Ravelin Properties REIT Reports First Quarter 2025 Results
The REIT's unaudited interim financial statements and Management's Discussion and Analysis for the three months ended March 31, 2025 are available under the REIT's issuer profile on SEDAR+ and can also be found on the REIT's website at ravelinreit.com.
Highlights
264,626 square feet of new leases and renewals were signed in the first quarter of 2025 (inclusive of leases which will commence in future quarters). These deals were completed at a weighted average net rental rate per square foot of $17.68, or 4.6% above the prior rental rate.
Occupancy as at March 31, 2025 was 76.7%, virtually unchanged from 76.8% as at December 31, 2024.
The REIT's current leasing pipeline exceeds 475,000 square feet of renewals and new leases across its global portfolio. In addition, the REIT has more than 90,000 square feet of rent reviews underway in Ireland, whereby the REIT has an opportunity to increase in-place rents to market rent levels during the lease terms.
The REIT's liquidity as at March 31, 2025 consisted of unrestricted cash of $14.0 million ($13.6 million at December 31, 2024) and property level restricted cash of $8.6 million ($10.7 million at December 31, 2024), for total liquidity of $22.6 million ($24.3 million at December 31, 2024).
Subsequent to March 31, 2025, the REIT disposed of one property (1189 Colonel Sam Drive in Oshawa, Ontario) for total gross proceeds of $16.5 million. The net cash proceeds from the disposition were fully used to reduce borrowings on the REIT's Canadian revolving credit facility.
On a trailing twelve-month basis, the REIT generated $80.7 million of Adjusted EBITDA, resulting in a net debt to Adjusted EBITDA ratio of 13.4x, inclusive of the REIT's convertible debentures, or 11.5x excluding convertible debentures. Management expects these metrics to improve as the full benefit of internalization savings achieved in the first quarter of 2025 will be reflected in the trailing twelve-month Adjusted EBITDA calculation in coming quarters.
On December 31, 2024, the REIT completed the early termination of its external management agreement with Slate Management ULC and commenced operations as an internally managed entity on January 1, 2025 (the "Internalization").
The REIT achieved total cost savings of approximately $3.0 million during the three months ended March 31, 2025 from the elimination of management fees and greater focus on overhead expense management. Please see the MD&A for a detailed cost savings analysis on an itemized basis during the three months ended March 31, 2025. Management continues to anticipate that the Internalization will result in annualized run-rate cost savings of at least $10 million on a full year basis in 2025.
Subsequent to Q1 2025, the REIT notified its external property management service provider for its Chicago, IL properties of its decision to terminate the existing agreement. Effective June 1, 2025, the REIT will internalize property management and property level accounting functions for these investment properties. Management of the REIT is actively working with the external property manager to ensure a seamless transition during this period.
As at March 31, 2025, and as previously reported, the REIT remains in breach of the financial leverage and debt service coverage covenants on its revolving credit facility and certain other mortgages, resulting in other mortgages being in breach due to cross-default clauses. The REIT's convertible debentures are also in default due to restrictions imposed by default of the debt from senior lenders. The REIT is in active discussions with its lenders to resolve current defaults and to amend, renew or consider alternate arrangements on its debt with the objective of reaching terms that are acceptable to the REIT.
During the three months ended March 31, 2025, and with the assistance of professional restructuring advisors, the REIT continued to seek a restructuring of a majority of its outstanding indebtedness and to raise additional capital (collectively, the "Recapitalization Plan"). The potential Recapitalization Plan may involve, among other things, amendments to the REIT's existing secured indebtedness (including amendments to covenants and extensions of maturities, among other potential amendments), conversion of all or a portion of the REIT's convertible debentures into equity, additional subscriptions for units, additional interim secured funding and/or a potential rights offering to raise additional equity capital. On March 28, 2025, the senior secured lenders party to the REIT's Second Amended and Restated Credit Agreement dated November 14, 2023 as amended (the "Syndicated Credit Agreement") completed a sale and assignment of all the indebtedness and obligations under the Syndicated Credit Agreement to G2S2 Capital Inc. ("G2S2 Capital") in the aggregate principal amount of $233.0 million and U.S. $43.7 million. Additionally, on March 31, 2025, a senior secured lender of the REIT completed a sale of all the indebtedness and obligations under certain mortgages to G2S2 Capital, in the aggregate principal amount of $295.5 million. The completion of the sale and assignment of the revolving facilities and mortgages required the consent of the REIT under the agreements governing the loans. In connection with providing consent to the sale and assignment, an independent committee of trustees of the REIT sought and obtained a six-month forbearance from G2S2 Capital to allow the REIT additional time to negotiate the terms of a Recapitalization Plan.
