AIP Realty Trust Announces Third Quarter 2024 Results

/EIN News/ -- VANCOUVER, British Columbia, Nov. 27, 2024 (GLOBE NEWSWIRE) -- AIP Realty Trust (the “Trust” or “AIP Realty”) (TSXV:AIP.U) today announced its financial results for the three and nine months ended September 30, 2024. All dollar amounts are stated in U.S. dollars.

2024 Highlights

• The Trust owns a multi-tenant light industrial flex facility located on Eagle Court in Lewisville, Texas (the “Eagle Court Property”). Investment property revenue was down approximately 20% in the three months ended September 30, 2024 compared to the same period in 2023, mainly due to the expiration of a lease that included a large parking agreement component and the vacancy of one unit from July 2024 through September 2024 with no rental revenue. That unit has been leased to a new tenant effective December 2024 at a 28% rental rate increase over the original lease rate. With this new tenant lease, the Eagle Court Property will be 100% leased.
• The Eagle Court Property has experienced normal turnover in 2024. The continued demand for light industrial flex facilities is driving rental rate increases. Unit turnover provides an opportunity to update suite revenue per square foot and bring it in-line with current market conditions. New leases signed in 2024 at the Eagle Court Property saw an average 12% increase in suite revenue per square foot.
• During the three and nine months ended September 30, 2024, the Eagle Court Property generated investment property revenue of $116,741 and $420,375, respectively, comprised of tenant rental revenue and revenue from contracts with customers, specifically common area maintenance. Investment property operating expenses for the three and nine months ended September 30, 2024 were $49,769 and $151,956, resulting in net rental income of $66,972 and $268,419, respectively.
• Effective April 19, 2024, the Trust completed the first tranche of a non-brokered private placement (the “Financing”) and issued 1,100,000 Preferred Units – Series B Convertible (each, a “Preferred Unit”), at a price of $0.50 per Preferred Unit for aggregate gross proceeds of $550,000. There were no finder’s fees paid in connection with the first tranche of the Financing.
• Effective April 29, 2024, the Trust completed an issuance of 1,500,000 Class A Trust Units (each, a “Unit”) at a deemed issue price of $0.50 per Unit in satisfaction of an outstanding debt in the amount of $750,000 owed to AllTrades Industrial Development LLC (“AID”), a related party, pursuant to the terms of a property exclusivity fee for a Master Funding and Forward Purchase Agreement dated September 19, 2022 (the “Agreement”) between AID and AIP Realty Management LLC (“Realty Management”), a wholly-owned subsidiary of the Trust. On May 9, 2024, the TSXV approved the offering of Units for outstanding debt and the Trust recorded the $750,000 as a one-time property exclusivity fee for the nine months ended September 30, 2024.
• Effective August 16, 2024, the Trust completed a second tranche of the Financing and issued 1,900,000 Preferred Units at a price of US$0.50 per Preferred Unit for aggregate gross proceeds of $950,000. There was $20,000 in finder’s fees paid to a non- related third party in connection with the second tranche of the Financing.

• The Trust has previously announced entering into forward purchase agreements with the option to acquire up to twelve (12) Serviced Industrial Business Suites (“SIBS”) in the shallow bay light industrial flex space being developed in the Dallas-Fort Worth (“DFW”) market by AllTrades Industrial Properties, Inc. (“AllTrades”), the Trust’s exclusive development partner, and a related party of the Trust.¹ 
  
  
• The Trust suspended its Q1 through Q3 quarterly distributions to support the Trust's priority of preserving capital to fund working capital until the properties discussed above are acquired.

