- 31.1% year-over-year increase in property revenue from Q1
2019
- 22.4% year-over-year increase in net operating
income1 from Q1 2019
- $18.4 million increase in net
income and comprehensive income from Q1 2019
- Same property NOI1 comparable to Q1
2019
- 24.0% year-over-year increase in AFFO1 from Q1
2019
- 74% of leases maturing in 2020 renewed with 2% average
annual rent increase
MONTRÉAL, May 13, 2020 /CNW
Telbec/ - PRO Real Estate Investment Trust ("PROREIT" or the
"REIT") (TSX: PRV.UN) today reported its financial and operating
results for the three-month period (or "first quarter") ended
March 31, 2020.
"Given the unprecedented social and economic impacts of the
COVID-19 pandemic and the rapidly changing business environment we
must all adapt to, we are pleased to report increases in
property revenue, net operating income, adjusted funds from
operations and comparable same property net operating income for
the first quarter of 2020," said Jim
Beckerleg, President and CEO, PROREIT.
"Our April rent collection has been very good given the economic
context we are operating in. These results reflect the
effectiveness of our established diversification strategies, both
in terms of asset class and geography, as well as our resilient and
well-diversified tenant base, 87% of which by base rent are
national and government tenants. In the retail sector, our
performance has benefited from our strategy of focusing on strip
malls anchored by needs-based community services including grocery
stores, pharmacies and government service providers. Finally, it
also reflects the strong tenant relationships we strive to
maintain," added Mr. Beckerleg.
"We have sufficient liquidity and cash flow for all expected
expenses, and no mortgages coming due in 2020. In the interest of
prudence and short-term financial flexibility, we are proactively
managing our balance sheet, costs and liquidity position, while
continuing to build a strong profile for the use of our capital
going forward."
"With our solid foundation and first quarter results within
targets, we believe we are well positioned to meet the challenges
ahead and resume our growth plans once markets stabilize. I wish to
sincerely thank our employees, tenants and their clients for their
incredible efforts and dedication, with a special thanks to those
serving our communities directly and helping Canadians through
these difficult times," concluded Mr. Beckerleg.
TABLE 1- FINANCIAL
HIGHLIGHTS
|
|
(CAD $ thousands
except unit, per unit amounts and unless otherwise
stated)
|
|
3 Months
Ended
March 31
2020
|
|
3 Months
Ended
March 31
2019
|
Financial data
|
|
|
|
|
Property
revenue
|
$
|
17,707
|
$
|
13,510
|
Net operating income
(NOI) (1)
|
$
|
10,355
|
$
|
8,458
|
Total
assets
|
$
|
650,987
|
$
|
516,875
|
Debt to Gross Book
Value (1)
|
|
58.06%
|
|
58.58%
|
Interest Coverage
Ratio (1)
|
|
2.7x
|
|
2.6x
|
Debt Service Coverage
Ratio (1)
|
|
1.6x
|
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
|
3.72%
|
|
3.88%
|
Net cash flows
provided from operating activities
|
$
|
3,300
|
$
|
4,541
|
Funds from Operations
(FFO) (1)
|
$
|
5,756
|
$
|
4,360
|
Basic FFO per unit
(1)(2)
|
$
|
0.1442
|
$
|
0.1389
|
Diluted FFO per unit
(1)(2)
|
$
|
0.1415
|
$
|
0.1359
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,989
|
$
|
4,829
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1500
|
$
|
0.1539
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1473
|
$
|
0.1505
|
AFFO Payout Ratio –
Basic (1)
|
|
105.0%
|
|
102.3%
|
AFFO Payout Ratio –
Diluted (1)
|
|
106.9%
|
|
104.6%
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS and Operational Key Performance Indicators".
|
(2)
|
Total basic units
consist of trust units of PROREIT and Class B LP Units (as defined
herein). Total diluted units also include deferred trust units and
restricted trust units issued under the REIT's long‑term incentive
plan.
|
PROREIT owned 93 investment properties at March 31, 2020, compared to 84 properties at the
same time last year. Total assets amounted to $651.0 million at March
31, 2020, representing an increase of $134.1 million, or 25.9%, compared to
$516.9 million at March 31, 2019. The increase is mainly due to the
acquisition of nine investment properties in the twelve-month
period ended March 31, 2020. During
the first quarter, PROREIT acquired a 100% interest in a
135,494 square-foot light industrial property in Moncton, New Brunswick, for $8.4 million before closing costs.
