- FFO per unit benefits from
developments/redevelopments, lower finance costs and lease
termination revenues
FREDERICTON, Aug. 10, 2017 /CNW/ - Plaza Retail REIT
(TSX: PLZ.UN) ("Plaza" or the "REIT") today announced their
financial results for the three and six months ended June 30, 2017.
For the three and six months ended June
30, 2017, Funds from Operations ("FFO") per unit increased
7.5% and 5.3%, respectively, over the prior year, when
non-recurring lease termination revenues are excluded. FFO per
unit, including lease termination revenues for the three and six
months ended June 30, 2017, increased
28.0% and 14.9%, respectively, over the same periods in the prior
year.
Michael Zakuta, President and CEO
said, "We are pleased with our strong results. Plaza's focus on
value-add developments and redevelopments continues to generate FFO
per unit growth for unitholders. Although our results benefitted
from some non-recurring revenues in the quarter, our FFO per unit
still showed strong growth over the prior year. We achieve our
goals of FFO per unit growth and NAV growth by being opportunistic
and by developing and redeveloping high quality retail projects
leased to national retailers."
|
Financial Results
Summary
|
(CAD$000s, except
percentages, per unit amounts
and coverage
ratios)
|
Three Months
Ended
June 30,
2017
|
Three Months
Ended
June 30,
2016
|
Change
|
Six Months
Ended
June 30,
2017
|
Six Months
Ended
June 30,
2016
|
Change
|
Total property rental
revenue
|
$26,755
|
$24,923
|
+ 7.4%
|
$52,095
|
$49,389
|
+ 5.5%
|
Total property
operating expenses
|
$9,507
|
$9,644
|
- 1.4%
|
$19,534
|
$18,806
|
+ 3.9%
|
Total NOI
|
$17,248
|
$15,279
|
+ 12.9%
|
$32,561
|
$30,583
|
+ 6.5%
|
|
|
|
|
|
|
|
Same-asset rental
revenue
|
$22,139
|
$22,262
|
- 0.6%
|
$44,447
|
$44,435
|
n/c
|
Same-asset operating
expenses
|
$7,521
|
$7,799
|
- 3.6%
|
$15,280
|
$15,359
|
- 0.5%
|
Same-asset
NOI
|
$14,618
|
$14,463
|
+ 1.1%
|
$29,167
|
$29,076
|
+ 0.3%
|
|
|
|
|
|
|
|
FFO
|
$9,809
|
$7,421
|
+ 32.2%
|
$18,135
|
$14,912
|
+ 21.6%
|
FFO per
unit
|
$0.096
|
$0.075
|
+ 28.0%
|
$0.177
|
$0.154
|
+ 14.9%
|
FFO payout
ratio
|
70.5%
|
87.0%
|
- 19.0%
|
76.2%
|
85.1%
|
- 10.5%
|
|
|
|
|
|
|
|
AFFO
|
$9,025
|
$6,694
|
+ 34.8%
|
$16,870
|
$13,731
|
+ 22.9%
|
AFFO per
unit
|
$0.088
|
$0.067
|
+ 31.3%
|
$0.165
|
$0.142
|
+ 16.2%
|
AFFO payout
ratio
|
76.6%
|
96.4%
|
- 20.5%
|
81.9%
|
92.4%
|
- 11.4%
|
|
|
|
|
|
|
|
Profit and total
comprehensive income
|
$6,027
|
$11,335
|
- 46.8%
|
$6,306
|
$15,795
|
- 60.1%
|
|
|
|
|
|
|
|
EBITDA
|
$15,624
|
$13,703
|
+ 14.0%
|
$29,947
|
$27,939
|
+ 7.2%
|
|
|
|
|
|
|
|
Total distributions
to unitholders
|
$6,912
|
$6,455
|
+ 7.1%
|
$13,818
|
$12,689
|
+ 8.9%
|
|
|
|
|
|
|
|
Interest coverage
ratio
|
2.46 x
|
2.06 x
|
+ 19.4%
|
2.37 x
|
2.06 x
|
+ 15.0%
|
Debt coverage
ratio
|
1.75 x
|
1.48 x
|
+ 18.2%
|
1.68 x
|
1.50 x
|
+ 12.0%
|
Refer to "Non-IFRS
Financial Measures" below for further explanations.
