The ownership of Uptown Tower has filed a motion to sell the troubled property at 4144 North Central Expressway in Dallas.
The Houston-based investor that owns the office building, Whitestone Uptown Tower LLC, entered Chapter 11 bankruptcy protection on Dec. 1 as it was in the process of being foreclosed upon. Lenders targeted December for the building’s foreclosure after the ownership defaulted on mortgage payments.
The motion for sale from the ownership followed a motion from creditor RSS MSBAM2013-C13-TX WUT, LLC seeking to compel Whitestone Uptown Tower to file a sale motion and amend plan, among other actions.
Whitestone Uptown Tower seeks to move the 253,561-square-foot property with a 363 sale, a U.S. Bankruptcy Code process allowing potential buyers to assume assets free and clear of liens and other claims.
The ownership is asking for approval of a proposed bidding process, with initial bids due by 5 p.m. on May 17. Qualifying bids would be determined on May 22. If necessary, an auction would take place on June 4. A closing deadline of July 31 is suggested.
The lender suggested $26 million be considered as the stalking horse bid for the process. The sum is also used as the minimum bid in the ownership’s proposed bidding procedures, which the ownership said indicates there is at least $8 million of equity in the property.
Dallas County lists the 1982-built Uptown Tower’s market value at more than $27.6 million. The ownership’s motion to sell states that its primary lender has filed a proof of claim with loan obligations of about $18.8 million after credit for escrow and suspense funds.
An emergency motion filed March 14 by the ownership to use collateral cash to keep up the tower’s regular operations said the building has a good occupancy rate of approximately 80% and “has begun to recover.” The Chapter 11 filing will enable the Whitestone to reorganize its debt to better match its projected cash flow, the emergency motion said.
Real estate as an asset class has long been a mainstay for investor portfolios, both small or large. While it has mostly been focused on residential real estate, the turn of the century brought in another sub-asset class in the form of commercial real estate, which became the go-to product for high net-worth individuals (HNIs), since the rental yields were far higher than residential real estate.
However, the large ticket size meant that the asset class was always exclusive to HNIs or institutional investors. Over the last half a decade, with the advent of tech platforms and listing of Real Estate Investment Trusts (REITs), this asset class has become more accessible to the general public due to smaller ticket sizes in which investors can invest. In order to further stimulate the growth of this asset class, SEBI plans to introduce MSM REITs – a new way to invest into commercial real estate.Also Read: MSM REITs: How SEBI’s game-changing move will transform India’s real estate investment landscape
What are REITs and why is there a need for MSM REITs?
In simple terms, REITs own a portfolio of commercial properties and investors can purchase units of REITs to gain exposure to this portfolio. Similar to investing in units of a mutual fund scheme, investors gain exposure to the portfolio of assets the scheme owns. REITs manage those properties and collect rentals from the tenants occupying them, which is further distributed to its investors.
Currently, there are four listed REITs in India, 2 sponsored by top developers namely Embassy REIT and Mindspace REIT and 2 sponsored by investment managers namely Brookfield REIT and Nexus REIT. Each of these 4 REITs have a diversified portfolio of underlying properties across Tier 1 and Tier 2 cities in India.
However, certain investors want to gain exposure to specific assets, where they know the entire characteristics like the property, tenant, lease structure, yield profile etc. This is where MSM REITs will enable investors to make property specific investments. Extending our example of regular REITs being equivalent to owning units of a mutual fund scheme, MSM REITs can be thought of as being equivalent to owning a share of a single company. It would allow investors to create their own customized portfolio based on their own unique requirements, just like investors can create their own portfolio by picking up shares in multiple stocks.Also Read: Are real estate investors keen on fractional real estate? 3 experts share insights
How can one find the right MSM REIT to invest in?
An investor should understand and research extensively the underlying asset held by a MSM REIT. To get an investor started on the research, have listed a few parameters which an investor should look for:
Quality and location: These two are arguably the most important features, which an investor needs to assess before investing as the best quality tenants occupy the best buildings in the best locations. Therefore, it is important to visit the asset physically, which enables the investor to ascertain the asset quality as well as the surrounding micro-market.
Grade A properties are usually located in Central or Secondary Business Districts of the city. They come with quality amenities, impressive lobbies, LEED or IGBC certification, high ceiling heights and are built by Grade A developers. In case an investor is unable to visit physically, the location of the building along with the quality of the developer and tenant (like Fortune 1000 or Indian top 100 companies) can serve as a good proxy to assess the quality and location.
Lease structure: In a typical commercial lease, the tenant has lock-in for only a small duration of the lease (3-5 years), while the landlord is ‘locked-in’ for the entire lease period (5-15 years). During the lock-in period, the party which is ‘locked-in’ can’t terminate the contract. An attractive MSM REIT would be one in which the remaining lock-in period is at least 2-3 years and the remaining lease period is at least 5 years.
Moreover, it is important to also understand who has invested in the fit-outs. One should prefer an asset where the fit-outs are done by the tenant, as that improves the stickiness of the tenant and reduces the chance of vacation by the tenant.
Demand/supply dynamics: A good quality asset with a good tenant, has to be understood along with the expected demand and upcoming supply in the location. When compared to the demand, if a micro-market sees a much larger upcoming supply, it pushes the vacancy higher, which puts a significantly downward pressure on the rentals as it gives the bargaining power to the tenants to renegotiate the rents.
Hence, an investor should look for markets which have a vacancy below 10% and favorable demand and supply characteristics. The vacancy and demand/supply data are published regularly by research teams of large IPCs (International Property Consultants) like JLL, CBRE and Knight Frank which can be a good starting point for research.
Management quality: The performance of a MSM REIT will be heavily influenced by the quality of its management team. Poor decision-making, lack of experience, or ineffective property management can impact returns. Therefore, an investor is advised to invest in a MSM REIT, whose management team has a proven track record in investing and exiting assets.Also Read: Real estate dominates Indian household savings with highest allocation: Report
Is diversification necessary in MSM REITs?
Just like in any other investment, diversification is important in MSM REITs as well. However, the diversification will now be under the control of individual investors. We have suggested a couple of ways in which an investor can diversify:
Based on asset class: As the industry matures, there will be MSM REITs available across multiple asset classes like office, retail, warehousing, industrial, hospitality, etc. An investor should be able to invest in assets across all of these and benefit from the upward movements of any particular asset class in a cycle. For example, we are beginning to see asset class diversification in regular REITs as well – the first three REITs to be listed were office, post which the first retail REIT got listed last year. MSM REIT can also be expected to follow a similar trend.
