PROREIT ANNOUNCES FOURTH QUARTER 2022 AND FISCAL YEAR 2022 RESULTS

MONTREAL, March 22, 2023 /CNW/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT") PRV today reported its financial and operating results for the three-month period ("fourth quarter" or "Q4") and fiscal year ("Fiscal 2022") ended December 31, 2022.

Fourth Quarter and Fiscal 2022 Highlights

• Total assets reached $1.04 billion at December 31, 2022, up 4.6% compared to the same date last year
• Property revenue increased by 9.3% in Q4 year-over-year and by 25.2% in Fiscal 2022 compared to last year
• Net operating income (NOI)* up 9.1% in Q4 year-over-year and up 24.8% for Fiscal 2022 compared to last year
• Industrial Same Property NOI* up 5.0% in Q4 year-over-year and up 4.3% in Fiscal 2022 compared to last year
• Net income and comprehensive income up $2.7 million for Fiscal 2022 compared to last year
• AFFO* increased by 4.5% in Q4 year-over-year and by 24.8% in Fiscal 2022 compared to last year
• Debt to Gross Book Value* of 49.7% at December 31, 2022, compared to 53.1% at same date last year
• 93.2% of 2022 gross leasable area ("GLA") renewed at 16.4% average spread, and 49.8% of 2023 GLA renewed at average spread of 36.7%
• Occupancy rate of 98.5% at December 31, 2022

"PROREIT continued to deliver in Fiscal 2022 despite operating in a challenging macro-economic and high interest rate environment," said Jim Beckerleg, President and CEO, PROREIT.

"Not only did we surpass the $1 billion mark in total assets this year, we successfully refocused our high-quality portfolio in the robust industrial sector and achieved meaningful operational and leasing synergies. Thanks to our joint venture transaction with Crestpoint Real Estate Investments Ltd. completed in the second quarter of 2022 and the sale of 11 non-core retail assets during the year, our industrial segment now accounts for 69% of base rent at year end, compared to 64% at the end of last year. Through some planned capital recycling and other opportunities that may arise, we would see our next industrial segment target to approach 80% of base rent in the near term.

"We also improved our key financial and operational metrics. While sustaining a high occupancy rate of 98.5%, we have renewed our maturing leases at very positive leasing spreads. The benefits of those efforts will be more fully reflected in our financial performance over the coming quarters. Industrial Same Property NOI* growth also stands to benefit from the full impact of our higher concentration in the industrial space and the significant market value embedded in our strategic portfolio.

"We strengthened our balance sheet during the year, reducing our total debt level by $10 million, and executing on our strategy to reduce our Debt to Gross Book Value* ratio to below 50%, 10 months ahead of our target date.

"The strong team and deep bench strength we have assembled over the past years gives me great confidence in PROREIT's ability to achieve the next level of its growth. We are well positioned to increase the industrial concentration of our portfolio further in locations with robust economies while pursuing our goal to reach $2 billion in assets. We will maintain a disciplined capital allocation approach to create sustainable value to the benefit of our stakeholders.

"It has been my privilege to lead this team over the past 10 years and I look forward to providing continued guidance from the board, as Gordie takes the helm as CEO on April 1^st, after this successful transition year," concluded Mr. Beckerleg.

Financial Results
Table 1- Financial Highlights

PROREIT owned 130 investment properties at December 31, 2022, including a 50% ownership interest in 42 investment properties, compared to 120 properties owned at 100% at the end of Fiscal 2021. Total assets amounted to $1.04 billion at December 31, 2022, compared to $990.0 million as at December 31, 2021, an increase of $46.0 million or 4.6%. During the twelve-month period ended December 31, 2022, PROREIT acquired a 50% interest in 21 investment properties, sold a 50% interest in 21 other investment properties and sold a 100% interest in 11 non-strategic retail properties.

