properties | 3,295,446 | (6,794,914) | 10,090,360 | 6,353,047 | (10,002,310) | 16,355,357 | |||
| Δ in value of investment properties in joint ventures | 591,229 | (1,335,437) | 1,926,666 | 418,539 | (616,951) | 1,035,490 | |||
| Unit based compensation | 115,865 | (1,905) | 117,770 | 507,176 | 308,546 | 198,630 | |||
| Δ fair value adjustments on derivative financial instruments | (112,130) | (277,250) | 165,120 | (390,676) | 473,220 | (863,896) | |||
| Interest on the lease liability | - | 7,283 | (7,283) | 7,483 | 21,554 | (14,071) | |||
| Income taxes | (2,332) | - | (2,332) | (2,332) | (789) | (1,543) | |||
| FFO(1) | 3,347,120 | 2,790,255 | 20% | 9,709,595 | 7,820,191 | 24% | |||
| FFO per unit(1) | 0.163 | 0.145 | 12% | 0.474 | 0.434 | 9% | |||
| Distributions | 1,748,368 | 1,446,381 | 301,987 | 5,218,536 | 4,063,714 | 1,154,822 | |||
| Distributions per unit | 0.085 | 0.075 | 13% | 0.255 | 0.225 | 13% | |||
| FFO per unit(1) - after distributions | 0.078 | 0.070 | 10% | 0.219 | 0.209 | 5% | |||
| Distributions per unit as a % of FFO per unit(1) | 52% | 52% | - | 54% | 52% | 2% | |||
| Weighted avg. units o/s Basic | 20,592,733 | 19,186,564 | 1,406,169 | 20,488,429 | 18,030,472 | 2,457,957 | |||
| (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” | |||||||||
Adjusted Funds from Operations
| 3 months | 9 months | ||||||||
| Periods ended September 30 | 2022 | 2021 | Δ | 2022 | 2021 | Δ | |||
| FFO (1) | 3,347,120 | 2,790,255 | 556,865 | 9,709,595 | 7,820,191 | 1,889,404 | |||
| Amortization of finance charges included in interest expense | - | - | - | - | - | - | |||
| Straight-line rent adjustment(2) | (119,325) | (142,009) | 22,684 | (362,280) | (447,320) | 85,040 | |||
| Maintenance/cap-ex on existing properties | (85,072) | (46,558) | (38,514) | (169,048) | (138,866) | (30,182) | |||
| Leasing costs on existing properties | - | - | - | - | - | - | |||
| Debt extinguishment penalties | - | - | - | - | - | - | |||
| AFFO(1) | 3,142,723 | 2,601,688 | 21% | 9,178,267 | 7,234,005 | 27% | |||
| AFFO per unit(1) | 0.153 | 0.136 | 13% | 0.448 | 0.401 | 12% | |||
| Distributions per unit | 0.085 | 0.075 | 13% | 0.255 | 0.225 | 13% | |||
| AFFO per unit(1) - after distributions | 0.068 | 0.061 | 12% | 0.193 | 0.176 | 10% | |||
| Distributions per unit(1) as a % of AFFO per unit(1) | 56% | 55% | 1% | 57% | 56% | 1% | |||
| Weighted avg. units o/s Basic | 20,592,733 | 19,186,564 | 1,406,169 | 20,488,429 | 18,030,472 | 2,457,957 | |||
| (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) Adjusted for the proportionate share of equity accounted investments | |||||||||
Reconciliation of Net Income to EBITDA
| 3 months | 9 months | ||||||||
| Periods ended September 30 | 2022 | 2021 | Δ | 2022 | 2021 | Δ | |||
| Net income attributable to unitholders | (540,958) | 11,192,478 | (11,733,436) | 2,816,358 | 17,636,921 | (14,820,563) | |||
| Net interest expense | 1,671,201 | 1,160,610 | 510,591 | 4,463,664 | 3,244,782 | 1,218,882 | |||
| Interest on the lease liability | - | (7,283) | 7,283 | (7,483) | (21,554) | 14,071 | |||
| Income taxes | (2,332) | - | (2,332) | (2,332) | (789) | (1,543) | |||
| Other financial charges | 2,755 | 2,248 | 507 | 6,993 | 3,489 | 3,504 | |||
| EBITDA(1) | 1,130,666 | 12,348,053 | (11,217,387) | 7,277,200 | 20,862,849 | (13,585,649) | |||
| Δ in value of investment properties | 3,295,446 | (6,794,914) | 10,090,360 | 6,353,047 | (10,002,310) | 16,355,357 | |||
| Δ in value of investment properties in joint ventures | 591,229 | (1,335,437) | 1,926,666 | 418,539 | (616,951) | 1,035,490 | |||
| Δ in value of convertible debentures | (112,130) | (164,945) | 52,815 | (317,496) | 272,848 | (590,344) | |||
| Δ in value of warrants | - | (112,305) | 112,305 | (73,180) | 200,372 | (273,552) | |||
| Adjusted EBITDA(1) | 4,905,211 | 3,940,452 | 24% | 13,658,110 | 10,716,808 | 27% | |||
| Interest expense | 1,751,404 | 1,301,854 | 449,550 | 4,694,763 | 3,332,560 | 1,362,203 | |||
| Principal repayments | 1,145,038 | 836,828 | 308,210 | 3,249,980 | 2,424,317 | 825,663 | |||
| Debt service requirements | 2,896,442 | 2,138,682 | 35% | 7,944,743 | 5,756,877 | 38% | |||
| Interest coverage ratio based on adjusted EBITDA(1) | 2.8x | 3.0x | (0.2x) | 2.9x | 3.2x | (0.3x) | |||
| Debt service coverage based on adjusted EBITDA(1) | 1.7x | 1.8x | (0.1x) | 1.7x | 1.9x | (0.2x) | |||
| (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 22nd, 2022, 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/ma2akihb
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 September 30th, 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.
