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Agellan Commercial Real Estate Investment Trust

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Agellan Commercial Real Estate Investment Trust Releases First Quarter 2016 Results

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 month period ended March 31, 2016. All dollar amounts (except per Unit amounts) are in thousands of Canadian dollars (“CAD”), unless otherwise stated.

FINANCIAL AND OPERATIONAL HIGHLIGHTS           March 31, 2016     December 31, 2015
(all dollar amounts in 000's, except per Unit amounts)            
 
Summary of Operational Information
Number of Properties 32 32
Gross Leasable Area ("GLA") (in 000's) 4,712 4,711
Occupancy % (at period end) 91.1% 92.6%
Average lease term to maturity (years) 3.4 3.4
 
Summary of Financial Information
Gross Book Value(1) $642,173 $678,211
Debt (face value) $346,786 $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
      March 31, 2016     March 31, 2015     Variance
 
Total Property and Property Related Revenue $22,369 $20,663 $1,706
Net Operating Income ("NOI")(1) $13,087 $12,091 $996
Funds From Operations ("FFO")(1) $7,964 $7,283 $681
Adjusted Funds From Operations ("AFFO")(1) $6,509 $5,565 $944
 
Basic and Diluted FFO per Unit(1) $0.34 $0.31 $0.03
Basic and Diluted AFFO per Unit(1) $0.28 $0.24 $0.04
Distributions per Unit $0.194 $0.194 $0.00
 
Payout Ratio(1) 70%
Units Outstanding at Period-end: 23,395,139
Weighted Average Units Outstanding (Basic) 23,430,333
Weighted Average Units Outstanding (Diluted)     23,432,073            

(1) This is a non-IFRS measure. Please see “Non-IFRS supplemental measures” below.

Summary of Significant Events:

  • For the three month period ended March 31, 2016, the REIT achieved FFO per Unit of $0.340 and AFFO per Unit of $0.278 compared to $0.310 and $0.237, respectively, for the three month period ended March 31, 2015. The increases in FFO and AFFO represent FFO and AFFO growth of 9.7% and 17.3%, respectively.
  • For the three month period ended March 31, 2016, the REIT achieved NOI of $13,087 compared to $12,091 for the three month period ended March 31, 2015. This increase represents NOI growth of 8.2%.
  • During the three month period ended March 31, 2016, the REIT experienced NOI, FFO and AFFO growth as a result of improved operating fundamentals, such as increased leasing activity and rental rate growth arising from the REIT’s U.S. assets.
  • In addition, the REIT benefited from income generated from its U.S. assets for the three months ended March 31, 2016 due to the increase in the valuation of the United States Dollar (“USD”) relative to the CAD compared to the three months ended March 31, 2015. The average value of the USD in relation to the CAD increased 10.6%, during the three month period ended March 31, 2016, compared to the three month period ended March 31, 2015, which increased the CAD net income the REIT generated from its U.S. assets during these periods. For the three month period ended March 31, 2016, the REIT generated approximately 74% of its NOI from assets located in the United States.
  • The REIT’s payout ratio for the three month period ended March 31, 2016 decreased to 70% from 82% for the three month period ended March 31, 2015.
  • As at April 1, 2016, the REIT’s occupancy was 90.9%, down 1.1% from January 1, 2016, primarily due to lease expiries at the REIT’s Houston industrial properties. The occupied square footage of the REIT’s portfolio during the quarter decreased approximately 50,000 square feet (“sqft”), primarily due to one tenant at the REIT’s Long Point Road property, who vacated approximately 40,000 sqft during the quarter. Subsequent to quarter end, the REIT entered into a new lease for the aforementioned 40,000 sqft that commenced on April 6, 2016.
  • During the quarter, the REIT entered into two notable leases. The first represents approximately 43,000 sqft at the REIT’s Consumers Road complex in Toronto, Ontario. The term of the lease is 10 years beginning in the first quarter of 2017 and reflects prevailing market rents. The second is a renewal of a major tenant at the REIT’s Woodward Street property in Austin, Texas to extend the lease for an additional 7 years. This lease was the REIT’s most significant pending lease expiry during 2016, representing approximately 11.5% of the REIT’s total 2016 lease expirations.
  • On March 16, 2016, the REIT obtained a conditional building permit for the development of a retail and parking facility at the REIT’s Consumers Road complex in Toronto, Ontario. The conditional building permits received for the retail and parking facility, as well as the proposed car dealership and corporate head office, have allowed the REIT to begin development while final site plan details are finalized with the City of Toronto.
  • Subsequent to the quarter end, 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. Eligible Unitholders who were previously participating in the DRIP at the time of its suspension will automatically resume participation in the DRIP and no action is required. Eligible Unitholders that had not previously opted into the DRIP but now wish to do so may elect to participate by contacting their broker, investment dealer or financial institution holding their Units.
  • Subsequent to the quarter end, 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.

“Our U.S. focused investment strategy continues to be a positive characteristic for the REIT, and progress is being made to create value from the REIT’s Canadian assets” said Frank Camenzuli, Chief Executive Officer of the REIT.

The REIT will hold a conference call to discuss the REIT’s financial performance for the period ended March 31, 2016 on Tuesday, May 10, 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: 7788954. 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 May 10, 2016 until midnight EST on May 24, 2016. To access the replay, call 905-694-9451 or 1-800-408-3053 and enter participant pass code: 4064653.

Other information:

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 month period ended March 31, 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.

Forward-looking information:

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
fcamenzuli@agellancapital.com

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