WINNIPEG, MB, Aug. 25, 2022 /CNW/ – Lanesborough Real Estate Investment Trust (“LREIT”) (TSXV: LRT.UN) today reported its operating results for the quarter ended June 30, 2022. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with the interim management’s discussion & analysis â quarterly highlights (“MD&A â QH”) and the interim financial statements for the quarter ended June 30, 2022, which may be obtained from the SEDAR website at www.sedar.com.
ANALYSIS OF OPERATING RESULTS
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Analysis of Loss and Comprehensive Loss |
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|
Three Months Ended June 30 |
Six Months Ended June 30 |
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|
Increase (Decrease) in Income |
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|
2022 |
2021 |
Amount |
% |
2022 |
2021 |
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|
Rentals from investment properties |
$ 4,340,395 |
$ 4,730,117 |
$ (389,722) |
(8) % |
$ 9,020,927 |
$ 9,005,652 |
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|
Property operating costs |
(3,070,111) |
(3,107,421) |
37,310 |
1 % |
(6,499,617) |
(6,351,011) |
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|
Net operating income (NOI) |
1,270,284 |
1,622,696 |
(352,412) |
(22) % |
2,521,310 |
2,654,641 |
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|
Interest income |
9,280 |
43,462 |
(34,182) |
(79) % |
53,681 |
86,641 |
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|
Interest expense |
(2,541,631) |
(2,817,470) |
275,839 |
10 % |
(5,498,847) |
(6,011,450) |
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|
Trust expense |
(304,755) |
(315,375) |
10,620 |
3 % |
(879,481) |
(628,860) |
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|
Loss before the following |
(1,566,822) |
(1,466,687) |
(100,135) |
(7) % |
(3,803,337) |
(3,899,028) |
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|
Fair value adjustments |
(604,866) |
(2,721,190) |
2,116,324 |
78 % |
(1,454,258) |
(10,361,758) |
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|
Gain on extinguishment of Series G |
– |
– |
– |
– |
19,797,489 |
– |
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|
Income (loss) before discontinued |
(2,171,688) |
(4,187,877) |
2,016,189 |
48 % |
14,539,894 |
(14,260,786) |
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|
Loss from discontinued operations |
(656,615) |
(388,154) |
(268,461) |
(69) % |
(1,149,631) |
(886,492) |
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|
Income (loss) and comprehensive |
$ (2,828,303) |
$ (4,576,031) |
$ 1,747,728 |
38 % |
$ 13,390,263 |
$ (15,147,278) |
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Overall Results
LREIT completed Q2-2022 with a loss and comprehensive loss of $2.8 million, compared to a loss and comprehensive loss of $4.6 million, during the same period in the prior year, representing a decrease in loss of $1.7 million.
The decrease in loss mainly reflects a $2.1 million decrease in the extent of unfavourable fair value adjustments, as well as a $0.3 million decrease in interest expense, partially offset by a $0.4 million decrease in net operating income (“NOI”) and a $0.3 million increase in the loss from discontinued operations.
The decrease to the extent of the loss due to fair value adjustments is mainly due to the comparatively high losses from fair value adjustments which were recognized during Q2-2021. During Q2-2021, losses from fair value adjustments, in the amount of $2.7 million, were recorded to reflect a decrease in the normalized rent potential of two properties in the Fort McMurray properties segment. During Q2-2022, the losses from fair value adjustments, in the amount of $0.6 million, mainly reflect the impact of higher than expected property insurance costs for certain properties within the Fort McMurray properties segment as well as the impact of an increase in normalized operating costs.
The decrease in interest expense is primarily attributable to the recent exchange of the Series G Debentures. As previously reported, the Series G Debentures, and all interest accrued thereon, were exchanged for Trust Units on February 24, 2022, which resulted in a $0.3 million decrease in interest expense during Q2-2022.
The decrease in NOI was mainly driven by an increase in the property operating costs of the Fort McMurray properties segment, which increased primarily due to increased utilities and maintenance costs as well as a reduction in the Canada Emergency Wage Subsidy received by the Trust; partially offset by an increase in the rental revenues of the Fort McMurray properties segment. As outlined in greater detail in the “Analysis of Operating Results – Rental Revenues From Investment Properties” section of the MD&A – QH, the average occupancy of the Fort McMurray properties segment increased from 81% during Q2-2021 to 88% during Q2-2022. Due to the modest level of net operating income of the Held for Sale property segment during Q2-2021, the sale of Woodland Park during fiscal Q2-2022 did not have a notable impact on the overall change in the net operating income of the Trust.
The increase in the loss from discontinued operations is mainly due to a $0.3 million or 40% increase in the property operating costs of Chateau St. Michael’s, the property classified as discontinued operations. The increase in property operating costs mainly reflects a $0.3 million reduction in amounts received under the Canada Emergency Wage Subsidy program.
TRUSTEE ELECTION
Pursuant to LREIT’s majority voting policy in trustee elections dated November 8, 2013, if a trustee does not receive a vote “for” from unitholders holding at least a majority of the trust units of LREIT (“Units”) represented in person or by proxy at a unitholder meeting, the trustee must tender their resignation to the vice-chair. On June 28, 2022, at the annual general and special meeting of the unitholders of LREIT (the “Meeting”), Charles Loewen and Earl Coleman, trustees of LREIT, each received less than a majority of the votes “for” their election as trustees of LREIT. 26 of the unitholders of LREIT holding 115.7 million (17.01%) of the Units were represented at the Meeting in person or by proxy. Accordingly, on August 8, 2022 and August 10, 2022, respectively, Messrs. Coleman and Loewen tendered their resignations to the vice-chair of the board of trustees of LREIT, Arni Thorsteinson. After considering the resignations of Messrs. Loewen and Coleman, Mr. Thorsteinson made the determination not to accept the resignations of Messrs. Loewen and Coleman. Due to the current financial hardship of LREIT, locating suitable and qualified replacements would be very difficult.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol LRT.UN (Trust Units). For further information on LREIT, please visit our website at www.lreit.com.
This press release contains certain statements that could be considered as forward-looking information. The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Lanesborough Real Estate Investment Trust
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