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, 2016. All dollar amounts (except per Unit amounts) are in thousands of Canadian dollars (“CAD”), unless otherwise stated.
|FINANCIAL AND OPERATIONAL HIGHLIGHTS||June 30, 2016||December 31, 2015|
|Summary of Operational Information|
|Number of Properties||31||32|
|Gross Leasable Area ("GLA") (in 000's)||4,670||4,711|
|Occupancy % (at period end)||93.4%||92.6%|
|Average lease term to maturity (years)||3.3||3.4|
|Summary of Financial Information|
|Gross Book Value(1)||$||641,724||$||678,211|
|Debt (face value)||$||346,850||$||354,757|
|Debt to Gross Book Value(1)||54%||52%|
|Interest Coverage (annual)||3.3x||3.2x|
|Weighted average interest rate||3.9%||4.0%|
|For the three month period ended|
|June 30, 2016||June 30, 2015||Variance|
|Total Property and Property Related Revenue||$||21,301||$||19,321||$||1,980|
|Net Operating Income ("NOI")(1)||$||12,116||$||11,280||$||836|
|Funds From Operations ("FFO")(1)||$||7,711||$||6,641||$||1,070|
|Adjusted Funds From Operations ("AFFO")(1)||$||6,420||$||5,060||$||1,360|
|Basic and Diluted FFO per Unit(1)||$||0.329||$||0.282||$||0.047|
|Basic and Diluted AFFO per Unit(1)||$||0.274||$||0.215||$||0.059|
|Distributions per Unit||$||0.193||$||0.194||($0.001)|
|Units Outstanding at Period-end:||23,401,025|
|Weighted Average Units Outstanding (Basic)||23,435,585|
|Weighted Average Units Outstanding (Diluted)||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, 2016, the REIT achieved FFO per Unit of $0.329 and AFFO per Unit of $0.274 compared to $0.282 and $0.215, respectively, for the three month period ended June 30, 2015. The increases in FFO and AFFO represent growth of 16.7% and 27.4%, respectively.
- For the six month period ended June 30, 2016, the REIT achieved FFO per Unit of $0.669 and AFFO per Unit of $0.552 compared to $0.591 and $0.451, respectively, for the six month period ended June 30, 2015. The increases in FFO and AFFO represent growth of 13.2% and 22.4%, respectively.
- For the three month period ended June 30, 2016, the REIT achieved NOI of $12,116 compared to $11,280 for the three month period ended June 30, 2015. This increase represents growth of 7.4%.
- For the six month period ended June 30, 2016, the REIT achieved NOI of $25,203 compared to $23,371 for the six month period ended June 30, 2015. This increase represents growth of 7.8%.
- The foregoing NOI, FFO and AFFO growth during the three and six month periods ended June 30, 2016 is attributable to improved operating fundamentals, such as increased leasing activity and rental rate growth arising from both the REIT’s U.S. and Canadian assets, as well as the net impact of acquisitions and dispositions made since the beginning of 2015.
- In addition, during the three and six month periods ended June 30, 2016, the REIT benefited from increased Canadian dollar income generated from its U.S. assets due to the increase in the valuation of the United States Dollar (“USD” or “US$”) relative to the CAD compared to the three and six month periods ended June 30, 2015. The average value of the USD in relation to the CAD increased 4.8% during the three month period ended June 30, 2016, compared to the three month period ended June 30, 2015, and increased 7.7% during the six month period ended June 30, 2016 compared to the six month period ended June 30, 2015. This appreciation increased the CAD net income the REIT generated from its U.S. assets during these periods. For the three and six month periods ended June 30, 2016, the REIT generated approximately 74% of its NOI from assets located in the United States.
- The REIT’s payout ratio for the three and six month periods ended June 30, 2016 decreased to 71% and 70%, respectively from 90% and 86% for the three and six month periods ended June 30, 2015, which decreases are attributable to the same factors noted above.
- As at July 1, 2016, the overall occupancy rate of the REIT’s portfolio was 93.4%, up from 90.9% as of April 1, 2016, primarily due to lease commencements at 2151 Airwest Boulevard, 6600 Long Point Road, and 251 Consumers Road.
- During the quarter, one of the REIT’s existing tenants at its 2151 Airwest Boulevard property leased an additional 50,000 sqft, which reduced the financial impact of a Q1 2016 vacancy at the property. In addition, as previously announced, during the quarter the REIT leased approximately 40,000 sqft at its Long Point Road property, which also reduced the financial impact of a Q1 2016 vacancy at the property.
- There were two lease commencements at the REIT’s Consumers Road property during the three month period ended June 30, 2016 for 11,000 sqft of previously vacant space and 28,000 sqft of vendor leased space, with both leases increasing the minimum rent of the property going forward. Additionally, subsequent to the quarter end, the REIT entered into a binding offer to lease approximately 11,000 sqft of vendor lease space at the REIT’s Consumers Road property expected to commence March 1, 2017 and further reduce the total area subject to the vendor head lease to approximately 8,000 sqft.
