PROREIT ANNOUNCES FIRST QUARTER RESULTS FOR FISCAL 2024

MONTREAL, May 8, 2024 /CNW/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today reported its financial and operating results for the three months ended March 31, 2024 ("first quarter" or "Q1").

First Quarter of Fiscal 2024 Highlights

• Property revenue increased by 1.7% in Q1 year-over-year
• Net operating income (NOI) was up 1.9% in Q1 year-over-year
• Same property NOI* was up 7.8% in Q1 year-over-year
• Sale of three non-core properties for gross proceeds of $26.1 million in Q1
• Entered into binding agreements in Q1 for the sale of two non-core retail properties, which are expected to close in Q2, for gross proceeds of $7.0 million
• 55.6% of gross leasable area ("GLA") maturing in 2024 renewed at average spread of 33.5%
• Occupancy rate at 97.7% at March 31, 2024 (including committed space)
• Total debt (current and non-current) of $493.6 million at March 31, 2024, a decrease of $25.1 million, compared to $518.7 million at the same date last year
• Adjusted Debt to Gross Book Value* was 49.5% at March 31, 2024, compared to 50.2% at December 31, 2023
• $39.5 million in available credit facility and $11.6 million in cash at March 31, 2024

"PROREIT started the year on solid footing, continuing to reap the benefits of our stated strategy to focus on the industrial sector. In the first quarter of 2024, we delivered 7.8% Same Property NOI* growth year-over-year for our industrial assets, mainly driven by robust lease renewal spreads and rental steps," said Gordon G. Lawlor, President and CEO, PROREIT.

"In the quarter, we further optimized our portfolio with the disposition of three non-core properties for gross proceeds of $26.1 million and by entering into binding agreements for the sale of two non-core retail properties for gross proceeds of $7.0 million, scheduled to close in Q2 2024. This will increase our industrial segment exposure to 83.1% of total GLA, on a proforma basis.

"Our successful property sales in the first quarter also allowed us to reduce total debt year-over-year by $25.1 million to $493.6 million, bringing our Adjusted Debt to Gross Book Value* of 49.5% at quarter-end. For the remainder of 2024, mortgage maturities amount to $17.8 million and we expect to renew at market terms.

"Leasing activities have been very positive. We have now renewed or replaced 55.6% of GLA maturing in 2024 at a positive average spread of 33.5% for the entire portfolio, including a robust 47.7% positive average spread for the industrial sector. We are also pleased to have signed a 15-year lease with a new quality international tenant starting in February 2025 following the expiry of the current lease for a 128,000-square-foot property with annual rent steps and a base rent that is in excess of 30% over the expiring lease.

"While our occupancy rate was strong at 97.7%, it was temporarily impacted by transitional vacancies in a few industrial properties which are experiencing strong leasing momentum.

"Finally, we are pleased to have published our third Sustainability Report. As we adapt to evolving stakeholder expectations, we maintained our focus on sustainable business objectives and the implementation of additional best practices. We are proud of our achievements over the past year and are committed to continuing to improve as we move forward on our ESG journey.

"With 2024 well underway, we will continue to focus on recycling capital and further increasing our footprint in the attractive industrial sector as the market stabilizes. We will pursue this strategy while managing our balance sheet and allocating capital prudently to the benefit of our unitholders and, ultimately, all our stakeholders," concluded Mr. Lawlor.

Financial Results
Table 1- Financial Highlights

At March 31, 2024, PROREIT owned 120 investment properties (including a 50% ownership interest in 42 investment properties), compared to 130 investment properties (including a 50% ownership interest in 42 investment properties) at March 31, 2023. The decrease in total properties is a result of the sale of a 100% interest in ten investment properties during the twelve months ended March 31, 2024. At March 31, 2024, total assets amounted to $1.00 billion, compared to $1.05 billion as at March 31, 2023.