For the fourth quarter and fiscal year ended December 31, 2022:

• Property revenue amounted to $25.1 million, an increase of $2.1 million or 9.3%, compared to $22.9 million for the same prior year period, and for Fiscal 2022 was $97.2 million, an increase of $19.5 million or 25.2%, compared to $77.7 million for fiscal 2021. The increases were mainly driven by incremental revenues from net acquisition activity over the last twelve-month period.
• Same Property NOI*, which represented 92 properties out of the 130-property portfolio, reached $11.2 million for the quarter, an increase of $0.2 million or 2.1%, compared to the same prior year period. Same Property NOI*, which represented 69 properties out of the 130-property portfolio, was $34.7 million for the year, an increase of $0.2 million or 0.5%, compared to last year. The increases were a result of higher occupancy in the industrial and retail asset class and certain contractual rent increases and higher rental rates on lease renewals in the industrial asset class offset by the decrease in office asset class occupancy compared to the same period in 2021. Only representing 10.9% of total Same Property NOI*, office Same Property NOI* decreased by 10.6% during the fourth quarter year-over-year as a result of increased vacancy in one of the eight office properties.
• Net operating income* amounted to $14.6 million for the quarter, compared to $13.4 million in Q4 2021, an increase of $1.2 million or 9.1%, and was $57.7 million for the year, an increase of $11.5 million or 24.8%, compared to $46.3 million for fiscal 2021. The increases were mainly driven by the impact of the net property acquisition activity over the last twelve-month period.
• AFFO* totaled $7.7 million for the quarter, an increase of $0.3 million or 4.5%, compared to $7.4 million for Q4 2021 and was $31.3 million for Fiscal 2022, an increase of $6.2 million or 24.8%, compared to $25.1 million last year. The increases were largely related to the net increase in the number of properties acquired during Fiscal 2022 and the increase in property management fees earned by Compass, which collects 100% of the property management fees as sole property manager for the entire 50%-owned 42 property portfolio.
• AFFO Payout Ratio – Basic* stood at 88.5% for the quarter, compared to 91.5% for Q4 2021 and was 86.9% for Fiscal 2022, compared to 87.7% for fiscal 2021. The improvement was largely related to the increase in NOI* resulting from the net increase in the number of properties during Fiscal 2022, the increase in property management fees ear

ned by Compass, which collects 100% of the property management fees as sole property manager for the entire 50%-owned 42 property portfolio, partially offset by increases in maintenance capital expenditures and stabilized leasing costs, as well as certain general and administrative costs resulting to the REIT's growth.

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

For the three months ended December 31, 2022, net income and comprehensive income amounted to $6.5 million, compared to $65.0 million during the same prior year period. The $58.5 million decrease mainly relates to the $58.8 million impact in the non-cash fair market value adjustment on investment properties compared to the same period last year. PROREIT updated independent external appraisals for 6 properties during the fourth quarter of 2022, and 43 properties during Fiscal 2022.

For the twelve months ended December 31, 2022, net income and comprehensive income amounted to $84.5 million, compared to $81.8 million during the same prior year period. The $2.7 million increase is mainly attributable to the $11.4 million increase in NOI* and the $2.3 million favourable impact on the non-cash fair value adjustment for Class B LP Units, partially offset by the $10.6 million less favourable impact in the non-cash fair value adjustment on investment properties, and by the $3.7 million increase in interest and financing costs in 2022, compared to 2021. In Fiscal 2022, PROREIT updated independent external appraisals for 44 properties, contributing to the fair market value gain of $52.5 million.

Solid Balance Sheet

PROREIT is committed to progressively improving its balance sheet, including its Debt to Gross Book Value* ratio and its cash position and sources of funds available. PROREIT maintains diversified debt maturities appropriate for the overall debt level of its portfolio.

Debt to Gross Book Value* was 49.7% at December 31, 2022, down from 53.1% at the same date last year. Weighted average interest rate on mortgage debt was 3.7% at December 31, 2022, compared to 3.4% at the same date last year.

At December 31, 2022, PROREIT had $23.0 million available on its credit facility.

Portfolio Transactions

On August 4, 2022, PROREIT completed its joint venture transaction with Crestpoint Real Estate Investments Ltd. and its affiliates ("Crestpoint") to jointly own an industrial-focused portfolio of 42 properties located in Atlantic Canada, including 41 properties in Dartmouth, Nova Scotia, and one property in Moncton, New Brunswick, comprised of nearly 3.1 million square feet of GLA. As part of the transaction, PROREIT and Crestpoint each acquired a 50% interest in 21 primarily industrial properties owned by a third party, for a total purchase price of $228.0 million (before closing costs). In conjunction with the acquisition, the REIT sold a 50% interest in 21 of its properties to Crestpoint, having a total value of $227.0 million for a total consideration to the REIT of $113.5 million (before closing costs). PROREIT, through its wholly owned property management business Compass Commercial Realty, acts as the sole property manager for the entire 42-property portfolio and collects industry standard fees.

