VANCOUVER, Nov. 8, 2017 /PRNewswire/ - Pure Industrial Real
Estate Trust (the "Trust") (TSX: AAR.UN) is pleased to announce the
release of its financial results for the three and nine months
ended September 30, 2017.
Q3-2017 Financial Results
The Q3-2017 financial results, consisting of the Trust's
unaudited condensed consolidated interim financial statements for
the three and nine months ended September
30, 2017, and management's discussion and analysis of
results of operations and financial condition ("MD&A") dated
November 8, 2017, are available on
SEDAR (www.sedar.com) and the Trust's website (www.piret.ca).
Unless otherwise indicated, all amounts are in thousands of
Canadian dollars.
Q3-2017 Highlights
(All metrics have been normalized for IFRIC 21 and assumes
all property taxes have been pro-rated and accrued based on the
number of days of ownership within the reporting year.)
- As at September 30, 2017, the
Trust's portfolio under management consists of 173 income
producing properties representing gross leasable area ("GLA") of
24.2 million square feet ("sf"), an increase from 19.6 million sf
as at December 31, 2016. In addition,
the Trust's portfolio consists of 131.6 acres of land held for
future development and one property under development, which will
add 330,540 sf of GLA to the Trust's portfolio, upon completion in
Q4-2017.
- Investment properties fair value, including properties
classified as assets held for sale as at September 30, 2017 is $2,995,062 a $563,385 increase from December 31, 2016. The increase in investment
properties is due primarily to the net acquisition activities
during the nine months ended September 30,
2017, aggregate fair value gains across the portfolio and in
particular in the Greater Toronto
Area, offset by a foreign exchange related decrease due to
the U.S. exchange rate decreasing from USD:CAD 1.343 as at December
31, 2016 to USD:CAD 1.248 as
at September 30, 2017. In Q3-2017,
the Trust recognized an aggregate fair value gain of $53,276, driven mostly by capitalization rate
compression in the Ontario market.
Year to date fair value gains recognized on the Trust's portfolio
total $145,903.
- Net asset value per unit increased 8.9% to $5.99 per unit as at September 30, 2017 from $5.50 as at December 31,
2016, and 2.9% from $5.82 as
at June 30, 2017, driven by fair
value gains in the Trust's portfolio and the net positive effect of
the Trust's portfolio upgrading initiatives.
- Debt to Gross Book Value, as defined in the MD&A, as
at September 30, 2017 was 37.5%, a
480 basis point decrease from 42.3% as at December 31, 2016 and a 100 basis point decrease
from 38.5% as at June 30, 2017. The
decrease to the leverage metric was predominately attributable to
the net proceeds received from the August
2017 equity offering and the fair value increases to
investment properties recognized due to capitalization rate
compression across the Trust's portfolio. The Trust has set a
leverage target of approximately 40% and has achieved this target
in 2017.
- Revenues for the three months ended September 30, 2017 increased by 20.0% compared to
the same period in the prior year. The increase is primarily
related to acquisition activity in 2017 and Q4-2016, increasing GLA
from 17.8 million sf as at September 30,
2016 to 24.2 million sf as at September 30, 2017, and same property revenue
growth.
- Adjusted Net Operating Income ("NOI"), as defined in the
MD&A, for the three months ended September 30, 2017 increased 19.5% to
$39,750 from $33,250 for the same period in 2016, due to the
full quarter impact of the acquisition of fourteen properties
during Q4-2016, the acquisition of thirteen income producing
properties to date in 2017, and organic growth through an increase
in same property occupancy. The increase was partially offset by
the disposition of sixteen properties from October 2016 to September
2017; the sale of a 75% interest in five properties into a
joint-venture during Q1-2017; and an unfavourable average US dollar
exchange rate for the period (US$1.00: C$1.2528),
compared to the same period in the prior year (US$1.00: C$1.3050).
