TORONTO–(BUSINESS WIRE)–Agellan Commercial Real Estate Investment Trust (“Agellan” or the “REIT”) (TSX: ACR.UN):
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Agellan Commercial Real Estate Investment Trust (the “REIT”) (TSX:ACR.UN) is pleased to report its financial results for the three month period ended March 31, 2018. All dollar amounts (except per Unit amounts) are in thousands of Canadian dollars (“CAD”), unless otherwise stated.
Net Income increased $0.966 per Unit over the same quarter last year; Funds From Operations and Adjusted Funds from Operations per Unit increased 6.4% and 13.9% over the same quarter last year; and The REIT agreed to dispose of its Consumers Road complex for approximately $256.3M (subject to certain adjustments).
“The REIT continues to make strides on its strategic direction and the agreement to sell Parkway Place is the most significant step to date,” said Frank Camenzuli, the REIT’s Chief Executive Officer. “The REIT is excited to have achieved another strategic milestone and is looking forward to redeploying the proceeds and continuing to grow the REIT’s presence in U.S. industrial real estate.”
FINANCIAL AND OPERATIONAL HIGHLIGHTS March 31, 2018 December 31, 2017 Summary of Operational Information Number of Properties 45 44 Gross Leasable Area ("GLA") (in 000’s) 6,695 6,652 Occupancy % (at period end) 96.5% 96.2% Average lease term to maturity (years) 3.9 4.0 Summary of Financial Information Gross Book Value(1) $883,907 $832,768 Debt (face value) $410,370 $392,507 Debt to Gross Book Value(1) 46% 47% Interest Coverage Ratio (annual)(1) 3.3x 2.3x Weighted average interest rate 4.2% 4.2%
For the three month period ended March 31, 2018 March 31, 2017 Net Operating Income ("NOI")(1) $15,470 $14,024 Net Income $40,655 $6,949 Funds From Operations ("FFO")(1) $10,189 $8,313 Adjusted Funds From Operations ("AFFO")(1) $8,587 $6,569 Adjusted Cash Flow From Operations ("ACFO")(1) $8,246 $4,882 Basic and Diluted FFO per Unit(1) $0.301 $0.283 Basic and Diluted AFFO per Unit(1) $0.254 $0.223 Distributions Declared $6,836 $6,036 Distributions per Unit $0.202 $0.206 Payout Ratio(1) 83% 124% Units Outstanding at Period-end 33,771,703 32,770,050 Weighted Average Units Outstanding (Basic and Diluted) 33,813,424 29,401,636
Summary of Significant Events:
For the three month period ended March 31, 2018, the REIT achieved net income of $40,655, compared to net income of $6,949 for the three month period ended March 31, 2017. This represents an increase in net income of $0.966 per Unit, primarily related to the fair value adjustment on the REIT`s investment properties. For the three month period ended March 31, 2018, the REIT achieved FFO per Unit of $0.301, compared to $0.283 for the three month period ended March 31, 2017. This represents a 6.4% increase in FFO per Unit. For the three month period ended March 31, 2018, the REIT achieved AFFO per Unit of $0.254, compared to $0.223 for the three month period ended March 31, 2017. This represents a 13.9% increase in AFFO per Unit. For the three month period ended March 31, 2018, the REIT’s ACFO was $8,246 and its Payout Ratio was 83%.
As at April 1, 2018, the overall occupancy rate of the REIT’s portfolio was 96.8%, representing an increase from the January 1, 2018 occupancy rate of 95.7%. This increase was primarily the result of additional leases beginning at the newly developed retail space located at the REIT’s Consumers Road complex. On January 9, 2018, the REIT entered into an agreement to purchase a 58,000 square foot multi-tenant industrial property located in Laurel, Maryland. The property is currently 92% occupied by 6 tenants with a weighted average remaining lease term of 4.5 years. The acquisition is expected to close before the end of May 2018 for total consideration of U.S. $5,280 (excluding closing costs), representing a going-in capitalization rate of 8.1%. The REIT anticipates financing the transaction with funds from its credit facility. On February 28, 2018, the REIT extended the maturity of its credit facility and increased the maximum funds available thereunder. The credit facility now matures on January 25, 2020 and the maximum availability thereunder has been increased from $120.0 million to $140.0 million. On March 27, 2018, the REIT entered into a purchase and sale agreement, and subsequently amended, to dispose of its Consumers Road complex, including the four office properties and newly developed retail space and parking garage. The sale price for the property is approximately $256.3 million (excluding closing costs) and is subject to certain adjustments in respect of, among other things, certain committed leasing costs. In conjunction with the sale of the REIT’s Consumers Road complex, the REIT has also agreed to an approximately $2.8 million vendor head lease with the purchaser in respect of certain vacant retail space. The REIT expects to use the sale proceeds (i) to repay all outstanding amounts owing under the REIT’s credit facility secured by the REIT’s Consumers Road complex, (ii) to acquire industrial assets located in the REIT’s target markets in the United States, (iii) to repay certain other outstanding debt of the REIT, (iv) to make a special distribution to Unitholders (as described in “Part IV – Distributions and Adjusted Cash Flow from Operations” in the REIT’s MD&A), and (v) for general business and working capital purposes,. On May 4, 2018, the purchaser waived the conditions in its favour under the purchase and sale agreement and closing of the transaction is expected to occur prior to the end of the second quarter. Following the sale of the REIT’s Consumers Road complex, the REIT expects to be retained by the purchaser to provide certain management services.
