DUNDEE REIT (TSX:D.UN) today announced its financial results for the three
months ended March 31, 2014. Senior management will host a conference call to
discuss the results tomorrow, May 9, 2014 at 9:00 a.m. (ET).
As previously announced in the Trust's annual report, we are moving into a new
and exciting time in our business and starting May 8, 2014, Dundee REIT's name
will be Dream Office REIT.
HIGHLIGHTS FOR THE QUARTER
-- Appointment of new CEO - Jane Gavan has been appointed the Chief
Executive Officer of the Trust effective May 8, 2014. Michael Cooper
will remain Chair of the Executive Committee;
-- AFFO per unit increased 1.6% compared to same period in prior year -
AFFO per unit was $0.62 for the quarter compared to $0.61 in the first
quarter of 2013 and $0.62 in the fourth quarter of 2013;
-- Portfolio occupancy remains strong at 94.2% - occupancy rate at quarter
end was 94.2%, remains well above the national average; 631,000 square
feet of leasing was completed during the quarter at incrementally higher
rates;
-- Leasing activity - To date, the Trust has leased approximately 2.1
million square feet for tenants taking occupancy in 2014, which
represents approximately 66% of the total 2014 lease maturities.
-- Embedded rent growth potential remains strong - average in-place net
rents are approximately 9% below estimated market rents.
-- Financing activities - issued $150 million of unsecured debentures in
the quarter with a fixed rate of 4.07% and a term to maturity of six
years;
-- Strong and conservative capital structure maintained - the Trust's
leverage remained stable at 47.6% compared to December 31, 2013.
Interest coverage ratio remains at 2.9 times and debt-to-EBITDFV ratio
remains at 8.0 years.
(unaudited) Three Months Ended
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($000's except unit and per unit March 31, December 30, March 31,
amounts) 2014 2013 2013
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Investment properties revenue (1) $ 206,679 $ 208,418 $ 189,568
Net operating income ("NOI") (2) 116,066 115,899 107,237
Comparative properties NOI (3) 106,701 106,459 106,035
Funds from operations ("FFO") (4) 78,104 78,242 72,669
Adjusted funds from operations
("AFFO") (4) 67,291 66,984 61,615
Investment properties value (5) 7,298,526 7,303,121 6,695,410
Debt (1) 3,649,505 3,662,543 3,326,521
Debt-to-gross book value (4) 47.6% 47.6% 47.3%
Per unit data (basic)
FFO $ 0.73 $ 0.72 $ 0.72
AFFO $ 0.62 $ 0.62 $ 0.61
Distributions $ 0.56 $ 0.56 $ 0.55
Units (period end)
REIT Units, Series A 103,966,154 103,420,221 97,910,460
REIT Units, Series B - - 16,316
LP Class B Units, Series 1 3,538,457 3,538,457 3,534,432
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Total number of units 107,504,611 106,958,678 101,461,208
-----------------------------------------
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Portfolio gross leasable area
(square feet) (6) 24,557,452 24,561,791 23,327,935
Occupied and committed space 94.2% 94.3% 94.7%
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"Our portfolio occupancy continues to outperform the national average, allowing
us to continue to deliver solid financial and operating results," said Ana
Radic, Chief Operating Officer of Dundee REIT. "We are pleased with our ability
to maintain our leasing pipeline under challenging conditions in the office
market."
OPERATIONAL HIGHLIGHTS
-- Portfolio occupancy remains strong at 94.2% - the overall percentage of
occupied and committed space remains strong at 94.2%. On a comparative
property basis, occupancy has decreased modestly by 10 basis points over
Q4 2013. National average occupancy was 89.7%, a decline of 60 basis
points over Q4 2013.
-- Leasing activity - Leasing activity for the quarter consisted of 218,000
square feet of new leases and 413,000 square feet of renewals, all at
higher rates than expiries, which totaled 631,000 square feet. In
addition, approximately 404,400 square feet of gross leasable area was
committed for future occupancy at quarter end. To date, the Trust has
leased 2.1 million square feet for tenants taking occupancy in 2014,
which represents 66% of the total 2014 lease maturities.