- For the three months ended September 30,
2017, the Trust's same property NOI ("SPNOI"), as
defined in the MD&A, increased by $525 or 1.8% compared to the same period in prior
year, from 16.8 million sf representing 71.5% of the Trust's
overall portfolio. The increase in SPNOI is primarily due to an
average occupancy increase of 174,000 sf in Ontario and 139,000 sf in Alberta, offset by 121,000 sf of average
occupancy decreases in the USA and
a weaker U.S. dollar (average USD:CAD exchange rate of 1.2528 in
Q3-2017 versus 1.3050 in Q3-2016). On a constant currency basis,
eliminating the impact of the change in the U.S. dollar exchange
rate quarter over quarter, the Trust's SPNOI increased 2.6% for the
three months ended September 30, 2017
relative to the same period in the prior year. Excluding the
expansion activities completed during 2016 in Ontario, New
Jersey and Texas, SPNOI
increased by 1.3% in aggregate and 2.1% on a constant currency
basis, and for the USA segment
specifically, SPNOI increased 1.8% (6.3% increase on a US dollar
basis).
- Funds from Operations ("FFO")1, as defined in
the MD&A, for the three months ended September 30, 2017 increased 33.3% over the same
period in the prior year and also increased 5.1% when compared to
Q2-2017. FFO in the third quarter of 2017 relative to the third
quarter of 2016 was positively impacted by SPNOI increases and FFO
from net new acquisitions, offset partially by the translation
impact of the weaker U.S. dollar on the Trust's U.S. operations and
the Trust's disposition activity since Q4-2016.
- FFO per Unit ("FFOPU"), as defined in the MD&A, of
$0.10 decreased by 0.4% for the three
months ended September 30, 2017 over
the same period in the prior year and is 3.5% lower relative to
Q2-2017. On a per unit basis, FFOPU was negatively impacted by the
temporary dilutive effect of additional units issued from the
$230 million August 2017 equity offering where the proceeds
were not yet fully deployed in the quarter.
- Adjusted Funds from Operations ("AFFO")1, as defined in
the MD&A, for the three months ended September 30, 2017 increased 23.7% over the same
period in the prior year and increased by 4.2% when compared to
Q2-2017. The net increase in AFFO, compared to the prior year, is
primarily due to an increase in FFO, offset partially by higher
capital expenditures related to leasing activity. AFFO in the third
quarter of 2017 relative to the second quarter of 2017 was
positively impacted by new acquisitions completed in the quarter
and higher NOI offset partially by dispositions.
- Adjusted Funds from Operations per Unit ("AFFOPU"), as
defined in the MD&A, of $0.08 for
the three months ended September 30,
2017 decreased by 7.5% over the prior year comparative and
decreased 4.4% from Q2-2017 largely due to the temporary dilutive
effect of additional units issued from the $230 million August
2017 equity offering where the proceeds were not yet fully
deployed in the quarter.
- G&A expenses for the three months ended September 30, 2017 decreased to $1,223 from $2,802
compared to the same period in the prior year, representing 2.2%
and 6.1% of rental revenues, respectively. The decrease in G&A
over the prior year comparative is primarily due to a decrease in
non-cash compensation and the incremental severance cost of
$691 recognized in Q3-2016. Included
in G&A expense is the non-cash fair value adjustment relating
to the re-measurement of the Trust's unit-based compensation
liabilities, totaling a $330 gain, a
decrease of $877 relative to the
three months ended September 30,
2016. The Trust's unit price decreased 7.6% in Q3-2017 in
contrast to a price increase of 7.0% in Q3-2016. G&A expenses
excluding the fair value component and the incremental severance
cost recognized in Q3-2016, represents 2.8% and 3.4% of rental
revenues, for the three months ending September 30, 2017 and the same period of the
prior year, respectively.
- The occupancy of the Trust's portfolio was 97.1% as at
September 30, 2017, excluding
properties classified as assets held for sale, an increase of 40
basis points from June 30, 2017 and
an increase of 180 basis points from September 30, 2016. Including committed leasing,
the occupancy is 97.9% as at September 30,
2017, an increase of 40 basis points from June 30, 2017, however remained flat relative to
September 30, 2016. The weighted
average remaining lease term increased from 5.8 years as at
June 30, 2017 and decreased from 6.7
years as at September 30, 2016 to 6.4
years at the end of Q3-2017.
