An anonymous trustee reports

LANESBOROUGH REIT REPORTS 2023 FIRST QUARTER RESULTS

Lanesborough Real Estate Investment Trust today released its operating results for the quarter ended March 31, 2023. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with interim management's discussion and analysis -- quarterly highlights and the interim financial statements for the quarter ended March 31, 2023, which may be obtained from the SEDAR website.

Overall results

LREIT completed Q1 2023 with income and comprehensive income of $1.2-million, compared with income and comprehensive income of $16.2-million during the first quarter of 2022, representing a decrease in income and comprehensive income of $15.1-million. The decrease mainly reflects the fact that income and comprehensive income was comparatively high in the prior period due to the $19.8-million gain which resulted upon the extinguishment of Series G debentures as well as a $600,000 decrease in NOI. The decrease was partially offset by a $4.9-million increase from fair value adjustments, a $300,000 decrease in interest expense and a $300,000 decrease in trust expense.

The gain on extinguishment of the Series G debentures was the result of the exchange transaction completed on Feb. 24, 2022, pursuant to which the Series G debentures, in the aggregate principal amount outstanding of $24.8-million, and all accrued or unpaid interest owing thereon in the amount of $8.2-million, were exchanged for 659.9-million trust units. The trust units had a fair value of $13.2-million and debt in the aggregate amount of $33.0-million was extinguished, resulting in a gain of $19.8-million.

The decrease in NOI for the investment properties is mainly due to a $1.2-million decrease in rental revenues, partially offset by a $600,000 decrease in property operating costs, both of which are primarily attributable to the sales of Laird's Landing, Lakewood Apartments and Westhaven Manor on Jan. 31, 2023, and the sale of Woodland Park on March 15, 2022.

The increase from fair value adjustments is mainly due to a $4.1-million gain from fair value adjustments during Q1 2023, compared with an $800,000 loss from fair value adjustments during Q1 2022. The increase in Q1 2023 was primarily due to an increase in the carrying value of the properties located in Fort McMurray, Alta., as a result of an increase in the normalized revenue considered to be achievable in the market in light of the continued favourable occupancy trend. Losses from fair value adjustments recognized during Q1 2022 mainly reflected an increase in the long-term vacancy assumptions used in the valuation of properties in the Fort McMurray properties segment as a result of external market data obtained at the time.

The decrease in interest expense mainly reflects a $200,000 decrease in interest on the debentures due to the exchange of the Series G debentures for trust units on Feb. 24, 2022, and a $100,000 decrease in the amortization of transaction costs. The cash component of mortgage loan interest remained virtually unchanged, increasing by $900 in Q1 2023, compared with Q1 2022. Notwithstanding the nominal increase, the increase mainly reflects an increase in the weighted average interest rate on mortgage loans, which increased from 5.7 per cent as of March 31, 2022, to 7.2 per cent as of March 31, 2023, almost entirely offset by the impact of a reduction in the average mortgage loan principal balance outstanding during Q1 2023. The decrease in the mortgage loan debt was the result of the sales of Laird's Landing, Lakewood Apartments and Westhaven Manor on Jan. 31, 2023, and the sale of Woodland Park on March 15, 2022, as well as lump sum and regular principal payments made during 2022 and Q1 2023.

The decrease in trust expense mainly reflects a $200,000 decrease in professional fees primarily attributable to the exchange of the Series G debentures for trust units during Q1 2022.

About Lanesborough Real Estate Investment Trust

The REIT is a real estate investment trust which is listed on the TSX Venture Exchange under the symbol LRT.UN (trust units).

We seek Safe Harbor.