Based on geography: Another way to diversify would be investing across multiple cities and minimizing the city risk at a portfolio level. In fact, this risk is present in some of the listed REITs as well. For example, embassy REIT has a significant majority of its portfolio in Bangalore. Having this flexibility to diversify, would allow the investor to pick and choose markets with strong fundamentals like low vacancy and consistent rental growth.
What are the risks involved?
Like any other financial investment, the MSM REITs will come along with its own set of risks which an investor must be aware of before investing. Some important ones are listed below:
Tenancy: Given that the MSM REIT will have only a single or maybe a handful of tenants, the risk of the tenant vacating the property will always be there. To mitigate this, we recommend investors to conduct a thorough research about the market, tenant, as well as the lease structure. Diversifying across multiple MSM REITs will reduce this risk over time as it is unlikely that all of the tenants vacate at the same time.
Interest rate: Similar to any yield oriented product, MSM REITs also have an underlying interest rate risk. When interest rates go up, an investor would expect higher yield as safer investments like FDs and government bonds start offering higher returns. This leads to fall in REIT prices as prices move inversely to yields.
Liquidity: As MSM REITs are expected to be listed on stock exchanges, they will be much more liquid as compared to a direct real estate investment. However, in times of market stress, it may be challenging to sell MSM REIT units at a desired price, just like a regular REIT. Investors can mitigate this risk by allocating capital for the long term (over 4-5 years).
MSM REITs vs. Regular REITs
A key point to note is the difference in the ticket size. While regular REITs have a ticket size of only one unit (having unit size of less than Rs. 400), MSM REITs are expected to have a minimum ticket size of Rs. 10 lakhs. This large ticket size is to ensure that investors perform thorough research before investing given the nascent stage of the industry. However, as time progresses, the ticket size restriction may be relaxed, similar to the way minimum ticket size in REITs was reduced to one unit from Rs. 2 lakhs initially.
In conclusion, MSM REITs will present a unique opportunity to invest in rent generating commercial assets. For investors who want to choose the assets and micro-markets they invest in, it will reduce the minimum ticket size. Moreover, for the developers and holders of institutional asset managers, it will allow them to bring those assets to market, which were earlier too small for regular REITs and too big for HNIs, thereby providing further boost to commercial real estate.Kunal Moktan is CEO and Co-founder, Property Share.
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WINNIPEG, MB, Feb. 29, 2024 /CNW/ – Artis Real Estate Investment Trust (“Artis” or the “REIT”) (TSX: AX.UN, AX.PR.E, AX.PR.I) today provided an update on the strategic review and announced its financial results for the year ended December 31, 2023. 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, 2023. All amounts are in thousands of Canadian dollars, unless otherwise noted.
“In the fourth quarter of 2023, Artis met a number of operational and strategic benchmarks, which demonstrate the underlying strength of our portfolio and signal to the market the quality of our real estate and our internal management platform,” said Samir Manji, President and CEO of Artis. “Specifically, we achieved a 5.8% average increase in rental rates across 261,889 square feet of lease renewals that commenced during the three months ended December 31, 2023, while same property net operating income growth in the fourth quarter was 9.2% compared to the same period in the prior year. This increase reflects our ability to generate organic growth while highlighting the demand for the real estate in our portfolio. The significance of this demand is further emphasized by our strategic disposition activities. Since the announcement of the strategic review in August 2023, we have completed or entered into unconditional agreements for $473.6 million of property dispositions. This is a testament to the attractiveness of our real estate portfolio and strategic capacity to monetize assets to support our near-term goals: strengthen the balance sheet by reducing debt and enhance liquidity. In pursing additional dispositions, we will continue to do so with an owner’s mentality. Ultimately, selling any asset at a significantly discounted price is contrary to the fundamental principle of value investing to “buy low and sell high”. This will remain a key consideration for Artis moving forward. As we continue to monetize assets to pay down debt, our current distribution program remains unchanged. The Board and the Special Committee remain committed to exploring all strategic alternatives that may be available to unlock and maximize value for our owners.”
UPDATE ON STRATEGIC REVIEW
On August 2, 2023, Artis’s Board of Trustees (the “Board”) established a Special Committee to initiate a strategic review process to consider and evaluate alternatives that may be available to the REIT to unlock and maximize value for unitholders. Since that time, Artis has entered into unconditional sale agreements or completed sales of nearly $500 million (in line with international financial reporting standards (“IFRS”)) and will continue to remain focused on unlocking value, enhancing liquidity and maximizing net asset value (“NAV”) per unit.
On September 11, 2023, the Board announced that the Special Committee retained BMO Nesbitt Burns Inc. to provide financial advisory services to the REIT and Special Committee in connection with the strategic review process.
Over the past several months, the Special Committee and the Board have been working with the REIT’s financial advisors to explore options available to unlock and maximize value for unitholders, including the potential sale of the REIT. In the current market, Artis and its advisors do not believe that there is a buyer prepared to acquire the REIT at a reasonable value relative to management’s latest published NAV per unit of $13.96. There continues to be a healthy appetite in the private transaction environment for quality retail and industrial assets. There is also buyer interest for certain office assets, but office buyers in general are expecting bargain prices or vendor financing, neither of which are compatible with Artis’s desire to generate financial liquidity from dispositions.
Since the announcement of the strategic review, Artis has completed or entered into unconditional agreements for $161.9 million of office sales at values and on terms that were acceptable to the REIT, and will continue to consider further office dispositions. In addition, Artis has completed or entered into unconditional sale agreements for $256.2 million of retail assets and $55.5 million of industrial assets. This equates to $473.6 million of asset sales (in line with the REIT’s IFRS values reported at December 31, 2023), including unconditional transactions, since August 2, 2023. The REIT is continuing to evaluate opportunities relating to the sale of additional retail, office, and industrial assets, with a focus on the industrial portfolio, in its efforts to further deleverage and strengthen the balance sheet, grow NAV per unit, and enhance liquidity. A portion of this liquidity may be directed towards the normal course issuer bid (“NCIB”) which was renewed on December 19, 2023.
The Board remains committed to pursuing strategic alternatives that may be available to the REIT to unlock and maximize value for unitholders, including pursuing near-term opportunities available to Artis to enhance and grow NAV per unit. The work undertaken over the past several months has enabled Artis to properly assess the current environment and options available to the REIT in an effort to create and maximize value for unitholders.
