TORONTO, November 14, 2023–(BUSINESS WIRE)–Inovalis Real Estate Investment Trust (the “REIT”) (TSX: INO.UN) today reported financial results for the quarter ended September 30, 2023. The Consolidated Financial Statements and Management’s Discussion and Analysis (“MD&A”) for Q3 2023 are available on the REIT’s website at and at www.sedarplus.ca1. All amounts are presented in thousands of Canadian dollars or Euros, except rental rates, square footage, per unit amounts or as otherwise stated.

Chief Executive Officer Stephane Amine commented The office real estate sector around the world is experiencing challenging financial, economic and social change. Our seasoned management team has weathered similar real estate cycles in the past. Following management’s recommendation and advice from external advisors, the Board of Trustees decided that after payment of the November distribution, it will suspend the REIT’s distributions until further notice to provide the REIT with greater financial strength and flexibility to continue advancing short and long term objectives.”


Net Rental Income

For the portfolio that includes assets owned entirely by the REIT (“IP Portfolio”), Net Rental Income (“NOI”) for the three months ended September 30, 2023 (“Q3 2023”), decreased significantly to CAD$4.83 million (EUR€3.314 million) compared to CAD$6.337 million (EUR€4.645 million) for the three months ended September 30, 2022 (“Q3 2022”), in line with our expectations regarding the full vacancy of the Arcueil property since July 1, 2023.

In Q3 2023, Net Rental Income, adjusted for IFRIC 212for the portfolio that includes the REIT’s proportionate share in joint ventures (“Total Portfolio”), was CAD$5.783 million (EUR€3.968 million), compared to CAD$7.191 million (EUR€5.271 million) for Q3 2022, a decrease due to the same reasons described above with respect to the IP Portfolio.

Leasing Operations

As at September 30, 2023, occupancy for the REIT’s IP Portfolio was 54.6% and the Total Portfolio was 64.6%, largely affected by total vacancy in Arcueil and the space vacated by the main tenant at the Neu-Isenburg property.

Management is also considering short and long-term rental opportunities for the Sablière office property to offset the protracted City Hall approval process for redevelopment.

Steady interest from prospective tenants throughout the year 2023 underscores confidence in our Parisian, German and Spanish portfolio. To bolster leasing efforts, management is selectively undertaking capital expenditure improvements on properties with the highest vacancy to attract tenants and maximize rent.

On June 5, 2023, the Municipality of Paris adopted a new town planning regulation (plan local d’urbanisme – PLU) to reform city building rules in light of climate change impacts and to increase the social housing offering, beginning in 2024.

The PLU defines the rules for building and land use, including the property’s use (residential, retail, offices, public equipment, natural land, etc.), building materials and architecture, and authorization to repurpose a property. In particular, the PLU bioclimatic implements a new mechanism, whereby some buildings with low housing capacity and with a surface area exceeding 5,000 square meters will have to devote 10% of their surface area to the creation of housing. Management will be monitoring the application of the new regulation and will adapt the REIT’s plans accordingly.

1 This press release contains certain Non-GAAP and other financial measures. Refer to “Non-GAAP Financial Measures and Other Financial Measures” in this press release for a complete list of these measures and their meaning.
2 Net rental Income adjusted for IFRIC 21 is a Non-GAAP Measure. See the “Net Rental Income” section for further discussion on the composition and usefulness of this metric and as well as a quantitative reconciliation to its most directly comparable financial measure. See the section “Non-GAAP Financial Measures and Other Measures” for more information on the REIT’s non-GAAP financial measures.

Capital Market Considerations and the Suspension of Distributions

There is significant downward pressure on net asset values due to volatile economic conditions driven by high inflation and energy costs in the Euro-zone. Unitholders’ equity on September 30, 2023 was CAD$279.1 million (EUR€194.4 million), which implies a book value per Unit at that date of CAD$8.53/Unit or CAD$8.37/Unit on a fully-diluted basis, using the Weighted Average Number of Units for the period.

The Board of Trustees has carefully considered the results of management’s analysis and advice from its advisors regarding the REIT’s distribution payments. The Board today announced that following payment of the distribution on December 15, 2023 to Unitholders of record on November 30, 2023, it will be suspending monthly distribution to Unitholders until further notice.

Management will continue to address volatile risks in the current capital markets by managing the debt to gross book value ratio for the Total Portfolio (49.6 % at September 30, 2023) and seeking fixed rate mortgages.

