- Property revenue of $17.3
million, 30.7% increase from Q3 2019
- Net operating income1 of $10.4 million, 22.0% increase from Q3
2019
- Net loss and comprehensive loss of $0.7 million
- AFFO1 of $5.9
million, 15.6% increase from Q3 2019
- AFFO payout ratio1 of 76.8%, 30.8% improvement from Q3
2019
- Successful renewal of 92.5% of leases maturing in 2020 to
date, at average 4% year one rent increase
MONTRÉAL, Nov. 10, 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 "third quarter") ended
September 30, 2020.
"We are gratified with our third quarter results, which continue
to highlight our robust performance across most of our key metrics,
in the face of the ongoing impact of the COVID-19 pandemic over the
past months and the consequent economic volatility," said
Jim Beckerleg, President and CEO,
PROREIT.
"We believe our outstanding collection capacity demonstrates the
resilience of our portfolio and the stability of our cash flows
with 99.2% of third quarter rent collected and 99.6% of rent
collected for the first month of the fourth quarter currently under
way," added Mr. Beckerleg.
"We have a sound diversification strategy, with exposure in
performing markets and benefit from a strong tenant mix. Our
occupancy rate remained firm at 98.1%, with over 86% of our
portfolio base rent coming from national and government tenancies.
Our retail segment continues to perform strongly as approximately
70% of our retail base rent is comprised of tenants providing
essential services and products anchored by grocery stores and
pharmacies," commented Mr. Beckerleg.
"We continue to focus on maintaining our solid tenant
relationships while managing our business prudently. With our
defensive portfolio, underpinned by solid operational fundamentals,
we are confident in the future and in our ability to leverage
significant growth opportunities as economic activity resumes, to
the benefit of our unitholders," concluded Mr. Beckerleg.
COVID-19 Impact
Given the ongoing pandemic, PROREIT has continued to closely
monitor the situation and remained fully focused on ensuring the
health and safety of its employees, tenants and the communities in
which it owns properties.
___________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
In the second quarter and third quarter of 2020, PROREIT
supported certain tenants that have been negatively impacted by the
pandemic through the provision of rent deferrals on a case-by-case
basis as well as participating in the Canada Emergency Commercial Rent Assistance
("CECRA") program, which provides qualifying tenants with a 75%
gross rent reduction − 50% funded by the government and 25% by the
landlord incurring a rent abatement. As at September 30, 2020, PROREIT has approximately
$0.7 million of rent deferrals to be
repaid by tenants over various terms not exceeding 12 months. These
amounts are being successful collected as per their deferral
agreements. For the three and nine-month ended September 30, 2020, PROREIT recorded respectively
a $0.3 million and $0.7 million provision in relation to COVID-19
bad debt provisions, CECRA participation and rent abatements.
As previously announced, PROREIT's monthly collection of gross
rent as of October 21, 2020 is as
follows:
|
Oct.
2020
|
Sept.
2020
|
August
2020
|
July
2020
|
Gross rent
collections, including government and
other tenants who typically pay at the end of the
month, based on historical collection cycles
|
99.6%
|
99.6%
|
99.5%
|
98.5%
|
Breakdown:
|
|
|
|
|
Industrial
tenants
|
100.0%
|
100.0%
|
100.0%
|
97.9%
|
Mixed-use commercial
tenants
|
98.5%
|
98.5%
|
98.5%
|
100.0%
|
Office
tenants
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Retail
tenants
|
99.9%
|
99.7%
|
99.6%
|
97.4%
|
Temporary rent
deferral agreements under fixed
repayment terms
|
0%
|
0%
|
0%
|
0%
|
Gross rent in arrears
and discussions with tenants
are ongoing and managed on a case-by-case basis
|
0.4%
|
0.4%
|
0.5%
|
0.9%
|
Results
TABLE 1- FINANCIAL HIGHLIGHTS
(CAD $ thousands
except unit, per unit amounts and unless
otherwise stated)
|
3 Months
Ended
September 30
2020
|
3 Months
Ended
September 30
2019
|
9 Months
Ended
September 30
2020
|
9 Months
Ended
September 30
2019
|
Financial data
|
|
|
|
|
|
|
|
|
Property
revenue
|
$
|
17,302
|
$
|
13,241
|
$
|
52,221
|
$
|
40,312
|
Net operating income
(NOI) (1)
|
$
|
10,399
|
$
|
8,525
|
$
|
30,527
|
$
|
25,431
|
Total
assets
|
$
|
634,079
|
$
|
628,604
|
$
|
634,079
|
$
|
628,604
|
Debt to Gross Book
Value (1)
|
|
58.72%
|
|
56.72%
|
|
58.72%
|
|
56.72%
|
Interest Coverage
Ratio (1)
|
|
2.8x