There can be no assurance that the strategic review process will result in the REIT pursuing any transaction. The REIT has not set a timetable for completion of this process and does not intend to disclose further developments unless it determines that disclosure is appropriate or necessary.
2023 ANNUAL HIGHLIGHTS
Portfolio Activity
- Disposed of nine industrial properties, five retail properties, three office properties and a parcel of development land for an aggregate sale price of $322.4 million.
- Entered into unconditional agreements to sell four office properties, one industrial property, one retail property and a portfolio of eight retail properties located in Canada and one industrial property located in the U.S. for aggregate sale prices of $393.4 million and US$38.7 million.
- Completed the development of Blaine 35 II, comprising two industrial properties totalling 198,900 square feet, located in the Twin Cities Area, Minnesota. The first building was 100.0% committed and the second building was 100.0% occupied upon completion.
- Completed the development of Park Lucero East, an industrial property comprising 561,000 square feet, located in the Greater Phoenix Area, Arizona. Artis has a 10% ownership interest in this property.
- Completed the development of 300 Main, a residential/commercial property located in Winnipeg, Manitoba.
Balance Sheet and Liquidity
- Utilized the NCIB to purchase 7,473,874 common units at a weighted-average price of $7.27 and 583,801 preferred units at a weighted-average price of $17.77. The REIT purchased the maximum number of common units allowed under the NCIB term that expired on December 18, 2023.
- Improved Total Debt to Adjusted EBITDA (1) to 7.7 at December 31, 2023, compared to 8.3 at December 31, 2022.
- Repaid the Series D senior unsecured debentures upon maturity in the amount of $250.0 million.
- Renewed the second tranche of the revolving credit facilities in the amount of $280.0 million for a two-year term maturing on April 29, 2025.
- Extended the maturity date of the $100.0 million non-revolving credit facility for a one-year term maturing on February 6, 2024 and extended the maturity date of the $150.0 million non-revolving credit facility for a one-year term maturing on July 18, 2024. Subsequent to the end of the year, extended the maturing date of the $100.0 million non-revolving credit facility for a two-year term maturing February 6, 2026.
Financial and Operational
- Same Property NOI (1) in Canadian dollars for 2023 increased 7.6% compared to 2022.
- Maintained strong portfolio occupancy of 90.1% at December 31, 2023, unchanged from December 31, 2022.
- Renewals totalling 1,024,276 square feet and new leases totalling 1,163,799 square feet commenced during 2023.
- Weighted-average rental rate on renewals that commenced during 2023 increased 4.8%.
(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. |
BALANCE SHEET AND LIQUIDITY
The REIT’s balance sheet metrics are as follows:
December 31, |
December 31, |
||||
2023 |
2022 |
||||
Total investment properties |
$ 3,066,841 |
$ 3,683,571 |
|||
Unencumbered assets |
1,567,001 |
2,034,409 |
|||
NAV per unit (1) |
13.96 |
17.38 |
|||
Total Debt to GBV (1) |
50.9 % |
48.5 % |
|||
Total Debt to Adjusted EBITDA (1) |
7.7 |
8.3 |
|||
Adjusted EBITDA interest coverage ratio (1) |
1.93 |
2.98 |
|||
Unencumbered assets to unsecured debt (1) |
1.62 |
1.54 |
|||
(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, 2023, Artis had $28.9 million of cash on hand and $135.3 million available on its revolving credit facilities.
Liquidity and capital resources may be impacted by financing activities, portfolio acquisition, disposition and development activities or debt repayments occurring subsequent to December 31, 2023.
FINANCIAL AND OPERATIONAL RESULTS
Three months |
Year ended December 31, |
||||||||
$000’s, except per unit amounts |
2023 |
2022 |
% Change |
2023 |
2022 |
% Change |
|||
Revenue |
$ 80,892 |
$ 94,102 |
(14.0) % |
$ 335,837 |
$ 372,512 |
(9.8) % |
|||
Net operating income |
45,352 |
52,377 |
(13.4) % |
184,017 |
209,980 |
(12.4) % |
|||
Net loss |
(86,837) |
(128,301) |
(32.3) % |
(332,068) |
(5,294) |
6,172.5 % |
|||
Total comprehensive (loss) income |
(116,270) |
(147,659) |
(21.3) % |
(364,399) |
105,537 |
(445.3) % |
|||
Distributions per common unit |
0.15 |
0.31 |
(51.6) % |
0.60 |
0.76 |
(21.1) % |
|||
FFO (1) (2) |
$ 27,275 |
$ 34,690 |
(21.4) % |
$ 120,539 |
$ 163,189 |
(26.1) % |
|||
FFO per unit – diluted (1) (2) |
0.25 |
0.30 |
(16.7) % |
1.08 |
1.38 |
(21.7) % |
|||
FFO payout ratio (1) (3) |
60.0 % |
50.0 % |
10.0 % |
55.6 % |
43.5 % |
12.1 % |
|||
AFFO (1) (2) |
$ 15,418 |
$ 21,307 |
(27.6) % |
$ 69,998 |
$ 110,950 |
(36.9) % |
|||
AFFO per unit – diluted (1) (2) |
0.14 |
0.18 |
(22.2) % |
0.63 |
0.94 |
(33.0) % |
|||
AFFO payout ratio (1) (3) |
107.1 % |
83.3 % |
23.8 % |
95.2 % |
63.8 % |
31.4 % |
(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. |
(2) The REIT also calculates FFO and AFFO, adjusted for the impact of the realized gain (loss) on equity securities. Refer to FFO and AFFO section of Artis’s 2023 Annual MD&A. |
(3) FFO payout ratio and AFFO payout ratio are calculated excluding the Special Distribution declared in December 2022. Refer to FFO and AFFO section of Artis’s 2023 Annual MD&A. |
Artis reported portfolio occupancy of 90.1% at December 31, 2023, unchanged from December 31, 2022. Weighted-average rental rate on renewals that commenced during 2023 increased 4.8%.