On September 27, 2022, the REIT announced that it completed the sale of a portfolio of nine non-core retail properties totaling approximately 94,000 square feet of GLA, located in Western Canada, for gross proceeds of $18.8 million, excluding closing costs. Proceeds of the sale were used to repay approximately $14.1 million in related mortgages maturing in January 2023, and the balance was used to partially repay a term loan.

On November 3, 2022, PROREIT completed the sale of a non-strategic retail property in Alberta, totaling approximately 11,000 square feet of GLA, for gross proceeds of $5.4 million (before closing costs). Proceeds of the sale were used to pay out a term loan of approximately $3.4 million, with the balance being used for general trust purposes.

On December 13, 2022, the REIT completed the sale of a small retail property in Quebec totaling approximately 3,500 square feet of GLA for gross proceeds of $1.6 million (before closing costs). Proceeds of the sale were used to partially pay down the REIT's credit facility.

Operating Performance

At December 31, 2022, PROREIT's portfolio totaled 130 investment properties, including a 50% ownership interest in 42 investment properties, aggregating 6.5 million square feet of GLA (at the REIT's interest) with a weighted average lease term of 4.1 years. The occupancy rate of the portfolio remains strong at 98.5% as at December 31, 2022.

PROREIT continues to benefit from a robust operating environment, with 93.2% of leases maturing in 2022 renewed at a positive average spread of 16.4%, and 49.8% of leases maturing in 2023 renewed at a positive average spread of 36.7%.

CEO Succession

On October 4, 2022, PROREIT announced that Gordon G. Lawlor will succeed James W. Beckerleg as President and Chief Executive Officer of the REIT and will join the REIT's Board of Trustees, effective April 1, 2023, at which time Mr. Beckerleg will be named Vice Chair of the Board and Co-Founder, as part of the REIT's CEO succession plan. Mr. Beckerleg has been President and Chief Executive Officer and a Trustee of PROREIT since 2013. The REIT also announced that Alison Schafer will be appointed Chief Financial Officer and Secretary of the REIT concurrently with these changes.

Distributions

Distributions to unitholders of $0.0375 per trust unit of the REIT were declared monthly during the three months ended December 31, 2022, 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.

Investor Conference Call and Webcast Details

PROREIT will hold a conference call to discuss its fourth quarter and Fiscal 2022 results on March 23, 2023, at 10:30 a.m. (EDT). There will be a question period reserved for financial analysts. To access the conference call, please dial 888-664-6383 (conference: 18931915). A recording of the call will be available until March 30, 2023 by dialing 888-390-0541 Access code: 931915#.

The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or at  https://app.webinar.net/xWzqGM4V1Z4

Annual Meeting of Unitholders

PROREIT will host its annual meeting on June 6, 2023. Additional information regarding the meeting will be contained in the REIT's information circular to be prepared in connection with the meeting.

About PROREIT

PROREIT PRV 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 earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA"); annualized adjusted earnings before interest, tax, depreciation and amortization ("Annualized Adjusted EBITDA"); adjusted funds from operations ("AFFO"); funds from operations ("FFO"); gross book value ("Gross Book Value"); net operating income ("NOI"); Same Property NOI; and (ii) certain non-IFRS ratios, including: 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 to Gross Book Value; Debt Service Coverage Ratio; Interest Coverage Ratio; Debt to Annualized Adjusted EBITDA 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. 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 IFRS measures, 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 year ended December 31, 2022, dated March 22, 2023 (the "2022 MD&A"), available on PROREIT's SEDAR profile at www.sedar.com, 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.

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

The following is the Same Property NOI by asset class for the three-month periods and years ended December 31, 2022 and 2021:

Reconciliation of AFFO and FFO to net income and comprehensive income

Reconciliation of Adjusted EBITDA to net income and comprehensive income

Calculation of Debt to Annualized Adjusted EBITDA Ratio

Calculation of the Interest Coverage Ratio

Calculation of the Debt Service Coverage Ratio

Calculation of Gross Book Value and 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 and the future financial and operating performance of PROREIT. 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 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 December 31, 2022, which are available under PROREIT's profile on SEDAR at www.sedar.com.

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