For the first quarter ended March 31,
2020:
- Property revenue amounted to $17.7
million. The increase of $4.2
million, or 31.1%, compared to the same period last year, is
primarily due to incremental revenues from the property
acquisitions completed in the twelve-month period ended
March 31, 2020.
- Same property net operating income1 amounted to
$8.2 million, which is comparable to
the same period last year.
- Net operating income1 was $10.4 million, an increase of $1.9 million, or 22.4%, compared to $8.5 million for the same period last year. This
increase results primarily from the favourable impact of property
acquisitions completed in the twelve-month period ended
March 31, 2020.
- AFFO1 totalled $6.0
million, a $1.2 million
increase compared to $4.8 million for
the same period last year, or a 24.0% increase year-over-year. This
increase is mainly due to the property acquisitions completed in
the twelve-month period ended March 31,
2020.
- AFFO payout ratio1 stood at 105.0% compared to
102.3% for the same period last year. The difference mainly relates
to the impact of the lag between the full redeployment of funds
from the mid-August 2019 equity
offering and the timing of the March
2020 acquisition.
TABLE 2-
RECONCILIATION OF NET OPERATING INCOME TO NET COMPREHENSIVE
INCOME
|
|
(CAD $
thousands)
|
|
3 Months
Ended
March 31
2020
|
|
3 Months
Ended
March 31
2019
|
Property
revenue
|
$
|
17,707
|
$
|
13,510
|
Property operating
expenses
|
|
7,352
|
|
5,052
|
Net operating
income (NOI) (1)
|
|
10,355
|
|
8,458
|
General and
administrative expenses
|
|
683
|
|
523
|
Long‑term incentive
plan expense
|
|
(3,258)
|
|
1,272
|
Depreciation of
property and equipment
|
|
74
|
|
18
|
Amortization of
intangible assets
|
|
93
|
|
93
|
Interest and
financing costs
|
|
3,889
|
|
3,225
|
Distributions ‑ Class
B LP Units
|
|
398
|
|
429
|
Fair value adjustment
‑ Class B LP Units
|
|
(9,388)
|
|
3,355
|
Fair value adjustment
‑ investment properties
|
|
(42)
|
|
49
|
Other
income
|
|
(509)
|
|
(526)
|
Other
expenses
|
|
278
|
|
319
|
Transaction
costs
|
|
-
|
|
31
|
Net income (loss)
and comprehensive income (loss)
|
$
|
18,137
|
$
|
(330)
|
|
|
(1)
|
See "Non‑IFRS and
Operational Key Performance Indicators".
|
For the three months ended March 31,
2020, net income and comprehensive income amounted to
$18.1 million, compared to a net
loss and comprehensive loss of $0.3
million for the same prior year period. The $18.4 million increase mainly relates to the
$12.7 million favourable impact in
the non-cash fair value adjustment on Class B LP Units combined
with the $4.5 million favourable
impact in the long-term incentive plan expense for the quarter
ended March 31, 2020 compared to the
same period in 2019.
Strong Balance Sheet and Solid Cash Position
PROREIT continued to demonstrate prudent capital management and
remains committed to a conservative balance sheet. At the end of
the quarter, debt to gross book
value1 ratio stood at 58.06% and the
weighted average interest on mortgage debt was 3.72%. PROREIT has
no mortgage maturities coming due in 2020, while only $6 million will be due in 2021.
PROREIT has an adequate liquidity position, with $11 million of cash-on-hand at May 13, 2020, and $3.5
million available through its revolving credit facility.
TABLE 3- TOTAL
PORTFOLIO BASE RENT
|
BY ASSET
CLASS
|
|
|
March 31,
2020
|
March 31,
2019
|
|
Number of properties
|
% Base
Rent
|
Number of
properties
|
% Base
Rent
|
Retail
|
49
|
36.5
|
49
|
46.0
|
Commercial Mixed
Use
|
8
|
17.6
|
7
|
10.5
|
Office
|
10
|
15.8
|
9
|
16.1
|
Industrial
|
26
|
30.1
|
19
|
27.4
|
TOTAL
|
93
|
100.0
|
84
|
100.0
|
|
BY
PROVINCE
|
|
|
March 31,
2020
|
March 31,
2019
|
|
Number ofproperties
|
% Base Rent
|
Numberof
properties
|
% Base Rent
|
Maritime
Provinces
|
39
|
42.6
|
32
|
43.2
|
Quebec
|
16
|
15.1
|
16
|
18.9
|
Western
Canada
|
26
|
14.2
|
26
|
18.2
|
Ontario
|
12
|
28.1
|
10
|
19.6
|
Acquisitions made during the last twelve-month period
contributed to the diversification of PROREIT's asset portfolio.
