ARTIS REAL ESTATE INVESTMENT TRUST RELEASES 2024 ANNUAL RESULTS

Mar 06 2025 22:00 GMT

WINNIPEG, MB , March 6, 2025 /CNW/ - Artis Real Estate Investment Trust ("Artis" or the "REIT") (TSX: AX.UN) (TSX: AX.PR.E) (TSX: AX.PR.I) announced today its financial results for the year ended December 31, 2024. The annual results in this press release should be read in conjunction with the REIT's consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2024. All amounts are in thousands of Canadian dollars, except per unit amounts or otherwise noted.

"Over the course of 2024, we made significant progress towards our objective of strengthening our balance sheet and reducing leverage," said Samir Manji, President and Chief Executive Officer of Artis. "During the year, we monetized $972.9 million of real estate and, through this active disposition exercise, were able to materially reduce leverage from 50.9% at December 31, 2023 to 40.2% at December 31, 2024. To refinance debt and improve the REIT's risk profile, we entered into a new three-year senior secured credit facility in an aggregate amount of $520.0 million Canadian dollars during the fourth quarter. Our investment in Cominar has been impacted by the higher interest rate environment over the past few years. We are actively engaged in resolving the structural challenges that the investor group is facing and anticipate resolving this matter in the near term. Until then, we have followed accounting principles to book a provision related to our preferred investment and while we believe this reflects a conservative estimate, we expect this will be resolved and confirmed in the months ahead. In the meantime, interest rates have been moving in our favour, and with a healthy level of liquidity, we can now shift our attention to pursing opportunities that support our objective of maximizing value for our unitholders."

2 024 ANNUAL HIGHLIGHTS

Portfolio Activity

Acquired an additional 50% interest in the Kincaid Building, an office property located in the Greater Vancouver Area, British Columbia, for $22.5 million.
Acquired an additional 5% interest in Park 8Ninety V, an industrial property located in the Greater Houston Area, Texas, for total consideration of US$4.0 million. The property was subsequently sold.
Disposed of seven office properties, seven retail properties, one industrial property, two parking lots, and a parcel of development land located in Canada, and 14 industrial properties and three office properties located in the U.S., for an aggregate sale price of $972.9 million.
Entered into unconditional agreements to sell two industrial and two retail properties located in Canada for an aggregate sale price of $70.5 million, which closed subsequent to the end of the year.

Balance Sheet and Liquidity

Entered into a three-year secured credit facility agreement in an aggregate amount of $520.0 million, which includes a $350.0 million revolving credit facility and a $170.0 million non-revolving credit facility.
Repaid unsecured non-revolving credit facilities in the aggregate amount of $250.0 million.
Utilized the NCIB to purchase 7,227,999 common units at a weighted-average price of $7.03 and 654,284 preferred units at a weighted-average price of $18.24.
Reported NAV per Unit ⁽¹⁾ of $13.75 at December 31, 2024, compared to $13.96 at December 31, 2023.
Improved Total Debt to GBV ⁽¹⁾to 40.2% at December 31, 2024, compared to 50.9% at December 31, 2023.
Improved Total Debt to Adjusted EBITDA ⁽¹⁾ to 6.2 at December 31, 2024, compared to 7.7 at December 31, 2023.

Financial and Operational

Same Property NOI ⁽¹⁾ in Canadian dollars for 2024 increased 0.8% compared to 2023.
Reported FFO per unit⁽¹⁾ of $1.05 for 2024, improved from $0.89 for 2023, and reported AFFO per unit ⁽¹⁾ of $0.65 for 2024, improved from $0.44 for 2023.
Reported portfolio occupancy of 88.2% (89.2% including commitments) at December 31, 2024, compared to 90.1% at December 31, 2023.
Renewals totalling 740,424 square feet and new leases totalling 454,256 square feet commenced during 2024.
Weighted-average rental rate on renewals that commenced during 2024 increased 2.6%.

(1)	Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure.

INVESTMENT IN COMINAR

During 2022, Artis participated in an investor group to acquire Cominar Real Estate Investment Trust ("Cominar"). The REIT's contribution to this transaction was $112.0 million to acquire approximately 32.64% of Iris Acquisition II LP ("Iris"), an entity formed to acquire the outstanding units of Cominar, and $100.0 million of junior preferred units which carry a distribution rate of 18.0% per annum.

