Agellan Commercial Real Estate Investment Trust (TSX:ACR.UN):
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST (the “REIT”) (TSX:ACR.UN) is pleased to report its financial results for the three and six month periods ended June 30, 2017. All dollar amounts (except per Unit amounts) are in thousands of Canadian dollars (“CAD”), unless otherwise stated.
|FINANCIAL AND OPERATIONAL HIGHLIGHTS||June 30, 2017||December 31, 2016|
|Summary of Operational Information|
|Number of Properties||44||34|
|Gross Leasable Area ("GLA") (in 000's)||6,658||5,896|
|Occupancy % (at period end)||95.2%||93.2%|
|Average lease term to maturity (years)||4.3||4.0|
|Summary of Financial Information|
|Gross Book Value(1)||$847,509||$777,013|
|Debt (face value)||$422,378||$412,902|
|Debt to Gross Book Value(1)||50%||53%|
|Interest Coverage Ratio (annual)(1)||3.1x||3.2x|
|Weighted average interest rate||4.1%||4.1%|
|For the three month period ended|
|June 30, 2017||June 30, 2016||Variance|
|Total Property and Property Related Revenue||$24,816||$21,301||$3,515|
|Net Operating Income ("NOI")(1)||$14,833||$12,116||$2,717|
|Net Income (Loss)||$10,929||($2,120)||$13,049|
|Funds From Operations ("FFO")(1)||$10,014||$7,710||$2,304|
|Adjusted Funds From Operations ("AFFO")(1)||$8,605||$6,417||$2,188|
|Adjusted Cash Flow From Operations ("ACFO")(1)||$8,526||$6,429||$2,097|
|Basic and Diluted FFO per Unit(1)||$0.31||$0.33||($0.02)|
|Basic and Diluted AFFO per Unit(1)||$0.26||$0.27||($0.01)|
|Basic and Diluted ACFO per Unit(1)||$0.26||$0.27||($0.01)|
|Distributions per Unit||$0.194||$0.193||($0.001)|
|Units Outstanding at Period-end:||32,830,461||23,401,025|
|Weighted Average Units Outstanding (Basic)||32,844,881||23,435,585|
|Weighted Average Units Outstanding (Diluted)||32,844,881||23,437,096|
|(1)||This is a non-IFRS measure. Please see “Non-IFRS supplemental measures” below.|
Summary of Significant Events:
- For the three month period ended June 30, 2017, the REIT achieved net income of $10,929, compared to a net loss of $2,120 for the three month period ended June 30, 2016. This increase represents an increase in net income per unit of $0.423 per unit.
- For the three month period ended June 30, 2017, the REIT achieved FFO of $10,014, AFFO of $8,605 and ACFO of $8,526, compared to $7,710, $6,417, and $6,429, respectively for the three month period ended June 30, 2016. This represents a 29.9% increase in FFO, a 34.1% increase in AFFO, and a 32.6% increase in ACFO.
- For the three month period ended June 30, 2017, the REIT achieved FFO per Unit of $0.305, AFFO per Unit of $0.262, and ACFO per Unit of $0.260, compared to $0.329, $0.274, and $0.274 respectively, for the three month period ended June 30, 2016. This represents a 7.3% decrease in FFO per Unit, a 5.1% decrease in AFFO per Unit, and a 4.4% decrease in ACFO per Unit.
- For the three month period ended June 30, 2017, the REIT achieved NOI of $14,833 compared to $12,116 for the three month period ended June 30, 2016, representing growth of 22.4%.
- For the six month period ended June 30, 2017, the REIT achieved net income of $17,878, compared to a net loss of $3,273 for the six month period ended June 30, 2016. This increase represents an increase in net income per unit of $0.711 per unit.
- For the six month period ended June 30, 2017, the REIT achieved FFO of $18,326, AFFO of $15,656 and ACFO of $15,158, compared to $15,674, $12,926, and $12,904, respectively for the six month period ended June 30, 2016. This represents a 16.9% increase in FFO, a 21.1% increase in AFFO, and an 17.5% increase in ACFO.