PROREIT's industrial exposure rose to 30.1% while the combined
commercial mixed-use and office exposure increased to 33.4% at the
end of the first quarter of 2020. The acquisitions increased
exposure in the Ontario,
Quebec and Maritime markets to
85.8% during the same period.
TABLE 4-
OPERATIONAL HIGHLIGHTS
|
|
|
March 31
2020
|
March 31
2019
|
Operational data
|
|
|
Number of
properties
|
93
|
84
|
Gross leasable area
(square feet) ("GLA")
|
4,580,932
|
3,702,430
|
Occupancy rate
(1)
|
98.3%
|
98.0%
|
Weighted average
lease term to maturity (years)
|
5.5
|
5.8
|
|
|
(1)
|
Occupancy rate
includes lease contracts for future occupancy of currently vacant
space. Management believes the inclusion of this committed space
provides a more balanced reporting. The committed space at March
31, 2020 was approximately 12,636 square feet of GLA (7,915 square
feet of GLA at March 31, 2019).
|
GLA increased 23.7% to 4,580,932 square feet at March 31, 2020, compared to 3,702,430 square feet
at March 31, 2019. The increase
of 878,502 square feet in GLA is a result of the acquisition of
nine investment properties in the twelve-month period ended
March 31, 2020.
Well-diversified Tenant Base
Occupancy rate remained firm at 98.3% as at March 31, 2020, compared to 98.0% a year earlier.
The anchored, high profile 10 largest tenants by base rent in
PROREIT's portfolio accounted for approximately 35.3% of base rent
at March 31, 2020, and comprise
approximately 7.2 years of remaining lease term. Credit
quality tenants represent 44.0% of in-place annualized base rent,
and 87% of the portfolio base rent is from national and government
tenants. 65% of the base rent in the retail segment is from tenants
providing essential services to the public, including grocery
stores, pharmacies, financial institutions, government offices and
medical offices.
Weighted average lease term to maturity stood at 5.5 years, and
over 74% of PROREIT's leases maturing in 2020 have been renewed to
date, at an additional 2% average annual rent increase.
Distributions and DRIP
Distributions to unitholders totaling $0.0525 per trust unit of the REIT were declared
monthly during the three months ended March
31, 2020, representing distributions of $0.63 per unit on an annual basis.
Equivalent distributions are paid on the Class B limited
partnership units ("Class B LP Units") of PRO REIT Limited
Partnership, a subsidiary of the REIT.
As announced on April 22, 2020,
subsequent to quarter-end, PROREIT's Board of Trustees revised its
distribution policy and declared a cash distribution of
$0.0375 per trust unit of the
REIT for the month of April 2020, or $0.45 on an annualized basis, payable on
May 15, 2020, to unitholders of
record as at April 30, 2020. This will allow for a reduction
in PROREIT's payout ratio and leverage, as well as provide
additional flexibility in allocating capital to the benefit of
unitholders.
In response to the current stock market disruption and
volatility caused by the COVID-19 pandemic, PROREIT also announced
on April 22, 2020 the suspension of
its distribution reinvestment plan ("DRIP"), effective immediately.
The DRIP will remain suspended until further notice and
distributions of PROREIT will be paid only in cash.
COVID-19 Impact and Outlook
Throughout the ongoing COVID-19 global pandemic, PROREIT has
remained fully committed to ensuring the health and safety of its
employees, tenants and the communities in which it owns properties.
PROREIT continues to closely monitor the evolving response to the
pandemic by the federal and provincial governments of Canada in order to combat the virus, which
have caused significant disruption to businesses in Canada and globally.
In this context, PROREIT continues to operate and manage its
business prudently, while maintaining its long-standing and strong
relationships with its tenants. April
2020 rent collected, which reflects a full month of pandemic
impact, provides an indication of PROREIT's collection capacity for
May 2020. Subsequent to quarter-end,
PROREIT received 92.5% of contractual April
2020 rental payments and entered into temporary rental
deferral agreements with tenants representing 5.3% of gross rent,
the majority of which will be payable in the second half of 2020.