As at December 31, 2024, the REIT's cumulative share of losses of Iris exceeded the REIT's net investment in the common equity units and the REIT recorded an expected credit loss on the junior preferred units of $31.3 million. As at December 31, 2024, the carrying value of the junior preferred units was $139.9 million, which reflects interest income received in the form of additional junior preferred units since initial investment, net of the allowance for expected credit loss.

In accordance with IFRS Accounting Standards, an expected credit loss is measured as a probability-weighted estimate of the expected present value of the cash shortfalls, which represent the difference between the cash flows owed to the REIT and the cash flows expected to be received by the REIT. The estimate reflects reasonable and supportable information that is available at the reporting date. Since December 2024, there have been discussions with interested parties to acquire a portion or the entire portfolio of the investment properties of Iris with a solution to settle the outstanding senior and junior preferred units of Iris and the settlement may include a discount to the senior and junior preferred units. These discussions are ongoing, and management expects that an agreement for a transaction may be reached within the next few months with terms that could result in the REIT recovering an amount in excess of the carrying value of the junior preferred units at December 31, 2024. As more information becomes available, the REIT will adjust the allowance for expected credit loss as appropriate in future reporting periods.

The REIT's estimate is dependent on the ability of Iris to execute its plans and the possible results of a transaction with the unitholders of Iris. Because these estimates are made at a specific point in time and are inherently subject to judgement and measurement uncertainty, such estimates could differ from actual results.

BALANCE SHEET AND LIQUIDITY

The REIT's balance sheet metrics are as follows:

	December 31,	December 31,
	2024	2023

Total investment properties	$ 2,372,878	$ 3,066,841
NAV per unit ⁽¹⁾	13.75	13.96
Total Debt to GBV ⁽¹⁾	40.2 %	50.9 %
Total Debt to Adjusted EBITDA ⁽¹⁾	6.2	7.7
Adjusted EBITDA interest coverage ratio ⁽¹⁾	2.47	1.93

(1)	Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure.

At December 31, 2024, Artis had $32.8 million of cash on hand and $265.0 million available on its revolving credit facilities. Under the terms of the secured credit facilities, the REIT must maintain certain financial covenants which limit the total borrowing capacity of the credit facilities. At December 31, 2024, the borrowing capacity of the secured credit facilities was not limited.

Liquidity and capital resources may be impacted by financing activities, portfolio acquisition, disposition and development activities or debt repayments occurring subsequent to December 31, 2024.

FINANCIAL AND OPERATIONAL RESULTS

	Three months ended December 31,			Year ended December 31,
$000's, except per unit amounts	2024	2023	% Change	2024	2023	% Change

Revenue	$ 68,851	$ 80,892	(14.9) %	$ 300,369	$ 335,837	(10.6) %
Net operating income	37,695	45,352	(16.9) %	163,231	184,017	(11.3) %
Net loss	(29,423)	(86,837)	(66.1) %	(47,414)	(332,068)	(85.7) %
Total comprehensive income (loss)	25,736	(116,270)	(122.1) %	32,182	(364,399)	(108.8) %
Distributions per common unit	0.15	0.15	— %	0.60	0.60	— %

FFO ⁽¹⁾	$ 23,809	$ 27,275	(12.7) %	$ 111,417	$ 99,856	11.6 %
FFO per unit - diluted ⁽¹⁾	0.23	0.25	(8.0) %	1.05	0.89	18.0 %
FFO payout ratio⁽¹⁾	65.2 %	60.0 %	5.2 %	57.1 %	67.4 %	(10.3) %

AFFO⁽¹⁾	$ 14,980	$ 15,418	(2.8) %	$ 68,461	$ 49,315	38.8 %
AFFO per unit - diluted⁽¹⁾	0.15	0.14	7.1 %	0.65	0.44	47.7 %
AFFO payout ratio⁽¹⁾	100.0 %	107.1 %	(7.1) %	92.3 %	136.4 %	(44.1) %

(1)	Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure.

Artis reported portfolio occupancy of 88.2% (89.2% including commitments) at December 31, 2024, compared to 90.1% at December 31, 2023. Weighted-average rental rate on renewals that commenced during 2024 increased 2.6%.