|
Three Months Ended June 30,
2017 Financial Highlights
- FFO per unit increased to $0.096,
up 28.0% from $0.075 in the prior
year and adjusted funds from operations ("AFFO") per unit was
$0.088, up 31.3%, from $0.067 in 2016. FFO and AFFO per unit were
positively impacted by growth from developments and redevelopments,
non-recurring lease termination revenues of $1.6 million and a decrease in finance
costs;
- Even excluding the non-recurring lease termination revenues,
FFO and AFFO per unit increased by 7.5% and 8.9%,
respectively;
- FFO and AFFO payout ratios were 70.5% and 76.6%, respectively,
compared to 87.0% and 96.4% in 2016;
- Net property operating income ("NOI") increased to $17.2 million, up 12.9% from $15.3 million in the same period in the prior
year, impacted mainly by: (i) NOI from developments and
redevelopments; and (ii) lease termination revenues received in the
quarter resulting from two lease termination transactions;
- Same-asset NOI was $14.6 million
compared to $14.5 million for the
same period in the prior year, up 1.1%, mainly due to a decrease in
non-recoverable costs and maintenance expenses, more than
offsetting lower same-asset NOI from vacancies;
- Profit and total comprehensive income for the quarter was
$6.0 million compared to $11.3 million for the prior year, mainly due to
non-cash fair value adjustments; and
- The interest coverage ratio improved from 2.06x for the quarter
ended June 30, 2016 to 2.46x for the
quarter ended June 30, 2017. The debt
coverage ratio also improved to 1.75x from 1.48x for the prior
year. The improvements in the ratios reflect higher EBITDA and
lower finance costs.
Six Months Ended June 30, 2017
Financial Highlights
- FFO per unit increased to $0.177,
up 14.9% from $0.154 in the prior
year and AFFO per unit was $0.165, up
16.2%, from $0.142 in 2016. FFO and
AFFO per unit were positively impacted by growth from developments
and redevelopments, non-recurring lease termination revenues of
$1.6 million and a decrease in
finance costs;
- Even excluding the non-recurring lease termination revenues,
FFO and AFFO per unit increased by 5.3% and 5.5%,
respectively;
- FFO and AFFO payout ratios were 76.2% and 81.9%, respectively,
compared to 85.1% and 92.4% in 2016;
- NOI increased to $32.6 million,
up 6.5% from $30.6 million in the
same period in the prior year, impacted mainly by NOI from
developments and redevelopments, as well as the lease termination
revenues recorded relating to the two lease termination
transactions;
- Same-asset NOI was $29.2 million
compared to $29.1 million for the
same period in the prior year, up 0.3%;
- Profit and total comprehensive income for the six months ended
June 30, 2017 was $6.3 million compared to $15.8 million for the six months ended
June 30, 2016, mainly due to non-cash
fair value adjustments; and
- The interest coverage ratio improved from 2.06x for the six
months ended June 30, 2016 to 2.37x
for the six months ended June 30,
2017. The debt coverage ratio also improved to 1.68x from
1.50x for the six months ended June 30,
2016. The improvements in the ratios reflect higher EBITDA
and lower finance costs.
Further Information
Further information is found in
Appendix A below. A more detailed analysis of the REIT's
financial and operating results is included in the REIT's
Management's Discussion and Analysis and Condensed Interim
Consolidated Financial Statements, which have been filed on SEDAR
and can be viewed at www.sedar.com or on the REIT's website at
www.plaza.ca.
Conference Call
Michael
Zakuta, President and CEO, and Floriana Cipollone, CFO,
will host a conference call for the investment community on
Friday, August 11,
2017 at 10:00 a.m. ET (11:00
a.m. AT). The call-in numbers for participants are
647-427-7450 or 888-231-8191.
