All figures in $USD unless otherwise noted.
EARNINGS
- For the three months ended
June 30, 2022 , net loss was approximately$10.3 million , in comparison to the$0.3 million net loss reported for the three months endedMarch 31, 2022 and the$0.8 million net income reported for the three months endedJune 30, 2021 . For the six months endedJune 30, 2022 , net loss was$10.6 million in comparison to the$2.2 million net loss reported for the six months endedJune 30, 2021 ; - Excluding non-cash fair value adjustments, net income was
$0.8 million for the three months endedJune 30, 2022 , in comparison to the$0.5 million reported for the three months endedMarch 31, 2022 and the$0.6 million reported for the three months endedJune 30, 2021 . Excluding non cash fair value adjustments, net income was$1.3 million in comparison to the$1.1 million reported for the six months endedJune 30, 2021 ; - For the three months ended
June 30, 2022 , AFFO was approximately$0.7 million , in comparison to the$0.4 million reported for the three months endedMarch 31, 2022 and the$0.6 million reported for the six months endedJune 30, 2021 . For the six months endedJune 30, 2022 , AFFO was$1.1 million in comparison to the$1.1 million reported for the six months endedJune 30, 2021 . Excluding a one-time adjustment to asset management fees, AFFO was approximately$0.4 million , in line with the$0.4 million reported for the quarter endedMarch 31, 2022 ;
Three Months Ended | Six Months Ended | ||||||||||||||||
2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Net Income/(Loss) | $ | (10,303,122 | ) | $ | (345,345 | ) | $ | 753,511 | $ | (10,648,467 | ) | $ | (2,192,406 | ) | |||
Net Income Before Fair Value Adjustments | $ | 806,599 | $ | 532,100 | $ | 590,600 | $ | 1,338,699 | $ | 1,099,548 | |||||||
FFO | $ | 971,866 | $ | 290,189 | $ | (393,047 | ) | $ | 1,262,054 | $ | (2,507,407 | ) | |||||
AFFO | $ | 687,960 | $ | 446,351 | $ | 585,498 | $ | 1,134,311 | $ | 1,093,450 | |||||||
Distributions | $ | 467,669 | $ | 448,658 | $ | 452,624 | $ | 916,327 | $ | 907,790 | |||||||
AFFO Per Unit | $ | 0.09 | $ | 0.06 | $ | 0.08 | $ | 0.15 | $ | 0.14 | |||||||
Distributions Per Unit | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.12 | $ | 0.12 | |||||||
AFFO Payout Ratio | 68 | % | 101 | % | 77 | % | 81 | % | 83 | % |
- NAV AT
$8.63 PER TRUST UNIT (CAD$11 .12):
For the three months endedJune 30, 2022 , the Trust reported NAV at$8.63 per Trust Unit (CAD$11.12 ); - AVERAGE RENT INCREASES ACROSS INVESTMENT PORTFOLIO:
Wholly-Owned Real Estate Investments Portfolio: For the three months endedJune 30, 2022 , average rents increased by 3% to$1,136 per unit from the$1,104 per unit reported for the three months endedMarch 31, 2022 and 10% from the$1,034 reported for the three months endedJune 30, 2021 ;
Joint Venture Real Estate Investments Portfolio: For the three months endedJune 30, 2022 , average rents increased by 1% to$1,443 per unit from the$1,427 per unit reported for the three months endedMarch 31, 2022 and 4% from the$1,388 reported for the three months endedJune 30, 2021 ; - CAD $13
MILLION BRIDGE LOAN :
OnApril 18, 2022 , the Trust entered into an agreement with an entity related to the Asset Manager of the Trust, to borrowCAD$13 million to be used for theHouston, TX Transaction andPreferred Capital Investment . Summarized terms of the Bridge Loan are (i) interest rate the greater of 6.0% per annum or the Canadian CharteredBank Prime Rate plus a spread; (ii) two year term; (iii) fully open for repayment at any time prior to maturity; $3.5 MILLION , 12% PREFERRED CAPITAL INVESTMENT:
OnApril 22, 2022 , The Trust provided a$3.5 million preferred capital loan (“South Dakota Preferred Capital Loan”) for the recapitalization of a multi-residential portfolio located inSioux Falls, South Dakota . The preferred capital loan earns 12% interest during the initial three year term; andHOUSTON, TX ACQUISITION:
OnApril 29, 2022 , the Trust acquired the remaining 50% interest in theHouston, TX Equity Accounted andPreferred Investment for$5.3 million . The Trust now owns 100% of this investment and now reports it as an investment property on the Trust’s financial statements.