Artis's portfolio has a stable lease expiry profile with 43.4% of gross leasable area expiring in 2029 or later. Information about Artis's lease expiry profile is as follows:

	Current vacancy	Monthly tenants	2025	2026	2027	2028	2029 & later	Total portfolio

Expiring square footage	11.7 %	0.3 %	12.3 %	13.2 %	8.8 %	10.3 %	43.4 %	100.0 %
In-place rents	N/A	N/A	$ 17.12	$ 17.02	$ 16.38	$ 16.29	$ 17.09	$ 16.92
Market rents	N/A	N/A	$ 16.42	$ 16.19	$ 15.95	$ 15.14	$ 16.24	$ 16.10

UPCOMING WEBCAST AND CONFERENCE CALL

A conference call with management will be held on Friday, March 7, 2025, at 12:00 p.m. CT (1:00 p.m. ET). In order to participate, please dial 1-437-900-0527 or 1-888-510-2154. You will be required to identify yourself and the organization on whose behalf you are participating.

Alternatively, you may access the simultaneous webcast by following the link from our website at https://www.artisreit.com/investor-link/conference-calls/. Prior to the webcast, you may follow the link to confirm you have the right software and system requirements.

If you cannot participate on Friday, March 7, 2025, a replay of the conference call will be available by dialing 1-289-819-1450 or 1-888-660-6345 and entering passcode 33673#. The replay will be available until Monday, April 7, 2025. The webcast will be archived 24 hours after the end of the conference call and will be accessible for 90 days.

CAUTIONARY STATEMENTS

This press release contains forward-looking statements within the meaning of applicable Canadian securities laws. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements include, among others, statements regarding the timing and amount of distributions and the future financial position, business strategy, potential acquisitions and dispositions, plans and objectives of Artis. Without limiting the foregoing, the words "outlook", "objective", "expects", "anticipates", "intends", "estimates", "projects", and similar expressions or variations of such words and phrases suggesting future outcomes or events, or which state that certain actions, events or results ''may'', ''would'', "should" or ''will'' occur or be achieved are intended to identify forward-looking statements. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.

Forward-looking statements are based on a number of factors and assumptions which are subject to numerous risks and uncertainties, which have been used to develop such statements, but which may prove to be incorrect. Although Artis believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Assumptions have been made regarding, among other things: the general stability of the economic and political environment in which Artis operates, treatment under governmental regulatory regimes, securities laws and tax laws, the ability of Artis and its service providers to obtain and retain qualified staff, equipment and services in a timely and cost efficient manner, currency, exchange and interest rates, global economics and financial markets.

Artis is subject to significant risks and uncertainties which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied in these forward-looking statements. Such risk factors include, but are not limited to risks related to the strategy, real property ownership, overall investment portfolio, geographic concentration, current economic conditions, strategic initiatives, pandemics and other public health events, debt financing, interest rate fluctuations, foreign currency, tenants, specified investment flow-through rules, other tax-related factors, illiquidity, competition, reliance on key personnel, future property transactions, general uninsured losses, dependence on information technology systems, cyber security, environmental matters and climate change, land and air rights leases, public market, market price of common units, changes in legislation and investment eligibility, availability of cash flow, fluctuations in cash distributions, nature of units and legal rights attaching to units, preferred units, debentures, dilution, unitholder liability, failure to obtain additional financing, potential conflicts of interest, developments and trustees.

For more information on the risks, uncertainties and assumptions that could cause Artis's actual results to materially differ from current expectations, refer to the section entitled "Risk Factors" of Artis's 2024 Annual Information Form for the year ended December 31, 2024, the section entitled "Risk and Uncertainties" of Artis's 2024 Annual MD&A, as well as Artis's other public filings, available on SEDAR+ at www.sedarplus.ca.

Artis cannot assure investors that actual results will be consistent with any forward-looking statements and Artis assumes no obligation to update or revise such forward-looking statements to reflect actual events or new circumstances other than as required by applicable securities laws. All forward-looking statements contained in this press release are qualified by this cautionary statement.

