WINNIPEG, MB, Nov. 3, 2021 /CNW/ - Artis Real Estate Investment
Trust ("Artis" or the "REIT") (TSX: AX.UN, AX.PR.A, AX.PR.E,
AX.PR.I) announced today its financial results for the three and
nine months ended September 30,
2021. The third quarter press release should be read in
conjunction with the REIT's consolidated financial statements and
Management's Discussion and Analysis ("MD&A") for the period
ended September 30, 2021. All
amounts are in thousands of Canadian dollars, unless otherwise
noted.
"We are pleased with the progress we've made to date in the
execution of our new vision and strategy for Artis," said
Samir Manji, President and Chief
Executive Officer of Artis. "During the third quarter, we closed
the sale of 32 properties for an aggregate sale price of
$761.3 million, including the sale of
the GTA industrial portfolio which represented a significant
milestone in the implementation of our Business Transformation
Plan. These dispositions were key to providing the REIT with the
financial flexibility we now have to execute on our return of
capital and value investing strategies, while allowing us to
meaningfully reduce our debt to gross book value to 44.0% and to
achieve an increase in NAV per unit to $17.45 at September
30, 2021. During the quarter, we acquired a parcel of
industrial development land in the Twin
Cities Area where we've identified an attractive opportunity
to develop modern, high-demand industrial real estate that aligns
with our value creation plan. We are confident in our
strategy, and look forward to continuing to demonstrate our ability
to unlock and create value for our owners in the quarters
ahead."
THIRD QUARTER HIGHLIGHTS (1)
Business Strategy Update
- Subsequent to the end of the quarter, announced that a
consortium led by Canderel Real Estate Property Inc., had, through
a newly-formed entity, entered into an arrangement to acquire
Cominar Real Estate Investment Trust ("Cominar") for consideration
of $11.75 in cash per unit (the
"Cominar Transaction"). Artis has committed up to a total of
$214.1 million to the Cominar
Transaction's capital structure, including $100.0 million of junior preferred units and
$114.1 million in common equity
units. The Cominar Transaction is expected to close in the first
quarter of 2022, subject to the approval of Cominar unitholders,
court and required regulatory approvals and customary closing
conditions.
Portfolio Activity
- Disposed of 27 industrial properties in the Greater Toronto Area, Ontario, two industrial properties in
Winnipeg, Manitoba, and three
retail properties in Regina,
Saskatchewan, for an aggregate sale price of $761.3 million.
- Acquired a parcel of industrial development land in
the Twin Cities Area, Minnesota, for a purchase price of
US$2.2 million.
Balance Sheet and Liquidity
- Increased NAV per unit to $17.45
at September 30, 2021, compared to
$15.03 at December 31, 2020.
- Improved secured mortgages and loans to GBV to 25.8% at
September 30, 2021, compared to 27.7%
at December 31, 2020.
- Improved total long-term debt and credit facilities to GBV to
44.0% at September 30, 2021, compared
to 50.2% at December 31, 2020.
- Improved total long-term debt and credit facilities to Adjusted
EBITDA to 8.3 at September 30, 2021,
compared to 9.4 at December 31,
2020.
- Improved Adjusted EBITDA interest coverage ratio to 3.71 for
the third quarter of 2021, compared to 3.66 for the third quarter
of 2020.
- Utilized the normal course issuer bid ("NCIB") to purchase
4,929,552 common units at a weighted-average price of $11.64 and 37,748 preferred units at a
weighted-average price of $24.03.
- Invested in equity securities for an aggregate cost of
$44.5 million.
(1) Inclusive of
properties held under equity accounted investments.
|
Financial and Operational
- Reported a conservative AFFO payout ratio of 65.2% for the
third quarter of 2021, compared to 51.9% for the third quarter of
2020.
- Reported FFO per unit of $0.33
for the third quarter of 2021, compared to $0.37 for the third quarter of 2020.
- Reported AFFO per unit of $0.23
for the third quarter of 2021, compared to $0.27 for the third quarter of 2020.
- Same Property NOI in Canadian dollars for the third quarter of
2021 decreased 4.7% compared to the third quarter of 2020.
- Same Property NOI in functional currency for the third quarter
of 2021 decreased 1.4% compared to the third quarter of 2020.