Funds From Operations and Adjusted Funds From Operations

In Q3 2023, the REIT reported FFO and AFFO1 per Unit of CAD$0.06 and CAD$0.07 respectively, compared to CAD$0.18 for Q3 2022, due to lower net rental income as a consequence of Arcueil property full vacancy. The FFO payout ratio was 173.7%, in line with the internal forecast.

Over the three quarters of 2023, the cumulative FFO per Unit was CAD$0.42, which is sufficient to cover distributions through to the November distribution. Refer to the Non-GAAP Financial Measures and Other Measures section of this press release for a more detailed discussion on FFO and AFFO.

Financing Activity

The REIT is financed almost exclusively with asset-level, non-recourse financing with an average term to maturity of 3.7 years for the Total Portfolio (3.4 years for the IP Portfolio).

Subsequent to the quarter end, the CAD$17,765 mortgage loan on the Stuttgart property that matured in May 2023, was successfully extended for one year until August 2024. This short-term extension will allow management to reassess and obtain improved financing terms in Q2 2024.

In the first nine months of 2023, the weighted average interest rate was 2.57% across the IP Portfolio and 2.60% on the Total Portfolio, and reflects the increased interest margin on the Stuttgart mortgage loan and the additional interest cost of unhedged contracts on Sabliere, Arcueil and Pantin properties. Management will assess the best hedging options on these contracts, considering redevelopment plans and hedging pricing opportunities.

Several mortgage loans are maturing in 2023 (Neu-Isenburg) and early 2024 (Kösching and Trio). The management team is negotiating new senior debt with short-term conditions, extending time to reassess financing terms with lower borrowing costs by the end of 2024.

Despite increases to the European Central Bank key lending rates, management is confident that the REIT will continue to access financing opportunities through its banking networks in Europe leveraging the quality of its properties, lease terms and high caliber tenants.

1 FFO and AFFO are non-GAAP measures. See the section “Non-GAAP Financial Measures and Other Measures” for more information on the REIT’s Non-GAAP measures. A reconciliation of FFO and AFFO to Net Income can be found under the section Non-GAAP Reconciliation (FFO and AFFO).

Environmental, Social and Governance (ESG)

Integrating ESG objectives and strategies into the REIT’s business reflects the growing importance these factors play with many of our key stakeholders. Investors recognize the risks associated with changing regulatory requirements, tenants are including sustainability considerations in their leasing decisions, and employees want to work for responsible and socially-focused organizations. The REIT is working to improve its long-term environmental performance, and also investing in “human capital” for the implementation and monitoring of all ESG initiatives.

The Spanish property Delgado has been nominated for a LEbED Gold certification.

On the German portfolio, offers for a green electricity procurement policy are to be received beginning 2024, in addition to the implementation of smart water-saving equipment.

The social aspect of the ESG policy is also a critical point in the upcoming redevelopment projects of Sabliere and Arcueil as reforms become effective in 2024 to the City of Paris building rules to address climate change impacts, new ESG standards, and increase social housing.


Certain statements contained, or contained in documents incorporated by reference, may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the REIT’s future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, occupancy rates, rental rates, productivity, projected costs, capital investments, development and development opportunities, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding the REIT’s future results, performance, achievements, prospects, costs, opportunities, and financial outlook, including those relating to acquisition and capital investment strategies and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities.

Although management believes that the expectations reflected in the forward-looking information are reasonable, no assurance can be given that these expectations will prove to be correct, and since forward-looking information inherently involves risks and uncertainties, undue reliance should not be placed on such information.

Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such forward-looking statements. The estimates and assumptions, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth in this press release as well as the following:

  1. the ability to continue to receive financing on acceptable terms;

  2. the future level of indebtedness and the REIT’s future growth potential will remain consistent with current expectations;

  3. there will be no changes to tax laws adversely affecting the REIT’s financing capability, operations, activities or structure;

  4. the REIT will retain and continue to attract qualified and knowledgeable personnel as the portfolio and business grow;

  5. the impact of the current economic climate and the current global financial conditions on operations, including the REIT’s financing capability and asset value, will remain consistent with current expectations;

  6. there will be no material changes to government and environmental regulations that could adversely affect operations;

  7. conditions in the international and, in particular, the French, German, Spanish and other European real estate markets, including competition for acquisitions, will be consistent with past conditions;

  8. capital markets will provide the REIT with readily available access to equity and/or debt financing, including any intensification thereof, and

  9. the demand for the REIT’s properties and global supply chains and economic activity in general.