NOTICE WITH RESPECT TO NON-GAAP & SUPPLEMENTARY FINANCIAL MEASURES DISCLOSURE

In addition to reported IFRS measures, certain non-GAAP and supplementary financial measures are commonly used by Canadian real estate investment trusts as an indicator of financial performance. "GAAP" means the generally accepted accounting principles described by the CPA Canada Handbook - Accounting, which are applicable as at the date on which any calculation using GAAP is to be made. Artis applies IFRS, which is the section of GAAP applicable to publicly accountable enterprises.

Non-GAAP measures and ratios include Funds From Operations ("FFO"), Adjusted Funds from Operations ("AFFO"), FFO per Unit, AFFO per Unit, FFO Payout Ratio, AFFO Payout Ratio, NAV per Unit, Total Debt to GBV, Adjusted EBITDA Interest Coverage Ratio and Total Debt to Adjusted EBITDA.

Management believes that these measures are helpful to investors because they are widely recognized measures of Artis's performance and provide a relevant basis for comparison among real estate entities.

These non-GAAP and supplementary financial measures are not defined under IFRS and are not intended to represent financial performance, financial position or cash flows for the period, nor should any of these measures be viewed as an alternative to net income, cash flow from operations or other measures of financial performance calculated in accordance with IFRS.

The above measures are not standardized financial measures under the financial reporting framework used to prepare the financial statements of Artis. Readers should be further cautioned that the above measures as calculated by Artis may not be comparable to similar measures presented by other issuers. Refer to the Notice With Respect to Non-GAAP & Supplementary Financial Measures Disclosure of Artis's 2024 Annual MD&A, which is incorporated by reference herein, for further information (available on SEDAR+ at www.sedarplus.ca or Artis's website at www.artisreit.com).

The reconciliation for each non-GAAP measure or ratio and other supplementary financial measures included in this Press Release is outlined below.

NAV per Unit

	December 31, 2024	December 31, 2023

Unitholders' equity	$ 1,580,975	$ 1,716,332
Less: face value of preferred equity	(181,594)	(197,951)

NAV attributable to common unitholders	1,399,381	1,518,381

Total number of diluted units outstanding:
Common units	100,733,768	107,950,866
Restricted units	585,230	477,077
Deferred units	465,779	323,224

	101,784,777	108,751,167

NAV per unit	$ 13.75	$ 13.96

Total Debt to GBV

	December 31, 2024	December 31, 2023

Total assets	$ 2,803,161	$ 3,735,030
Add: accumulated depreciation	13,080	11,786

Gross book value	2,816,241	3,746,816

Secured mortgages and loans	681,650	911,748
Preferred shares liability	1,009	928
Carrying value of debentures	199,907	199,630
Credit facilities	250,480	794,164

Total debt	$ 1,133,046	$ 1,906,470

Total debt to GBV	40.2 %	50.9 %

Adjusted EBITDA Interest Coverage Ratio

	Three months ended		Year ended
	December 31,		December 31,
	2024	2023	2024	2023

Net loss	$ (29,423)	$ (86,837)	$ (47,414)	$ (332,068)
Add (deduct):
Tenant inducements amortized to revenue	6,255	6,177	25,456	24,595
Straight-line rent adjustments	219	(509)	(451)	(2,554)
Depreciation of property and equipment	319	311	1,194	1,226
Net loss from equity accounted investments	16,090	1,804	86,595	57,385
Distributions from equity accounted investments	768	1,373	3,483	4,346
Interest expense	19,329	32,816	105,624	121,876
Strategic review expenses	234	28	1,492	207
Expected credit loss on preferred investments	31,316	—	31,316	—
Fair value (gain) loss on investment properties	(15,954)	119,803	14,935	344,286
Fair value loss (gain) on financial instruments	15,311	(12,201)	(4,558)	41,730
Foreign currency translation loss (gain)	754	(3,880)	5,144	(6,932)
Income tax expense (recovery)	298	3,067	(2,287)	(5,605)

Adjusted EBITDA	45,516	61,952	220,529	248,492

Interest expense	19,329	32,816	105,624	121,876
Add (deduct):
Amortization of financing costs	(879)	(797)	(3,237)	(3,401)
Amortization of above- and below-market mortgages, net	—	84	—	778