- Reported portfolio occupancy of 88.8% (90.8% including
commitments) at September 30, 2021,
compared to 90.3% (91.8% including commitments) at June 30, 2021.
- Renewals totalling 332,619 square feet and new leases totalling
113,564 square feet commenced during the third quarter of
2021.
- Weighted-average rental rate on renewals that commenced during
the third quarter of 2021 increased 1.7%.
BALANCE SHEET AND LIQUIDITY
The REIT's balance sheet highlights and metrics, on a
Proportionate Share basis, are as follows:
|
September
30,
|
|
December
31,
|
|
2021
|
|
2020
|
Fair value of
investment properties
|
$
|
4,280,190
|
|
$
|
4,844,086
|
Fair value of
unencumbered assets
|
1,942,909
|
|
1,941,959
|
NAV per unit
(1)
|
|
17.45
|
|
|
15.03
|
Secured mortgages and
loans to GBV (1)
|
|
25.8 %
|
|
27.7 %
|
Total long-term debt
and credit facilities to GBV (1)
|
|
44.0 %
|
|
50.2 %
|
Total long-term debt
and credit facilities to Adjusted EBITDA (1)
|
|
8.3
|
|
|
9.4
|
Adjusted EBITDA
interest coverage ratio (1)
|
|
3.71
|
|
|
3.29
|
Unencumbered assets
to unsecured debt
|
2.27
|
|
1.73
|
At September 30, 2021, NAV per
unit was $17.45, compared to
$15.03 at December 31, 2020.
At September 30, 2021, Artis had
$280.3 million of cash on hand and
$591.7 million available on its
revolving term credit facilities. Under the terms of the
revolving credit facilities, the REIT must maintain certain
financial covenants which limit the total borrowing capacity of the
revolving credit facilities to $638.2
million.
Liquidity and capital resources may be impacted by financing
activities, portfolio acquisition, disposition and development
activities, debt repayments, or other activities in accordance with
the Business Transformation Plan occurring subsequent to
September 30, 2021.
FINANCIAL AND OPERATIONAL RESULTS
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
$000's, except per
unit amounts
|
2021
|
2020
|
%
Change
|
2021
|
2020
|
%
Change
|
|
|
|
|
|
|
|
Revenue
|
$
|
97,658
|
|
$
|
113,328
|
|
(13.8)
|
%
|
$
|
321,834
|
|
$
|
345,907
|
|
(7.0)
|
%
|
Net operating
income
|
56,089
|
|
68,017
|
|
(17.5)
|
%
|
182,358
|
|
204,308
|
|
(10.7)
|
%
|
Net income
(loss)
|
39,855
|
|
45,699
|
|
(12.8)
|
%
|
328,771
|
|
(10,881)
|
|
(3,121.5)
|
%
|
Total comprehensive
(loss)
|
81,345
|
|
15,250
|
|
433.4
|
%
|
334,767
|
|
26,205
|
|
1,177.5
|
%
|
Distributions per
common unit
|
0.15
|
|
0.14
|
|
7.1
|
%
|
0.44
|
|
0.41
|
|
7.3
|
%
|
|
|
|
|
|
|
|
FFO
(1)
|
$
|
42,019
|
|
$
|
50,816
|
|
(17.3)
|
%
|
$
|
134,020
|
|
$
|
146,615
|
|
(8.6)
|
%
|
FFO per unit
(1)
|
0.33
|
|
0.37
|
|
(10.8)
|
%
|
1.02
|
|
1.06
|
|
(3.8)
|
%
|
FFO payout ratio
(1)
|
45.5
|
%
|
37.8
|
%
|
7.7
|
%
|
43.1
|
%
|
38.7
|
%
|
4.4
|
%
|
|
|
|
|
|
|
|
AFFO
(1)
|
$
|
29,827
|
|
$
|
37,671
|
|
(20.8)
|
%
|
$
|
96,557
|
|
$
|
107,831
|
|
(10.5)
|
%
|
AFFO per unit
(1)
|
0.23
|
|
0.27
|
|
(14.8)
|
%
|
0.73
|
|
0.78
|
|
(6.4)
|
%
|
AFFO payout ratio
(1)
|
65.2
|
%
|
51.9
|
%
|
13.3
|
%
|
60.3
|
%
|
52.6
|
%
|
7.7
|
%
|
(1) Represents a
non-GAAP measure. Refer to the Notice with Respect to
non-GAAP Measures.
|
Artis reported portfolio occupancy of 88.8% (90.8% including
commitments) at September 30, 2021,
compared to 90.3% (91.8% including commitments) at June 30, 2021. Weighted-average rental rate
on renewals that commenced during the third quarter of 2021
increased 1.7%.
