WINNIPEG, Aug. 23, 2018 /CNW/ - Lanesborough Real Estate
Investment Trust ("LREIT") (TSXV: LRT.UN) today reported its
operating results for the quarter ended June
30, 2018. The following comments in regard to the financial
position and operating results of LREIT should be read in
conjunction with interim management's discussion & analysis –
quarterly highlights and the interim financial statements for the
quarter ended June 30, 2018, which
may be obtained from the LREIT website at www.lreit.com or the
SEDAR website at www.sedar.com.
ANALYSIS OF OPERATING RESULTS
|
Analysis of
Loss
|
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
|
|
Increase
(Decrease)
in Income
|
|
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
Rentals from
investment properties
|
$
|
4,449,474
|
|
$
|
4,880,593
|
|
$
|
(431,119)
|
|
(9)%
|
|
$
|
8,916,977
|
|
$
|
9,525,108
|
|
Property operating
costs
|
|
(2,828,493)
|
|
(2,406,449)
|
|
(422,044)
|
|
(18)%
|
|
(5,647,063)
|
|
(4,818,851)
|
|
Net operating
income
|
|
1,620,981
|
|
2,474,144
|
|
(853,163)
|
|
(34)%
|
|
3,269,914
|
|
4,706,257
|
|
Interest
income
|
|
50,758
|
|
44,612
|
|
6,146
|
|
14%
|
|
100,584
|
|
90,224
|
|
Interest
expense
|
|
(3,749,689)
|
|
(3,713,754)
|
|
(35,935)
|
|
(1)%
|
|
(7,395,823)
|
|
(7,400,008)
|
|
Trust
expense
|
|
(322,573)
|
|
(357,490)
|
|
34,917
|
|
10%
|
|
(703,447)
|
|
(772,968)
|
|
Loss before the
following
|
|
(2,400,523)
|
|
(1,552,488)
|
|
(848,035)
|
|
(55)%
|
|
(4,728,772)
|
|
(3,376,495)
|
|
Gain (loss) on sale
of investment property
|
|
(48,077)
|
|
-
|
|
(48,077)
|
|
n/a
|
|
(82,959)
|
|
58,377
|
|
Fair value
adjustments
|
|
(8,399,644)
|
|
(7,346,907)
|
|
(1,052,737)
|
|
(14)%
|
|
(23,505,387)
|
|
(10,273,086)
|
|
Loss before
discontinued operations
|
|
(10,848,244)
|
|
(8,899,395)
|
|
(1,948,849)
|
|
(22)%
|
|
(28,317,118)
|
|
(13,591,204)
|
|
Income (loss) from
discontinued operations
|
|
(152,608)
|
|
(10,543)
|
|
(142,065)
|
|
(1,347)
|
|
(178,462)
|
|
35,547
|
|
Loss and
comprehensive loss
|
$
|
(11,000,852)
|
|
$
|
(8,909,938)
|
|
$
|
(2,090,914)
|
|
(23)%
|
|
$
|
(28,495,580)
|
|
$
|
(13,555,657)
|
Overall Operating Results
LREIT completed Q2-2018 with a loss and comprehensive loss of
$11.00 million, compared to a loss
and comprehensive loss of $8.91
million during Q2-2017. The increase in the loss mainly
reflects $1.05 million unfavourable
variance in the fair value adjustments of the investment properties
and the investment property classified as held for sale, as well as
a $0.85 million decrease in net
operating income.
Losses related to fair value adjustments during both Q2-2018 and
Q2-2017 were due to reduced revenue expectations as a result of
reductions in the anticipated positive impact of the post‑wildfire
rebuilding efforts on the Fort
McMurray rental market and increasing uncertainty
surrounding a recovery of the Fort
McMurray rental market.
The decrease in net operating income mainly reflects a decrease
in rental revenue of $0.43 million
and an increase in operating costs of $0.42
million. The decrease in rental revenue is mainly due to the
decreased revenue of the held for sale and/or sold property
segment, as a result of reduced occupancy and average rental rates
at Woodland Park, the property that is classified as held for sale.
The increase in property operating costs is mainly due to an
increase in insurance related costs, an increase in utility costs,
and an increase in property taxes. Also contributing to the
increase in property operating costs was an increase in the
property operating costs for the held for sale and/or sold
properties as a result of certain condominium fees paid to the
condominium corporation established as part of the Woodland Park
Condominium Sales Program.
