ISG CAPITAL'S VALUE ENHANCEMENT METHODOLOGY VALIDATED - CONTRIBUTES TO 22% IRR
18 May 2011 - 1:43AM
PR Newswire (Canada)
TORONTO, May 17 /CNW/ -- - Utility costs reduced by 50% -
Prototype property receives Energy Star Rating of 90 -
TORONTO, May 17 /CNW/ - ISG Capital Corporation (TSXV: SUS) ("ISG"
or the "Corporation") is pleased to report that its proprietary
greening methodology has resulted in a 22% internal rate of return
("IRR") since inception on the Company's prototype industrial
property, a 200,615 square foot distribution center on 19.98 acres
of land in Ingersoll, Ontario (the "Ingersoll Property"). The
Ingersoll Property was purchased by ISG in February of 2009 for
$9,908,500 and the Corporation has recently received an appraisal
update letter from the Altus Group confirming a valuation of
$11,000,000 as at April 15, 2011. A report prepared by Abraxas
Energy Consulting ("Abraxas") confirmed that utility costs at the
Ingersoll Property dropped from a 36 month average of $0.83 p.s.f.
per year ending in July 2009 to $0.41 p.s.f. per year as of
February 2011, a reduction of approximately 50%. This
significant decrease in utility costs allowed ISG to work with its
tenant to increase net rent and cash flow and extend the term of
the lease while actually lowering the tenant's gross occupancy
costs. The Energy Star rating of the building has dramatically
improved, moving from 72 at acquisition to 90 after the ISG
improvements. Savings were realized by installing (i) a
control system with software to accurately control HVAC equipment
and heat-flow and (ii) state of the art lighting throughout the
building. In total, the retrofits installed by ISG had an initial
capital cost of $158,983 ($0.79 p.s.f.), which was reduced to a net
cost of $83,759 ($0.42 p.s.f.) after subsidies. These
retrofits resulted in normalized savings of approximately $59,397
in the first year alone. ISG used the 12 month period beginning
March 1, 2010 and ending February 28, 2011 (the "Data Period") for
its data sample. During that time, the proprietary heating
automation system reduced natural gas consumption from 234,693 M3
to 134,216 M3, representing a reduction in normalized heating costs
of $23,794. Similarly, the installation of energy efficient
lighting and control technology cut electricity usage from 833,677
kWh to 467,775 kWh equal to a normalized reduction in electricity
costs of $35,603. To determine the normalized heating and
electricity cost savings, Abraxas calculated baseline natural gas
and electricity usage for the three years prior to the start of the
data period. The actual electricity and natural gas usage over
the measurement period was then normalized against this baseline
for rate, climate and usage by Abraxas to ensure that the reported
savings are the result of the initiatives undertaken by ISG and not
the result of a drop in rates, differences in climate or changes in
the facilities operating schedule. "We have exceeded our
performance goals with our initial property. The data is in
and we have an evidence-based investment model which can now be
implemented across a portfolio of income producing properties"
noted David Ogden, ISG's President and CEO. New Lease Agreement As
part of its overall methodology, ISG and its tenant the Hercules
Tire & Rubber Company ("Hercules") amended their lease to
increase the base rent, return it to a simple net structure and
extend the term to December 31, 2017. By dramatically reducing
energy costs ISG was able to increase the base rent - and related
cash flow, while reducing the overall occupancy costs for
Hercules. In this way, both parties were able to economically
benefit from the implementation of ISG's greening methodology.
Third party consultants were retained to verify the Corporation's
IRR on the Ingersoll Property assuming a disposition at the updated
value in May of 2011. Operating gains from ISG's energy saving
initiatives and the new property value produced an IRR of 22% from
the date of acquisition in February of 2009. This IRR was
37.5% higher than the 16% level that would have been achieved
without the ISG process. "By taking our business model full circle
from property acquisition, through retrofit and finally resulting
in an accretive lease amendment, we have demonstrated how our
proprietary methodology can add significant value to the owners and
tenants of industrial properties. We are now focused on
aligning ourselves with an operating partner with a national
platform capable of acquiring, managing and growing free cash
flow using our unique methodology on a portfolio of income
producing industrial properties", added Ogden. About ISG ISG is a
publicly-traded commercial real-estate company (www.isgcapital.ca)
focused on enhancing the environmental and financial performance of
industrial buildings. The company is committed
to creating shareholder value by incorporating environmentally
and socially responsible approaches in its growth strategy.
The TSXV has neither approved nor disapproved the contents of this
press release and does not accept responsibility for its adequacy
or accuracy. To view this news release in HTML formatting, please
use the following URL:
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David Ogdenbr/ President and Chief Executive Officerbr/ (416)
203-7538 or (877) 877-0213br/ ua
href="http://www.isgcapital.ca"www.isgcapital.ca/a/u /p
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