Artis' portfolio has a stable lease expiry profile with 48.6% of
gross leasable area expiring in 2025 or later. Weighted-average
in-place rents for the total portfolio are $13.28 per square foot and are estimated to be
1.9% above market rents. Information about Artis' lease
expiry profile is as follows:
|
Current
vacancy
|
Monthly
Tenants
|
2021
|
2022
|
2023
|
2024
|
2025
&
later
|
Total
portfolio
|
|
|
|
|
|
|
|
|
|
Expiring square
footage
|
11.2
|
%
|
0.1
|
%
|
9.0
|
%
|
9.9
|
%
|
10.3
|
%
|
10.9
|
%
|
48.6
|
%
|
100.0
|
%
|
In-place
rents
|
N/A
|
N/A
|
$
|
12.54
|
|
$
|
12.65
|
|
$
|
14.43
|
|
$
|
12.96
|
|
$
|
13.38
|
|
$
|
13.28
|
|
Market
rents
|
N/A
|
N/A
|
$
|
11.54
|
|
$
|
12.37
|
|
$
|
14.02
|
|
$
|
12.97
|
|
$
|
13.26
|
|
$
|
13.03
|
|
PORTFOLIO ACTIVITY
Acquisition
On September 24, 2021, the REIT
acquired a parcel of industrial development land in the Twin Cities Area, Minnesota, for a purchase price of
US$2.2 million.
Dispositions
During Q3-21, Artis disposed of the following properties:
Property
|
Property
count
|
Location
|
Disposition
date
|
Asset
class
|
Owned
share
of
GLA
|
Sale
price
|
|
|
|
|
|
|
|
GTA Industrial
Portfolio
|
27
|
Greater Toronto Area,
Ontario
|
July 15, 2021
& August 19, 2021
|
Industrial
|
2,450,123
|
$
|
724,300
|
King Edward
Industrial Portfolio
|
2
|
Winnipeg,
Manitoba
|
July 21,
2021
|
Industrial
|
31,800
|
3,200
|
East Landing Retail
Portfolio
|
2
|
Regina,
Saskatchewan
|
August 23,
2021
|
Retail
|
65,083
|
19,100
|
West Landing
Mall
|
1
|
Regina,
Saskatchewan
|
September 1,
2021
|
Retail
|
39,022
|
14,665
|
New Developments
At September 30, 2021, the REIT
had four ongoing development projects: 300 Main, Park 8Ninety V,
Park Lucero East and Blaine 35.
300 Main is a mixed-used commercial and residential/multi-family
property located in Winnipeg,
Manitoba. Park 8Ninety V is the final phase of an industrial
development project in the Greater
Houston Area, Texas, and is
expected to comprise three buildings totalling 677,000 square feet
once complete. Artis has a 95% interest in Park 8Ninety V in
the form of a joint venture arrangement. Park Lucero East is a state-of-the-art
industrial development project located in the Greater Phoenix Area, Arizona, which is expected to comprise three
Class A industrial buildings totalling approximately 561,000 square
feet upon completion. Artis has a 10% interest in
Park Lucero East in the form of an
investment in an associate. Blaine 35 is a two-phase
industrial development project located in the Twin Cities Area, Minnesota, with prominent interstate frontage
at the intersection of I-35W and 85th Ave N. The first phase
of the project, Blaine 35 I, consists of one building anticipated
to total approximately 118,500 square feet of leasable area.
The second phase, Blaine 35 II, will comprise two buildings
expected to total approximately 198,900 square feet of leasable
area.
IMPACT OF COVID-19
As a diversified REIT, Artis' portfolio comprises industrial,
office and retail properties which, at September 30, 2021, were 88.8% leased (90.8%
including commitments on vacant space) to high-quality tenants
across Canada and the U.S. with a
weighted-average remaining lease term of 5.3 years.
Rent collection has been a key focus during this time. As
at September 30, 2021, 98.9% of rent
charges (both excluding and including deferred rent charges) have
been collected for the three months ended September 30, 2021.