The REIT is in discussions with G2S2 Capital and other lenders regarding the terms of an acceptable potential Recapitalization Plan. As of the date hereof, no agreement has been reached with any of the REIT's stakeholders with respect to a potential Recapitalization Plan, and there can be no assurance that the REIT will be successful in negotiating a potential Recapitalization Plan, or in raising the additional funding needed for the REIT to continue as a going concern. If the REIT is unsuccessful in negotiating a potential Recapitalization Plan, the REIT will be unable to continue as a going concern, and, in that case, the market price of the units and the convertible debentures would be materially adversely affected or extinguished.
Summary of Q1 2025 Results
Three months ended March 31,
(thousands of dollars, except per unit amounts)
2025
2024
Change %
Rental revenue
$
46,768
$
50,261
(6.9) %
Net operating income ("NOI")
$
19,633
$
23,177
(15.3) %
Net loss
$
(11,189)
$
(22,571)
(50.4) %
Weighted average diluted number of trust units (000s)
86,128
85,937
0.2 %
Funds from operations ("FFO")
$
1,556
$
3,544
(56.1) %
FFO per unit
$
0.02
$
0.04
(50.0) %
FFO payout ratio
— %
— %
— %
Core-FFO
$
2,546
$
4,474
(43.1) %
Core-FFO per unit
$
0.03
$
0.05
(40.0) %
Core-FFO payout ratio
— %
— %
— %
Adjusted FFO ("AFFO")
$
1,441
$
3,776
(61.8) %
AFFO per unit
$
0.02
$
0.04
(50.0) %
AFFO payout ratio
— %
— %
— %
March 31, 2025
December 31, 2024
Change %
Total assets
$
1,237,476
$
1,229,711
0.6 %
Total debt
$
1,097,574
$
1,090,024
0.7 %
Portfolio occupancy
76.7 %
76.8 %
(0.1) %
Loan-to-value ("LTV") ratio
89.3 %
89.4 %
(0.1) %
Net debt to adjusted EBITDA 1
13.4x
12.9x
0.5x
Interest coverage ratio 1
1.2x
1.2x
—x
1 EBITDA is calculated using trailing twelve month actuals, as defined below.
Investor Information
The REIT's financial results and supplemental materials have been filed under the REIT's issuer profile on SEDAR+ and are also available on the REIT's website at ravelinreit.com under the Investors page. For any questions related to the REIT's financial results or ongoing business initiatives, please contact the REIT's investor relations team at [email protected] or (647) 792-6060.
About Ravelin Properties REIT (TSX: RPR.UN)
The REIT owns and operates a portfolio of well-located commercial real estate assets in North America and Europe. The majority of the REIT's portfolio is comprised of government and high-quality credit tenants. Visit ravelinreit.com to learn more.
Forward Looking Statements
Certain information herein constitutes "forward-looking information" as defined under Canadian securities laws which reflect management's expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words "plans", "expects", "does not expect", "scheduled", "estimates", "intends", "anticipates", "does not anticipate", "projects", "believes", or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "might", "occur", "be achieved", or "continue" and similar expressions identify forward-looking statements. Forward-looking statements contained herein include, but are not limited to, statements relating to: the REIT's current leasing pipeline and anticipated future leasing activity; expectations of improved Adjusted EBITDA and related metrics; the state of discussions with the REIT's lenders and any resolution of current defaults and arrangements on its existing debt; the ability of the REIT to reach an agreement regarding terms of the proposed Recapitalization Plan; the ability for the REIT to continue as a going concern and any effect on market price of its securities; the anticipated cost savings of the Internalization and greater focus on overhead expense management; and the anticipated internalization of property management and accounting functions for the REIT's Chicago, IL properties, including expected timing and transition. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the REIT's Annual Information Form for the year ended December 31, 2024, available under the REIT's issuer profile on SEDAR+ and on the REIT's website at ravelinreit.com.