The REIT cautions that this list of assumptions is not exhaustive. Although the forward-looking statements contained in this MD&A are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements.

When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not, or the times at or by which, such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to:

  • the REIT’s ability to execute its growth and capital deployment strategies;

  • the impact of changing conditions in the European office market;

  • the marketability and value of the REIT’s portfolio;

  • changes in the attitudes, financial condition and demand in the REIT’s demographic markets;

  • fluctuation in interest rates and volatility in financial markets;

  • general economic and geopolitical conditions, including any continuation or intensification of the current economic downturn and conflicts in the Ukraine and Middle East;

  • developments and changes in applicable laws and regulations; and

  • such other factors discussed under ‘‘Risk and Uncertainties’’ in the MD&A.

If any risks or uncertainties with respect to the above materialize, or if the opinions, estimates or assumptions underlying the forward-looking statements prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking statements. The opinions, estimates or assumptions referred to above and described in greater detail under ‘‘Risks and Uncertainties’’ in the MD&A should be considered carefully by readers. Although management has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other risk factors not presently known or that management believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking statements.

Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Certain statements included in press release may be considered a ‘‘financial outlook’’ for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than this press release. All forward-looking statements are based only on information currently available to the REIT and are made as of the date of this press release. Except as expressly required by applicable Canadian securities law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All forward-looking statements in this press release are qualified by these cautionary statements.

Non-GAAP Financial Measures and Other Measures

There are financial measures included in this MD&A that do not have a standardized meaning under IFRS. These measures include funds from operations, adjusted funds from operations, and other measures presented on a proportionate share basis. These measures have been derived from the REIT’s financial statements and applied on a consistent basis as appropriate. Management includes these measures as they represent key performance indicators to management, and it believes certain investors use these measures as a means of assessing relative financial performance. These measures, as computed by the REIT, may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. These measures should not be considered in isolation or used in substitute for other measures of performance prepared in accordance with IFRS.

Adjusted Funds From Operations” or “AFFO” is a meaningful supplemental measure that can be used to determine the REIT’s ability to service debt, fund expansion capital expenditures, fund property development, and provide distributions to Unitholders after considering costs associated with sustaining operating earnings.

AFFO calculations are reconciled to net income, which is the most directly comparable IFRS measure. AFFO should not be construed as an alternative to net income or cash flow generated from operating activities, determined in accordance with IFRS.

AFFO is defined as FFO subject to certain adjustments, including adjustments for: (i) the non-cash effect of straight-line rents, (ii) the cash effect of the rental guarantee received, (iii) amortization of fair value adjustment on assumed debt, (iv) capital expenditures, excluding those funded by a dedicated cash reserve or capex financing, and (v) amortization of transaction costs on mortgage loans.

Adjusted Funds From Operations / Unit” or “AFFO / Unit” is AFFO divided by the issued and outstanding Units, plus Exchangeable Securities (fully diluted basis).

AFFO Payout Ratio” is the value of declared distributions on Units, if any, and Exchangeable Securities, divided by AFFO.

Average term to maturity” refers to the average number of years remaining in the lease term.

Book value per Unit” refers to the REIT’s total equity divided by the Weighted Average number of Units and Exchangeable Securities (on a fully diluted basis).

Debt-to-Gross-Book Value” refers to the REIT’s apportioned amount of indebtedness respectively in the IP Portfolio and the Total Portfolio. Indebtedness on a IP and Total Portfolio basis is calculated as the sum of (i) lease liabilities, (ii) mortgage loans, (iii) other long-term liabilities, and (iv) deferred tax liabilities. Indebtedness does not include certain liabilities as is the case for the Exchangeable Securities and at the joint venture level for the contribution from the REIT and its partners.

Exchangeable Securities” means the exchangeable securities issued by CanCorp Europe, in the form of interest bearing notes, non-interest bearing notes, share premium and common shares.

Fully diluted basis” refers to a nominal value divided by the issued and outstanding Units, plus Exchangeable Securities.

Funds From Operations” or “FFO” follows the definition prescribed by the Real Estate Property Association of Canada publication on Funds From Operations & Adjusted Funds From Operations, dated January 2022 with one exception.

Management considers FFO to be a meaningful supplemental measure that can be used to determine the REIT’s ability to service debt, fund capital expenditures, and provide distributions to Unitholders.

As an exception, considering the significant amount of cash held in Euros in Canada and the volatility of the Canadian dollar against the Euro, the unrealized gain (loss) recognized for the three and twelve months ended December 31, 2022, have been excluded from the FFO calculation.