STRATEGIC OUTLOOK:
The current macro environment of rapidly increasing interest rates and persistent inflation is presenting a challenging environment in how to address valuations, particularly in certain geographies. In the current context, capitalization rates on apartment buildings are below the cost of five- and ten-year mortgage debt, resulting in a negative investing spread scenario for the first time in many years. Specifically, mortgage bond yields have increased more than capitalization rates. This inversion has caused, in the opinion of the
The Board and Senior Management have taken the view that it is of upmost importance to protect the safety of the balance sheet and take a highly conservative approach in the coming quarters. Operating costs have risen rapidly, and in some cases, we are experiencing double digit cost increases, which is greater than the levels of inflation reported by various governmental authorities. Senior Management is monitoring costs closely and taking steps where it can minimize the impact from cost escalations.
Certain geographies are presenting additional operating challenges for a portion of the Trust’s portfolio. These geographies include
Conversely, the portion of the Trust’s portfolio in
The Board and Senior Management will not attempt to grow for the sake of growth and does not believe we should hold onto real estate properties in a rising interest rate environment with no corresponding increase to capitalization rates and no near-term strong rental rate growth. As a result of this negative investing spread scenario, combined with the current inflationary environment, the Board and Senior Management take the view that, it could look to dispose of certain properties. This option should be explored, with a view that net proceeds be returned to Unitholders or re-invested in other investments that generate higher rates of return.
Furthermore, Management has made it a priority to reduce and eliminate all non-registered mortgage debt and is taking immediate steps in this regard. As of
The Board and Management will assess these matters on a quarterly basis and determine if the Trust should: (i) distribute excess income; (ii) distribute net proceeds from asset sales, after debt repayment; (iii) reinvest net proceeds into other investments; (iv) distribute proceeds as a return of capital or special distribution; and/or (v) use excess proceeds to repurchase Trust Units in the marketplace.
To demonstrate the external manager’s alignment of interests in these unprecedented times, the manager has agreed, at its option, subject to each payment being approved by the independent trustees and taking into account the NAV calculation, to accept payments for services in Trust Units, calculated at the greater of: (i) the price of Trust Units issued within six months prior to payment; or (ii) 95% of NAV as reported in the prior quarter. Such Trust Units will be issued in exchangeable B units, and pending Unitholder approval at the next Annual General Meeting, the asset manager will accrue the fee for services due. Furthermore, for any real estate properties that are provisioned by way of write downs or preferred investments that are classified as non-performing, the asset manager will not charge a fee for asset management services until such time as those assets return to performing status.
As stated previously, the prudent approach during these unprecedented times is to assess direction each quarter with the principal focus of securing a strong balance sheet and either returning capital or deploying it opportunistically into the best yielding investments. That may include avoiding equity investments, and instead invest in higher yielding preferred / debt investments.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain information in this news release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expect", "intend" and similar expressions.
Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse factors affecting the
Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Except as required by applicable law, the Trust undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise
Certain financial information presented in this press release reflect certain non-International Financial Reporting Standards (“IFRS”) financial measures, which include, but not limited to NOI, FFO and AFFO. These measures are commonly used by real estate investment companies as useful metrics for measuring performance, however, they do not have standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other real estate investment companies. These terms are defined in the Trust’s Management Discussion and Analysis for the three months ended
Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the
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Source:
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