Selected Financial Information

(unaudited)		Three months ended September 30							Nine months ended September 30
			2024			2023				2024			2023
Rental revenue		$116,741			$147,260				$420,375			$445,338
Property operating expenses		$(49,769		)	$(62,501		)		$(151,956		)	$(158,550		)
Net rental income		$66,972			$84,759				$268,419			$286,788
Other expenses		$(681,575		)	$(705,636		)		$(2,690,645		)	$(2,406,753		)
Fair value adjustment to investment property			1,179		$1,375					3,928		$4,935
Net loss and total comprehensive loss		$(613,424		)	$(619,502		)		$(2,418,298		)	$(2,115,030		)

As at September 30 (Unaudited) and December 31 (Audited)			2024			2023
Investment property		$5,822,000			$5,822,000
Cash		$568,461			$118,642
Due from related parties		$568,461			$118,642
Deferred finance costs		$71,993			$0
Secured bank indebtedness (net of debt discount)		$2,945,124			$3,017,083
Accounts payable		$156,535			$424,991
Accrued expenses		$5,568,222			$4,209,243
Units outstanding			4,924,448			3,424,448

The foregoing is a summary of selected information for the three and nine months ended September 30, 2024 and 2023 and is qualified in its entirety by, and should be read in conjunction with, the Trust’s condensed interim consolidated financial statements and management discussion and analysis for the three and nine months ended September 30, 2024 and 2023. These documents are available on SEDAR+ at www.sedarplus.com, and on the Trust’s website at www.aiprealtytrust.com.

Related party disclosures

The executive management team of the Trust is the same executive management team as AllTrades.

Outlook and Subsequent Events

Through its agreement with AllTrades, the Trust has been granted an exclusive right to purchase all AllTrades’ completed and leased facilities, as well as any facilities in development. The 12 properties mentioned above and subject to forward purchase agreements include five DFW-area facilities already completed or nearing completion, and seven additional facilities on which development has commenced. Development on these facilities was funded with equity capital from AllTrades and Trinity Investors, a $7 billion Dallas-based real estate private equity investor. In addition, AllTrades is actively planning the next tranche of facilities in DFW and the Houston metropolitan area.

As previously disclosed in March 2024, the Board of Trustees continues to explore the execution of its business plan and relationship with AllTrades and is considering a transaction structure that would also facilitate the Trust acquiring AllTrades. AllTrades has twelve facility assets comprised of (a) five (5) assets ready for acquisition, comprising 377,990 SF and 143 leasable units and (b) seven (7) assets under development for 476,877 SF and 167 leasable units.

As previously disclosed in March 2024, Raymond James Ltd. (“Raymond James”) continues to serve as financial advisor for the Trust in connection with a potential transaction involving AllTrades.

Effective November 1, 2024, the Trust completed a third (final) tranche of the Financing and issued 690,000 Preferred Units at a price of US$0.50 per Preferred Unit for aggregate gross proceeds of $345,000. There was $17,250 in finder’s fees paid to a non-related third party in connection with the third tranche of the Financing.

In total, the Trust issued 3,690,000 Preferred Units under the Financing for aggregate gross proceeds of $1,845,000 and paid $37,250 in finder's fees to a non-related third party. Each of the Preferred Units issued under the Financing will be subject to a four-month and one-day hold period from the date of issuance. The Trust intends to use the proceeds of the Financing for working capital and general corporate purposes.

Effective November 14, 2024, the Trust announced that, through its newly formed wholly owned subsidiary AIP OP, LP (“OP LP”), it has entered into a securities purchase agreement (the “Securities Purchase Agreement”) with 2024 ATIP, Inc. (“ATIP”) pursuant to which the Trust proposes to acquire (the “AllTrades Transaction”) all of the issued and outstanding membership interests (“Membership Interests”) of AllTrades Industrial Properties, LLC (“New AllTrades”). OP LP is a Delaware limited partnership of which Realty USA, a wholly owned subsidiary of the Trust, serves as general partner. Pursuant to the AllTrades Transaction, among other things, OP LP will acquire all of the Membership Interests, the consideration for which is expected to be comprised of the following:

• Pending the results of an independent third-party valuation (the “Formal Valuation”), the aggregate consideration for the Membership Interests is expected to be up to US$78,700,000 (the “Purchase Price”);
• On closing of the AllTrades Transaction:
• OP LP will pay cash consideration equal to the amount of indebtedness of New AllTrades and any of its subsidiaries plus the transaction expenses; and
• OP LP will issue to ATIP an amount equal to 25% of the aggregate Purchase Price in series B preferred partnership units of OP LP (the “LP Units”) to be issued at a price equivalent to the price per class A trust unit of the Trust (“Units”) to be issued under an offering (the proceeds of which are expected to be used to fund a portion of the Purchase Price) to be completed by the Trust, which LP Units will be convertible into class A trust units of the Trust (“Units”);
• The remainder of the Purchase Price will be paid, if earned, on the first, second, third and fourth anniversaries of the closing date of the AllTrades Transaction by the issuance by OP LP to AllTrades of LP Units as of such anniversary dates, with such number of LP Units to be issued equal to the aggregate amount of “Building Starts” (defined in the Securities Purchase Agreement as each “approval by the board of trustees of the Trust of the development of a New AllTrades-branded SIBS building, and the receipt of equity financing necessary to build such building”) between such anniversaries multiplied by US$1,119,886 per Building Start, divided by the volume-weighted average price of the Units for the thirty (30) trading days immediately preceding such payment date.
  

The AllTrades Transaction remains subject to customary closing conditions including approval from the TSX Venture Exchange (the “TSXV”), approval of Trust unitholders (as further described below), the completion of the Formal Valuation and a fairness opinion to be provided by Raymond James, and no material adverse effects, among others. The AllTrades Transaction is anticipated to constitute a “Reverse Takeover” as defined in the policies of the TSXV and, accordingly, further information regarding the AllTrades Transaction will be disclosed by the Trust in a comprehensive news release to be filed on the Trust’s SEDAR+ profile at www.sedarplus.com.

The Trust also announced that effective November 14, 2024, it has closed a securities purchase transaction whereby Plymouth Industrial OP, LP, a subsidiary of Plymouth Industrial REIT, Inc. (“Plymouth”), purchased an aggregate of 4,400,000 Series A-1 Preferred Limited Partnership Interests (the “OP Units”) of OP LP at a price of US$0.50 per OP Unit for aggregate cash consideration of US$2,200,000 (the “Plymouth Transaction”). The Plymouth Transaction was carried out pursuant to the terms of an investment agreement among the Trust, Realty USA, OP LP and Plymouth, dated as of the date hereof.

The OP Units acquired by Plymouth will be exchangeable for Units pursuant to the terms of an exchange agreement, dated as of the date hereof (the “Exchange Agreement”), among the Trust, OP LP, Realty USA and Plymouth, such exchange right to be effective upon receipt of unitholder approval of the AllTrades Transaction and any necessary approvals of the TSXV.

In connection with the Plymouth Transaction: (i) the Trust, OP LP, Plymouth, Realty Management and AIP Eagle Court, LLC (“AIPEC”), entered into a put agreement, dated as of the date hereof (the “Put Agreement”), which provides Plymouth with a right to cause OP LP to repurchase its preferred limited partnership interests issued to Plymouth at the original cost in the event that the AllTrades Transaction is not completed on or before June 30, 2025 or following certain other events, for a period of 180 days; and (ii) and Plymouth and Realty Management, the holder of all of the equity of AIPEC, entered into a Pledge and Security Agreement, dated as of the date hereof, pursuant to which Realty Management pledged all of its ownership interest in AIPEC to Plymouth to secure payment of OP LP’s obligations under the Put Agreement.

Pursuant to the terms of an investor rights agreement (the “Investor Rights Agreement”) among the Trust, Plymouth and OP LP, dated as of the date hereof, the Trust shall designate Mr. Witherell as an observer authorized to attend meetings of the board of trustees of the Trust (the “Board”). Further, Plymouth will be afforded approval rights whereby the Trust shall not take or implement certain corporate actions without in each instance first obtaining written approval from Plymouth. Following the completion of the AllTrades Transaction, the Investor Rights Agreement will terminate and in accordance with the terms of the Exchange Agreement, the Trust will, if requested by Plymouth, cause the appointment of Mr. Witherell to the Board.