Due to government-mandated capacity restrictions and temporary
closures of certain non-essential businesses throughout the course
of the COVID-19 pandemic, a number of tenants had to limit
operations. To support tenants through this difficult time,
qualifying tenants who were in need of assistance were given the
option to defer a portion of their rent, with an agreement to repay
the amount at a specified later date. As at September 30, 2021, the outstanding balance of
rent deferrals granted to tenants was $1.3
million ($1.3 million on a
Proportionate Share basis).
The REIT anticipates that the majority of rent deferrals and
rents receivable will be collected, however, there are certain
tenants that may not be able to pay their outstanding rent.
As at September 30, 2021, an
allowance for doubtful accounts in the amount of $1.8 million ($1.8
million on a Proportionate Share basis) has been recorded,
compared to $2.0 million
($2.0 million on a Proportionate
Share basis) at December 31,
2020.
Overall, Artis' first priority is to maintain a safe environment
for its tenants, employees and the community. During this
unprecedented and uncertain time, Artis is committed to minimizing
the impact on its business, and as a diversified REIT, Artis is
confident that it is well-positioned to handle the economic
challenges that may lie ahead.
UPCOMING WEBCAST
Interested parties are invited to participate in a webcast with
management on Thursday, November 4,
2021, at 12:00 p.m. CT
(1:00 p.m. ET). In order to
participate, please register for the event at:
https://us02web.zoom.us/webinar/register/WN_6BgMZ85JQ0i9tUQWxvVKcw.
You will be required to identify yourself at the time of
registration.
If you cannot participate on Thursday,
November 4, 2021, a replay of the webcast will be available
on Artis' website at
www.artisreit.com/investor-link/conference-calls/. The replay will
be available until Wednesday, March 9,
2022.
NOTICE WITH RESPECT TO NON-GAAP MEASURES
In addition to reported IFRS measures, the following non-GAAP
measures are commonly used by Canadian real estate investment
trusts as an indicator of financial performance: Proportionate
Share, Property NOI, Same Property NOI, FFO, AFFO, FFO and AFFO
Payout Ratios, NAV per Unit, Debt to GBV, Adjusted EBITDA Interest
Coverage Ratio and Debt to Adjusted EBITDA. "GAAP" means the
generally accepted accounting principles described by the CPA
Canada Handbook - Accounting, which are applicable as at the date
on which any calculation using GAAP is to be made. Artis
applies IFRS, which is the section of GAAP applicable to publicly
accountable enterprises. These non-GAAP measures are not
defined under IFRS and are not intended to represent operating
profits for the period, or from a property, nor should any of these
measures be viewed as an alternative to net income, cash flow from
operations or other measures of financial performance calculated in
accordance with IFRS.
Readers should be further cautioned that these non-GAAP measures
as calculated by Artis may not be comparable to similar measures
presented by other issuers. These non-GAAP measures are defined in
the REIT's Q3-21 MD&A.
CAUTIONARY STATEMENTS
This press release contains forward-looking statements.
For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "expects",
"anticipates", "intends", "estimates", "projects", "seeks", and
similar expressions or variations of such words and phrases or
state that certain actions, events or results ''may'', ''would'' or
''will'' occur or be achieved are intended to identify
forward-looking statements.
Particularly, statements regarding the Business Transformation
Plan, the steps required to implement the Business Transformation
Plan, the terms and conditions of the Cominar Transaction and
Artis' participation therein, the timing of the Cominar
Transaction, Artis' return of capital and value investing
strategies, building Artis into a best-in-class asset management
and investment platform focused on value investing in real estate,
the REIT's ability to execute its strategy, the REIT's ability to
maximize long-term value and anticipated returns, expected
distributions by the REIT, planned divestitures, the use of
proceeds from divestitures, prospective investments and investment
strategy, Artis' plans to optimize the value and performance of its
assets, Artis' goals to grow net asset value ("NAV") per unit and
distributions, efficiencies and cost savings, the tax treatment of
Artis, Artis' status(es) under the Tax Act, the tax treatment of
divestitures, are forward looking statements.
