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LANESBOROUGH REIT REPORTS 2021 YEAR END RESULTS

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WINNIPEG, MB, April 8, 2022

WINNIPEG, MB, April 8, 2022 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV: LRT.UN) today reported its operating results for the year ended December 31, 2021. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with Management's Discussion & Analysis, annual report and the financial statements for the year ended December 31, 2021, which may be obtained from the SEDAR website at www.sedar.com.

Notwithstanding the continued presence of the COVID‑19 pandemic and the disruption to operations caused by the flooding in downtown Fort McMurray in April of 2020, the Trust has experienced year‑over‑year growth in revenues during both 2020 and 2021, which may suggest the long‑awaited end to what has been several years of declining revenues.

According to Alberta's Budget 2022 Economic Forecast, after a 7.9% contraction in real Gross Domestic Product ("GDP") in 2020, the GDP in Alberta grew by an estimated 5.8% during 2021.

Despite the positive economic data in LREIT's primary market of Alberta and the development of a more favourable revenue trend, the Trust continued to face liquidity challenges and required $16.6 million of advances, made at the sole discretion of 2668921 Manitoba Ltd., under the revolving loan facility to fund the cash shortfall from operating activities, as well as mortgage loan principal payments, transaction costs for debt financing, and capital expenditures.

In an effort to meet ongoing funding obligations and sustain operations, LREIT has continued to pursue debt restructuring arrangements with certain of its lenders and has relied on favourable interim financing arrangements and other support from Shelter and its parent company, 2668921 Manitoba Ltd.

As of the date of this press release, the Trust has renewed, refinanced or obtained forbearance agreements for all mortgage loan debt, except for the debt secured by Woodland Park, which had an estimated aggregate balance outstanding of $28.2 million, as of December 31, 2021. Since February of 2019, Woodland Park has been in receivership and was classified as held for sale prior to being sold during the first quarter of 2022.

At December 31, 2021, the Trust was in breach of a debt service coverage ratio requirement of a $2.0 million first mortgage loan secured by Chateau St. Michael's, the property classified as discontinued operations. All payments of principal and interest have been made as scheduled and the lender has taken no action to demand repayment or enforce its security under the loan.


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Effective January 1, 2021, the Trust obtained amendments from 2668921 Manitoba Ltd. to the terms of the mortgage loan secured by a second charge over the property known as Nelson Ridge and the mortgage loan secured by the property known as Norglen Terrace resulting in reductions to the interest rates on the loans from 9% and 6% per annum, respectively, to 2% per annum.

Effective January 1, 2021 the revolving loan was amended to reduce the interest rate from 7% per annum to 2% per annum.

On November 1, 2021, the revolving loan was renewed and amended to extend the maturity date from December 31, 2021 to June 30, 2023 and to increase the maximum amount that may be advanced under the facility from $100.0 million to $120.0 million.

Subsequent to December 31, 2021, the mortgage loan receivable, in the amount of $4,000,000, was collected in full and used to partially repay the revolving loan, increasing the balance available under the revolving loan facility.

As of the date of this press release, the maximum available balance remaining on the revolving loan facility is $17.6 million.

In addition, LREIT continues to receive full interest payment deferrals on the loans held by 2668921 Manitoba Ltd., including the revolving loan and full deferrals on the payment of property management and service fees.

Subsequent to December 31, 2021, the Series G Debentures, with an aggregate principal amount outstanding of $24.8 million and all the accrued or unpaid interest owing thereon, in the amount of $8.2 million, were exchanged for 659.9 million Trust units with all claims of the holders of the Series G Debentures ("Debentureholders") extinguished. The exchange transaction reduces LREIT's overall debt and interest burden, simplifies its capital structure, improves its balance sheet and may allow the Debentureholders an opportunity to participate in a possible recovery of LREIT in the future.

Subsequent to December 31, 2021, Woodland Park was sold for $13.2 million. The net sales proceeds, of $12.8 million are being used to pay any outstanding fees and disbursements of the Receiver and counsel to the Receiver; to repay the Receiver's borrowings with respect to the receivership, in the amount of $1.0 million, in full; and, to partially repay the first mortgage loan secured by the property and accrued interest thereon, which was estimated to be $27.2 million as of December 31, 2021.

The deficit between the net sales proceeds applied to the first mortgage loan and the balance outstanding on the first mortgage loan could result in a claim against the Trust by the lender pursuant to the mortgage guarantee provided by the Trust at the time of the original execution of the first mortgage loan. Such a claim would be unsecured and subordinate to the Trust's existing secured debt, inclusive of any amounts outstanding with respect to the revolving loan facility from 2668921 Manitoba Ltd. and any amounts advanced by 2668921 Manitoba Ltd. or its affiliates, including Shelter.

ANALYSIS OF OPERATING RESULTS

Analysis of Loss and Comprehensive Loss

Year Ended December 31





Increase (Decrease)

in Income

2021

2020

Amount

%








Rentals from investment properties

$

18,327,013

$

17,540,289

$

786,724

4%

Rental loss insurance proceeds

1,872,888

-

1,872,888

- %

Property operating costs

(12,833,102)

(12,207,778)

(625,324)

(5)%

Net operating income (NOI)

7,366,799

5,332,511

2,034,288

38%








Interest income

239,462

181,092

58,370

32%

Interest expense

(12,250,385)

(18,102,440)

5,852,055

32%

Trust expense

(1,243,802)

(1,320,296)

76,494

6%








Loss before the following

(5,887,926)

(13,909,133)

8,021,207

58%








Fair value adjustments

(10,097,524)

(30,700,377)

20,602,853

67%








Loss before discontinued operations

(15,985,450)

(44,609,510)

28,624,060

64%








Loss from discontinued operations

(3,345,566)

(3,464,159)

118,593

3%








Loss and comprehensive loss

$

(19,331,061)

$

(48,073,669)

$

28,742,653

60%

 

Analysis of Loss per Unit

Year Ended December 31

2021

2020

Change





Loss before discontinued operations



‑ basic and diluted

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