-- Average in-place net rents 9% below market rents - The Trust continues
to capture rental rate gains in connection with leasing activity. At the
end of Q1 2014, the portfolio average in-place rent was $17.97 per
square foot, up from $17.83 at December 31, 2013 and up from $17.26 at
March 31, 2013, yet remain approximately 9% below estimated market
rents.
FINANCIAL HIGHLIGHTS
-- 0.6% growth in comparative properties net operating income ("NOI")
compared to Q4 2013 and Q1 2013 - comparative property NOI was up $0.7
million, or 0.6% compared to both Q4 2013 and Q1 2013, with increases in
Western and Eastern Canada and Calgary downtown, driven mainly by higher
rental rates achieved on new leasing done over the past year and the
benefit of step rents, offset by lower occupancy. Total NOI for the
quarter is up $8.8 million, or 8.2% compared to Q1 2013, including $9.5
million generated by properties acquired in 2013.
-- AFFO per unit growth of 1.6% over the same quarter in the prior year -
AFFO per unit for the first quarter increased by $0.01 over the same
period in the prior year and was stable compared to Q4 of 2013.
-- FFO per unit growth of 1.4% over the same quarter in the prior year -
FFO per unit increased by $0.01 compared to both the same period in the
prior year and the fourth quarter of 2013.
CAPITAL INITIATIVES
-- $150 million unsecured debentures offering in Q1 2014 - On January 21,
2014, the Trust completed the issuance of $150 million aggregate
principal amount of Series C senior unsecured debentures ("Series C
Debentures"). The Series C Debentures bear interest at a rate of 4.074%
with a maturity date of January 21, 2020. DBRS Limited has assigned the
Series B Debentures a BBB (low) rating with a stable trend. The net
proceeds of $148.6 million from the Series C Debentures was used to
repay one of the demand revolving credit facility totalling $87.5
million and discharged mortgages totalling $59.3 million (including debt
settlement costs). This further strengthened the Trust's debt metrics
reducing our variable rate debt to 6.3% at Q1 2014 from 8.7% at Q4 2013
of total debt.
-- Discharged $58.0 million of secured debt - During the quarter, the Trust
repaid approximately 59% of the mortgages due in 2014, totalling
approximately $58.0 million, increasing our unencumbered assets by
approximately $150 million.
-- Strong and conservative capital structure maintained - The Trust's
leverage remained flat at 47.6% compared to Q4 2013 and its pool of
unencumbered assets increased to over $770 million from approximately
$620 million at December 2013.
-- Normal course issuer bid - During the quarter, the Trust purchased for
cancellation 11,000 REIT A Units under the normal course issuer bid at
an average price of $27.16 per unit and a total cost of approximately
$0.3 million. To date, the Trust purchased for cancellation
approximately 2.1 million REIT A Units under the normal course issuer
bid at an average price of $28.42 per unit and a total cost of
approximately $61.0 million.
March 31, December 31, March 31,
Key performance metrics 2014 2013 2013
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Financing activities
Weighted average face interest
rate 4.23% 4.22% 4.49%
Level of debt (debt-to-gross book
value)(4) 47.6 % 47.6% 47.3%
Interest coverage ratio(4) 2.9 times 2.9 times 2.9 times
Debt-to-EBITDFV (4) 8.0 years 8.0 years 8.0 years
Debt - average term to maturity
(years) 4.6 years 4.6 years 4.8 years
Variable rate debt as percentage
of total debt 6.3% 8.7% 5.4%
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Appointment of new CEO - Jane Gavan has been appointed the Chief Executive
Officer of the Trust; Michael Cooper to remain Chair of the Executive Committee.
"Jane is a proven leader with business vision and exceptional management skills"
said Michael Cooper, "Together with Mario and Ana, the four of us have worked
together for years transforming the REIT into an industry leader and will
continue to build on that foundation under Jane's direction". Jane joined DREAM
in 1998 and has played a key role in numerous transactions including the 1998
acquisition of Lehndorff Properties, the 2003 business restructuring that
resulted in the creation of DREAM Office REIT, the REIT's $2.3 billion portfolio
sale to GE Real Estate, the initial public offering of DREAM Global REIT and the
$1.3 billion acquisition of Scotia Plaza. Jane is presently the President, Asset
Management of DREAM. In that capacity, she oversees the operations of the three
public REIT's managed by DREAM.