2.2% of gross rent in arrears are with smaller tenants and
discussions are ongoing and managed on a case-by-case basis.
PROREIT will continue to proactively adapt its strategy in
reaction to the developing economic and social impacts of the
pandemic and to mitigate the risks facing its business.
While it is impossible to predict the extent or the duration of
the impact of the COVID-19 pandemic, once the situation stabilizes,
PROREIT expects to be well positioned to leverage its strengths and
resume its long-term growth strategy, including the acquisition of
high-quality, low-risk real estate in favourable secondary markets
to the benefit of its unitholders.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its first quarter
2020 results on May 14, 2020, at 10:30 a.m. EDT. There will be a question period
reserved for financial analysts. To access the conference call,
please dial (888) 664-6383 or 416-764-8650 or 514-225-6995
(conference id: 13869270). A recording of the call will be
available until May 21, 2020 by
dialing (888) 390-0541 or 416-764-8677, access code for
participants 869270 #.
The conference call will also be accessible via live webcast on
PROREIT's website at www.proreit.com or
https://produceredition.webcasts.com/starthere.jsp?ei=1316020&tp_key=6fe17abfd5
Virtual Annual Meeting of Unitholders
PROREIT's Annual Meeting of Unitholders will be held
on Thursday, June 11, 2020, at 11:00
a.m. (Montreal time). In
light of the COVID-19 pandemic and out of concern for the health
and wellbeing of the REIT's unitholders, employees and other
stakeholders, and the public health protocols that federal,
provincial, and local governments have imposed, this year's annual
meeting will be held in a virtual only format, which will be
conducted via live audio webcast online at
https://web.lumiagm.com/271046443 password: PRV2020 (case
sensitive). Unitholders will have an equal opportunity to attend
the meeting online regardless of their geographic location. Please
refer to the management information circular of PROREIT dated
April 30, 2020, available under
PROREIT's SEDAR profile at www.sedar.com and at www.proreit.com,
for important information and detailed instructions about how to
participate at the meeting and vote on the business to be conducted
at the meeting.
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS"). In this press release, as a complement to results
provided in accordance with IFRS, PROREIT discloses and discusses
certain non-IFRS financial measures, including same property net
operating income (or same property NOI), adjusted funds from
operations or AFFO, AFFO payout ratio, net operating income or NOI,
debt to gross book value, gross book value, interest coverage
ratio, debt service coverage ratio, and funds from operations or
FFO. These non-IFRS measures are not defined by IFRS, do not have a
standardized meaning and may not be comparable with similar
measures presented by other issuers. PROREIT has presented such
non-IFRS measures as management of the REIT believes they are
relevant measures of PROREIT's underlying operating performance and
debt management. Non-IFRS measures should not be considered as
alternatives to net income, cash generated from (utilized in)
operating activities or comparable metrics determined in accordance
with IFRS as indicators of PROREIT's performance, liquidity, cash
flow, and profitability. For a full description of these measures
and, where applicable, a reconciliation to the most directly
comparable measure calculated in accordance with IFRS, please refer
to the "Non-IFRS and Operational Key Performance Indicators"
section in PROREIT's management's discussion and analysis for the
three months ended March 31, 2020
(the "Q1 2020 MD&A"), available under PROREIT's profile
on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities legislation. Forward-looking
statements are based on a number of assumptions and are subject to
a number of risks and uncertainties, many of which are beyond
PROREIT's control, that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to the ability
of the REIT to executive its growth strategy, the duration and
impact on the REIT and its tenants of the COVID-19 pandemic, the
liquidity position and cash flow of the REIT and its capacity to
pay all expenses, the future use of capital available to the REIT,
the future performance of the REIT. PROREIT's objectives and
forward-looking statements are based on certain assumptions,
including management's perceptions of historical trends, current
conditions and expected future developments.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT 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 law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form and "Risks and Uncertainties" in the Q1
2020 MD&A, both of which are available under PROREIT's profile
on SEDAR at www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
About PROREIT
PROREIT (www.proreit.com) is an unincorporated open-ended real
estate investment trust owning a diversified portfolio of 93
commercial properties across Canada representing over 4.5 million square
feet of GLA. Established in March
2013, PROREIT is mainly focused on strong primary and
secondary markets in Québec, Atlantic
Canada and Ontario, with
selective exposure in Western
Canada.
__________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
SOURCE PROREIT