Mr. George Armoyan reports

CLARKE INC. REPORTS 2023 FOURTH QUARTER AND YEAR END RESULTS AND THE REDEPLOYMENT OF CAPITAL ON CERTAIN REAL ESTATE DISPOSITIONS

Clarke Inc. has released its results for the three months and year ended Dec. 31, 2023, and redeployed capital on certain real estate dispositions.

Results for the year ended Dec. 31, 2023

Net income for the year ended Dec. 31, 2023, was $3.4-million compared with $3.2-million in 2022. The company's operating businesses were more profitable in 2023 compared with 2022. Hotel revenues were $64.2-million in the year ended Dec. 31, 2023, compared with $54.7-million in 2022.

Comprehensive income for the year ended Dec. 31, 2023, was $17.1-million compared with $10.1-million in 2022. Comprehensive income exceeded 2022 due primarily to remeasurement losses on the company's defined benefit pension plans recorded in other comprehensive income in the prior year, partially offset by revaluations on certain hotels that were more significant in 2022 than in 2023.

During 2023, the company's book value per common share increased by $1.25, or 8 per cent. The change can be attributed primarily to: (i) hotel net operating income of $22.5-million, or $1.60 per share; (ii) revaluation gains on certain hotel properties of $16.1-million, or $1.14 per share; and (iii) a gain on the disposition of the company's share in a joint operation of $8.1-million, or 58 cents per share, offset by: (iv) combined fair value adjustments and realized losses on investment properties of $7.8-million, or 56 cents per share; (v) interest and accretion of $7.2-million, or 51 cents per share; and (vi) depreciation and amortization of $10.2-million, or 72 cents per share.

Clarke's basic and diluted earnings per share (EPS) for the year ended Dec. 31, 2023, were 24 cents, compared with 23 cents for the year ended Dec. 31, 2022. The company's book value per common share at the end of the year was $16.53 while its common share price was $14.28.

Results for the fourth quarter of 2023

The company had net income of $7.5-million in the fourth quarter of 2023 compared with $1.3-million in the same period in 2022. The $8.1-million gain recorded on exiting a joint operation in the fourth quarter is the primary reason for the increase year-over-year.

Comprehensive income for the fourth quarter was $16.1-million compared with $20.4-million for the same period in 2022. The primary reason for the decrease year-over-year is the reduced revaluation gains on certain hotel properties in 2023 compared with 2022.

For the three months ended Dec. 31, 2023, Clarke's basic and diluted EPS was 54 cents, compared with 10 cents for the same period in 2022.

Additional commentary on the company's results can be found in the company's management's discussion and analysis for the year ended Dec. 31, 2023.

Other information

Highlights of the consolidated financial statements for the three months and year ended Dec. 31, 2023, compared with the three months and year ended Dec. 31, 2022, are as shown in the associated table.

Redeployment of capital from certain asset dispositions

During the fourth quarter of 2023, the company finalized the exit of its one-third ownership in the 1111 Atwater Ave. development in Montreal, Que. The company received net proceeds of $26.2-million, including cash of $16.5-million and a $9.7-million secured loan from one of its former partners in the development. The company recognized a gain for accounting purposes on this disposition of $8.1-million.

During the fourth quarter of 2023, the company also sold two of its office buildings located in Houston, Tex., for net proceeds of $7.5-million. In the third quarter of 2023, these investment properties had been remeasured to their fair value less costs to sell, resulting in a fair value decrease of $4.3-million. The company also remeasured its remaining investment property in Houston, Tex., and recorded a fair value decrease of $3.5-million in 2023.

Subsequent to Dec. 31, 2023, the company entered into an agreement to sell the shares of its wholly owned subsidiary, Holloway Lodging U.S. Inc., to a company controlled by George Armoyan, Clarke's chairman, and his immediate family member, for consideration of $3.2-million (U.S.). The transaction constitutes a related-party transaction pursuant to Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. The company is exempt from the requirements to obtain a formal valuation and minority shareholder approval in connection with the sale in reliance on the exemptions contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101, respectively, as the fair market value of the transaction does not exceed 25 per cent of the company's market capitalization. The transaction was reviewed and approved by the board of directors of the company, excluding Mr. Armoyan, who abstained from voting on the matter. The transaction is subject to certain postclosing adjustments and is expected to close in March, 2024.

Tom Casey, Clarke's chief financial officer, stated: "The capital from our recent dispositions will be redeployed to the construction of the second phase of our Talisman residential development on Carling Ave. in Ottawa, Ont., as well as other renovations and repurposing opportunities that we expect to be accretive to the company's shareholders. The immediate response to the first phase of the Talisman has been very positive, and we are very excited to welcome our first residents in June, 2024." The first phase of the Talisman consists of two towers and 404 rental units, and the second phase will consist of three towers and 612 rental units. The Talisman will feature parkland, extensive tenant amenities and ground-floor commercial space.

About Clarke Inc.

Halifax-based Clarke is an investment and real estate company with holdings in a diversified group of businesses and across real estate sectors. Further information about Clarke, including the consolidated financial statements, and management's discussion and analysis for the year ended Dec. 31, 2023, is available at SEDAR+ and on the company's website.

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