A replay of the call will be available until Friday, August
18, 2017. To access the replay, dial 416-849-0833 or 855-859-2056
(Passcode: 50696190). The audio replay will also be available for
download on the REIT's website for 90 days following the conference
call.
About Plaza
Plaza is an open-ended real estate
investment trust and is a leading retail property owner and
developer, particularly in Eastern Canada. Plaza's portfolio
at June 30, 2017 includes interests
in 296 properties totaling approximately 7.6 million square feet
across Canada and additional lands
held for development. Plaza's properties include a mix of strip
plazas, stand-alone small box retail outlets and enclosed shopping
centres, anchored by approximately 91% national tenants. For
more information, please visit www.plaza.ca.
Non-IFRS Financial Measures
This press release
contains certain non-IFRS financial measures including FFO, AFFO,
same-asset NOI and EBITDA. These measures are commonly used by
entities in the real estate industry as useful metrics for
measuring performance. However, they do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other publicly traded
entities. These measures should be considered as supplemental in
nature and not as a substitute for related financial information
prepared in accordance with IFRS. Please refer to the REIT's
Management's Discussion and Analysis for a reconciliation of these
non-IFRS measures to standardized IFRS measures.
Forward-looking Information
This news release
contains forward looking statements relating to our operations and
the environment in which we operate, which are based on our
expectations, estimates, forecasts and projections. These
statements are not future guarantees of future performance and
involve risks and uncertainties that are difficult to control or
predict. Therefore, actual outcomes and results may differ
materially from those expressed in these forward looking
statements. Readers, therefore, should not place undue reliance on
any such forward looking statements. Further, a forward looking
statement speaks only as of the date on which such statement is
made. We undertake no obligation to publicly update any such
statement, to reflect new information or the occurrence of future
events or circumstances, except for forward-looking information
disclosed in prior disclosures which, in light of intervening
events, requires further explanation to avoid being
misleading.
The TSX does not accept responsibility for the adequacy or
accuracy of this release.
Appendix A
New Leases /
Renewals and Occupancy
|
|
Strip
Plazas
|
Enclosed
Malls
|
Single-User
Retail
|
Single-User
QSR(1)
|
2017 – Q2
YTD
|
|
|
|
|
Leasing renewals (sq.
ft.)
|
146,040
|
83,354
|
14,296
|
9,526
|
Weighted average rent
($/sq. ft.)
|
$15.27
|
$15.50
|
$28.00
|
$39.68
|
|
|
|
|
|
Change in weighted
average rent
|
3.4%
|
6.7%
|
4.7%
|
5.0%
|
|
|
|
|
|
Expiries that renewed
(sq. ft.)
|
146,040
|
83,354
|
14,296
|
9,526
|
Weighted average rent
($/sq. ft.)
|
$14.77
|
$14.52
|
$26.75
|
$37.79
|
|
|
|
|
|
|
|
|
|
|
New leasing (sq.
ft.)
|
39,477
|
9,386
|
-
|
1,790
|
Weighted average rent
($/sq. ft.)
|
$17.85
|
$15.43
|
-
|
$25.00
|
|
|
|
|
|
|
|
|
|
|
Expiries not renewed
(sq. ft.)
|
60,665
|
7,711
|
8,268
|
4,038
|
Weighted average rent
($/sq. ft.)
|
$14.52
|
$13.34
|
$21.04
|
$25.06
|
|
|
|
|
|
|
|
|
|
|
2017 – Remainder
of Year
|
|
|
|
|
Expiries (sq.
ft.)
|
84,570
|
28,035
|
2,485
|
14,648
|
Weighted average rent
($/sq. ft.)
|
$15.06
|
$16.81
|
$20.00
|
$36.37
|
|
|
|
|
|
(1) QSR refers to quick service
restaurant.
|
- Same-asset committed occupancy and total committed occupancy
remained high at 95.8% and 95.8%, respectively, at June 30, 2017, compared to 96.6% and 96.6%,
respectively, at June 30, 2016.