- During the three months ended September
30, 2017, approximately 188,000 sf of new leases were
signed and 423,000 sf of expiring space was renewed, at
rents with an average increase of 2.8% relative to the expiring
rents. To date, the Trust has renewed and re-leased approximately
78% of the 2.7 million sf of leases which expire in 2017.
- The Trust has successfully secured a new tenant for its 627,000
sf property in Ontario, currently
leased to tenant Best Buy, and set to expire February 28, 2018. The new lease will commence on
July 1st, 2018 for a 10 year term and
is structured to enable the tenant to consolidate multiple
locations into one space.
Acquisitions, Dispositions and Financing
- On July 13, 2017, the Trust
completed the acquisition of a 150,000 sf warehouse located
in Scarborough, Ontario for a
purchase price of $16,100 plus
standard closing costs and adjustments of $680, and representing a going-in capitalization
rate of 5.6%. The acquisition was funded with cash on hand. Upon
closing, the Trust entered into a development agreement to
redevelop the site, with a new state-of-the-art 300,000 sf
distribution centre for a total estimated cost of $35,434, including the land and existing
warehouse. Construction on the redevelopment is expected to
commence in the first quarter of 2018.
- On August 17, 2017, the Trust
completed the acquisition of a 764,182 sf distribution
centre located in Brampton,
Ontario for a purchase price of $101,000 plus transaction and standard closing
costs and adjustments of $2,123, and
representing a going-in capitalization rate of 5.0%. The
acquisition was funded with cash on hand.
- On August 18, 2017, the Trust
completed the acquisition of a 471,051 sf distribution
centre located in Vaughan, Ontario
for a purchase price of $75,800 plus
transaction and standard closing costs and adjustments of
$1,524, and representing a going-in
capitalization rate of 4.6%. The acquisition was funded with cash
on hand.
- On August 18, 2017, the Trust
completed the acquisition of 84 acres of land located in the
Dallas suburb of Wilmer, Texas for a total purchase price of
$6,705 (US$
5,327) plus standard closing costs and adjustments of
$604 (US$
480). The acquisition was funded with cash on hand. Upon
acquisition, the Trust committed to spend $2,517 (US$2,000)
on municipal infrastructure improvements of which the Trust will be
responsible for $1,097 (US$872), while the remainder will be recoverable
from the local municipal government upon completion. As of
September 30, 2017, $nil has been
incurred to date.
- On August 30, 2017, the Trust
completed the acquisition of a 190,000 sf industrial asset
and an adjacent 4.5 acre parcel of land located in Pickering, Ontario for a combined purchase
price of $23,962 plus transaction and
standard closing costs and adjustments of $510, and representing a going-in capitalization
rate of 5.3% for the income-producing property. The acquisition was
funded with cash on hand.
- On September 7, 2017, the Trust
completed the acquisition of a 268,226 distribution centre
located in Richmond, British
Columbia for a purchase price of $32,600 plus standard closing costs and
adjustments of $80, and representing
a going-capitalization rate of 5.9%. The acquisition was funded
with cash on hand.
- In September 2017, the Trust
completed the acquisition of four industrial assets totaling
463,623 sf, two located in Mississauga,
Ontario and two located in Montreal, Quebec, for a total purchase price
of $135,700, plus transaction and
standard closing costs and adjustments of $3,055, and representing a weighted going-in
capitalization rate of 5.5%. The acquisition of one of the
Montreal assets closed on
September 18, 2017, and the remaining
three closed on September 29,
2017.
- During the three months ended September
30, 2017, the Trust completed the disposition of
three properties, two of which were classified as assets held for
sale as at December 31, 2016, for
gross proceeds of $14,285, before
closing costs, and $3,035 higher than
the aggregate of original purchase prices. The three disposed
assets in the third quarter were unencumbered at the time of the
sale.
- On August 3, 2017, the Trust
completed an equity offering for 35,937,500 Class A units
priced at $6.40 per unit, which
includes the full over-allotment option for 4,687,500 Class A
units, for total gross proceeds of $230,000.
- On September 29, 2017, the Trust
entered into a $150,000 unsecured
term loan facility (the "Unsecured Term Loan") and drew
$125,000. The Trust has the option to
draw the remaining $25,000 within six
months, otherwise the option will be cancelled. The Unsecured Term
Loan matures on February 28, 2023 and
bears interest at levels consistent with entities carrying an
investment grade rating and also provides for interest rate
declines with improved credit rating levels.