For the first quarter ended March 31, 2024:

• Property revenue amounted to $25.7 million in Q1 2024, an increase of $0.4 million or 1.7%, compared to $25.3 million for the same prior year period. The increase was mainly due to contractual increases in rent and higher rental rates on lease renewals and new leases, offset by the decrease in the number of properties in the portfolio.
• Net operating income (NOI) amounted to $14.8 million for the quarter, compared to $14.5 million in Q1 2023, an increase of $0.3 million or 1.9%, which was mainly driven by the same factors impacting property revenue described above.
• Same Property NOI*, which represented all 120 properties in the portfolio, reached $14.5 million for the quarter, an increase of $1.0 million or 7.8%, compared to the same quarter last year. The increase was largely a result of contractual increases in rent and higher rental rates on lease renewals and new leases across all asset classes, along with higher occupancy rates in the office asset class, offset by the slight decrease in occupancy in the industrial asset class.
• Net cash flows provided from operating activities for the quarter was $9.7 million, compared to $10.6 million for Q1 2023.
• AFFO* totaled $7.4 million for the quarter, down slightly from $7.8 million for Q1 2023.
• AFFO Payout Ratio – Basic* stood at 91.6% for the quarter, compared to 87.0% for Q1 2023, the increase was primarily driven by the reduction in the number of properties owned and higher interest expense and leasing costs, partially offset by contractual increases in rent and higher rental rates on lease renewals.

TABLE 2- Reconciliation of net operating income to net income and comprehensive income

For the three months ended March 31, 2024, net loss and comprehensive loss was $9.5 million, compared to net income and comprehensive income of $13.0 million during the same prior year period. The $22.5 million variance was mainly related to the $20.9 million impact in the non-cash fair market value adjustment on investment properties between Q1 2024 and Q1 2023.

Sustained Operating Environment

At March 31, 2024, PROREIT's portfolio totaled 120 investment properties (including a 50% ownership interest in 42 investment properties), aggregating 6.2 million square feet of GLA, with a weighted average lease term of 3.9 years.

The occupancy rate of the portfolio was 97.7% as at March 31, 2024 (including committed space), compared to 98.6% at the same date last year. The decrease in occupancy rate is mainly due to a few vacancies in industrial properties where management is currently experiencing strong leasing momentum.

The weighted average in‐place rent for industrial properties at March 31, 2024 was $8.53 per square foot, an increase of 9.4% compared to $7.80 per square foot at the same date last year.

At March 31, 2024, PROREIT had renewed 55.6% of GLA maturing in 2024 at a positive average spread of 33.5% and, for the industrial sector, at a positive average spread of 47.7%.

In addition, for a tenant expiry in January 2025, PROREIT secured a lease for the 128,000 square foot space with a new quality international tenant for a 15-year term with annual rent steps and base rent in excess of 30% over the expiring lease.

Portfolio Transactions

In the first quarter of 2024, PROREIT completed the sales of three non-core properties for total gross proceeds of $26.1 million (excluding closing costs), as follows:

On February 2 and 9, 2024, PROREIT completed the sales of two non-core properties in Upper Tantallon, Nova Scotia and Montreal, Quebec totalling approximately 124,000 square feet for gross proceeds of $20.7 million (excluding closing costs). Proceeds of the sales were used to repay approximately $16.0 million in related mortgages, with the balance used for general business purposes.

On March 15, 2024, PROREIT sold a non-core retail property in Courtenay, British Columbia for gross proceeds of $5.4 million (excluding closing costs). The net proceeds of the sale were used to partially repay a $9.4 million mortgage secured by additional retail properties.

Also in the first quarter, PROREIT entered into binding agreements for the sale of two non-core retail properties, for gross proceeds of $7.0 million (excluding closing costs), which are expected to close in Q2 2024, subject to standard closing conditions.

The first agreement was entered into on March 19, 2024, PROREIT with a third-party purchaser to sell one non-core retail property in Regina, Saskatchewan totalling approximately 11,000 square feet for gross proceeds of $4.7 million (excluding closing costs). Net proceeds of the sale will be used to prepay a portion of the outstanding credit facility or for general business purposes.

The second agreement was entered into on March 26, 2024, with a third-party purchaser to sell one non-core retail property in Pincher Creek, Alberta totalling approximately 8,500 square feet for gross proceeds of about $2.3 million (excluding closing costs). Net proceeds of the sale will be used to prepay a portion of the outstanding credit facility or for general business purposes.