Artis’s portfolio has a stable lease expiry profile with 45.2% of gross leasable area expiring in 2028 or later. Weighted-average in-place rents for the total portfolio are $15.15 per square foot and are estimated to be 1.7% above market rents. Information about Artis’s lease expiry profile is as follows:
Current |
Monthly |
2024 |
2025 |
2026 |
2027 |
2028 & later |
Total |
||||||||
Expiring square footage |
10.0 % |
0.3 % |
11.3 % |
9.8 % |
12.3 % |
11.1 % |
45.2 % |
100.0 % |
|||||||
In-place rents |
N/A |
N/A |
$ 16.85 |
$ 16.93 |
$ 16.71 |
$ 13.44 |
$ 14.34 |
$ 15.15 |
|||||||
Market rents |
N/A |
N/A |
$ 16.36 |
$ 16.62 |
$ 16.72 |
$ 12.96 |
$ 14.13 |
$ 14.89 |
UPCOMING WEBCAST AND CONFERENCE CALL
A conference call with management will be held on Friday, March 1, 2024 at 12:00 p.m. CT (1:00 p.m. ET). In order to participate, please dial 1-416-764-8688 or 1-888-390-0546. 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 1, 2024, a replay of the conference call will be available by dialing 1-416-764-8677 or 1-888-390-0541 and entering passcode 805832#. The replay will be available until Friday, March 8, 2024. 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 with respect to potential sales of retail, office and industrial assets, the REIT’s NCIB and its objective to pursue various opportunities available to the REIT to grow NAV per unit and the strategies to pursue such objective. Without limiting the foregoing, the words “outlook”, “objective”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “believes”, “plans”, “seeks”, 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, tax matters, credit, market, currency, operational, liquidity and funding risks, real property ownership, geographic concentration, current economic conditions, strategic initiatives, pandemics and other public health events, debt financing, interest rate fluctuations, foreign currency, tenants, SIFT 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 markets, 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, trustees and risks and uncertainties regarding strategic alternatives including the terms of their availability, whether they will be available at all and the effects of their implementation.
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 2023 Annual Information Form for the year ended December 31, 2023, the section entitled “Risk and Uncertainties” of Artis’s 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 Same Property Net Operating Income (“Same Property NOI”), 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.
Supplementary financial measures includes unencumbered assets to unsecured debt.
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 2023 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, |
December 31, |
||
Unitholders’ equity |
$ 1,716,332 |
$ 2,229,159 |
|
Less face value of preferred equity |
(197,951) |
(212,547) |
|
NAV attributable to common unitholders |
1,518,381 |
2,016,612 |
|
Total number of diluted units outstanding: |
|||
Common units |
107,950,866 |
115,409,234 |
|
Restricted units |
477,077 |
440,617 |
|
Deferred units |
323,224 |
203,430 |
|
108,751,167 |
116,053,281 |
||
NAV per unit |
$ 13.96 |
$ 17.38 |
Total Debt to GBV
December 31, |
December 31, |
||
Total assets |
$ 3,735,030 |
$ 4,553,913 |
|
Add: accumulated depreciation |
11,786 |
10,585 |
|
Gross book value |
3,746,816 |
4,564,498 |
|
Secured mortgages and loans |
911,748 |
864,698 |
|
Preferred shares liability |
928 |
950 |
|
Carrying value of debentures |
199,630 |
449,091 |
|
Credit facilities |
794,164 |
901,159 |
|
Total debt |
$ 1,906,470 |
$ 2,215,898 |
|
Total debt to GBV |
50.9 % |
48.5 % |
Unencumbered Assets to Unsecured Debt
December 31, |
December 31, |
||
Unencumbered assets |
$ 1,567,001 |
$ 2,034,409 |
|
Unencumbered assets in properties held under joint venture arrangements |
47,243 |
50,557 |
|
Total unencumbered assets |
1,614,244 |
2,084,966 |
|
Senior unsecured debentures |
199,630 |
449,091 |
|
Unsecured credit facilities |
794,164 |
901,159 |
|
Total unsecured debt |
$ 993,794 |
$ 1,350,250 |
|
Unencumbered assets to unsecured debt |
1.62 |
1.54 |
Adjusted EBITDA Interest Coverage Ratio
Three months ended |
Year ended |
||||||
December 31, |
December 31, |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Net loss |
$ (86,837) |
$ (128,301) |
$ (332,068) |
$ (5,294) |
|||
Add (deduct): |
|||||||
Tenant inducements amortized to revenue |
6,177 |
6,301 |
24,595 |
25,405 |
|||
Straight-line rent adjustments |
(509) |
(424) |
(2,554) |
(1,379) |
|||
Depreciation of property and equipment |
311 |
312 |
1,226 |
1,254 |
|||
Net loss (income) from equity accounted investments |
1,804 |
28,196 |
57,385 |
(74,659) |
|||
Distributions from equity accounted investments |
1,373 |
734 |
4,346 |
4,166 |
|||
Interest expense |
32,816 |
29,013 |
121,876 |
89,437 |
|||
Strategic review expenses |
28 |
— |
207 |
— |
|||
Fair value loss on investment properties |
119,803 |
156,533 |
344,286 |
178,431 |
|||
Fair value (gain) loss on financial instruments |
(12,201) |
(18,075) |
41,730 |
21,130 |
|||
Foreign currency translation (gain) loss |
(3,880) |
(1,583) |
(6,932) |
6,683 |
|||
Income tax expense (recovery) |
3,067 |
(5,894) |
(5,605) |
14,355 |
|||
Adjusted EBITDA |
61,952 |
66,812 |
248,492 |
259,529 |
|||
Interest expense |
32,816 |
29,013 |
121,876 |
89,437 |
|||
Add (deduct): |
|||||||
Amortization of financing costs |
(797) |
(787) |
(3,401) |
(3,177) |
|||
Amortization of above- and below-market mortgages, net |
84 |
234 |
778 |
896 |
|||
Adjusted interest expense |
$ 32,103 |
$ 28,460 |
$ 119,253 |
$ 87,156 |
|||
Adjusted EBITDA interest coverage ratio |
1.93 |
2.35 |
2.08 |
2.98 |
Total Debt to Adjusted EBITDA
December 31, |
December 31, |
||
Secured mortgages and loans |
$ 911,748 |
$ 864,698 |
|
Preferred shares liability |
928 |
950 |
|
Carrying value of debentures |
199,630 |
449,091 |
|
Credit facilities |
794,164 |
901,159 |
|
Total debt |
1,906,470 |
2,215,898 |
|
Quarterly Adjusted EBITDA |
61,952 |
66,812 |
|
Annualized Adjusted EBITDA |
247,808 |
267,248 |
|
Total Debt to Adjusted EBITDA |
7.7 |
8.3 |
Same Property NOI
Year ended |
Year ended |
||||||||||||
December 31, |
% Change |
December 31, |
% Change |
||||||||||
2023 |
2022 |
Change |
2023 |
2022 |
Change |
||||||||
Net operating income |
$ 45,352 |
$ 52,377 |
$ 184,017 |
$ 209,980 |
|||||||||
Add (deduct) net operating income from: |
|||||||||||||
Joint venture arrangements |
3,116 |
1,548 |
11,123 |
8,886 |
|||||||||
Dispositions and unconditional dispositions |
(6,215) |
(14,943) |
(9,174) |
(40,569) |
|||||||||
(Re)development properties |
340 |
227 |
(2,716) |
(6,634) |
|||||||||
Lease termination income adjustments |
(101) |
(374) |
(135) |
(1,289) |
|||||||||
Other |
(51) |
76 |
301 |
172 |
|||||||||
(2,911) |
(13,466) |
(601) |
(39,434) |
||||||||||
Straight-line rent adjustments (1) |
(699) |
(804) |
(2,697) |
(3,045) |
|||||||||
Tenant inducements amortized to revenue (1) |
5,922 |
5,532 |
24,220 |
22,969 |
|||||||||
Same Property NOI |
$ 47,664 |
$ 43,639 |
$ 4,025 |
9.2 % |
$ 204,939 |
$ 190,470 |
$ 14,469 |
7.6 % |
(1) Includes joint venture arrangements.
