VANCOUVER, May 13, 2016 /CNW/ - Pure Industrial Real Estate
Trust (the "Trust") (TSX: AAR.UN) is pleased to announce the
release of its financial results for the three months ended
March 31, 2016.
Q1 2016 Financial Results
The Q1-2016 financial results, consisting of the Trust's
unaudited condensed consolidated interim financial statements for
the three months ended March 31,
2016, and management's discussion and analysis of results of
operations and financial condition ("MD&A") dated May 13, 2016, are available on SEDAR
(www.sedar.com) and the Trust's website (www.piret.ca). Unless
otherwise indicated, all amounts are in Canadian dollars.
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 period.)
- As at March 31, 2016, the Trust's
portfolio under management consists of 166 income producing
properties representing gross leasable area ("GLA") of
approximately 17.3 million square feet ("sf"), a decrease from 169
properties as at December 31, 2015.
In addition, the Trust's portfolio consists of: 26.4 acres of
land held for development; one property under development, which
will comprise 422,433 sf of GLA upon completion; and one property
under expansion, which will comprise an additional 59,600 sf of GLA
upon completion in Q2-2016.
- Investment properties decreased to $2.03
billion as at March 31, 2016
from $2.07 billion at December 31, 2015 due primarily to the decrease
in the US exchange rate at period end compared to December 31, 2015. In addition, the
disposition of four properties offset by the acquisition of one
property during the three months ended March
31, 2016 contributed to the decrease.
- For the three months ended March 31,
2016, the Trust purchased and cancelled 1,114,000 Class A
Units pursuant to a normal course issuer bid at an average cost of
$4.28 per Class A Unit for a total
cost of $4.8 million.
- Loan to Gross Book Value as at March 31,
2016 was 48.8%, remaining unchanged from December 31, 2015.
- Funds From Operations per Unit ("FFOPU") increased by 1.0% for
three months ended March 31, 2016,
over the prior year due primarily to higher net operating income
("NOI"), offset by an increase in interest and income tax
expense. FFOPU decreased 2.4% when compared to the fourth
quarter due primarily to a slight decrease in NOI related to
dispositions and higher property tax savings in the fourth quarter,
an increase in general and administrative ("G&A") expenses and
income tax expense. The increase in G&A expenses of
approximately $400,000 is related to
the non-cash compensation increasing due to the increase in the
Trust's unit price from $4.37 at
December 31, 2015 to $4.76 at March 31,
2016.
- Adjusted Funds From Operations per Unit ("AFFOPU") for the
three months ended March 31, 2016
increased 0.4 cents or 4.5% for the
three months ended March 31, 2016
over the prior year; and increased 0.2
cents or 1.8% over the fourth quarter due to a decrease in
capital expenditures.
- Revenue for the three months ended March
31, 2016 increased 2.9% to $43.5
million from $42.3 million for
the same period in 2015.
- For the three months ended March 31,
2016, the Trust's adjusted NOI, increased 2.5% for the three
months ended March 31, 2016 compared
to the prior year.
- The Trust's same property NOI ("SPNOI") for the first quarter
decreased by approximately $68,000 or
0.25% from 15.9 million sf, representing 92% of the Trust's overall
portfolio. The small decrease in NOI is due primarily to
vacancy of 180,000 sf in Calgary,
78,000 sf in Edmonton, 110,000 sf
of flex office space at the Airport Corporate Centre property in
the Greater Toronto Area ("GTA")
and free rent associated with a new lease in the Greater Vancouver Area ("GVA"). The impact of
the vacancy loss on SPNOI was partially offset by an average
increase of 3.7% in rental rates and a currency exchange
gain. When including additional property and asset management
fee revenue, SPNOI decreased by 0.08% over that period.
- G&A expenses for the three months ended March 31, 2016 increased slightly to $1.6 million from $1.5
million in 2015 and represent 3.8% of rental revenue,
unchanged from the prior year.
- The development in Vaughan,
Ontario and expansion in Barrington, New Jersey have been delivered to
the tenant for fixturing and rent for both properties commenced on
April 15. The Vaughan property and Barrington property will generate additional
annual rents of over $8 million and
US$900,000,
respectively.
