Mr. Daniel Drimmer reports

TRUE NORTH COMMERCIAL REIT REPORTS Q1 2023 RESULTS

True North Commercial Real Estate Investment Trust today released its financial results for the three months ended March 31, 2023.

"Despite a challenging operating environment, positive leasing momentum continued in the first quarter of 2023," stated Daniel Drimmer, the REIT's chief executive officer. Management will remain focused on executing our previously announced strategic initiatives that will help strengthen the REIT's financial and liquidity position.

Q1 highlights

• Completed the sale of 400 Carlingview Dr., Toronto, Ont., on March 10, 2023, for a sale price of $7,250. The proceeds of disposition net of costs were $7,006.
• Entered into an unconditional agreement of purchase and sale to dispose of 360 Laurier Ave., Ottawa, Ont., for a sale price of $17,500 with closing expected to be on or about June 15, 2023.
• Contractually leased and renewed approximately 124,100 square feet with a weighted average lease term of 3.84 years and a 2.4-per-cent increase over expiring base rents.
• Portfolio occupancy of 93 per cent with an average remaining lease term of 4.5 years (91 per cent and 4.3 years including investment properties held for sale).
• Revenue and net operating income (NOI) decreased 7 per cent and 16 per cent, respectively, compared with Q1 2022 driven by a decrease in same-property NOI.
• During 2022, the REIT received termination income from one tenant at 6925 Century Ave. who downsized a portion of their space effective Q4 2022. Excluding this termination income and the lost revenue associated with the vacant space, Q4 2022 AFFO basic and diluted per unit would have been 11 cents which is consistent with Q1 2023 results. To date, 60 per cent of this vacancy has been contractually re-leased with rents commencing in the latter half of 2023.
• Same-property NOI decreased by 16.6 per cent and 15.4 per cent excluding investment properties held for sale due to termination fees received in Q1 2022 along with tenants downsizing on renewal. The decrease in NOI generated from investment properties held for sale was due to the lead tenant vacating the Laurier property effective February, 2023. Same-property NOI excluding investment properties held for sale and termination fees decreased 6.6 per cent in Q1 2023.
• Funds from operations (FFO) and adjusted funds from operations (AFFO) basic and diluted per unit decreased by five cents to 11 cents as compared with Q1 2022.
• Announced a 50-per-cent reduction to the monthly cash dividend from 4.95 cents per unit to 2.475 cents per unit or 29.7 cents per unit on an annualized basis (distribution reduction). The new declared distribution was paid on April 17, 2023, to unitholders of record on March 31, 2023. The distribution reduction is expected to provide an additional $25-million in cash annually that will be used to improve the company's capital profile.
• Available funds of $58.4-million at the end of Q1 2023.

Subsequent events

• On April 12, 2023, the REIT announced the intention to commence a normal course issuer bid (the NCIB) subject to the approval of the Toronto Stock Exchange. The REIT will have the ability to purchase for cancellation up to a maximum of 8,239,557 of its units representing 10 per cent of the REIT's public float of 82,395,573 units at a price per unit equal to the market price at the time of acquisition. The NCIB became effective from April 18, 2023, and will remain in place until the earlier of April 17, 2024, or the date on which the REIT has purchased the maximum number of units permitted.
• Also on April 12, 2023, the REIT announced the suspension of the dividend reinvestment plan (DRIP) until further notice. As a result unitholders received distributions in cash effective with the distribution paid on April 17, 2023, to unitholders of record on March 31, 2023.
• On April 26, 2023, the REIT announced that effective June 30, 2023, Tracy Sherren, the REIT's president and chief financial officer, and president, Canadian commercial, Starlight Investments, will be retiring from her executive positions at the REIT and Starlight Investments. Ms. Sherren will remain as a trustee of the REIT. Martin Liddell, the current chief financial officer at Starlight Investments, will be appointed as a chief financial officer of the REIT in addition to his positions at Starlight Investments. Chris Bell will continue to act as the president and chief investment officer at Starlight Investments as well as serving as the interim president of the Canadian commercial division at Starlight Investments.

The REIT's presentation currency is the Canadian dollar. Unless otherwise stated, dollar amounts expressed in this press release are in thousands of dollars.

Operating results

Q1 2023 revenue and NOI decreased 7 per cent and 16 per cent, respectively when compared with the same period in 2022. The main contributor was the decrease in termination income and lower revenue from a tenant in the REIT's GTA portfolio that downsized a portion of their space effective Q4 2022 combined with a 101,200-square-feet lease expiry in Q1 2023 at the Laurier property. The decrease was partially offset by termination income received from the tenant at the property disposed of in Q1 2023 and NOI from an acquisition completed in Q3 2022.

The REIT's FFO and AFFO decreased $4,033 and $4,036, respectively in Q1 2023 over the comparable period. FFO and AFFO were negatively impacted by a reduction in same property NOI due to a reduction in revenue, combined with higher financing costs as a result of higher interest rates on mortgage refinancings and the REIT's credit facility. FFO and AFFO benefited from NOI on the acquisition completed in Q3 2022 and termination income.

Q1 2023 FFO and AFFO basic and diluted per unit were lower by five cents compared with Q1 2022. Excluding termination fees earned in 2022, Q1 2023 FFO basic and diluted per unit were lower by three cents and AFFO basic and diluted per unit were lower by three cents and two cents, respectively, compared with Q1 2022.

Q1 2023 same-property NOI decreased 16.6 per cent and 15.4 per cent excluding investment properties held for sale when compared with Q1 2022.

Property occupancy in Alberta and British Columbia decreased due to lease expiries in the second half of 2022, however NOI was positively impacted by contractual rent increases. New Brunswick and Nova Scotia same-property NOI experienced a decline due to certain tenants that downsized on renewal, however same-property occupancy in New Brunswick was positively impacted by new lease deals and tenant expansions completed in 2022 with rents commencing in the first half of 2023.

Ontario same-property NOI decreased mainly due to termination fees received in Q1 2022 relating to a tenant in the REIT's GTA portfolio that downsized a portion of their space effective December, 2022, 60 per cent has been contractually re-leased with rents commencing in the latter half of 2023. The decrease in NOI generated from investment properties held for sale was due to the lead tenant vacating the Laurier property on expiry effective February, 2023.

Same-property NOI excluding investment properties held for sale and termination fees decreased 6.6 per cent in Q1 2023.

At the end of Q1 2023, the REIT had access to available funds of $58,393.

As at March 31, 2023, the REIT's mortgage portfolio carried a weighted average term to maturity of 3.14 years and a weighted average fixed interest rate of 3.63 per cent. During the quarter, the REIT refinanced a total of $31,121 of mortgages, one with a fixed interest rate of 4.83 per cent (five-year term) and one with a variable interest rate at prime plus 1.5 per cent (one-year term), providing the REIT with additional liquidity of approximately $5,700.

About True North Commercial Real Estate Investment Trust

The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT currently owns and operates a portfolio of 46 commercial properties consisting of approximately 5.0 million square feet in urban and select strategic secondary markets across Canada focusing on long-term leases with government and credit-rated tenants. The REIT is focused on growing its portfolio principally through acquisitions across Canada and such other jurisdictions where opportunities exist.

We seek Safe Harbor.