- For the six month period ended June 30, 2017, the REIT achieved FFO per Unit of $0.586, AFFO per Unit of $0.500, and ACFO per Unit of $0.484, compared to $0.669, $0.552, and $0.551 respectively, for the six month period ended June 30, 2016. This represents a 12.4% decrease in FFO per Unit, a 9.4% decrease in AFFO per Unit, and an 12.2% decrease in ACFO per Unit.
- For the six month period ended June 30, 2017, the REIT achieved NOI of $28,857 compared to $25,203 for the six month period ended June 30, 2016, representing growth of 14.5%.
- The REIT’s Payout Ratio for the three and six month periods ended June 30, 2017 were 74% and 79%, respectively. This represents a 3% increase and 9% increase from the three and six month periods ended June 30, 2016, respectively. For the three and six month period ended June 30, 2017, the REIT’s Payout Ratio was negatively impacted by the REIT’s public offering of Units on February 27, 2017 as the purchasers of these Units were entitled to participate in the distribution payable for the month of February 2017. As well, funds received from the public offering were deployed into acquisitions throughout the six month period ended June 30, 2017 and additional listing fees payable to the TSX increased general and administrative costs, which negatively impacted the REIT’s Payout Ratio.
- As at July 1, 2017, the overall occupancy rate of the REIT’s portfolio was 95.4%, up from 94.5% as of April 1, 2017.
- In Canada, the REIT has continued to build on the leasing momentum reported during the first quarter of 2017 and, to date, has re-leased approximately 61% of the 215,000 square feet that was set to expire during 2017 and 2018 at its Consumers Road complex. These new and amended leases reflect initial weighted average net rents that are comparable to the weighted average net rents of the expiring leases, but include contractual rent increases over the terms of the leases.
- Leasing momentum has also continued at the retail and parking facility under development at the REIT’s Consumers Road complex. During the second quarter of 2017, the REIT entered into leases and binding offers to lease for approximately 8,000 square feet of retail space. In aggregate, the REIT has leases and binding offers to lease covering approximately 21,000 square feet of the total 42,000 square feet and is in leasing discussions with several other retailers for the remaining retail space in the facility.
- During the second quarter of 2017, the REIT entered into a lease amending agreement with CEVA Freight, LLC at its Plainfield, Indiana distribution centre. This renewal addresses Agellan’s single largest potential lease expiration of 2017 and extends the current lease term by 5 years.
- On April 18, 2017, the REIT made an indirect investment in a 410,000 square feet multi-tenanted distribution centre located in Tampa, Florida. The total purchase price of the property was approximately US$15.2 million (before closing costs) and was financed, in part, by a US$7.8 million first mortgage, which matures on May 1, 2027 and bears interest at a fixed rate of 4.40% per annum. The REIT purchased this 9% non-controlling interest through a strategic partnership with a private Canadian-based investor. The property was purchased at a capitalization rate of 9.2%. The REIT expects to make further investments in other properties through this partnership, which is focussed on acquiring quality value-add industrial properties located in the US that can generate superior cash flow and returns.
- On April 25, 2017, the REIT acquired an industrial distribution facility located in Flint, Michigan. The facility comprises approximately 400,000 square feet of gross leasable area and was acquired for an aggregate purchase price of approximately US$16.0 million (before closing costs), representing a capitalization rate of approximately 12%. The facility is fully leased to General Motors LLC and was financed by drawing down funds under its credit facility.
- On June 27, 2017, the REIT acquired eight industrial properties located throughout suburban Chicago, Illinois. The properties are comprised of approximately 314,000 square feet of gross leasable area and were acquired for an aggregate purchase price of approximately US$28.0 million (before closing costs), representing a going-in capitalization rate of approximately 7.7%. The REIT financed the acquisition of the properties by drawing on its operating credit facility and obtaining a first mortgage.