|
|
2.8x
|
|
2.7x
|
|
2.7x
|
Debt Service Coverage
Ratio (1)
|
|
1.6x
|
|
1.7x
|
|
1.6x
|
|
1.7x
|
Weighted average
interest rate on mortgage debt
|
|
3.73%
|
|
3.74%
|
|
3.73%
|
|
3.74%
|
Net cash flows
provided from operating activities
|
$
|
8,936
|
$
|
5,339
|
$
|
13,137
|
$
|
9,498
|
Funds from Operations
(FFO) (1)
|
$
|
5,527
|
$
|
4,410
|
$
|
16,119
|
$
|
10,279
|
Basic FFO per unit
(1)(2)
|
$
|
0.1381
|
$
|
0.1234
|
$
|
0.4031
|
$
|
0.3126
|
Diluted FFO per unit
(1)(2)
|
$
|
0.1349
|
$
|
0.1205
|
$
|
0.3943
|
$
|
0.3050
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,863
|
$
|
5,070
|
$
|
17,070
|
$
|
14,747
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1465
|
$
|
0.1419
|
$
|
0.4269
|
$
|
0.4485
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1431
|
$
|
0.1386
|
$
|
0.4176
|
$
|
0.4376
|
AFFO Payout Ratio –
Basic (1)
|
|
76.8%
|
|
111.0%
|
|
89.6%
|
|
105.4%
|
AFFO Payout Ratio –
Diluted (1)
|
|
78.6%
|
|
113.6%
|
|
91.6%
|
|
108.0%
|
|
(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 92 investment properties at September 30, 2020, compared to 91 properties at
the same time last year. Total assets amounted to $634.1 million at September 30, 2020, representing an increase of
$5.5 million, or 0.9%, compared
to $628.6 million at
September 30, 2019. PROREIT acquired two investment
properties in the twelve-month period ended September 30, 2020, and sold one property on
September 28, 2020.
Year-over-year variances for the three and nine-month periods
ended September 30, 2020 also reflect
the timing of seven acquisitions made in September 2019 − out of the 91 properties owned
at September 30, 2019 − which
consequently have a marginal impact on the results of the three and
nine-month periods ended September 30,
2019.
For the third quarter ended September 30,
2020:
- Property revenue was $17.3
million. The increase of $4.1
million, or 30.7%, compared to the same period last year, is
primarily due to incremental revenues from seven property
acquisitions in September 2019 and
two property acquisitions in the twelve-month period ended
September 30, 2020.
- Same property net operating income1 was $7.8 million, a decrease of $0.2 million, or 3.0%, compared to the same
quarter last year. The decrease is mainly attributable to COVID-19
related bad debt provisions, CECRA participation and rental
abatements of $0.3 million.
- Net operating income1 was $10.4 million, an increase of $1.9 million, or 22.0%, compared to $8.5 million for the same period last year. This
increase results primarily from the favourable impact of the seven
property acquisitions in September
2019 and the 2 property acquisitions in the twelve-month
period ended September 30, 2020.
- AFFO1 totalled $5.9
million, a $0.8 million
increase compared to $5.1 million for
the same period last year, or a 15.6% increase year over year. This
increase is mainly due to the favourable impact of the seven
property acquisitions in September
2019 and the 2 property acquisitions in the twelve-month
period ended September 30, 2020.
- AFFO payout ratio1 stood at 76.8% compared to 111.0%
for the same period last year, a 30.8% improvement. The favourable
variance mainly relates to the revision of PROREIT's monthly
distributions to $0.0375 per unit
from $0.0525 commencing April 2020.
- On September 28, 2020, PROREIT
sold a free-standing retail property in Saint John, New Brunswick, for gross proceeds
of $5.1 million, in excess of its
IFRS carrying value.
For the nine-month period ended September
30, 2020:
- Property revenue was $52.2
million. The increase of $11.9
million, or 29.5%, compared to the same period last year, is
primarily due to incremental revenues from seven property
acquisitions in September 2019 and
two property acquisitions in the twelve-month period ended
September 30, 2020.
- Same property net operating income1 was $23.8 million, a decrease of $0.6 million, or 2.4%, compared to the same
period last year. The decrease is mainly attributable to COVID-19
related bad debt provisions, CECRA participation and rental
abatements of $0.6 million.
- Net operating income1 was $30.5
million, an increase of $5.1
million, or 20.0%, compared to $25.4
million for the same period last year. This increase results
primarily from the favourable impact of seven property acquisitions
in September 2019 and two property
acquisitions in the twelve-month period ended September 30, 2020.
- AFFO1 totalled $17.1
million, a $2.3 million
increase compared to $14.7 million
for the same period last year, or a 15.8% increase year over year.