- The occupancy of the portfolio was 95.3% as at March 31, 2016, an increase of 0.7% from Q4-2015,
with a weighted average lease term of 6.3 years. Including
committed space, the occupancy was 96.6% at March 31, 2016, an increase of 0.4% from
Q4-2015.
- Approximately 467,500 sf, or 63.1%, of the 741,000 sf of
expiring space in the quarter was renewed and approximately 21,000
sf of new leases were signed. The average rental rate increase
was 0.4% on renewals and new leases for expiries in the
quarter. A total of 799,500 sf of leasing was completed in the
three months ended March 31, 2016,
much of it related to leases which expire in 2016.
Ontario Acquisition
On January 8, 2016, the Trust
acquired a 25% joint interest in an investment property located in
Ontario and subsequently entered
into a co-ownership agreement with a third party to own and operate
the property. The Trust acquired its interest in the property for a
total purchase price of $1,650,000,
plus standard closing costs and adjustments of $28,815.
Dispositions
During the three months ended March 31,
2016, the Trust sold its interest in four investment
properties located in Vaughan,
Ontario for gross proceed of $18.5
million less standard closing costs and adjustments of
$1.3 million resulting in net
proceeds of $17.2 million.
Selected Financial Information
|
|
|
Three months
ended
March
31
|
($000s, except per
unit basis)
|
2016
|
2015
|
Revenue
|
$ 43,546
|
$ 42,304
|
Net operating income
(1)
|
$ 30,219
|
$ 29,480
|
Distributions
declared per Class A Unit
|
$ 0.08
|
$ 0.08
|
FFO(2) per
unit (fully diluted)
|
$ 0.10
|
$ 0.10
|
|
Payout
Ratio(3)
|
79.2%
|
80.0%
|
AFFO(2)
per unit (fully diluted)
|
$ 0.09
|
$ 0.09
|
|
Payout
ratio(3)
|
85.2%
|
89.0%
|
G&A as a Percent
of Revenue
|
3.8%
|
3.7%
|
|
|
(1)
|
Net operating
income has been normalized for IFRIC 21 and assumes all
property taxes have been pro-rated and accrued based on number of
days of ownership within the reporting
year.
|
(2)
|
FFO and AFFO are
widely accepted supplemental measures of financial performance for
real estate entities. These measures are not defined under
IFRS, however. For a description of these measures and an IFRS
to non-IFRS reconciliation, see the Trust's MD&A under
"Distributable Income" and "Liquidity and Capital Resources" and
"Non-IFRS Measures". The Trust's MD&A is available on
SEDAR at www.sedar.com.
|
(3)
|
FFO and AFFO payout
ratios are calculated based on the ratio of distribution rate to
fully diluted FFO and AFFO per unit.
|
|
|
|
|
|
|
|
|
|
|
March 31,
2016
|
December 31,
2015
|
Debt-to-GBV
|
|
|
|
48.8%
|
48.8%
|
Employees
|
|
|
|
39
|
38
|
Outlook
Real Estate Fundamentals
From a leasing market perspective, according to CBRE, the
Canadian National availability rate remained steady as of Q1-2016
at 5.5%, with declining availability in the GVA and Edmonton and offset by increasing availability
in Calgary (due to new supply) and
Halifax. Approximately 6.0
million sf of positive net absorption occurred in the quarter, led
by the GVA at 1.7 million sf, Edmonton at 1.1 million sf, and Montreal at 1.4 million sf; and offset by 0.6
million sf of negative absorption in Winnipeg. Notably,
Calgary recorded 0.4 million sf of
positive net absorption in the quarter. According to CBRE,
absorption nationally was driven primarily by demand for large-bay
warehouse space from e-commerce, transportation and logistics
users. The average net asking rent rose slightly from
$6.47 per sf ("psf") in the fourth
quarter in 2015 to $6.50 psf in this
quarter led by rental rate increases of 4.5% and 1.3% respectively
in the GVA and the GTA, offset by rental rate declines of 1.4% and
1.3% respectively in Calgary and
Edmonton.