Selected Financial Information
|
|
|
|
|
|
September
30,
|
December
31,
|
|
2017
|
2016
|
Investment properties
($000s)
|
|
$2,969,419
|
$2,320,845
|
Mortgages payable and
other loans ($000s)
|
|
$1,152,050
|
$1,043,491
|
Weighted average debt
term to maturity on mortgages (years)
|
|
4.9
|
5.0
|
Debt to gross book
value3
|
|
37.5%
|
42.3%
|
Debt to
EBITDA3
|
|
7.9
|
8.3
|
|
September
30,
|
June 30,
|
September
30,
|
|
2017
|
2017
|
2016
|
Occupancy, end of
period including committed1
|
97.9%
|
97.5%
|
97.9%
|
Occupancy, end of
period1
|
97.1%
|
96.7%
|
95.3%
|
Occupancy, average
for the three months ended
|
96.9%
|
96.6%
|
95.1%
|
|
Three months ended
September 30
|
Nine months ended
September 30
|
($000s, except per
unit basis)
|
2017
|
2016
|
2017
|
2016
|
Revenue
|
$55,098
|
$45,951
|
$163,724
|
$134,801
|
Net operating income
3
|
39,750
|
33,250
|
117,592
|
95,718
|
Distributions
declared per unit
|
$
|
0.08
|
$
|
0.08
|
$
|
0.23
|
$
|
0.23
|
FFO4 per
unit (fully diluted)
|
$
|
0.10
|
$
|
0.10
|
$
|
0.30
|
$
|
0.30
|
Payout
ratio5
|
81.3%
|
81.0%
|
78.5%
|
77.3%
|
AFFO4 per
unit (fully diluted)
|
$
|
0.08
|
$
|
0.09
|
$
|
0.25
|
$
|
0.26
|
Payout
ratio5
|
99.0%
|
91.6%
|
92.9%
|
91.1%
|
G&A as a Percent
of Revenue
|
2.2%
|
6.1%
|
4.2%
|
4.7%
|
1
|
Non-IFRS measure and
further defined in Section VI "Additional IFRS and Non-IFRS
Measures" in the Trust's MD&A.
|
2
|
Excludes properties
classified as assets held for sale.
|
3
|
Net operating income
has been normalized for IFRIC 21 ("Adjusted NOI") and assumes all
property taxes have been pro-rated and accrued based on number of
days of ownership within the reporting year.
|
4
|
FFO and AFFO
are widely accepted supplemental measures of financial performance
for real estate entities. These measures are not defined under the
International Financial Reporting Standards ("IFRS"). Definitions
for FFO and AFFO have been revised to conform to industry standards
effective January 1, 2017. For a description of these measures and
an IFRS to non-IFRS reconciliation, see the Trust's MD&A under
"Funds from Operations and Adjusted Funds from Operations" and
"Operational and Financial Highlights" and "Non-IFRS Measures". The
Trust's MD&A is available on SEDAR at www.sedar.com.
|
5
|
FFO and AFFO
payout ratios are calculated based on the ratio of distribution
rate to fully diluted FFO and AFFO per unit.
|
Conference Call
As previously announced on October 11,
2017, management will host the conference call at
2:00 pm (EST) on Thursday, November 9, 2017, to review the
financial results and corporate developments for the quarter ended
September 30, 2017.
To participate in this conference call, please dial one of the
following numbers approximately 10 minutes prior to the
commencement of the call, and ask to join the Pure Industrial Real
Estate Trust Conference Call.
Dial in numbers:
Toll free dial in number (from Canada and USA).........................................................................
1-888-390-0546
International or Local
Toronto........................................................................................................
1-416-764-8688
Conference Call Replay
If you cannot participate on November 9,
2017, a replay of the conference call will be available by
dialing one of the following replay numbers. You will be able
to dial in and listen to the conference 120 minutes after the
meeting end time, and the replay will be available until
Thursday, November 16, 2017.
Please enter the Replay ID# 469721, followed by the # key.
Replay toll free dial in number (from Canada and USA).............................................................