OUTLOOK
We are pleased with our strong leasing velocity and financial results. Our
occupancy levels are presently high and have historically been well above the
national average. Our tenant base is well diversified, with balanced exposure to
large and small tenants, which should mitigate the impact from the supply of the
new office developments in downtown Toronto and Calgary.
We are increasing our focus to value-add and repositioning initiatives. We are
exploring new ideas to increase the income and value of our properties through
intensification and alternative uses, especially in downtown buildings where
urbanization allows for increased revenue in office and retail space. We are
also looking at development opportunities on underutilized land within our
portfolio. We are in the early stages of our assessment but are excited about
the potential opportunities.
Looking ahead, our focus continues to be on operational performance, tenant
retention, proactive asset management and maintaining a strong and flexible
balance sheet.
CONFERENCE CALL
Senior management will host a conference call to discuss the results tomorrow,
May 9, 2014 at 9:00 a.m. (ET). To access the conference call, please dial
1-866-229-4144 in Canada and the United States or 416-216-4169 elsewhere and use
passcode 8839 855#. To access the conference call via webcast, please go to
Dundee REIT's website at www.dundeereit.com and click on the link for News &
Events, then click on Calendar of Events. A taped replay of the conference call
and the webcast will be available 90 days.
Other information
Information appearing in this news release is a select summary of results. The
consolidated financial statements and management's discussion and analysis for
the Trust, as well as its Supplementary Information Package are available at
www.dundeereit.com and on www.sedar.com.
Dundee REIT is an unincorporated, open-ended real estate investment trust.
Dundee REIT is focused on owning, acquiring, leasing and managing well-located,
high-quality central business district and suburban office properties. Its
portfolio currently comprises approximately 24.6 million square feet of gross
leasable area in major urban centres across Canada. Dundee REIT's portfolio is
well diversified by geographic location and tenant mix. For more information,
please visit www.dundeereit.com.
FOOTNOTES
(1) Includes investment properties revenue of investments in joint
ventures.
(2) NOI (non-GAAP measure) - is defined as total of net rental income,
including the share of net rental income from investment in joint
ventures and property management income, excluding net rental income
from properties sold and assets held for sale.
(3) Includes investments in joint ventures and excludes redevelopment
properties, properties sold and assets held for sale.
(4) Non-GAAP measures - FFO, AFFO, debt-to-gross book value, level of debt,
interest coverage ratio, and debt-to-EBITDFV are key measures of
performance used by real estate operating companies; however, they are
not defined by International Financial Reporting Standards ("IFRS"), do
not have standard meanings and may not be comparable with other
industries or income trusts. Refer to the "Non-GAAP Measures" section
of the MD&A for the detailed calculations of these non-GAAP measures.
(5) Includes investments in joint ventures and excludes assets held for
sale.
(6) Excludes redevelopment properties and properties held for sale.
Forward looking information
This press release may contain forward-looking information within the meaning of
applicable securities legislation. Forward-looking information is based on a
number of assumptions and is subject to a number of risks and uncertainties,
many of which are beyond Dundee 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, general and local economic and business conditions; the financial
condition of tenants; our ability to refinance maturing debt; leasing risks,
including those associated with the ability to lease vacant space; and interest
and currency rate functions. Our objectives and forward-looking statements are
based on certain assumptions, including that the general economy remains stable,
interest rates remain stable, conditions within the real estate market remain
consistent, competition for acquisitions remains consistent with the current
climate and that the capital markets continue to provide ready access to equity
and/or debt. All forward-looking information in this press release speaks as of
the date of this press release. Dundee REIT does not undertake to update any
such forward-looking information whether as a result of new information, future
events or otherwise. Additional information about these assumptions and risks
and uncertainties is contained in Dundee REIT's filings with securities
regulators, including its latest annual information form and MD&A. These filings
are also available at Dundee REIT's website at www.dundeereit.com.
FOR FURTHER INFORMATION PLEASE CONTACT:
Dundee REIT
P. Jane Gavan
Chief Executive Officer
(416) 365-6572
Dundee REIT
Mario Barrafato
Chief Financial Officer
(416) 365-4132
Dundee REIT
Ana Radic
Chief Operating Officer
(416) 365-4136
www.dundeereit.com
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