FFO and AFFO
Three months ended |
Year ended |
||||||
December 31, |
December 31, |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Net loss |
$ (86,837) |
$ (128,301) |
$ (332,068) |
$ (5,294) |
|||
Add (deduct): |
|||||||
Tenant inducements amortized to revenue |
6,177 |
6,301 |
24,595 |
25,405 |
|||
Incremental leasing costs |
456 |
368 |
2,274 |
2,695 |
|||
Distributions on preferred shares treated as interest expense |
63 |
63 |
249 |
240 |
|||
Remeasurement component of unit-based compensation |
(34) |
(435) |
(1,433) |
(1,725) |
|||
Strategic review expenses |
28 |
— |
207 |
— |
|||
Adjustments for equity accounted investments |
4,381 |
29,211 |
66,862 |
(62,140) |
|||
Fair value loss on investment properties |
119,803 |
156,533 |
344,286 |
178,431 |
|||
Fair value (gain) loss on financial instruments |
(12,201) |
(18,075) |
41,730 |
21,130 |
|||
Foreign currency translation (gain) loss |
(3,880) |
(1,583) |
(6,932) |
6,683 |
|||
Deferred income tax expense (recovery) |
2,990 |
(6,315) |
(6,206) |
13,620 |
|||
Preferred unit distributions |
(3,671) |
(3,077) |
(13,025) |
(15,856) |
|||
FFO |
$ 27,275 |
$ 34,690 |
$ 120,539 |
$ 163,189 |
|||
Add (deduct): |
|||||||
Amortization of recoverable capital expenditures |
$ (1,985) |
$ (2,393) |
$ (7,403) |
$ (8,180) |
|||
Straight-line rent adjustments |
(509) |
(424) |
(2,554) |
(1,379) |
|||
Non-recoverable property maintenance reserve |
(400) |
(850) |
(2,200) |
(4,150) |
|||
Leasing costs reserve |
(7,500) |
(7,900) |
(30,400) |
(31,900) |
|||
Adjustments for equity accounted investments |
(1,463) |
(1,816) |
(7,984) |
(6,630) |
|||
AFFO |
$ 15,418 |
$ 21,307 |
$ 69,998 |
$ 110,950 |
FFO and AFFO Per Unit
Three months ended |
Year ended |
||||||
December 31, |
December 31, |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Basic units |
107,947,620 |
115,781,374 |
111,294,362 |
117,932,876 |
|||
Add: |
|||||||
Restricted units |
443,082 |
399,997 |
402,558 |
356,076 |
|||
Deferred units |
322,874 |
202,914 |
281,001 |
180,635 |
|||
Diluted units |
108,713,576 |
116,384,285 |
111,977,921 |
118,469,587 |
Three months ended |
Year ended |
||||||
December 31, |
December 31, |
||||||
2023 |
2022 |
2023 |
2022 |
||||
FFO per unit: |
|||||||
Basic |
$ 0.25 |
$ 0.30 |
$ 1.08 |
$ 1.38 |
|||
Diluted |
0.25 |
0.30 |
1.08 |
1.38 |
|||
AFFO per unit: |
|||||||
Basic |
$ 0.14 |
$ 0.18 |
$ 0.63 |
$ 0.94 |
|||
Diluted |
0.14 |
0.18 |
0.63 |
0.94 |
FFO and AFFO Payout Ratios
Three months ended |
Year ended |
||||||
December 31, |
December 31, |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Distributions per common unit |
$ 0.15 |
$ 0.15 |
$ 0.60 |
$ 0.60 |
|||
FFO per unit – diluted |
0.25 |
0.30 |
1.08 |
1.38 |
|||
FFO payout ratio |
60.0 % |
50.0 % |
55.6 % |
43.5 % |
|||
Distributions per common unit |
$ 0.15 |
$ 0.15 |
$ 0.60 |
$ 0.60 |
|||
AFFO per unit – diluted |
0.14 |
0.18 |
0.63 |
0.94 |
|||
AFFO payout ratio |
107.1 % |
83.3 % |
95.2 % |
63.8 % |
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
For further information: Samir Manji, President & Chief Executive Officer, Jaclyn Koenig, Chief Financial Officer or Heather Nikkel, Senior Vice-President – Investor Relations and Sustainability of the REIT at 204-947-1250. 600 – 220, Portage Avenue, Winnipeg, MB R3C 0A5, T 204.947.1250 F 204.947.0453, www.artisreit.com, AX.UN on the TSX
The real estate sector has been one of the most significant drivers of economic strength and growth in India. As per the latest data outlook real estate demand is estimated to be around 15-18 million sq. ft by the year 2025. Reportedly, as per the IBEF, luxury home sales in India have advanced by a 130% rate through mid-2023.
In FY23, the value of home sales in India’s residential property market rose to an all-time high of Rs 3.47 lakh crore (US$ 42 billion) which had a remarkable increase to the tune of around 48% over last year’s figures. The number of units sold also increased by 36% to 379,095.
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However, the real estate sector is likely to encounter substantial hurdles in the future as a result of rising property costs, rental rates, and loan payments. As inflation is projected to rise more in the coming years, there is growing concern about how it will impact the real estate industry in 2024.