FFO is reconciled to net income, which is the most directly comparable IFRS measure. FFO should not be construed as an alternative to net income or cash flow generated from operating activities, determined in accordance with IFRS.

FFO for the REIT is defined as net income in accordance with IFRS, subject to certain adjustments including adjustments for: (i) acquisition, eviction and disposal costs (if any), (ii) net change in fair value of investment properties, (iii) net change in fair value of derivative financial instruments at fair value through profit and loss, (iv) net changes in fair value of Exchangeable Securities, (v) finance costs related to distribution on Exchangeable Securities, (vi) adjustment for property taxes accounted for under IFRIC 21 (if any), (vii) loss on exercise of lease option (if any), (viii) adjustment for foreign exchange gains or losses on monetary items not forming part of an investment in a foreign operation (if any), (ix) gain or loss on disposal of investment properties or an interest in a subsidiary (if any), (x) finance income earned from loans to joint ventures (if any), (xi) loss on extinguishment of loans (if any), (xii) deferred taxes, (xiii) non-controlling interest, (xiv) goodwill / bargain purchase gains upon acquisition, and (xv) income taxes on sale of investment properties and provision for tax reassessment.

Exchangeable Securities are recorded as liabilities. Exchangeable Securities are recorded at fair value through profit and loss in accordance with IFRS. However, both are considered as equity for the purposes of calculating FFO and AFFO, as they are economically equivalent to the REIT’s Units, with the same features and distribution rights, that are economically equivalent to the distribution paid to Unitholders, if any.

Funds From Operations / Unit” or “FFO / Unit” is FFO divided by the issued and outstanding Units, plus Exchangeable Securities (fully diluted basis).

Gross book value” refers to the total consolidated assets for the IP Portfolio and Total Portfolio.

Investments in Joint Ventures” refers to the REIT’s proportionate share of the financial position and results of operation of its investment in joint ventures, which are accounted for using the equity method under IFRS in the consolidated financial statements, are presented below using the proportionate consolidation method at the REIT’s ownership percentage of the related investment. Management views this method as relevant in demonstrating the REIT’s ability to manage the underlying economics of the related investments, including the financial performance and the extent to which the underlying assets are leveraged, which is an important component of risk management.

For the purpose of the proportionate consolidation, the initial investment of both partners in the joint ventures were considered as being equity investments as opposed to a combination of equity and loans and accordingly, the related proportionate consolidation balance sheet items were eliminated as well as the associated finance income and finance costs. As the loans to the joint ventures were considered equity for proportionate consolidation purposes, any impairment recorded on the loans in accordance with IFRS 9 has been reversed for MD&A purposes. As such, any impairment recorded for IFRS purposes results in a difference in equity when reconciling IFRS and proportionate consolidation reporting.

Investment Properties Portfolio” or “IP Portfolio” refers to the eight wholly owned properties of the REIT.

Net Rental Income Adjusted for IFRIC 21” refers to Net Rental Income excluding property taxes recorded under IFRIC 21 rules.

Net Rental Income” refers to the rental income plus operating cost recoveries income plus other property revenue, less property operating costs and other costs.

Total Portfolio” refers to the eight properties referred to as the IP Portfolio and the five properties of the REIT held in joint-ownership with other parties.

“Weighted average lease term” or “WALT” is a metric used to measure a property portfolio’s risk of vacancy and refers to the average period in which all leases in a property or portfolio will expire. It is calculated as the sum of the percentages of rentable area multiplied by the number of years in each remaining lease term.

Weighted Average number of Units” refers to the mean of periodic values in the number of issued and outstanding Units over a specific reporting period.

FFO and AFFO Calculation

The reconciliation of FFO and AFFO for the three-month periods ended September 30 2023 and 2022, based on proportionate consolidation figures including REIT’s interest in joint ventures (see section Consolidated statement of earningsReconciliation to consolidated financial statements), is as follows:

Three months ended Sept. 30,

Nine months ended Sept. 30,

(in thousands of CAD$)





Net (loss) income attributable to the Trust
(including share of net earnings from investments in joint ventures)






Net change in fair value of investment properties





Net change in fair value of financial derivatives





Adjustment for property taxes accounted for under IFRIC 21





Distributions on Exchangeable securities





Net change in fair value of Exchangeable securities





Foreign exchange loss (gain)



Loss on extinguishment of mortgage loans (1)


Deferred income tax recoveries





Non-controlling interest











Non-cash effect of straight line rents





Cash effect of the rental guarantee





Amortization of transaction costs on mortgage loans














FFO / Units (diluted) (in CAD$)





AFFO / Units (diluted) (in CAD$)





  1. REALPAC guidance suggest that the foreign exchange gain or loss be included in the FFO calculation. However, due to the volatility of the Canadian dollar against the Euro, the REIT has elected to exclude from the FFO calculation, the unrealized gain or loss on the REIT’s cash Euros which are domiciled in Canadian financial institutions.