- On July 28, 2017, the REIT received an occupancy permit from the City of Toronto, and Porsche Cars Canada took occupancy of the newly constructed premises at the REIT’s Consumers Road complex. The REIT is required to complete certain development work in accordance with the lease agreement with the tenant.
The REIT will hold a conference call to discuss the REIT’s financial performance for the three and six month periods ended June 30, 2017 on Tuesday, August 15, 2017 at 2:00 p.m. (Toronto time). To access the call, please dial 1-416-340-2217 or 1-888-789-9572 and enter the participant pass code: 6267054. For operator assistance during the call, please press *0.
A replay of the conference call will be available from 5:00 p.m. (Toronto time) on August 15, 2017 until midnight (Toronto time) on August 29, 2017. To access the replay, please call 905-694-9451 or 1-800-408-3053 and enter participant pass code: 4520624.
Information appearing in this news release is a select summary of results. The REIT’s consolidated financial statements along with management’s discussion and analysis for the three and six month periods ended June 30, 2017 (“MD&A”) are available electronically on the REIT’s website at www.agellanreit.com and under the REIT’s issuer profile at www.sedar.com.
The REIT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning industrial, office and retail properties in select major urban markets in the United States and Canada.
The REIT’s 44 properties contain 7.0 million square feet of gross leasable area, with the REIT’s ownership interest at 6.7 million square feet. The properties are located in major urban markets in the United States and Canada.
Non-IFRS supplemental measures:
Certain terms used in this news release are not recognized under International Financial Reporting Standards (“IFRS”) and therefore these terms should not be construed as alternatives to IFRS measures, such as net income or cash flow from operating activities nor are these terms necessarily comparable to similar measures presented by other reporting issuers. These terms are used by management to measure, compare and explain the operating results and financial performance of the REIT. Management believes that these terms are relevant measures in comparing the REIT’s performance to industry data and the REIT’s ability to earn and distribute cash to holders of Units. These non-IFRS measures, including FFO, AFFO, ACFO, Payout Ratio, Gross Book Value, Interest Coverage Ratio, NOI, and related per Unit amounts are defined, and FFO, AFFO and ACFO are reconciled to net income, in the REIT’s MD&A, which should be read in conjunction with this news release.
This news release contains forward-looking information within the meaning of applicable securities legislation. Forward-looking information can be identified by words or expressions including, but not limited to, “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “predicts”, ”projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “should”, “might”, “occur”, “be achieved” or “continue” or similar expressions. Forward-looking information is necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are beyond the REIT’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. As such, management can give no assurance that actual results will be consistent with the forward-looking information. While such assumptions are considered reasonable by management of the REIT based on the information currently available, any of these assumptions could prove to be inaccurate and, as a result, the forward-looking information based on those assumptions could be incorrect. These risks and uncertainties include, but are not limited to: the REIT’s future growth potential; results of operations; future prospects for additional investment opportunities in Canada and the US, including access to debt and equity capital at acceptable costs, the ability to obtain necessary approvals and to minimize any unexpected costs or liabilities, environmental or otherwise, relating to any acquisitions or dispositions; demographic and industry trends remaining unchanged, including occupancy levels, lease renewals, the exercise of any early termination rights, rental increases and retailer competition; future levels of the REIT’s indebtedness remaining at acceptable levels, including its credit rating; tax laws as currently in effect remaining unchanged, including applicable specified investment flow-through rules; and current economic conditions remaining unchanged, including interest rates and applicable foreign exchange rates. Readers, therefore, should not place undue reliance on any such forward-looking statements, as forward-looking information involves significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. All forward-looking information in this news release speaks only as of the date of this news release. The REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities laws. All forward-looking statements in this news release are qualified by these cautionary statements. Additional information about these assumptions and risks and uncertainties is contained in the REIT’s filings with securities regulators, including its current annual information form and MD&A.
Agellan Commercial Real Estate Investment Trust
Frank Camenzuli, 416-593-6800, ext. 226
Chief Executive Officer