Before getting into the 2024 predictions, it’s crucial to understand how inflation affects the Indian real estate market.
Inflation and Property Prices:
Inflation has an important influence on property prices. When inflation increases, it also raises the costs of building houses due to higher expenses for materials and labourers. Resulting in the overall cost of a property. Additionally, inflation can impact people’s desire to buy property, as they may choose to delay or avoid making large purchases when they are uncertain about the future. This may result in a reduction of the demand for properties, which can also further fluctuate property prices.
When we look ahead to 2024, the influence of inflation on property prices will depend on mixed factors. One crucial issue will be how the government controls inflation and maintains economic stability. If the government takes significant steps to curb inflation in the Union Budget 2024-25, property prices may stabilise. The middle-income category drives a huge portion of property demand, and inflation has a significant impact on their purchasing power. If inflation remains under control, there may be increased demand for properties, thus raising property prices. However, if inflation continues to rise, people may have less money to buy homes, resulting in a drop in demand. This could result in decreased property prices, providing an excellent chance for purchasers to invest in real estate.
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Rental Rates and Inflation:
In the 2024 real estate forecast, inflation’s impact on rental prices is another key factor to consider. When the cost of living rises, landlords may be forced to raise rents to pay their costs. This makes it difficult for tenants, particularly middle-class families, to afford rental flats.
Furthermore, inflation can boost the cost of maintenance and utilities, which can be passed on to tenants in the form of higher rents. As rental rates rise, landlords may have trouble finding tenants, resulting in decreased demand for rental units.
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Inflation affects rental property investors in both positive and negative ways. On the one hand, they can increase earnings by raising rental rates. However, tenants may struggle to afford the increasing prices, resulting in abandoned rental units.
Loan EMIs and Inflation:
Inflation has a significant impact on the real estate market, increasing the cost of loan repayments. Borrowing money is often more expensive during periods of inflation. This may be a severe concern not just for current homeowners, but also for potential homebuyers because increased EMIs make it more difficult to repay loans or gain mortgage approval. If loan payments rise, consumers may find it more difficult to repay their loans or receive them in the first place. This could also affect the real estate business, as developers and builders may struggle to sell their properties, resulting in fewer new development projects.
Inflationary pressures in the real estate market are expected to influence all sectors, including residential, commercial, and retail. However, certain segments may experience a greater influence than others. For example, premium houses and prime business sites may see a greater price increase, but inexpensive housing and commercial spaces in the suburbs may see a mild increase. This can shift the current prices, especially in suburbs that are closer to tier 2 cities and restabilize the market
The real estate industry in India is likely to grow dramatically in the next few years, but inflation remains a concern. As we predict for 2024, inflation will have a variety of effects on the real estate market, depending on government policies, demand and supply, and overall economic stability. Inflation can raise property prices, rent rates, and loan payments, but the government can make policies to limit the effects. As a buyer or investor, one must stay current on economic trends to make informed real estate investment decisions in the years ahead.
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Dallas-based Crow Holdings has raised almost $3.7 billion in a new fund to make property investments across the U.S.
The new fund is the largest such capital raise yet for the family-owned investment firm. The Crow Holdings Realty Partners X LP fund includes co-invest agreements totaling nearly $600 million in equity capital.
Crow Holdings plans to use the equity raised from global banks, sovereign wealth funds, insurance companies, pension plans, family offices and high-net-worth individuals to acquire industrial, multifamily, manufactured housing, convenience retail, self-storage, and student housing properties around the country.
More than a quarter of the fund’s capital has already been spent on 14 property investments.
“This fund will continue to selectively invest in real estate assets that we believe benefit most from a number of long-term secular trends that support their continued income growth, primarily in the industrial and multifamily sectors in high growth markets across the country,” Bob McClain, CEO of Crow Holdings Capital, said in a statement. “Our talented team of experienced investment professionals have established a track record of high performance in multiple real estate cycles, and we have conviction about the current opportunities and possibilities.”
More than 70% of the fund’s commitments came from previous Crow Holdings investors. The new fund was almost 35% larger than the $2.3 billion raised for the firm’s previous Fund IX.
“Our successful fund raise, especially in the current challenging equity market environment, is a testament to the faith our returning and new investors have in our ability to identify and secure attractive real estate investments in our core focus areas,” Coe Juracek, Crow Holdings Capital senior managing director of investor coverage, said in a statement. “We are incredibly grateful for their continued support and partnership.”
Crow Holdings – based in Dallas’ historic Old Parkland complex – operates out of 20 offices across the U.S. The company has $31 billion in assets under management.
“We continue to increase and diversify our offerings and adjacent strategies to be of greater service to our investment partners, providing increased access to more of the firm’s core competencies and best ideas,” Michael Levy, CEO of Crow Holdings, said in a statement.
Crow Holdings in 2022 raised about $680 million in a fund to finance construction of more than $1 billion in U.S. apartments. The firm raised another $750 million to fund development of industrial buildings, apartments and other properties.
Crow Holdings last year teamed with an unnamed global institutional investor to create a $2.8 billion investment platform to buy buildings that house shops and eateries.
.
Commercial real estate (CRE) has long been an attractive investment avenue for those seeking to diversify their portfolios and capitalise on the stability and income potential of real property. Real Estate Investment Trusts (REITs) have been a game-changer in the global investment landscape, providing investors with a unique proposition to participate in the commercial real estate market. In a bid to catalyse the growth of the real estate sector in India, the Securities and Exchange Board of India (SEBI) has plans to introduce an innovative concept – the MSM REITs.
These MSM REITs, with a reduced minimum asset size of ₹25 crores, aim to foster a broader range of real estate investments while ensuring transparency, control, and credibility for investors. The minimum ticket size of Rs10 lakhs provides accessibility to retail investors while maintaining a certain level of sophistication.
This article explores the key features and advantages of MSM REITs, comparing them to traditional models and drawing parallels with global small-cap REITs.
Transparency, control and niche targeting
MSM REITs adopt a niche-targeted approach that allows investors to choose specific asset-focused schemes, offering transparency and control that goes beyond traditional blind pool investments. This provides investors with a clear understanding of the modalities and fundamentals of their investments ensuring a level of customisation and transparency that aligns with their evolving preferences.