1-888-390-0541
Replay international or local Toronto............................................................................................
1-416-764-8677
About Pure Industrial Real Estate Trust
Pure Industrial Real Estate Trust is an unincorporated,
open-ended investment trust that owns and operates a diversified
portfolio of income-producing industrial properties in leading
markets across Canada and key
distribution and logistics markets in the
United States. The Trust is an internally managed REIT and
is one of the largest publicly-traded REITs in Canada that offers investors exposure to
industrial real estate assets in Canada and the
United States. Additional information about the Trust is
available at www.piret.ca and www.sedar.com.
TSX – AAR.UN
Non-GAAP Measures:
The Trust prepares and releases
condensed consolidated interim financial statements prepared in
accordance with IFRS (GAAP). In this release, the Trust discloses
and discusses certain non-GAAP financial measures, including FFO,
FFO per Unit, AFFO, AFFO per Unit, adjusted net operating income
(Adjusted NOI), Net Asset Value per Unit, occupancy, Loan to Gross
Book Value, and capitalization rate. The non-GAAP measures are
further defined and discussed in the MD&A dated November 8, 2017 and filed on SEDAR, which should
be read in conjunction with this release. Since FFO, FFO per Unit,
AFFO, AFFO per Unit, adjusted net operating income (Adjusted NOI),
Net Asset Value per Unit, occupancy, Loan to Gross Book Value, and
capitalization rate are not determined by IFRS, such measures may
not be comparable to similar measures reported by other issuers.
The Trust has presented such non-GAAP measures as management
believes the measures are a relevant measure of the ability of the
Trust to earn and distribute cash returns to Unitholders and to
evaluate the Trust's performance. These non-GAAP measures
should not be construed as alternatives to net income (loss) or
cash flow from operating activities determined in accordance with
GAAP as an indicator of the Trust's performance. Please refer to
"Additional IFRS Measures and Non-IFRS Measures" in the Trust's
MD&A.
Forward-Looking Information:
Certain statements contained in this press release may
constitute forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as
such as "outlook", "believe", "expect", "may", "anticipate",
"should", "intend", "estimates" and similar expressions. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. The forward-looking statements contained in this news
release are based on certain key expectations and assumptions made
by the Trust, including: (i)the accretive acquisition of properties
and the anticipated extent of the accretion of any acquisitions,
which could be impacted by demand for properties and the effect
that demand has on acquisition capitalization rates and changes in
the cost of capital; (ii) the maintaining of occupancy levels and
rental revenue, which could be impacted by changes in demand for
the Trust's properties, tenant bankruptcies, the effects of general
economic conditions and supply of competitive locations in
proximity to the Trust's locations; (iii) the overall indebtedness
levels and the Trust's ability to refinance expiring debt, which
could be impacted by the level of acquisition activity and the
state of debt markets in general; (iv) The Trust's REIT status,
which can be impacted by regulatory changes enacted by governmental
authorities; (v) The Trust's cost estimates and expected yields
pertaining to development activity which could be impacted by
construction cost overruns or delays; (vi) the anticipated
distributions and payout ratios, which could be impacted by capital
expenditures, results of operations and capital resource allocation
decisions; and (vii) the anticipated replacement of expiring
tenancies, which could be impacted by the effects of general
economic conditions and the supply of competitive
locations.
Although the Trust believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Trust can give no assurance
that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, the failure to obtain necessary regulatory approvals or
satisfy the conditions to closing the property acquisitions,
competitive factors in the industries in which the Trust operates,
prevailing economic conditions, and other factors, many of which
are beyond the control of the Trust.
The forward-looking statements contained in this press
release represent the Trust's expectations as of the date hereof,
and are subject to change after such date. The Trust disclaims any
intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required under applicable securities
regulations.
The Toronto Stock Exchange has not reviewed nor approved the
contents of this press release and does not accept responsibility
for the adequacy or accuracy of this press release.
1 Definitions for FFO and AFFO have been revised to
conform to industry standards prescribed by REALpac effective
January 1, 2017 as further described
in Section II "Funds from Operations and Adjusted Funds from
Operations" in the MD&A.
SOURCE Pure Industrial Real Estate Trust (PIRET)