The Trust intends to use the proceeds of the Plymouth Transaction for working capital and general corporate purposes, and to fund the costs associated with proceeding to completion of the proposed AllTrades Transaction (including preliminary audit fees, legal fees, costs of preparing the necessary documentation, independent valuation costs, etc.) The Plymouth Transaction is necessary in order to complete the AllTrades Transaction as the Trust does not have sufficient financial resources to pay for the foregoing costs if it is unable to raise sufficient funding from other sources to satisfy current expenditures in anticipation of the AllTrades Transaction.

The Plymouth Transaction is being completed independently of the completion of the AllTrades Transaction with the funds made available for the Trust’s use immediately upon closing of the Plymouth Transaction. It is expected that any concurrent financing to be completed in connection with the closing of the AllTrades Transaction will be structured on substantially similar terms (in respect of security and offering price).

Based upon the above recently completed financings, the Trust has developed and maintains financial projections for the next twelve (12) months that show sufficient cash flows to cover forecasted operating expenses. As a result, management of the Trust believes it has sufficient cash resources to meet its obligations for the next twelve (12) months.

About AIP Realty Trust

AIP Realty Trust is an unincorporated, open ended mutual fund trust with a growing portfolio of AllTrades branded SIBS light industrial flex facilities focused on small businesses and the trades and services sectors in the U.S. These properties appeal to a diverse range of small space users, such as contractors, skilled trades, suppliers, repair services, last-mile providers, small businesses and assembly and distribution firms. They typically offer attractive fundamentals including low tenant turnover, stable cash flow and low capex intensity, as well as significant growth opportunities. With an initial focus on the Dallas-Fort Worth market, AIP plans to roll out this innovative property offering nationally. AIP holds the exclusive rights to finance the development of and to purchase all the completed and leased properties built across North America by its development and property management partner, AllTrades Industrial Properties, Inc. For more information, please visit www.aiprealtytrust.com.

For further information from the Trust, contact:
Leslie Wulf
Executive Chairman
(214) 679-5263
les.wulf@aiprealtytrust.com

Or

Greg Vorwaller
Chief Executive Officer
(778) 918-8262
Greg.vorwaller@aiprealtytrust.com

Cautionary Statement on Forward-Looking Information

This press release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of AIP Realty Trust with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding, future acquisitions by the Trust, the ability to obtain regulatory and unitholder approvals and other factors. When or if used in this news release, the words “anticipate”, “believe”, “estimate”, “expect”, “target”, “plan”, “forecast”, “may”, “schedule” and similar words or expressions identify forward-looking statements or information. These forward-looking statements or information may relate to the commencement of development on certain of the AllTrades facilities, receipt of final approval from the TSXV for the Financing and the Unit Issuance, proposed financing activity, proposed acquisitions, regulatory or government requirements or approvals, the reliability of third-party information and other factors or information. Such statements represent the Trust’s current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Trust, are inherently subject to significant business, economic, competitive, political and social risks, contingencies and uncertainties. Many factors, both known and unknown, could cause results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward- looking statements. These forward-looking statements are made as of the date hereof and are expressly qualified in their entirety by this cautionary statement. The Trust does not intend, and do not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements and information other than as required by applicable laws, rules and regulations.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release is not an offer of securities for sale in the United States. The securities may not be offered or sold in the United States absent registration or an exemption from registration under U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”). The Trust has not registered and will not register the securities under the U.S. Securities Act. The Trust does not intend to engage in a public offering of their securities in the United States.

Source: AIP Realty Trust

¹ The acquisition of each of the properties is subject to certain conditions, including but not limited to completion of the construction of each facility, receipt of audited financial statements for each facility, receipt of a satisfactory third-party appraisal supporting the purchase price for each facility, receipt of regulatory approvals, including the approval of the TSXV, approval of the independent trustees of AIP Realty and customary closing date and post-closing adjustments.