On April 18, 2018, the REIT declared a monthly distribution for the month ended April 30, 2018 of $0.0675 per Unit, representing $0.81 per Unit on an annualized basis. On April 30, 2018, the REIT acquired seven light industrial properties located in northeast Dallas, Texas. The properties comprise approximately 194,000 square feet of GLA, are 97% occupied and have a weighted average lease term of approximately 2.5 years. The acquisition price was approximately U.S. $12.2 million (before closing costs), representing a going-in capitalization rate of approximately 7.7%. The transaction was financed with funds from its credit facility and an $8.0 million first mortgage secured by the property.
The REIT will hold a conference call to discuss the REIT’s financial performance for the three month period ended March 31, 2018 on Wednesday, May 9, 2018 at 2:00 p.m. (Toronto time). To access the call, please dial 1-416-641-6104 or 1-800-806-5484 and enter the participant pass code: 6749642. For operator assistance during the call, please press *0.
A replay of the conference call will be available from 5:00 p.m. (Toronto time) on May 9, 2018 until midnight (Toronto time) on June 8, 2018. To access the replay, please call 1-905-694-9451 or 1-800-408-3053 and enter participant pass code: 5261030.
Information appearing in this news release is a select summary of results. The REIT’s consolidated financial statements along with management’s discussion and analysis for the three month period ended March 31, 2018 (“MD&A”) are available electronically on the REIT’s website at www.agellanreit.com and under the REIT’s issuer profile at www.sedar.com.
The REIT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning industrial, office and retail properties in select major urban markets in the United States and Canada.
The REIT’s 46 properties contain 7.3 million square feet of gross leasable area, with the REIT’s ownership interest at 6.9 million square feet. The properties are located in major urban markets in the United States and Canada.
Non-IFRS supplemental measures:
Certain terms used in this news release are not recognized under International Financial Reporting Standards (“IFRS”) and therefore these terms should not be construed as alternatives to IFRS measures, such as net income or cash flow from operating activities nor are these terms necessarily comparable to similar measures presented by other reporting issuers. These terms are used by management to measure, compare and explain the operating results and financial performance of the REIT. Management believes that these terms are relevant measures in comparing the REIT’s performance to industry data and the REIT’s ability to earn and distribute cash to holders of Units. These non-IFRS measures, including FFO, AFFO, ACFO, Payout Ratio, Gross Book Value, Interest Coverage Ratio, NOI, and related per Unit amounts are defined, FFO, is reconciled to net income, and AFFO and ACFO are reconciled to cash flows from (used in) operating activities in the REIT’s MD&A, which should be read in conjunction with this news release.
This news release contains forward-looking information within the meaning of applicable securities legislation. Forward-looking information can be identified by words or expressions including, but not limited to, “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “predicts”, ”projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “should”, “might”, “occur”, “be achieved” or “continue” or similar expressions. Forward-looking information is necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are beyond the REIT’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. As such, management can give no assurance that actual results will be consistent with the forward-looking information. While such assumptions are considered reasonable by management of the REIT based on the information currently available, any of these assumptions could prove to be inaccurate and, as a result, the forward-looking information based on those assumptions could be incorrect. These risks and uncertainties include, but are not limited to: the REIT’s future growth potential; results of operations; future prospects for additional investment opportunities in Canada and the US, including access to debt and equity capital at acceptable costs, the ability to obtain necessary approvals and to minimize any unexpected costs or liabilities, environmental or otherwise, relating to any acquisitions or dispositions; demographic and industry trends remaining unchanged, including occupancy levels, lease renewals, the exercise of any early termination rights, rental increases and retailer competition; future levels of the REIT’s indebtedness remaining at acceptable levels, including its credit rating; tax laws as currently in effect remaining unchanged, including applicable specified investment flow-through rules; and current economic conditions remaining unchanged, including interest rates and applicable foreign exchange rates. Readers, therefore, should not place undue reliance on any such forward-looking statements, as forward-looking information involves significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. All forward-looking information in this news release speaks only as of the date of this news release. The REIT 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 applicable securities laws. All forward-looking statements in this news release are qualified by these cautionary statements. Additional information about these assumptions and risks and uncertainties is contained in the REIT’s filings with securities regulators, including its current annual information form and MD&A.