Non-IFRS Measures
We disclose a number of financial measures in this news release that are not measures used under IFRS, including NOI, same property NOI, FFO, Core-FFO, AFFO, FFO payout ratio, Core-FFO payout ratio, AFFO payout ratio, NAV, adjusted EBITDA, net debt to adjusted EBITDA ratio, interest coverage ratio, debt service coverage ratio and LTV ratio, in addition to certain measures on a fully-diluted per unit basis.
NOI is defined as rental revenue, excluding non-cash straight-line rent and leasing costs amortized to revenue, less property operating costs prior to International Financial Reporting Interpretations Committee 21, Levies ("IFRIC 21") adjustments. Rental revenue for purposes of measuring NOI excludes revenue recorded as a result of determining rent on a straight-line basis and the amortization of leasing costs in revenue for IFRS. Same-property NOI includes those properties owned by the REIT for each of the current period and the relevant comparative period.
FFO is defined as net income adjusted for certain items including transaction costs, change in fair value of properties, change in fair value of financial instruments, change in fair value of Class B LP units, deferred income taxes, tax on gains on disposals of investment properties, distributions to Class B unitholders, depreciation and IFRIC 21 property tax adjustments.
Core-FFO is defined as FFO adjusted for the REIT's share of lease payments received for a data centre in Winnipeg, Manitoba (the "Data Centre"), which for IFRS purposes is accounted for as a finance lease.
AFFO is defined as FFO adjusted for amortization of deferred transaction costs; de-recognition and amortization of mark-to-market ("MTM") adjustments on mortgages refinanced or discharged; adjustments for interest rate subsidies received; recognition of the REIT's share of lease payments received for the Data Centre, which for IFRS purposes, is accounted for as a finance lease; amortization of straight-line rent; and normalized direct leasing and capital costs.
FFO payout ratio, Core-FFO payout ratio and AFFO payout ratio are defined as aggregate distributions made in respect of units of the REIT and Class B LP units divided by FFO, Core-FFO and AFFO, respectively.
FFO per unit, Core-FFO per unit and AFFO per unit are defined as FFO, Core-FFO and AFFO divided by the weighted average diluted number of units outstanding, respectively.
NAV is defined as the aggregate of the carrying value of the REIT's equity, Class B LP units, deferred units, and deferred tax liability.
Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, fair value gains (losses) from both financial instruments and investment properties, while also excluding non-recurring items such as transaction costs from dispositions, acquisitions or other events.
Net debt to adjusted EBITDA is defined as the aggregate amount of debt outstanding, less cash on hand, divided by the trailing twelve-month adjusted EBITDA.
Interest coverage ratio is defined as adjusted EBITDA divided by the REIT's interest expense for the period.
Debt service coverage ratio is defined as adjusted EBITDA divided by the debt service requirements for the period, whereby the debt service requirements reflects amortizing principal repayments and interest expensed during the period. Payments related to defeasance, prepayment penalties, or payments upon discharge of a mortgage are excluded from the calculation.
LTV ratio is defined as total indebtedness divided by total assets less restricted cash.
We use these measures for a variety of reasons, including measuring performance, managing the business, capital allocation and the assessment of risk. Descriptions of why these non-IFRS measures are useful to investors and how management uses each measure are included in the Management's Discussion and Analysis for the three months ended March 31, 2025, which readers should read when evaluating the measures included herein. We believe that providing these performance measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a manner similar to management. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar measures presented by others.
The tables below summarize a calculation of non-IFRS measures based on IFRS financial information.