Mandatory sponsor commitment and credibility
MSM REITs maintain the core structure of traditional REITs, comprising a Trustee, Sponsor/sponsor group, investment manager, and investors as primary stakeholders. Notably, in these MSM REITs, the Investment Manager and Sponsor can be the same entity. The proposed regulations ensure mandatory Sponsor commitment, fostering a ‘skin in the game’ mindset, and set minimum net worth requirements for the investment manager and sponsor, enhancing overall credibility.
Enhanced liquidity, easy transferability and low volatility
Listing units on stock exchanges introduce fair pricing, robust risk management, guaranteed settlement, high liquidity and easy transferability. Unlike the traditional models in the CRE investing space with long investment horizons, MSM REITs allow investors to exit at a time and price of their own choosing. Despite being a listed product, volatility remains low due to the backing of fairly stable assets.
Standardised regulations, risk mitigation and investor protection
The transition from the earlier models to a more structured approach in MSM REITs is a paradigm shift towards investor protection. Standardised regulations, Know Your Customer (KYC) norms, grievance redressal mechanisms, and the oversight of regulatory bodies collectively fortify investor confidence. The non-permissibility of investing in under-construction assets mitigates the risk of non-completion and disruption in returns. This prudent measure safeguards investors from uncertainties associated with projects still in progress, aligning with the aim of providing secure, stable and predictable returns.
In conclusion, incorporating MSM REITs into an investment portfolio offers investors a unique combination of stability, income generation, and growth potential. Drawing inspiration from global practices, the introduction of MSM REITs in India has the potential to mirror the success of small-cap REITs, single-asset REITs in other markets, such as the United States and the UK. This represents a progressive stride in the Indian real estate investment landscape.
By incorporating transparency, control, credibility, and investor protection, these REITs aim to stimulate further growth in the real estate sector and related segments of the economy. As India embraces this innovative approach, the MSM REITs have the potential to become a catalyst for a more inclusive and vibrant real estate investment ecosystem.
Abhishek Katiyar, VP of Strategic Initiatives at Property Share
Here’s your comprehensive 3-minute summary of all the things Finance Minister Nirmala Sitharaman said in her Budget speech: Click to download!
A Dallas hotel company is putting a dozen properties up for sale to pay down debts.
Ashford Hospitality Trust has been struggling to deal with rising interest rates and loan maturities on hundreds of millions of dollars in mortgages. Ashford owns about 100 hotels nationwide, including seven properties in Dallas-Fort Worth with more than 1,500 rooms.
Last year, the company said it was surrendering more than a dozen of its hotels to lenders after missing debt payments. Two of those properties were the Courtyard Plano Legacy Park and Residence Inn Plano.
Now Ashford said it’s offering a dozen of its hotels around the country for sale. The largest of those properties are in Atlanta, Boston, Savannah and Orlando.
“As we enter 2024, we are focused on paying off our strategic corporate financing,” Rob Hays, Ashford Trust’s President and Chief Executive Officer, said this week in a statement. “Between the excess proceeds from planned asset sales, excess proceeds from planned property refinancings, and proceeds from our non-traded preferred capital raise, we believe we have a viable path to pay off our strategic financing this year.
“Our hotel portfolio also continues to benefit from its geographic diversification, and I believe we are well-positioned to continue to outperform.”
Ashford previously sold a hotel in Florida – the 222-room WorldQuest Resort in Orlando – for $14.8 million.
The firm also said it’s in talks with lenders to refinance hotels in Atlanta, Nashville and Arlington, Va.
At the end of September, Ashford had about $3.6 billion in loans with an average interest rate of 7.9%.
Like other commercial property owners, the hotel firm has faced challenges to pay for loans made several years ago and often at lower interest rates.
Bryan Donohoe, CEO of Ares Commercial Real Estate Corp (NYSE:ACRE), executed a sale of 18,868 shares in the company on January 30, 2024, according to a recent SEC Filing. This transaction has been part of a series of sales by the insider over the past year, with a cumulative total of 18,868 shares sold and no shares purchased.
Ares Commercial Real Estate Corporation is a specialty finance company primarily engaged in originating and investing in commercial real estate loans and related investments. The company provides a range of financing solutions for the real estate industry, including senior mortgage loans, subordinated debt, preferred equity, and other forms of real estate financing.
The insider transaction history at Ares Commercial Real Estate Corp indicates a trend of 0 insider buys and 2 insider sells over the past year.
On the date of the insider’s recent transaction, shares of Ares Commercial Real Estate Corp were trading at $10.32, resulting in a market capitalization of $518.667 million.
The stock’s price-earnings ratio stands at 159.67, which is above both the industry median of 18.07 and the companys historical median price-earnings ratio.
Ares Commercial Real Estate Corp’s stock, with a price of $10.32 and a GuruFocus Value of $9.63, has a price-to-GF-Value ratio of 1.07, indicating that the stock is Fairly Valued according to the GF Value metric.
The GF Value is calculated considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates provided by Morningstar analysts.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
An almost 60% drop in sales wasn’t enough to knock Dallas off its top spot as the country’s leading commercial real estate investment market last year.
Close to $19 billion in Dallas-area commercial properties traded in 2023 — the most of any metro area in the country, according to year-end estimates by analysts at MSCI Inc. Dallas has been the leading commercial investment market for three years in a row.
Dallas outranked Los Angeles, Manhattan and Chicago for commercial property investment during the year. That was even though Dallas had the largest — 58% — decline among those cities in sales from 2022 to 2023.
Nationwide, the volume of commercial property transactions sank by 51%, according to MSCI. More than $374 billion in properties sold during the year.
“Deal volume fell at a pace in 2023 that was reminiscent of the worst parts of the Global Financial Crisis” of more than a decade ago, according to MSCI analysts. “Prices continued to decline as well, with some elements of the market down at double-digit rates.”
A jump in interest rates, a decline in lending for new transactions and continuing shakeout in the office building industry held down commercial property sales across the U.S.
Still, several major property trades in the Dallas area were among the largest in the country in 2023.
The more than $576 million purchase of the huge CityLine office tower campus in Richardson was the seventh biggest U.S. commercial property deal last year. The October sale of the 500-unit Sloane Street apartments in Carrollton to investor AvalonBay Communities Inc. totaled $142 million.
Downtown Dallas’ 1.2 million square foot Plaza of the Americas office and retail complex also changed hands to a joint venture between Glen Park Capital and Shelbourne, a New York-based commercial real estate owner and management company.