This increase is mainly due to the favourable impact of the 7
property acquisitions in September
2019 and the 2 property acquisitions in the twelve-month
period ended September 30, 2020.
- AFFO payout ratio1 stood at 89.6% compared to 105.4% for the
same period last year, a 15.0% improvement. The favourable variance
mainly relates to the revision of PROREIT's monthly distributions
to $0.0375 per unit from $0.0525 commencing April
2020.
- During the first quarter of 2020, 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.
___________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
TABLE 2- RECONCILIATION OF NET OPERATING INCOME TO NET INCOME
(LOSS) AND COMPREHENSIVE INCOME (LOSS)
(CAD $
thousands)
|
3 Months
Ended
September 30
2020
|
3 Months
Ended
September 30
2019
|
9 Months
Ended
September 30
2020
|
9 Months
Ended
September 30
2019
|
Property
revenue
|
$
|
17,302
|
$
|
13,241
|
$
|
52,221
|
$
|
40,312
|
Property operating
expenses
|
|
6,903
|
|
4,716
|
|
21,694
|
|
14,881
|
Net operating
income (NOI) (1)
|
|
10,399
|
|
8,525
|
|
30,527
|
|
25,431
|
General and
administrative expenses
|
|
854
|
|
623
|
|
2,430
|
|
1,720
|
Long–term incentive
plan expense
|
|
789
|
|
662
|
|
(1,527)
|
|
2,329
|
Depreciation of
property and equipment
|
|
66
|
|
65
|
|
207
|
|
137
|
Amortization of
intangible assets
|
|
93
|
|
93
|
|
279
|
|
279
|
Interest and
financing costs
|
|
3,829
|
|
3,094
|
|
11,505
|
|
9,644
|
Distributions – Class
B LP Units
|
|
173
|
|
407
|
|
757
|
|
1,255
|
Fair value adjustment
– Class B LP Units
|
|
585
|
|
155
|
|
(7,361)
|
|
4,081
|
Fair value adjustment
– investment properties
|
|
5,012
|
|
(3,255)
|
|
10,271
|
|
(9,983)
|
Other
income
|
|
(562)
|
|
(599)
|
|
(1,562)
|
|
(1,944)
|
Other
expenses
|
|
269
|
|
370
|
|
869
|
|
1,180
|
Transaction
costs
|
|
-
|
|
-
|
|
-
|
|
3,076
|
Net income (loss)
and comprehensive income (loss)
|
$
|
(709)
|
$
|
6,910
|
$
|
14,659
|
$
|
13,657
|
|
(1)
|
See "Non–IFRS and
Operational Key Performance Indicators".
|
For the three months ended September 30,
2020, net loss and comprehensive loss was $0.7 million, compared to net income and
comprehensive income of $6.9 million
for the same prior-year period. The $7.6
million decrease mainly relates to the $8.3 million difference in the non-cash fair
value adjustment on investment properties and the $0.7 million increase in interest and financing
costs, partially offset by a $1.9
million favourable impact in net operating
income1 for the quarter ended September 30, 2020, compared to the same period
in 2019.
For the nine months ended September 30,
2020, net income and comprehensive income was $14.7 million, an increase of $1.0 million compared to $13.7 million for the same period last year,
mainly as a result of the favourable $11.4
million impact of the non-cash fair value of Class B LP
Units combined with the $3.9 million
non-cash long-term incentive plan expense and $5.1 million favourable impact in net operating
income1, partially offset by the $20.3 million difference in non-cash fair value
adjustment on investment properties for the nine months ended
September 30, 2020, compared to the
same period last year.
During the third quarter, PROREIT updated its independent
external appraisals for 36 properties, resulting in a fair market
value expense of approximately $3.1
million, and $5.4 million for
the three and nine-month periods ended September 30, 2020. A total of 56 independent
external appraisals have been updated for the nine-month period
ended September 30, 2020.
___________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
Strong Balance Sheet and Solid Cash Position
PROREIT continued to exercise prudent capital management and
remains committed to maintaining a conservative balance sheet. At
the end of the third quarter, its debt to gross book
value1 ratio was 58.72% and the weighted average
interest on mortgage debt was 3.73%. PROREIT has no mortgage
maturities coming due in 2020, with only $6
million due in 2021.
PROREIT has an adequate liquidity position, with $10 million of cash and credit available as at
November 10, 2020.
On July 16, 2020, PROREIT entered
into a new non-revolving credit facility of $5 million bearing interest at prime plus 325.0
basis points or bankers' acceptance rate plus 425.0 basis points.
PROREIT is also currently in negotiations with respect to other
sources of liquidity that should be available in the fourth quarter
of 2020.