The calculation of NOI is as follows:
1 In accordance with IFRIC 21, the REIT recognizes property tax liability and expense on its existing U.S. properties as at January 1 of each year, rather than progressively, i.e. ratably throughout the year. The recognition of property taxes as a result of IFRIC 21 has no impact on NOI, FFO or AFFO.
2 Refer to "Non-IFRS measures" section above.
The reconciliation of cash flow from operating activities to FFO, Core-FFO and AFFO is as follows:
Three months ended March 31,
(thousands of dollars)
2025
2024
Cash flow from operating activities
$ 2,159
$ 5,318
Add (deduct):
Leasing costs amortized to revenue
2,104
2,518
Transaction costs
—
518
Working capital changes
2,711
(2,592)
Straight-line rent and other changes
(1,564)
(2,183)
Interest and finance costs
(17,841)
(18,306)
Interest paid
13,987
16,570
FFO 1
$ 1,556
$ 3,544
Finance income on finance lease receivable
(615)
(675)
Finance lease payments received
1,605
1,605
Core-FFO 1
$ 2,546
$ 4,474
Amortization of deferred transaction costs
1,250
1,746
Amortization of debt mark-to-market adjustments
(8)
(10)
Amortization of straight-line rent
(540)
(335)
Normalized direct leasing and capital costs
(1,807)
(2,099)
AFFO 1
$ 1,441
$ 3,776
1 Refer to "Non-IFRS measures" section above.
The calculation of trailing twelve month adjusted EBITDA is as follows:
Twelve months ended March 31,
(thousands of dollars)
2025
2024
Net loss
$ (445,144)
$ (138,283)
Straight-line rent and other changes
6,647
10,840
Interest income
(359)
(569)
Interest and finance costs
74,614
68,741
Change in fair value of properties
421,588
153,017
IFRIC 21 property tax adjustment 1
(132)
(294)
Change in fair value of financial instruments
19,329
6,065
Distributions to Class B shareholders
—
371
Transaction costs
2,804
518
Depreciation of hotel asset
854
975
Change in fair value of Class B LP units
(1,004)
(14,745)
Costs related to the Internalization
764
—
Strategic review costs
—
319
Deferred income tax recovery
(226)
(340)
Current income tax expense
919
2,966
Adjusted EBITDA 2
$ 80,654
$ 89,581
1 In accordance with IFRIC 21, the REIT recognizes property tax liability and expense on its existing U.S. properties as at January 1 of each year, rather than progressively, i.e. ratably throughout the year. The recognition of property taxes as a result of IFRIC 21 has no impact on NOI, FFO, Core-FFO or AFFO.
2 Adjusted EBITDA is based on actuals for the twelve months preceding the balance sheet date.
The calculation of net debt is as follows:
(thousands of dollars)
March 31, 2025
March 31, 2024
Debt, non-current
$ 174,216
$ 481,984
Debt, current
923,358
676,139
Debt
$ 1,097,574
$ 1,158,123
Less: cash on hand
13,999
11,853
Net debt
$ 1,083,575
$ 1,146,270
The calculation of net debt to adjusted EBITDA is as follows:
Twelve months ended March 31,
(thousands of dollars)
2025
2024
Debt
$ 1,097,574
$ 1,158,123
Less: cash on hand
13,999
11,853
Net debt
$ 1,083,575
$ 1,146,270
Adjusted EBITDA 1 2
80,654
89,581
Net debt to adjusted EBITDA 2
13.4x
12.8x
1 Adjusted EBITDA is based on actuals for the twelve months preceding the balance sheet date.
2 Refer to "Non-IFRS measures" section above.
The interest coverage ratio is calculated as follows:
1 Adjusted EBITDA is based on actuals for the twelve months preceding the balance sheet date.
2 Refer to "Non-IFRS measures" section above.
The following is the calculation of IFRS NAV on a total and per unit basis at March 31, 2025 and December 31, 2024:
1 Represents the fully diluted number of units outstanding and includes outstanding REIT units, DUP units and Class B LP units.
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