Report on Financial Results for the Three Months Ended March 31, 2025

Urbanfund Corp. (TSX-V: UFC) reported its Q1 2025 financial results, with rental revenue decreasing slightly to $2.09 million from $2.18 million in Q1 2024, and net income declining to $1.28 million ($0.023 per share) from $1.87 million ($0.034 per share). Funds from operations (FFO) also decreased to $1.17 million from $1.58 million year-over-year, while adjusted cash flows from operations (ACFO) showed a significant decline to -$1.20 million from $0.93 million; the company continues its dividend reinvestment plan, issuing 49,483 common shares valued at $39,161.

Analysis

Urbanfund Corp. reported a weaker financial performance for the three months ended March 31, 2025, compared to the prior year period. Rental revenue saw a slight decrease to $2.09 million from $2.18 million in Q1 2024. More significantly, net income attributable to shareholders fell to $1.23 million, or $0.023 per basic share, from $1.82 million, or $0.034 per basic share, in Q1 2024. Key non-IFRS measures also showed deterioration: Funds From Operations (FFO) decreased to $1.17 million ($0.022 per basic share) from $1.58 million ($0.030 per basic share) year-over-year. Adjusted Cash Flows from Operations (ACFO), a measure of sustainable cash flow for distributions, experienced a substantial decline, turning negative to -$1.20 million in Q1 2025 from $0.93 million in Q1 2024, primarily driven by a shift in cash from operating activities from $1.22 million provided in Q1 2024 to $0.93 million used in Q1 2025. Operationally, the company continued asset dispositions, selling two commercial units at 1040 Martin Grove Road for $841,776 (consistent with Q1 2024) and four commercial units at 270-330 Esna Park Drive for $691,991 (versus none in Q1 2024). The company's financial position showed total assets slightly down at $154.7 million, while total investment properties marginally increased to $109.2 million. Total mortgages payable decreased slightly to $55.1 million. While the debt-to-total-assets ratio remained stable at 36%, the debt-to-Adjusted EBITDA (trailing 12-months) increased to 4.15 times from 3.73 times at December 31, 2024, indicating increased leverage relative to earnings. The interest coverage ratio showed a minor improvement to 5.71, but the debt service ratio declined to 3.12. Liquidity, comprising cash and accounts receivable, decreased to $10.35 million from $12.65 million at year-end 2024, representing 18.8% of debt, down from 22.8%. Participation in the Dividend Reinvestment Plan (DRIP) also saw a sharp decline, with 49,483 shares issued in Q1 2025 (5.94% participation rate) compared to 224,838 shares in Q1 2024 (29.23% participation rate), despite the company maintaining its dividend policy.

Key Decisions for Investors

• Investors should exercise caution due to the reported decline in net income, FFO, and particularly the significant negative turn in ACFO, which raises questions about the sustainability of cash flows available for distribution despite management's stated expectation to meet dividend obligations.
• The increase in the Debt to Adjusted EBITDA ratio to 4.15x from 3.73x, coupled with reduced overall liquidity, signals a weakening in the company's credit profile that warrants close monitoring.
• The substantial decrease in DRIP participation from 29.23% to 5.94% could indicate shifting investor sentiment or a preference for cash dividends, and should be considered alongside the negative ACFO when assessing the attractiveness of the current dividend.
• Future performance will likely depend on the company's ability to stabilize rental revenue, improve operating cash flow, and successfully execute further asset sales to bolster liquidity and manage its leverage profile.