At March 31, 2024, the industrial segment accounted for 82.9% of GLA and 75.3% of net operating income (NOI). Following the close of the sales of the two properties under binding agreement expected to close in Q2 2024, the industrial segment will represent 83.1% of GLA and 76.1% of net operating income (NOI).

Financial Position

At March 31, 2024, PROREIT had $39.5 million in available credit facility and $11.6 million in cash.

Total debt (current and non-current) was $493.6 million at March 31, 2024, down from $518.7 million at the same date last year, a reduction of $25.1 million, including a reduction of its indebtedness under its credit facility by $24.0 million in Q1 2024.

The $17.8 million of remaining mortgages expiring in 2024 are expected to be renewed at market terms.

Debt to Gross Book Value* was 49.5% at March 31, 2024, compared to 49.2% at the same date last year. The weighted average interest rate on mortgage debt was 3.89% at March 31, 2024, compared to 3.70% at the same date last year and 3.88% at December 31, 2023.

Sustainability

PROREIT released its 2023 Sustainability Report on May 8, 2024, which highlights our commitments, strategy and accomplishments relating to the Environmental, Social and Governance (ESG) aspects of our organization. The report has been prepared with references to recognized disclosure guidelines, including the Sustainability Accounting Standards Board (SASB) Standards for the real estate industry and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), in addition to relevant industry-leading standards and benchmarks, such as GRESB, to ensure alignment with industry-applicable ESG best practices. The full report is available on PROREIT's website on its Sustainability page at https://proreit.ca/en/about/sustainability/.

Distributions

Distributions to unitholders of $0.0375 per trust unit of the REIT were declared monthly during the three months ended March 31, 2024, representing distributions of $0.45 per unit on an annual basis. Equivalent distributions are paid on the Class B limited partnership units of PRO REIT Limited Partnership ("Class B LP Units"), a subsidiary of the REIT.

On April 19, 2024, PROREIT announced a cash distribution of $0.0375 per trust unit for the month of April 2024. The distribution is payable on May 15, 2024, to unitholders of record as at April 30, 2024.

Strategy

PROREIT remains focused on the successful execution of its strategy for growth by expanding the portfolio organically and through disciplined acquisition, while optimizing its balance sheet and capital allocation. Management continues to evaluate acquisition opportunities under strict criteria, while also implementing its capital recycling program to move assets away from non-core properties to increase holdings in quality industrial properties in strong secondary markets. In the medium-term, PROREIT is targeting a goal of $2 billion in assets, 90% industrial base rent and 45% Adjusted Debt to Gross Book Value* in the next three to five years. These targets are based on the REIT's current business plan and strategies and are not intended to be a forecast of future results. See "Forward-Looking Statements".

Investor Conference Call and Webcast Details

PROREIT will hold a conference call to discuss its first quarter results for Fiscal 2024 on May 9, 2024 at 9:00 a.m. EDT. There will be a question period reserved for financial analysts. To access the conference call, please dial 888-664-6383 or 416-764-8650. A recording of the call will be available until May 16, 2024 by dialing 888-390-0541 or 416-764-8677 and using access code: 864949#.

The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or at https://app.webinar.net/DlA8L05OvJ1

Annual Meeting of Unitholders

PROREIT will host its annual meeting on June 4, 2024 at 11:00am (EDT) in Montréal, Québec at The Germain Hotel at 2050 Mansfield Street in the Pavillon Room. An audio webcast of the meeting will also be available at https://app.webinar.net/oXR4xKzOrlY. Additional information regarding the meeting is contained in the REIT's information circular, which has been prepared in connection with the meeting and is available on PROREIT's website in the Investors section under Annual Meeting and under PROREIT's profile on SEDAR+ at www.sedarplus.ca.

About PROREIT

PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. Founded in 2013, PROREIT owns a portfolio of high-quality commercial real estate properties in Canada, with a strong industrial focus in robust secondary markets.

For more information on PROREIT, please visit the website at: https://proreit.com.

Non-IFRS Measures

PROREIT's consolidated financial statements are prepared in accordance with International Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. In addition to reported IFRS measures, industry practice is to evaluate real estate entities giving consideration, in part, to certain non-IFRS financial measures, non-IFRS ratios and other specified financial measures (collectively, "non-IFRS measures"). Without limitation, measures followed by the suffix "*" in this press release are non-IFRS measures.

