Accretive acquisitions drive improvements
in revenue,
NOI and AFFO payout ratio
/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S.
NEWSWIRES/
TORONTO, Aug. 12, 2015 /CNW/ - True North Commercial Real
Estate Investment Trust (TSX: TNT.UN) (the "REIT") today
announced its financial results for the second quarter ended
June 30, 2015.
Second Quarter Highlights
- Increased industry-leading portfolio occupancy from 98.5% at
March 31, 2015 to 99.2% at
June 30, 2015;
- Government and credit-rated tenants represented 91.0% of
revenue at June 30, 2015;
- Announced strategic recycling of capital through the sale of a
non-core retail property for approximately $17 million at an implied capitalization rate of
5.6% and reinvestment of funds in the acquisition of a
four-property office portfolio in Fredericton, NB for approximately $35 million at a 7.1% implied capitalization
rate;
- Revenue from property operations for Q2 2015 totaling
$8.9 million, compared with
$5.3 million in Q2 2014;
- Net Operating Income ("NOI") for Q2 2015 of $5.6 million, compared with $3.3 million in Q2 2014;
- Funds from Operations ("FFO") of $0.17 per trust unit of the REIT ("Unit");
- Adjusted Funds From Operations ("AFFO") of $0.16 per Unit, resulting in a Q2 2015 normalized
AFFO payout ratio of 92%;
- Reduced indebtedness to gross book value ratio from 59.22% at
December 31, 2014 to 58.18% at
June 30, 2015;
- Reduced the weighted average fixed interest rate from 3.44% to
3.39%;
- Stable lease expiry profile with 100% of 2015 and 2016 expiries
renewed; and
- Paid distributions of $3,025
(representing $0.594 per Unit on an
annualized basis).
"During the second quarter, the REIT continued to build upon its
momentum," said Daniel Drimmer, the
REIT's President and Chief Executive Officer. "Following the
acquisition of 845 Prospect Street in Fredericton, New Brunswick in March, we
announced the further expansion of our presence in this core
secondary market with the acquisition of four additional
properties, and closed the transaction subsequent to
quarter-end. Separately, we completed the disposition of
Coronation Mall, a non-core retail property located in Duncan, British Columbia and recycled the
proceeds to acquire the new properties in Fredericton."
"Internally, we remain focused on key operating
initiatives. In this regard, proactive discussions with
tenants surrounding early lease renewals have been successful, and
100% of the 2015 and 2016 expiries have been renewed on similar or
better terms to those previously in place. Our ability to
negotiate early renewals speaks to the strong relationships we have
with our tenant base," continued Mr. Drimmer.
Operating Results and Financial Position
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Three months ended June 30
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Six months ended
June 30
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2015
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2014
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2015
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2014
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Revenue
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$8,882
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$5,283
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$17,772
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$10,915
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NOI
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$5,557
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$3,257
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$10,989
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$6,489
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Income and
comprehensive income
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$207
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$2,379
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$3,210
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$7,573
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FFO
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$3,352
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$1,899
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$6,504
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$3,649
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FFO per Unit - basic
(1)
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$0.17
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$0.15
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$0.32
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$0.30
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FFO per Unit -
diluted
(1)
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$0.16
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$0.14
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$0.30
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$0.28
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AFFO
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$3,276
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$1,841
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$6,393
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$3,492
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AFFO per Unit - basic
(1)
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$0.16
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$0.15
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$0.31
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$0.28
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AFFO per Unit -
diluted (1)
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$0.15
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$0.14
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$0.30
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$0.27
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AFFO payout ratio -
basic
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92%
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100%
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95%
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104%
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AFFO - Normalized
(2)
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$3,290
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$1,928
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$6,423
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$3,841
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AFFO Normalized per
Unit - basic (1)
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$0.16
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$0.16
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$0.32
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$0.31
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AFFO Normalized per
Unit - diluted (1)
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$0.15
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$0.15
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$0.30
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$0.29
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AFFO Normalized
payout ratio - basic
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92%
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95%
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94%
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95%
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Units outstanding for
FFO, AFFO and AFFO Normalized per Unit:
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Weighted average
(000s) – basic (1)
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20,297
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12,394
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20,351
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12,368
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Add:
Unexercised unit options
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1,154
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720
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1,135
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720
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Weighted average
(000s) – diluted (1)
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21,451
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13,114
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21,486
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13,088
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Notes:
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(1)
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For purposes of
calculating FFO and AFFO per Unit, Class B LP Units are included as
Units outstanding on
both a basic and diluted basis. Diluted amounts assume the conversion
of any unexercised Unit Options.
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(2)
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AFFO Normalized is
adjusted for non-recurring items such as due diligence acquisition
costs related to
property acquisitions the REIT is no longer pursuing and rental
income recognized as purchase price
adjustments under IFRS. See
"FFO and AFFO Reconciliations".
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Occupancy for the portfolio increased to 99.2% as at
June 30, 2015, reflecting the
strength of the REIT's unique strategy and the execution of its
business plan.
Revenue from property operations in the second quarter of 2015
was $8.9 million compared with
$5.3 million in Q2 2014. NOI in Q2
2015 was $5.6 million compared with
$3.3 million in the corresponding
period of 2014. The year-over-year increases in revenue and NOI are
primarily attributable to the REIT's acquisitions. On a same
property basis, Q2 2015 property revenue of $5.3 million was consistent with the level in Q2
2014, and NOI of 3.2 million was 1.6% below the 2014 level, due to
lower occupancy at Coronation Mall in British Columbia, which has been divested.