According to the CBRE cap rate survey for the first quarter,
demand for stabilized Class A industrial real estate nationally
across Canada remains extremely
strong as investors continue to look for safety and security in the
industrial asset class. Estimated cap rates remained steady or
lower from the previous quarter across all markets. The
overall cap rate for the quarter fell slightly to 5.89%, the change
being mostly attributable to the strength of demand in the
Vancouver market. The
national Class B Industrial real estate overall cap rate rose from
6.89% to 6.92% this quarter, primarily driven by an ease in demand
in the Edmonton market for such
product.
Outlook for Remainder of 2016
Leasing activity continues to be strong across our markets and
management remains focused on renewals and releasing
efforts. To date, 54% of the roughly 2.5 million sf of
expiries in 2016 have been renewed or re-leased, and consequently
our occupancy rate has increased from 94.6% at the end of 2015 to
95.3% as at March 31. Through the first quarter we have also
seen an increase in rental rate of 0.4% on average, despite ongoing
weakness in Alberta.
As a market, Alberta remains in
our focus. While we have not, to date, dealt with any major
disruptions in tenancy, management remains cautious about the
impact of a prolonged commodity slump on the real estate market in
Alberta and on our tenants. Hence
we have proactively maintained dialogue with select tenants to
ensure we remain current on their situation and continue to
evaluate available options to mitigate risk in the portfolio.
One such way of mitigating market risk is to increase our
exposure elsewhere, through selective acquisition and development.
As mentioned in previous statements, the development projects in
Vaughan and Barrington will deliver substantial per unit
NOI, FFO and AFFO growth commencing in the second quarter and
thereby increasing our relative exposure to the Ontario and US markets. Both projects are
now currently being fixtured by the tenant and rent commenced as
scheduled on April 15,
2016.
In addition to the Vaughan and
Barrington projects, management
has been in dialogue with existing tenants in Ontario and the US on future expansions, and
recently executed a lease amending agreement with an existing
tenant in Woodstock to expand
their premises by approximately 43,760 sf. The expansion will
generate an additional $327,300 in
NOI annually, with completion scheduled for Q4-2016, and will be
funded with existing working capital.
Finally, as discussed on our Q4-2015 Investor's call, management
is focused on improving our disclosure. The Q1 MD&A
includes significantly more detail on our operational performance
and future portfolio lease expiries, and we will continue to
consult with stakeholders to ensure we're delivering relevant and
meaningful disclosure and analysis.
Conference Call
As previously announced on April 25,
2016 management will host the conference call at
1:00 pm (EDT), 10:00 am (PDT), on Monday,
May 16, 2016, to review the financial results and corporate
developments for the three months ended March 31, 2016.
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 May 16,
2016, 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
May 23, 2016.
Please enter the Replay ID# 752491, 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
The Trust is an unincorporated, open-ended investment trust that
owns and operates a diversified portfolio of income-producing
industrial properties in leading markets. The Trust is an
internally managed REIT that focuses exclusively on investing in
industrial properties.
Additional information about the Trust is available at
www.piret.ca and www.sedar.com.
TSX – AAR.UN
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
"anticipate", "plan", "expect", "may", "will", "intend", "should",
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) Trust's portfolio consists of: 26.4 acres of land held for
development; one property under development, which will comprise
422,433 sf of GLA upon completion; and one property under
expansion, which will comprise an additional 59,600 sf of GLA upon
completion in Q2-2016; (ii) the Vaughan property and Barrington property will generate additional
annual rents of over $8 million and
US$900,000, respectively; (iii) , the
development projects in Vaughan
and Barrington will deliver
substantial per unit NOI, FFO and AFFO growth commencing in the
second quarter and thereby increasing our relative exposure to the
Ontario and US markets; and (iv)
the expansion will generate an additional $327,300 in NOI annually, with completion
scheduled for Q4-2016, and will be funded with existing working
capital.
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.
SOURCE Pure Industrial Real Estate Trust (PIRET)