WINNIPEG, MB, May 26, 2022 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV: LRT.UN) today reported its operating results for the quarter ended March 31, 2022. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with interim management's discussion & analysis – quarterly highlights and the interim financial statements for the quarter ended March 31, 2022, which may be obtained from the SEDAR website at www.sedar.com.
ANALYSIS OF OPERATING RESULTS
Analysis of Loss and Comprehensive Loss
Three Months Ended March 31
Rentals from investment properties
Property operating costs
Net operating income(NOI)
Loss before the following
Fair value adjustments
Gain on extinguishment of Series G Debentures
Income (loss) before discontinued operations
Loss from discontinued operations
Income (loss) and comprehensive income (loss)
LREIT completed Q1-2022 with income and comprehensive income of $16.2 million, compared to a loss and comprehensive loss of $10.6 million during Q1-2021, representing an increase in income and comprehensive income of $26.8 million. The increase mainly reflects a $19.8 million gain on extinguishment of Series G debentures; a $6.8 million decrease in the loss relating to fair value adjustments; and a $0.4 million increase in rentals from investment properties; partially offset by a $0.3 million increase in trust expense, mainly due to an increase in professional fees.
On February 11, 2022, the holders of the outstanding Series G Debentures ("Debentureholders") voted in favour of an extraordinary resolution approving the exchange of the Series G Debentures for trust units in the capital of LREIT (the "Trust Units"). The exchange transaction was completed on February 24, 2022 pursuant to which the Series G Debentures, in the aggregate principal amount outstanding of $24.9 million, and all accrued or unpaid interest owing thereon in the amount of $8.2 million, were exchanged for 659.9 million Trust Units. The Trust Units had a fair value of $13.2 million and debt in the aggregate amount of $33.0 million was extinguished, resulting in a gain of $19.8 million. On March 3, 2022, the Series G Debentures were formally delisted from the TSX Venture Exchange (TSX-V).
The decrease in loss due to fair value adjustments is mainly due to the comparatively high losses from fair value adjustments recognized during Q1-2021. In Q1-2021, losses from fair value adjustments, in the amount of $7.6 million, mainly reflect a decrease in the carrying value of the Fort McMurray properties as a result of a reduction in normalized rent potential and an increase in normalized property operating costs. The normalized rent potential was reduced to reflect the rental rates that were considered to be achievable in the Fort McMurray market and the normalized operating costs were increased to reflect the impact of a further hardening of the insurance market on normalized insurance premiums. In Q1-2022, losses from fair value adjustments, in the amount of $0.8 million, reflect a decrease in the carrying value of the investment properties based on new external market data that resulted in an increase in the long term vacancy assumptions used in the valuation of the properties in the Fort McMurray properties segment.
The increase in rental revenues primarily reflects a $0.4 million or 11% increase in the Fort McMurray properties segment, mainly due to a $0.4 million decrease in vacancy loss as the average occupancy of the Fort McMurray properties segment increased from 75% during Q1-2021 to 83% during Q1-2022.
On March 15, 2022, Woodland Park was sold for $13.2 million and the net sales proceeds, after accounting for selling costs and standard closing adjustments in the amount of $0.4 million, were $12.8 million. The property was under the control of the Receiver appointed by the Court of Queen's Bench of Alberta on February 28, 2019 and, as a result, information disclosed with respect to the sale of Woodland Park is based on information released by the Receiver and management's estimates. During Q1-2022, a portion of the net sales proceeds were used to repay an estimated $12.4 million of debt formerly secured by the property, inclusive of the full repayment of the Receiver's borrowings in the amount of $1.0 million. The remaining proceeds will be used to pay additional fees and disbursements of the Receiver and counsel to the Receiver with any further remaining amount being paid to the lender that held the loan formerly secured by the property. The deficit between the net sales proceeds applied to the loan previously secured by the property and the balance of debt outstanding is estimated to be $15.8 million. The deficit may result in a claim against LREIT by the lender pursuant to the mortgage guarantee provided by LREIT at the time of the original execution of the first mortgage loan. Such a claim would be unsecured and subordinate to the Trust's existing secured debt, inclusive of any amounts outstanding with respect to the revolving loan facility from 2668921 Manitoba Ltd. and any amounts advanced by 2668921 Manitoba Ltd. or its affiliates.
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