LREIT completed Q2-2018 with negative funds from operations
("FFO") of $2.55 million, compared to
negative FFO of $1.56 million during
Q2-2017, representing a decrease in FFO of $0.99 million. The decrease in FFO is mainly due
to a decrease in net operating income and an increase in loss from
discontinued operations.
Revenues
|
Rental
Revenue
|
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
|
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
Fort McMurray
properties
|
$
|
3,693,273
|
|
$
|
3,800,949
|
|
$
|
(107,676)
|
|
(3)%
|
|
$
|
7,349,353
|
|
$
|
7,371,036
|
|
Other investment
properties
|
369,677
|
|
391,025
|
|
(21,348)
|
|
(5)%
|
|
787,825
|
|
774,218
|
|
Sub‑total
|
4,062,950
|
|
4,191,974
|
|
(129,024)
|
|
(3)%
|
|
8,137,178
|
|
8,145,254
|
|
Held for sale and/or
sold properties
|
386,524
|
|
688,619
|
|
(302,095)
|
|
(44)%
|
|
779,799
|
|
1,379,854
|
|
Total
|
$
|
4,449,474
|
|
$
|
4,880,593
|
|
$
|
(431,119)
|
|
(9)%
|
|
$
|
8,916,977
|
|
$
|
9,525,108
|
|
Average Occupancy
Level, by Quarter
|
|
2017
|
2018
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q1
|
|
Q2
|
|
Fort McMurray
properties
|
|
68%
|
|
71%
|
|
73%
|
|
72%
|
|
69%
|
|
72%
|
|
Other investment
properties
|
|
71%
|
|
73%
|
|
73%
|
|
75%
|
|
77%
|
|
68%
|
|
Total
|
|
68%
|
|
72%
|
|
73%
|
|
72%
|
|
70%
|
|
71%
|
|
Held for sale and/or
sold properties
|
|
79%
|
|
79%
|
|
69%
|
|
61%
|
|
46%
|
|
51%
|
|
Average Monthly
Rents, by Quarter
|
|
2017
|
2018
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q1
|
|
Q2
|
|
Fort McMurray
properties
|
|
$1,684
|
|
$1,707
|
|
$1,711
|
|
$1,697
|
|
$1,685
|
|
$1,650
|
|
Other investment
properties
|
|
$909
|
|
$909
|
|
$903
|
|
$905
|
|
$907
|
|
$909
|
|
Total
|
|
$1,554
|
|
$1,573
|
|
$1,575
|
|
$1,563
|
|
$1,554
|
|
$1,525
|
|
Held for sale and/or
sold properties
|
|
$2,593
|
|
$2,611
|
|
$2,597
|
|
$2,549
|
|
$2,484
|
|
$2,258
|
During Q2-2018, total investment property revenue, excluding
held for sale and/or sold properties, decreased by $0.13 million or 3%, compared to Q2-2017, mainly
due to a decrease in the average rental rate of the Fort McMurray property portfolio.
During Q2-2018, revenue from the held for sale and/or sold
properties decreased by $0.30 million
or 44%, compared to Q2-2017, due to a decrease in the average
occupancy level and average rental rate of Woodland Park (the
property classified as held for sale).
The decrease in average occupancy is mainly due to the transfer
of two corporate tenants to other LREIT properties that offered
lower rental rates or were closer to urban amenities, and due to
the departure of tenants who were awaiting the reconstruction of
their homes. The Woodland Park property had a relatively high
proportion of tenants awaiting the reconstruction of their homes as
a result of the property's townhome offering and their proximity to
the area of Fort McMurray where
the majority of the homes were lost to the wildfire.
The decrease in the average rental rate is mainly due to the
turnover of a number of three‑bedroom units and townhome units,
which had been rented shortly after the wildfire at rates that were
higher than the competitive rates required in the current market
environment.
Property Operating Costs
|
Analysis of
Property Operating Costs
|
|
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
Fort McMurray
properties
|
|
$
|
2,145,605
|
|
$
|
1,883,781
|
|
$
|
261,824
|
|
14%
|
|
$
|
4,353,123
|
|
$
|
3,743,618
|
|
Other investment
properties
|
|
389,788
|
|
300,223
|
|
89,565
|
|
30%
|
|
746,070
|
|
604,955
|
|
Sub‑total
|
|
2,535,393
|
|
2,184,004
|
|
351,389
|
|
16%
|
|
5,099,193
|
|
4,348,573
|
|
Held for sale and/or
sold properties
|
|
293,100
|
|
222,445
|
|
70,655
|
|
32%
|
|
547,870
|
|
470,278
|
|
Total
|
|
$
|
2,828,493
|
|
$
|
2,406,449
|
|
$
|
422,044
|
|
18%
|
|
$
|
5,647,063
|
|
$
|
4,818,851
|
During Q2-2018, property operating costs, excluding the held for
sale and/or sold properties, increased by $0.35 million or 16%, compared to Q2-2017, mainly
due to an increase in insurance related costs. Other factors
contributing to the increase in property operating costs were an
increase in utility costs and an increase in property
taxes.