For the second quarter of 2015, basic and diluted FFO were
$0.17 and $0.16 per Unit respectively. This compares with
$0.15 and $0.14 per Unit respectively in Q2 2014, and
$0.16 and $0.15 per Unit respectively in Q1 2015. The
REIT's AFFO normalized payout ratio in the second quarter of 2015
was 92%, compared with 95% in Q2 2014 and 96% in Q1 2015. On a
year-over-year basis, the improvement in the REIT's AFFO payout
ratio is the result of strong growth in revenue, NOI, FFO and AFFO
during Q2 2015, which is primarily attributable to the 14
properties acquired in the latter half of 2014. The REIT's
AFFO payout ratio has improved from the Q1 2015 level, which
reflected elevated general and administrative expenses related to
annual compliance and regulatory matters. In addition,
certain operating costs such as snow removal and utilities are
seasonal in nature and as such are higher in the winter months.
Liquidity and Capital Resources
As at June 30, 2015, the REIT's
indebtedness to gross book value was 58.18%, a level well within
the 75% limit set out in the REIT's amended and restated
declaration of trust and below the REIT's year-end 2014 ratio of
59.22%. The weighted average interest rate on the REIT's mortgage
portfolio was 3.39%, and the weighted average term to maturity was
3.9 years. The REIT has minimal mortgage maturities until 2018, and
all interest rates are fixed for the terms of their respective
mortgages.
Tenant Profile
The REIT's portfolio has a stable lease expiry profile and
significant progress has been made with 100% of 2015 and 2016
expiries renewed early.
As at June 30, 2015, the
weighted-average term to maturity of leases at the REIT's
properties was 4.4 years. Government and credit-rated tenants
account for 63.7% and 27.3%, respectively, or 91.0% combined, of
the REIT's annualized gross revenue.
About the REIT
The REIT is an unincorporated, open-ended real estate investment
trust established under the laws of the Province of Ontario. The REIT currently owns and operates
a portfolio of 25 commercial properties in secondary markets across
Canada. The REIT is focused on
growing its portfolio principally through acquisitions across
Canada and such other
jurisdictions where opportunities exist.
For complete financial statements and management's discussion
and analysis for the period, and any other information relating to
the REIT, please visit www.sedar.com or the REIT's website at
www.truenorthreit.com.
Non-IFRS measures
The REIT's financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"). NOI, FFO,
AFFO, AFFO normalized, indebtedness, gross book value and
indebtedness to gross book value ratio, as well as other measures
discussed elsewhere in this news release, do not have a
standardized definition prescribed by IFRS and are, therefore,
unlikely to be comparable to similar measures presented by other
reporting issuers. The REIT uses non-IFRS measures to better assess
the REIT's underlying performance and financial position and
provides these additional measures so that investors may do the
same. Details on non-IFRS measures are set out in the REIT's
Management's Discussion and Analysis for the period ended
June 30, 2015 and available on the
REIT's profile at www.sedar.com.
Forward-looking Statements
Certain statements contained in this news release constitute
forward-looking information within the meaning of Canadian
securities laws. Forward-looking statements are provided for the
purposes of assisting the reader in understanding the REIT's
financial position and results of operations as at and for the
periods ended on certain dates and to present information about
management's current expectations and plans relating to the future
and readers are cautioned such statements may not be appropriate
for other purposes. Forward-looking information may relate to the
REIT's future outlook and anticipated events or results, including
the number and type of securities that may be sold under the short
form base shelf prospectus dated December
16, 2013, and may include statements regarding the financial
position, business strategy, budgets, projected costs, capital
expenditures, financing rates and costs, taxes and plans and
objectives of or involving the REIT. Particularly, statements
regarding future results, performance, achievements, prospects or
opportunities for the REIT or the real estate industry are
forward-looking statements. In some cases, forward-looking
information can be identified by terms such as "may", "might",
"will", "could", "should", "would", "occur", "expect", "plan",
"anticipate", "believe", "intend", "seek", "aim", "estimate",
"target", "project", "predict", "forecast", "potential",
"continue", "likely", "schedule", or the negative thereof or other
similar expressions concerning matters that are not historical
facts.
Forward-looking statements necessarily involve known and unknown
risks and uncertainties, that may be general or specific and which
give rise to the possibility expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate,
assumptions may not be correct and objectives, strategic goals and
priorities will not be achieved. A variety of factors, many of
which are beyond the REIT's control, affect the operations,
performance and results of the REIT and its business, and could
cause actual results to differ materially from current expectations
of estimated or anticipated events or results. These factors
include, but are not limited to; the risks discussed in the REIT's
materials filed with Canadian securities regulatory authorities
from time to time on www.sedar.com. The reader is cautioned to
consider these and other factors, uncertainties and potential
events carefully and not to put undue reliance on forward-looking
statements as there can be no assurance actual results will be
consistent with such forward-looking statements.
Information contained in forward-looking statements is based
upon certain material assumptions, including management's
perceptions of historical trends, current conditions and expected
future developments, as well as other considerations that are
believed to be appropriate in the circumstances, such as: the
Canadian economy will remain stable over the next 12 months;
inflation will remain relatively low; interest rates will remain
stable; conditions within the real estate market, including
competition for acquisitions, will be consistent with the current
climate; the Canadian capital markets will continue to provide the
REIT with access to equity and/or debt at reasonable rates when
required; Starlight Investments Ltd. will continue its involvement
as asset manager of the REIT in accordance with its current asset
management agreement; and the risks identified or referenced above,
collectively, will not have a material impact on the REIT. While
management considers these assumptions to be reasonable based on
currently available information, they may prove to be
incorrect.
The forward-looking statements made in this news release are
dated, and relate only to events or information, as of the date of
this news release. Except as specifically required by law, the REIT
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated events.
SOURCE True North Commercial Real Estate Investment Trust