Fair Value of Investment Properties
At the end of the
quarter, investment properties were valued using an overall
weighted average capitalization rate of 7.01%, a drop of two basis
points from the year ended December 31,
2016 and a drop of one basis point from June 30, 2016. Fair value adjustments are
determined based on the movement of various parameters, including
changes in stabilized NOI and capitalization rates. The fair
value decreases were largely due to changes in NOI.
Distributions
Distributions paid to REIT unitholders
and Class B exchangeable LP unitholders of the REIT's subsidiary
limited partnership were $6.9 million for the quarter ended
June 30, 2017, representing an AFFO
payout ratio of 76.6%, compared to distributions in the amount of
$6.5 million paid in the prior
year, representing an AFFO payout ratio of 96.4%.
Distributions paid to REIT unitholders and Class B exchangeable
LP unitholders of the REIT's subsidiary limited partnership
were $13.8 million for the six months ended June 30, 2017, representing an AFFO payout ratio
of 81.9%, compared to distributions in the amount of $12.7 million paid in the prior year,
representing an AFFO payout ratio of 92.4%.
Liquidity and Capital Structure
To fund ongoing
operating activities, the REIT has a revolving operating facility
with a Canadian chartered bank. It bears interest at prime
plus 0.75% or bankers' acceptances ("BAs") plus 2.00%. In
March 2017, the Trust pledged
additional properties to increase its operating facility from
$30.0 million to $43.5 million. At June 30, 2017 there was $13.1 million available on this facility (net of
letters of credit issued).
To fund development activities the REIT has two revolving
development facilities with Canadian chartered banks available upon
pledging of specific development assets. One is a
$20 million one-year revolving
facility that bears interest at prime plus 0.75% or BAs plus 2.25%.
The other is a $15 million two-year
revolving facility that bears interest at prime plus 0.75% or BAs
plus 2.00%. At June 30, 2017
there was $30.7 million available on
these development facilities. The REIT also has two variable rate
secured construction loans, one for $3.0
million and the other for $907
thousand on two of its Ontario development projects. The loans bear
interest at a rate of prime plus 1.25% or BAs plus 2.50% and prime
plus 1.00% or BAs plus 2.50%, respectively, and mature in
May 2018 and December 2017, respectively. At June 30, 2017, $2.7
million and $0.5 million,
respectively, were drawn on these loans.
During 2017 Plaza obtained new long-term financing in the amount
of $11.2 million (at Plaza's
consolidated share) with a weighted average term of 10.6 years and
a weighted average interest rate of 3.90%. The REIT ended the
quarter with total mortgages payable (excluding development,
construction and operating lines mentioned above) of $440
million with a weighted average interest rate on fixed rate
mortgages of 4.42% and a weighted average maturity of 6.3
years.
On November 30, 2016, the REIT
issued a redemption notice for the 7.0% Series C convertible
debentures to be redeemed on January
9, 2017. During 2016, $1.75
million in Series C convertible debentures were converted
into 333 thousand units and $198
thousand in cash, in accordance with the terms of
conversion, leaving a balance of $15.2
million in face value of debentures at December 31, 2016. Between January 3rd and 6th, 2017,
$12.9 million in Series C convertible
debentures were converted into 2.45 million units and $1.5 million in cash. On January 9, 2017, the remaining $2.3 million in Series C convertible debentures
were redeemed and paid out.
On February 28, 2017, the Trust
issued $6.0 million in Series II
unsecured debentures with an interest rate of 5.0% per annum
maturing on February 28, 2022.
Debt to gross assets, excluding convertible debentures, at
June 30, 2017 was 48.8% and including
convertible debentures was 52.7%. These compare to 47.9% and
53.4%, respectively at June 30, 2016.
The increase over the prior year excluding convertible debentures
was mainly due to the issuance of $6.0
million Series II unsecured debentures. The decrease
over the prior year including convertible debentures was mainly due
to the redemption of the Series B and C convertible
debentures.
SOURCE Plaza Retail REIT