Forward-looking statements are based on a number of factors and
assumptions which have been used to develop such statements, but
which may prove to be incorrect. Although Artis believes that
the expectations reflected in the forward-looking statements are
reasonable, it cannot guarantee future results, levels of activity,
performance or achievement since such expectations are inherently
subject to significant business, economic, competitive, political
and social uncertainties and contingencies. Assumptions have been
made regarding, among other things: the general stability of the
economic and political environment in which Artis operates,
treatment under governmental regulatory regimes, securities laws
and tax laws, the ability of Artis and its service providers to
obtain and retain qualified staff, equipment and services in a
timely and cost efficient manner, currency, exchange and interest
rates, global economic, financial markets and economic conditions
in Canada and the United States will not, in the long term,
be adversely impacted by the COVID-19 pandemic, disruptions
resulting from the temporary restrictions that governments imposed
on businesses to address the COVID-19 pandemic will not be long
term.
Artis is subject to significant risks and uncertainties which
may cause the actual results, performance or achievements of the
REIT to be materially different from any future results,
performance or achievements expressed or implied in these
forward-looking statements. Such risk factors include, but are not
limited to, risks associated with the possibility that the proposed
Cominar Transaction will not be completed on the terms and
conditions, or on the timing, currently contemplated, and that it
may not be completed at all, due to a failure to obtain or satisfy,
in a timely manner or otherwise, required unitholder, court and
regulatory approvals and other conditions of closing necessary to
complete the Cominar Transaction or for other reasons; risk related
to tax matters; and, credit, market, currency, operational,
liquidity and funding risks generally and relating specifically to
the Cominar Transaction; the COVID-19 pandemic, real property
ownership, geographic concentration, current economic conditions,
strategic initiatives, debt financing, interest rate fluctuations,
foreign currency, tenants, SIFT rules, other tax-related factors,
illiquidity, competition, reliance on key personnel, future
property transactions, general uninsured losses, dependence on
information technology, cyber security, environmental matters and
climate change, land and air rights leases, public markets, market
price of common units, changes in legislation and investment
eligibility, availability of cash flow, fluctuations in cash
distributions, nature of units, legal rights attaching to units,
preferred units, debentures, dilution, unitholder liability,
failure to obtain additional financing, potential conflicts of
interest, developments and trustees. Further, the Business
Transformation Plan has additional risk factors including, but not
limited to: failure to execute the Business Transformation Plan in
part or at all, the ability to achieve certain efficiencies to
generate savings in general and administrative expenses, pace of
completing investments and divestitures, the ability of Sandpiper
Asset Management Inc. ("Sandpiper") to provide services to Artis,
risk of not obtaining control or significant influence in portfolio
companies, risks associated with minority investments, reliance on
the performance of underlying assets, operating and financial risks
of investments, ranking of Artis' investments and structural
subordination, follow-on investments, investments in private
issuers, valuation methodologies involve subjective judgments,
risks associated with owning illiquid assets, competitive market
for investment opportunities, risks upon disposition of
investments, reputation of Artis and Sandpiper, unknown merits and
risks of future investments, resources could be wasted in
researching investment opportunities that are not ultimately
completed, credit risk, tax risk, regulatory changes, foreign
security risk, foreign exchange risk, potential conflicts of
interest with Sandpiper and market discount.
For more information on the risks, uncertainties and assumptions
that could cause the Artis' actual results to differ from current
expectations, refer to the section entitled "Risk Factors" of
Artis' Annual Information Form for the year ended December 31, 2020, the section entitled "Risk and
Uncertainties" of Artis' MD&A for the interim period ended
September 30, 2021, as well as Artis'
other public filings, available at www.sedar.com.
Artis cannot assure investors that actual results will be
consistent with any forward-looking statements and Artis assumes no
obligation to update or revise such forward-looking statements to
reflect actual events or new circumstances other than as required
by applicable securities laws. All forward-looking statements
contained in this press release are qualified by this
cautionary statement.
ABOUT ARTIS REAL ESTATE INVESTMENT TRUST
Artis is a diversified Canadian real estate investment trust
with a portfolio of industrial, office and retail properties in
Canada and the United
States. Artis' vision is to build a best-in-class asset
management and investment platform focused on growing net asset
value per unit and distributions for investors through value
investing in real estate.
600 - 220 Portage Avenue
Winnipeg, MB R3C 0A5
T 204.947.1250 F 204.947.0453
www.artisreit.com
AX.UN on the TSX
SOURCE Artis Real Estate Investment Trust