Mr. Daniel Drimmer reports

TRUE NORTH COMMERCIAL REIT REPORTS Q2 2023 RESULTS

True North Commercial Real Estate Investment Trust today released its financial results for the three and six months ended June 30, 2023.

"Positive leasing momentum continued during the quarter which highlighted our commitment to maintaining strong relationships with our tenants while continuing to focus on our strategic initiative of strengthening the REIT's financial and liquidity position with the sale of 360 Laurier Ave. West in Ottawa, Ont., in July," stated Daniel Drimmer, the REIT's chief executive officer.

Second quarter 2023 highlights

• Contractually leased and renewed approximately 301,800 square feet with a weighted average lease term of 4.7 years and a 15.9-per-cent increase over expiring base rents.
• Portfolio occupancy of 93 per cent with an average remaining lease term of 4.5 years (89 per cent and 4.4 years including investment properties held for sale).
• Revenue and net operating income (NOI) decreased 7 per cent and 15 per cent, respectively, compared with Q2 2022 driven by lower same property NOI. Excluding termination income and investment properties held for sale, revenue and NOI decreased 2 per cent and 6 per cent, respectively, compared with Q2 2022.
• During 2022, the REIT received termination income from one tenant at 6925 Century Ave., Mississauga, Ont., that downsized a portion of their space effective Q4 2022. To date, 60 per cent of this vacancy has been contractually re-leased with rents commencing in the latter half of 2023. Q2 2023 FFO and AFFO (adjusted funds from operations) basic and diluted per unit decreased five cents to 11 cents which is consistent and in line with Q1 2023. Excluding termination fees, Q2 2023 FFO and AFFO basic and diluted per unit were lower by two cents compared with Q2 2022.
• Same property NOI decreased 2.6 per cent excluding investment properties held for sale and termination fees. Excluding investment properties held for sale only, Q2 2023 same property NOI decreased 11.2 per cent as a result of the significant termination fee income recorded in the prior-year period.
• A total of $51.9-million of available funds at the end of Q2 2023.
• Commenced a normal course issuer bid that 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. During the six months ended June 30, 2023, the REIT repurchased 124,900 units for $300,000 under the NCIB.
• Suspension of the dividend reinvestment plan, as a result all unitholders received distributions in cash effective with the distribution paid on April 17, 2023, to unitholders of record on March 31, 2023.

YTD highlights

• Completed the sale of 400 Carlingview Dr., Toronto, Ont., on March 10, 2023, for a sale price of $7.25-million.
• Contractually leased and renewed approximately 425,900 square feet with a weighted average lease term of 4.5 years and a 12.2-per-cent increase over expiring base rents.
• 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. 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 REIT's capital profile.
• Effective June 30, 2023, Tracy Sherren, the REIT's president and chief financial officer and president, Canadian Commercial, Starlight Investments, retired 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, was appointed as chief financial officer of the REIT in addition to his positions at Starlight.

Subsequent events

• On July 10, 2023, the REIT completed the sale of 360 Laurier Ave. West, Ottawa, Ont., totalling 107,100 square feet, for a sale price of $17.5-million.
• On July 31, 2023, the REIT disposed of 32071 South Fraser Way, Abbotsford, B.C., totalling 52,300 square feet, for a sale price of $24.0-million.
• On July 31, 2023, the credit facility was amended to remove the temporary increase of $8-million due to the completion of the sale of the Abbotsford property. The two tranches of the credit facility were also amended to increase the secured portion from $30-million to $35-million and decrease the unsecured portion from $30-million to $25-million.
• The REIT refinanced $36.5-million of mortgages with a weighted average fixed interest rate of 6.05 per cent for five- and seven-year terms.

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

Revenue and NOI decreased 7 per cent and 15 per cent, respectively, in Q2 2023 and YTD 2023 when compared with the same periods in 2022. The decrease in revenue and NOI was largely a result of the decrease in termination income and lower revenue from a tenant in the REIT's greater Toronto area portfolio that downsized a portion of their space effective Q4 2022, combined with a 101,200-square-foot lease expiry in Q1 2023 at the Laurier property and 115,000-square-foot lease expiry in Q2 2023 at 3650 Victoria Park Ave., Toronto, Ont.,, together with the disposition in Q1 2023 (primary variance drivers). This decrease was partially offset by termination income received from the tenant at the Carlingview property and NOI from an acquisition completed in Q3 2022.

Excluding termination income and investment properties held for sale, revenue and NOI decreased 2 per cent and 6 per cent, respectively, in Q2 2023 and 3 per cent and 8 per cent, respectively, in YTD 2023.

Q2 2023 FFO and AFFO decreased $3,747 (YTD 2023 -- $7,780) and $3,875 (YTD 2023 -- $7,911), respectively, compared with the same period in 2022. FFO and AFFO were negatively impacted by the primary variance drivers, combined with higher financing costs as a result of higher interest rates on mortgage refinancings and higher interest expense on the credit facility. FFO and AFFO benefited from NOI on the acquisition completed in Q3 2022 and termination income.

Q2 2023 FFO and AFFO basic and diluted per unit decreased five cents to 11 cents. YTD 2023 FFO basic and diluted per unit decreased nine cents to 23 cents and AFFO basic and diluted per unit decreased nine cents to 22 cents compared with YTD 2022. Excluding termination fees, Q2 2023 FFO and AFFO basic and diluted per unit were lower by two cents and YTD 2023 FFO and AFFO basic and diluted per unit were lower by five cents compared with the same period in 2022.

Q2 2023 same property NOI decreased 2.6 per cent (YTD 2023 -- 4.6 per cent) excluding termination fees and investment properties held for sale. Excluding investment properties held for sale only, Q2 2023 same property NOI decreased 11.2 per cent (YTD 2023 -- 13.3 per cent) as a result of the significant termination fee income recorded in the prior-year periods.

Despite a decrease in occupancy, Alberta same property NOI was positively impacted by contractual rent increases and a new lease that commenced in Q1 2023. New Brunswick same property NOI increased as a result of a new lease that commenced in June, 2023, coupled with 141,000 square feet of government renewals across three properties at higher rental rates which were retroactive to Q4 2022. Same property NOI in Nova Scotia increased due to new leases that commenced in the second half of 2022 offset by certain tenants that downsized on renewal.

Ontario same property NOI decreased mainly due to termination fees received in Q2 2022 relating to a tenant in the REIT's GTA portfolio that downsized a portion of their space effective December, 2022, of which 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 and Victoria Park property on expiry.

At the end of Q2 2023, the REIT had access to available funds of approximately $51,927, and a weighted average term to maturity of 2.89 years in its mortgage portfolio with a weighted average fixed interest rate of 3.64 per cent. During the first 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.

Subsequent to quarter-end, the REIT refinanced $36,452 of mortgages with a weighted average fixed interest rate of 6.05 per cent for five- and seven-year terms.

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 44 properties consisting of approximately 4.8 million square feet in urban and select strategic secondary markets across Canada. The REIT is focused on growing its portfolio principally through acquisitions across Canada and such other jurisdictions where opportunities exist.

We seek Safe Harbor.