After accounting for held for sale and/or sold properties, total
property operating costs increased by $0.42
million or 18% during Q2-2018, compared to Q2-2017, The
operating costs of the held for sale and/or sold properties
increased by $0.07 million and was
primarily due to the capital reserve portion of condominium fees
paid by LREIT for its portion of ownership of Woodland Park. Prior
to the establishment of the condominium sales program, capital
expenditures at Woodland Park were capitalized.
Net Operating Income and Operating Margin
|
Three Months Ended
June 30, 2018 and 2017
|
|
Net Operating
Income
|
|
|
Three Months Ended
June 30
|
|
Increase
(Decrease)
|
|
Percent of
Total
|
|
Operating
Margin
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Fort McMurray
properties
|
$
|
1,547,668
|
|
$
|
1,917,168
|
|
$
|
(369,500)
|
|
(19)%
|
|
95%
|
|
77%
|
|
42%
|
|
50%
|
|
Other investment
properties
|
(20,111)
|
|
90,802
|
|
(110,913)
|
|
(122)%
|
|
(1)%
|
|
4%
|
|
(5)%
|
|
23%
|
|
Sub‑total
|
1,527,557
|
|
2,007,970
|
|
(480,413)
|
|
(24)%
|
|
94%
|
|
81%
|
|
38%
|
|
48%
|
|
Held for sale and/or
sold properties
|
93,424
|
|
466,174
|
|
(372,750)
|
|
(80)%
|
|
6%
|
|
19%
|
|
24%
|
|
68%
|
|
Total
|
$
|
1,620,981
|
|
$
|
2,474,144
|
|
$
|
(853,163)
|
|
(34)%
|
|
100%
|
|
100%
|
|
36%
|
|
51%
|
|
|
Six Months Ended
June 30, 2018 and 2017
|
|
Net Operating
Income
|
|
|
Six Months Ended June
30
|
|
Increase
(Decrease)
|
|
Percent of
Total
|
|
Operating
Margin
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Fort McMurray
properties
|
$
|
2,996,230
|
|
$
|
3,627,418
|
|
$
|
(631,188)
|
|
(17)%
|
|
92%
|
|
77%
|
|
41%
|
|
49%
|
|
Other investment
properties
|
41,755
|
|
169,263
|
|
(127,508)
|
|
(75)%
|
|
1%
|
|
4%
|
|
5%
|
|
22%
|
|
Sub‑total
|
3,037,985
|
|
3,796,681
|
|
(758,696)
|
|
(20)%
|
|
93%
|
|
81%
|
|
37%
|
|
47%
|
|
Held for sale and/or
sold properties
|
231,929
|
|
909,576
|
|
(677,647)
|
|
(75)%
|
|
7%
|
|
19%
|
|
30%
|
|
66%
|
|
Total
|
$
|
3,269,914
|
|
$
|
4,706,257
|
|
$
|
(1,436,343)
|
|
(31)%
|
|
100%
|
|
100%
|
|
37%
|
|
49%
|
During Q2-2018, the net operating income for the investment
properties portfolio, excluding held for sale and/or sold
properties, decreased by $0.48
million or 24%, compared to Q2-2017. The operating margin,
excluding held for sale and/or sold properties, decreased from 48%
during Q2-2017 to 38% during Q2-2018. The decreases are primarily
due to the decrease in revenue and the increase in the property
operating costs of the Fort
McMurray property portfolio, as discussed above.
ABOUT LREIT
LREIT is a real estate investment trust,
which is listed on the TSX Venture Exchange under the symbols
LRT.UN (Trust Units) and LRT.DB.G (Series G Debentures). For
further information on LREIT, please visit our website at
www.lreit.com.
This press release contains certain statements that could be
considered as forward-looking information. The
forward-looking information is subject to certain risks and
uncertainties, which could result in actual results differing
materially from the forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as the term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
SOURCE Lanesborough Real Estate Investment Trust