Almost half of the Dallas-area commercial property trades last year were apartments, with more than $9 billion in purchases. MSCI estimates that $4.4 billion in industrial buildings in the Dallas area were sold.
Dallas was the biggest U.S. market for apartment sales in 2023 and also a top metro area for industrial building purchases, according to MSCI.
“Unless office comes back in a big way, industrial and apartment will continue to drive these rankings,” MSCI chief economist Jim Costello said. “The Metroplex is more liquid than comparably sized areas globally. “
MSCI estimates that more than $1.9 billion of the commercial real estate deals in Dallas last year were by offshore investors. Dallas was second to Manhattan for foreign commercial property investment. Most of the Dallas transactions were by Canadian investors.
“Cross-border players increased their (nationwide) exposure to industrial and apartment, with net purchases of $3.3 billion and $1.5 billion, respectively,” according to MSCI. “These investors exited the suburban office sector, with net dispositions of $1.8 billion.”
Only about $52 billion in office purchases were recorded nationally in 2023 — a drop of 56% year-over-year. About $2.3 billion in Dallas offices were acquired.
“Unless some outside force drives sudden new excitement around office investment, current owners of assets will need to endure further price declines,” MSCI analysts predict.
Absolute-Net Lease in Place and Produces Strong 16.5% Cap Rate over the Life of the Lease Term
SCOTTSDALE, AZ / ACCESSWIRE / January 22, 2024 / Zoned Properties®, Inc. (“Zoned Properties” or the “Company”) (OTCQB:ZDPY), a leading real estate development firm for emerging and highly regulated industries, including legalized cannabis, today announced that the Company has acquired an investment property in Chicago, Illinois (the “Investment Property”) and entered into a long-term, absolute-net lease agreement with Justice Cannabis Co.’s BLOC Dispensaries to operate a Retail Dispensary.
“This investment significantly enhances our property investment portfolio and rental revenue base, and diversifies our tenant roster. We have partnered with a best-in-class cannabis operator, which underscores the highest and best use of this premier retail location. Illinois is home to one of the most exciting, emerging cannabis markets in the nation with strong consumer brands and growing consumer demand. Driven by robust consumer brands and escalating demand, Illinois’ market has reached new heights with the Department of Financial and Professional Regulation (IDFPR) reporting a surge in retail activity, including the launch of 28 new dispensaries and total dispensary sales eclipsing the $1.5 billion mark in FY23. We are poised to play a pivotal role in the commercial real estate landscape of the cannabis sector and this partnership aligns with the Company’s mission to innovate within the real estate development sector, driving growth and delivering value to shareholders,” commented Bryan McLaren, Chief Executive Officer of Zoned Properties. “The collaboration with Justice Cannabis Co.’s BLOC Dispensaries is a testament to our strategic vision and we look forward to expanding our relationship with their executive team.”
Transaction Highlights
-
Zoned Properties has acquired a premier Investment Property in Chicago, Illinois that has been entitled and permitted as a cannabis retail dispensary.
-
The Investment Property was acquired for approximately $1.6 million, including all closing costs and fees. The transaction also includes a commitment from the tenant’s operating partner of up to $1 million for renovation and construction improvements.
-
The Investment Property is leased to Justice Cannabis Co.’s BLOC Dispensaries under a long-term, absolute-net lease agreement, which will produce an approximate 16.5% Cap Rate when straight-lined over the 15-year term of the lease agreement. The lease includes 3% annual increases in base rent over the life of the lease term, yielding approximately $265,000 in annual base rental revenue when straight-lined over the life of the lease term.
Market Highlights
-
Illinois’ cannabis market is becoming one of the strongest in the nation. In 2023, the state saw over $1.5 billion in overall dispensary sales and is expected to see continued growth in 2024.
-
Chicago, Illinois is in the BLS-5 Region for cannabis retail locations, one of the most in-demand market regions in Illinois.
-
The Investment Property is located in a prime retail area, situated approximately 1.5 miles from the iconic Chicago White Sox stadium and is surrounded by several major highways.
About Justice Cannabis Co. & BLOC Dispensaries
Justice Cannabis Co. (formerly known as Justice Grown), has been a steady force in the U.S. cannabis industry for over 7 years and has garnered attention for all the right reasons. They are a full-service, vertical cannabis business. They cultivate, manufacture and distribute high quality cannabis products to a variety of customers, and patients across the United States. Founded on the premise of ‘cannabis made good, that does good to make you feel good,’ the Justice team has a long-standing and impressive reputation for their social justice commitments, quality products, unique dispensaries and a modern approach to service. Through its retail brand, Bloc, Justice Cannabis Co. offers products and dispensary experiences thoughtfully developed to aid in the daily journey of feeling better. With an expertly curated collection, and an attainable price point, Justice Cannabis Co. continues to garner attention for its growing community of loyal customers.
Justice Cannabis Co. holds multiple licenses across 8 states: California, Illinois, Pennsylvania, Massachusetts, New Jersey, Michigan, Missouri, and Utah. With over 100 years of combined cannabis experience on the executive team, Justice Cannabis Co. is composed of experienced cannabis professionals and alumni from some of the cannabis industry’s most influential and impactful brands. For more information, visit www.justicecannabisco.com.
About Zoned Properties, Inc. (OTCQB: ZDPY):
Zoned Properties is a specialized real estate development firm for emerging and highly regulated industries, including regulated cannabis. The Company is redefining the approach to commercial real estate investment through its integrated growth services.
Headquartered in Scottsdale, Arizona, Zoned Properties has developed a full spectrum of integrated growth services to support its real estate development model; the Company’s Property Technology, Advisory Services, Commercial Brokerage, and Investment Portfolio collectively cross-pollinate within the model to drive project value associated with complex real estate projects. With national experience and a team of experts devoted to the emerging cannabis industry, Zoned Properties is addressing the specific needs of a modern market in highly regulated industries.
Zoned Properties does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”). Zoned Properties’ corporate headquarters is located at 8360 E. Raintree Dr., Suite 230, Scottsdale, Arizona. For more information, call 877-360-8839 or visit www.ZonedProperties.com.
Twitter:@ZonedProperties
LinkedIn:@ZonedProperties
Safe Harbor Statement
This press release contains forward-looking statements. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Investor Relations
Zoned Properties, Inc.
Bryan McLaren
Tel (877) 360-8839
Investors@zonedproperties.com
www.zonedproperties.com
SOURCE: Zoned Properties, Inc.
View the original press release on accesswire.com