Adjusted interest expense	$ 18,450	$ 32,103	$ 102,387	$ 119,253

Adjusted EBITDA interest coverage ratio	2.47	1.93	2.15	2.08

Total Debt to Adjusted EBITDA

	December 31, 2024	December 31, 2023

Secured mortgages and loans	$ 681,650	$ 911,748
Preferred shares liability	1,009	928
Carrying value of debentures	199,907	199,630
Credit facilities	250,480	794,164

Total debt	1,133,046	1,906,470

Quarterly Adjusted EBITDA	45,516	61,952
Annualized Adjusted EBITDA	182,064	247,808

Total Debt to Adjusted EBITDA	6.2	7.7

FFO and AFFO

	Three months ended		Year ended
	December 31,		December 31,
	2024	2023	2024	2023

Net loss	$ (29,423)	$ (86,837)	$ (47,414)	$ (332,068)
Add (deduct):
Tenant inducements amortized to revenue	6,255	6,177	25,456	24,595
Incremental leasing costs	596	456	2,200	2,274
Distributions on preferred shares treated as interest expense	64	63	252	249
Remeasurement component of unit-based compensation	(459)	(34)	296	(1,433)
Strategic review expenses	234	28	1,492	207
Expected credit loss on preferred investments	31,316	—	31,316	—
Adjustments for equity accounted investments	17,653	4,381	92,241	66,862
Fair value (gain) loss on investment properties	(15,954)	119,803	14,935	344,286
Fair value loss (gain) on financial instruments	15,311	(12,201)	(4,558)	41,730
Realized gain (loss) on disposition of equity securities	709	—	6,124	(20,683)
Foreign currency translation loss (gain)	754	(3,880)	5,144	(6,932)
Deferred income tax (recovery) expense	(36)	2,990	(3,077)	(6,206)
Preferred unit distributions	(3,211)	(3,671)	(12,990)	(13,025)

FFO	$ 23,809	$ 27,275	$ 111,417	$ 99,856

Add (deduct):
Amortization of recoverable capital expenditures	$ (1,593)	$ (1,985)	$ (6,702)	$ (7,403)
Straight-line rent adjustments	219	(509)	(451)	(2,554)
Non-recoverable property maintenance reserve	(350)	(400)	(1,510)	(2,200)
Leasing costs reserve	(7,000)	(7,500)	(29,200)	(30,400)
Adjustments for equity accounted investments	(105)	(1,463)	(5,093)	(7,984)

AFFO	$ 14,980	$ 15,418	$ 68,461	$ 49,315

FFO and AFFO Per Unit

	Three months ended		Year ended
	December 31,		December 31,
	2024	2023	2024	2023

Basic units	102,039,797	107,947,620	105,063,202	111,294,362
Add:
Restricted units	556,575	443,082	507,404	402,558
Deferred units	465,396	322,874	429,010	281,001

Diluted units	103,061,768	108,713,576	105,999,616	111,977,921

FFO and AFFO per Unit

	Three months ended		Year ended
	December 31,		December 31,
	2024	2023	2024	2023

FFO per unit:
Basic	$ 0.23	$ 0.25	$ 1.06	$ 0.90
Diluted	0.23	0.25	1.05	0.89

AFFO per unit:
Basic	$ 0.15	$ 0.14	$ 0.65	$ 0.44
Diluted	0.15	0.14	0.65	0.44

FFO and AFFO Payout Ratios

	Three months ended		Year ended
	December 31,		December 31,
	2024	2023	2024	2023

Distributions per common unit	$ 0.15	$ 0.15	$ 0.60	$ 0.60
FFO per unit - diluted	0.23	0.25	1.05	0.89

FFO payout ratio	65.2 %	60.0 %	57.1 %	67.4 %

Distributions per common unit	$ 0.15	$ 0.15	$ 0.60	$ 0.60
AFFO per unit - diluted	0.15	0.14	0.65	0.44

AFFO payout ratio	100.0 %	107.1 %	92.3 %	136.4 %

ABOUT ARTIS REAL ESTATE INVESTMENT TRUST

Artis is a diversified Canadian real estate investment trust with a portfolio of industrial, office and retail properties in Canada and the United States. Artis's vision is to become a best-in-class real estate asset management and investment platform focused on value investing.

SOURCE Artis Real Estate Investment Trust