- On April 7, 2016, the REIT announced the amendment and reinstatement of its Unitholder Distribution Reinvestment Plan (the “DRIP”). Eligible unitholders that choose to participate in the DRIP will have their monthly cash distributions used to purchase Units of the REIT. While the amended DRIP no longer provides participants with a 3% bonus distribution of Units, it still provides participants with the opportunity to accumulate additional trust units of the REIT without incurring any commissions, service charges or brokerage fees.
- On May 3, 2016, the REIT disposed of its multi-tenant retail plaza located at 195-215 Rue Bellehumeur, in Gatineau, Quebec (“Plaza Bellehumeur”). The sale price for this non-core asset of the REIT was approximately $9,200 before closing costs and represents an in-place capitalization rate of approximately 7.2%. The proceeds of disposition were used by the REIT to temporarily reduce the outstanding balance on its credit facility, which was partially secured by Plaza Bellehumeur.
- On July 15, 2016, subsequent to quarter end, the REIT announced the resignation of Robert P. Perry from the board of trustees of the REIT and the appointment of Terra Attard to the trustees of the REIT, effective August 2, 2016.
- On July 27, 2016, subsequent to quarter end, the REIT announced that it had entered into agreements with certain private purchasers to sell a portion of the REIT’s Consumers Road property in Toronto, Ontario. The transaction involves the sale to arms-length purchasers of the REIT's partnership interest in 165 Yorkland LP, a limited partnership created by the REIT to own and operate a car dealership and corporate head office at the REIT’s Consumers Road property pursuant to a lease agreement with Porsche Cars Canada. The transaction is expected to close during the second quarter of 2017 and is subject to numerous closing conditions, including the REIT substantially completing the construction of the dealership and the occupancy thereof by Porsche Cars Canada. The gross sale price for the transaction will be determined based on a capitalization rate applied to the annual minimum rent payable, as determined under the lease agreement with Porsche Cars Canada. Such gross sale price represented the fair value of the partnership as of the date of the sale agreements. The disposition is consistent with the REIT's previously announced strategy of recycling capital by selling assets in certain markets that are no longer aligned with its core strategies in order to fund new investment opportunities. The REIT intends to focus on multi-tenant properties that provide enhanced diversity.
- The REIT continues to advance on the development of the retail and parking facility, car dealership and corporate head office at the REIT’s Consumers Road property under the conditional building permits obtained for the developments. The REIT believes it has adequately responded to the remaining queries from the City of Toronto on the site plan, which it expects to receive during the third quarter of 2016.
- On August 3, 2016, subsequent to quarter end, the REIT extended the lease relating to the single-tenant building located at 1201 John Burgess Road, in Fort Worth, for an additional seven year term. The rental rate for the first year of the extension represents an increase of approximately 2% over the expiring rate, which lease term expires on September 30, 2025.
- On August 4, 2016, subsequent to quarter end, the REIT closed a public offering of 4,485,000 units at a price of $10.25 per unit for aggregate gross proceeds of approximately $45,971, which includes 585,000 units issued as a result of the exercise in full of the underwriters’ over-allotment option. The REIT intends to use the net proceeds from the Offering to fund potential future acquisitions, to repay indebtedness owing under the REIT’s existing credit facilities and for general business purposes.
- On August 12, 2016, subsequent to quarter end, the REIT entered into an agreement to purchase two multi-tenanted light industrial properties located in Atlanta, Georgia. The two properties consist of four buildings containing approximately 322,000 sqft of GLA in the aggregate. The properties are approximately 90% occupied, have 21 tenants and are a good complement to the seven properties currently owned by the REIT in the Atlanta area. The aggregate purchase price for the properties is US$15,760 (excluding acquisition costs) representing a going in cap rate of approximately 7.25%. The transaction is expected to close on or about September 8, 2016.
“The REIT has seen exciting advancements on several strategic initiatives this quarter” said Frank Camenzuli, Chief Executive Officer of the REIT, “including two dispositions in Canada and an equity raise which will allow the REIT to advance its U.S. focused investment strategy, the elimination of a substantial portion of the remaining vendor lease space at Parkway Place, and strong leasing momentum across the portfolio providing a positive outlook for the second half of 2016.”
The REIT will hold a conference call to discuss the REIT’s financial performance for the period ended June 30, 2016 on Monday, August 15, 2016 at 2:00 p.m. EST. To access the call, please dial 1-416-340-2217 or 1-866-696-5910 and enter the participant pass code: 4017749. For operator assistance during the call, please press *0.
A replay of the conference call will be available from 5:00 p.m. EST on August 15, 2016 until midnight EST on August 29, 2016. To access the replay, call 905-694-9451 or 1-800-408-3053 and enter participant pass code: 2517107.
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, 2016 (“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 current portfolio comprises approximately 4.7 million square feet of gross leasable area in 31 properties. The properties are primarily 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 the REIT’s units. These non-IFRS measures, including FFO, AFFO, Payout Ratio, Gross Book Value, NOI, and related per Unit amounts are defined, and FFO and AFFO 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. 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 U.S., including access to debt and equity capital at acceptable costs and 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, 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 SIFT 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. 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