As a complement to results provided in accordance with IFRS, PROREIT discloses and discusses in this press release (i) certain non-IFRS financial measures, including: Adjusted Debt, adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA"); adjusted funds from operations ("AFFO"); annualized adjusted earnings before interest, tax, depreciation and amortization ("Annualized Adjusted EBITDA"); funds from operations ("FFO"); gross book value ("Gross Book Value"); and Same Property NOI and (ii) certain non-IFRS ratios, including: Adjusted Debt to Annualized Adjusted EBITDA Ratio; Adjusted Debt to Gross Book Value; AFFO Payout Ratio – Basic; AFFO Payout Ratio – Diluted; Basic AFFO per Unit; Diluted AFFO per Unit; Basic FFO per Unit; Diluted FFO per Unit; Debt Service Coverage Ratio; and Interest Coverage Ratio. These non-IFRS measures are not defined by IFRS and do not have a standardized meaning under IFRS. PROREIT's method of calculating these non-IFRS measures may differ from other issuers and may not be comparable with similar measures presented by other income trusts or issuers. PROREIT has presented such non-IFRS measures and ratios as management believes they are relevant measures of PROREIT's underlying operating and financial performance. For information on the most directly comparable financial measure disclosed in the primary financial statements of the REIT, composition of the non-IFRS measures, a description of how PROREIT uses these measures and an explanation of how these measures provide useful information to investors, refer to the "Non-IFRS Measures" section of PROREIT's management's discussion and analysis for the three months ended March 31, 2024, dated May 8, 2024, available on PROREIT's SEDAR+ profile at www.sedarplus.ca, which is incorporated by reference into this press release. As applicable, the reconciliations for each non-IFRS measure are outlined below. Non-IFRS measures should not be considered as alternatives to net income, cash flows provided by operating activities, cash and cash equivalents, total assets, total equity, or comparable metrics determined in accordance with IFRS as indicators of PROREIT's performance, liquidity, cash flow and profitability.

Table 3 - Reconciliation of Same Property NOI to net operating income (as reported in the consolidated financial statements)

Table 4 - Reconciliation of AFFO and FFO to net income and comprehensive income

Table 5 - Reconciliation of Adjusted EBITDA to net income and comprehensive income

Table 6 - Calculation of Adjusted Debt to Annualized Adjusted EBITDA Ratio

Table 7 - Calculation of the Interest Coverage Ratio

Table 8 - Calculation of the Debt Service Coverage Ratio

Table 9 - Calculation of Adjusted Debt

Table 10 - Calculation of Gross Book Value and Adjusted Debt to Gross Book Value

Forward-Looking Statements

This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation, including statements relating to certain expectations, projections, growth plans and other information related to REIT's business strategy and future plans. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.

Forward-looking statements contained in this press release include, without limitation, statements pertaining to the execution by PROREIT of its growth strategy, the future financial and operating performance of PROREIT, the medium-term goals of the REIT, the expected renewal of mortgages and the terms thereof and the anticipated reduction of interest rates. PROREIT's objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT's operations, including its financing capacity and asset value, will remain consistent with PROREIT's current expectations; (v) the performance of PROREIT's investments in Canada will proceed on a basis consistent with PROREIT's current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt.

The medium-term goals of the REIT disclosed under "Strategy" are based on the REIT's current business plan and strategies and are not intended to be a forecast of future results. The medium-term goals contemplate the REIT's historical growth and certain assumptions including but not limited to (i) current global capital market conditions, (ii) access to capital, (iii) interest rate exposure, (iv) availability of high-quality industrial properties for acquisitions, (v) dispositions of retail and office properties, and (vi) capacity to finance acquisitions on an accretive basis.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.

Additional information about these assumptions and risks and uncertainties is contained under "Risk Factors" in PROREIT's latest annual information form and "Risk and Uncertainties" in PROREIT's management's discussion and analysis for the three months ended March 31, 2024, which are available under PROREIT's profile on SEDAR+ at www.sedarplus.ca.

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