TABLE 3- TOTAL PORTFOLIO BASE RENT
BY ASSET CLASS
|
September 30,
2020
|
September 30,
2019
|
|
Number of Properties
|
% Base
Rent
|
Number
of Properties
|
% Base
Rent
|
Retail
|
48
|
35.4
|
49
|
37.8
|
Commercial Mixed
Use
|
8
|
18.9
|
8
|
17.9
|
Office
|
10
|
15.6
|
10
|
16.2
|
Industrial
|
26
|
30.1
|
24
|
28.2
|
TOTAL
|
92
|
100.0
|
91
|
100.0
|
BY PROVINCE
|
September 30,
2020
|
September 30,
2019
|
|
Number of Properties
|
% Base
Rent
|
Number
of Properties
|
% Base
Rent
|
Maritime
Provinces
|
38
|
41.6
|
37
|
40.6
|
Quebec
|
16
|
14.7
|
16
|
15.3
|
Western
Canada
|
26
|
14.3
|
26
|
14.8
|
Ontario
|
12
|
29.4
|
12
|
29.4
|
TOTAL
|
92
|
100.0
|
91
|
100.0
|
At September 30, 2020, PROREIT's
portfolio remains well-diversified with commercial mixed-use and
industrial exposure at 49.0% at the end of the third quarter of
2020 while the Ontario,
Quebec and Maritime markets
account for 85.7% of its portfolio.
___________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
TABLE 4- OPERATIONAL HIGHLIGHTS
|
September 30
2020
|
September 30
2019
|
Operational data
|
|
|
Number of
properties
|
92
|
91
|
Gross leasable area
(square feet) ("GLA")
|
4,571,311
|
4,396,004
|
Occupancy rate
(1)
|
98.1%
|
98.2%
|
Weighted average
lease term to maturity (years)
|
5.2
|
5.6
|
|
(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
September 30, 2020 was approximately 43,203 square feet of GLA
(30,327 square feet of GLA at September 30, 2019).
|
GLA increased 4.0% to 4,571,311 square feet at September 30, 2020, compared to 4,396,004 square
feet at September 30, 2019. The
increase of 175,307 square feet in GLA is a result of the
acquisition of nine investment properties in the twelve-month
period ended September 30, 2020.
Well-diversified and Robust Tenant Base
Occupancy rate remained solid at 98.1% as at September 30, 2020, in line with the previous
quarter. 86% of PROREIT's portfolio base rent is from national and
government tenants, and the anchored, high-profile 10 largest
tenants by base rent in the portfolio accounted for approximately
36.7% of base rent at September 30,
2020. Credit quality tenants represent 47.0% of in-place
annualized base rent, and 68.4% 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 5.2 years, and
92.5% of PROREIT's leases maturing in 2020 have been renewed to
date, at an additional 4% average year one rent increase, largely
driven by certain significant industrial renewals.
Distributions
Distributions to unitholders totaling $0.0375 per trust unit of the REIT were declared
monthly during the three months ended September 30, 2020, representing distributions of
$0.45 per unit on an annual
basis. Equivalent distributions are paid on the Class B limited
partnership units of PRO REIT Limited Partnership ("Class B LP
Units"), a subsidiary of the REIT.
On October 21, 2020, subsequent to
quarter-end, PROREIT announced a cash distribution of $0.0375 per unit for the month of October 2020. The distribution is payable on
November 16, 2020, to unitholders of
record as at October 30, 2020.
Renewal of Normal Course Issuer Bid
On September 21, 2020, PROREIT
announced that the Toronto Stock Exchange accepted its notice to
renew its normal course issuer bid ("NCIB") for a one-year period.
The NCIB commenced on September 24, 2020 and will
terminate on the earlier of: (i) September 23, 2021, and (ii)
the date on which the maximum number of Units that can be acquired
pursuant to the NCIB are purchased. PROREIT may purchase up to
1,924,228 Units under the NCIB, representing 5.0% of the REIT's
38,484,562 issued and outstanding Units as at September 18,
2020.
Outlook
PROREIT will continue to proactively adapt its near-term
strategy in light of the global pandemic and consequent economic
disruption, while mitigating the potential risks facing its
business. PROREIT also remains fully committed to the health and
safety of all its stakeholders, as well as maintaining its
longstanding tenant relationships.
With interest rates announced at historical lows over the next
few years, PROREIT intends to leverage the low-rate environment
opportunity to fully optimize its debt profile. Over the long term,
PROREIT is confident in its ability to drive organic growth as the
economy recovers, to the benefit of its unitholders.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its third quarter
2020 results on November 11, 2020, at 9:30 a.m. ET. 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: 82695004). A recording of the call will be
available until November 18, 2020, by
dialing (888) 390-0541 or 416-764-8677, access code
695004.
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=1395079&tp_key=949588c16c
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 September 30, 2020
(the "Q3 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 execute 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, and 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 Q3
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 92
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.
SOURCE PROREIT