  2. Loss on the Bad Homburg mortgage loan extension.

Overview – GAAP and Non-GAAP

The REIT has identified specific key performance indicators to measure the progress of its long-term objectives. These are set out below:

September 30, 2023

December 31, 2022

Operating metrics

IP Portfolio

Total Portfolio

IP Portfolio

Total Portfolio

Number of properties





Gross leasable area (sq. ft.)





Occupancy rate – end of period





Weighted average lease term

3.4 years

3.7 years

2.8 years

3.0 years

Average initial yield (1)





Capital management metrics

IP Portfolio

Total Portfolio

IP Portfolio

Total Portfolio

Available cash (3)





Fair value of investment properties





Debt-to-gross book value (2)





Debt-to-gross book value, net of cash) (2)





Weighted average loan term to maturity

3.4 years

3.0 years

3.7 years

3.4 years

Weighted average interest rate (2)





Interest coverage ratio (2)

2.5 x

2.5 x

3.4 x

3.5 x

  1. Calculated on annualized Net Rental Income (based on Net Rental Income for the year-to-date period).

  2. As defined in the section “Non-GAAP Financial Measures and Other Financial Measures”.

  3. See the section “Capital Management” of the Q3, 2023 MD&A for further discussion on the composition and usefulness of this metric.

Three months ended Sept. 30,

Nine months ended Sept. 30,

(thousands of CAD$ except per Unit and other data)





Financial performance metrics

Rental revenue





Rental revenue – Total Portfolio (1)





Net rental income





Net rental income – Total Portfolio (1)





Net income, attributable to the Trust





Funds from Operations (FFO) (1) (2)





Adjusted Funds from Operations (AFFO) (1) (2)





FFO per Unit (diluted) (1) (2)





AFFO per Unit (diluted) (1) (2)






Declared distributions on Units and Exchangeable securities





Declared distribution per Unit





FFO payout ratio (1) (2)





AFFO payout ratio (1) (2)





  1. See the section “Non-GAAP Financial Measures” for more information on the REIT’s non-GAAP financial measures and reconciliations thereof.

  2. The reconciliation of FFO and AFFO to Net Income can be found under the section Non-GAAP Reconciliation
    (FFO and AFFO).

About Inovalis REIT

Inovalis REIT is a real estate investment trust listed on the Toronto Stock Exchange in Canada. It was founded in 2013 by Inovalis and invests in office properties in primary markets of France, Germany and Spain. It holds 13 assets. Inovalis REIT acquires (indirectly) real estate properties via CanCorpEurope, authorized Alternative Investment Fund (AIF) by the CSSF in Luxemburg, and managed by Inovalis S.A.

About Inovalis Group

Inovalis S.A. is a French Alternative Investment fund manager, authorized by the French Securities and Markets Authority (AMF) under AIFM laws. Inovalis S.A. and its subsidiaries (Advenis S.A., Advenis REIM) invest in and manage Real Estate Investment Trusts such as Inovalis REIT, open ended funds (SCPI) with stable real estate focus such as Eurovalys (for Germany) and Elialys (Southern Europe), Private Thematic Funds raised with Inovalis partners to invest in defined real estate strategies and direct Co-investments on specific assets.

Inovalis Group (, founded in 1998 by Inovalis SA, is an established pan European real estate investment player with EUR 7 billion of AuM and with offices in all the world’s major financial and economic centers in Paris, Luxembourg, Madrid, Frankfurt, Toronto and Dubai. The group is comprised of 300 professionals, providing Advisory, Fund, Asset and Property Management services in Real Estate as well as Wealth Management services.

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Stephane Amine, Chief Executive Officer
Inovalis Real Estate Investment Trust
Tel: +33 1 5643 3315
[email protected]

Khalil Hankach, Chief Financial Officer
Inovalis Real Estate Investment Trust
Tel: +33 1 5643 3313
[email protected]


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