THIRD CONSECUTIVE QUARTER OF ORGANIC
GROWTH
QUÉBEC, Nov. 9, 2018 /CNW Telbec/
- Cominar Real Estate Investment Trust ("Cominar" or the
"REIT") (TSX: CUF.UN) is pleased to announce its results and
highlights for the third quarter of 2018.
2018 THIRD QUARTER – RESULTS AND HIGHLIGHTS
- 1.7% growth in same property net operating income
- 0.9% growth in the average net rent on renewed leases
- 110 bps year over year increase in the committed occupancy rate
from 92.2% to 93.3%
- Growth in the year-to-date retention rate of expiring leases
from 59.2% to 64.6%
- 1.6 million square feet of committed leases commencing in the
coming quarters which will contribute approximately $22.4 million in net operating income on an
annualized basis
- Decrease in AFFO payout ratio from 104.2% to 78.3%
- Decrease in debt to gross book value to 51.9%
- Appointment of Marie-Andrée Boutin as Executive Vice President,
Strategy and Operations, Retail
- Integration of construction activities in Montreal
- Post quarter appointment of Heather C.
Kirk as Executive Vice President and Chief Financial
Officer
"The third quarter was a busy time for Cominar as we focused
on moving our strategic plan forward, improving our operating
metrics and adding to our bench strength," said Sylvain Cossette, President and Chief Executive
Officer of Cominar. "I am delighted that Heather Kirk will be joining the Cominar team as
CFO and am confident she will make a meaningful contribution to the
continued improvement of our financial management, balance sheet,
strategic planning and unitholder relations."
"We have made continued progress operationally, recording our
third consecutive quarter of positive same property NOI growth and
increasing occupancy to 93.3%, the highest since Q1 2015," stated
Gilles Hamel, Executive Vice
President and Chief Financial Officer of Cominar. "We remain
focused on debt reduction and enhancing financial flexibility and
are pleased to report a decrease in debt to gross book value to
below 52%."
OVERVIEW OF THE THIRD QUARTER OF 2018
During the third quarter, Cominar continued to make progress on
its goals of debt reduction, focusing on its core markets and
improving governance.
On November 5, 2018, Cominar
announced the appointment of Heather C.
Kirk as Executive Vice President and Chief Financial Officer
effective December 3, 2018. During
the third quarter, Cominar announced the appointment of
Marie-Andrée Boutin as Executive Vice President, Strategy and
Operations, Retail, who will take over from Guy Charron during the fourth quarter of 2018,
and Sandra Lécuyer as Vice President, Talent and Organization to
promote a more strategic approach to managing our human
capital.
Leasing efforts allowed Cominar to report positive growth in
same property NOI for a third consecutive quarter with a 1.7%
increase, representing increases of 2.1% and 4.4% in the office and
the industrial and flex segments respectively, offset by a slight
decrease of 0.4% in the retail segment. Excluding the impact of the
closing of the Sears stores, the retail segment recorded 1.3%
growth in same property net operating income during the
quarter.
As at September 30, 2018, the
committed occupancy rate was 93.3%, up 110 bps from 92.2% as at
September 30, 2017. The spread
between the committed occupancy rate and the in-place occupancy
rate represents 1.6 million square feet of signed leases that
will commence during the next five quarters and which will
contribute approximately $22.4 million in net operating income on an
annualized basis.
The payout ratio of recurring AFFO for the quarter decreased
from 104.2% in 2017 to 78.3% in 2018, and for the nine-month period
ended September 30 from 117.7% in
2017 to 89.7% in 2018.
In addition, Cominar improved its retention rate of leases
expiring in 2018 of 64.6% as at September
30, 2018, up from 59.2% for the same period of 2017. The
retention rate for the leasable area maturing in the first nine
months of 2018 was 70.3%. This increase in retention rate comes
with 0.9% of growth in the average net rent of renewed leases.
During the third quarter of 2018, Cominar acquired, for
$36 million, the land and superficies
rights (the equivalent of air rights in Québec) related to a
property in which Cominar had been leasing the superficies rights
associated with its office building. The other superficies rights
are leased by the operator of a hotel that shares the site. This
acquisition is the result of a purchase option Cominar acquired as
part of a transaction with Ivanhoé Cambridge in 2014. The acquisition of this
land contributed to increasing the value of our property for an
amount greater than the acquisition cost of the land. This
acquisition also allowed us to increase our NOI in two ways;
firstly, by the receipt of the rent payable by the hotel operator
for the lease of the superficies rights related to the hotel, and
secondly, by the cancellation of the rent previously payable by
Cominar for the lease of the superficies rights related to the
office building.
During the third quarter of 2018, Cominar continued to
transition towards the internalization of certain construction
activities in Montreal, and the
diversification of the independent suppliers that are used. In this
respect, on October 14, 2018, Cominar
completed the integration of nearly all of the resources from
Groupe Dallaire's platform in Montreal into our new entity, Cominar
Construction. The latter is mandated to ensure continuity of
certain construction activities to better meet the needs of Cominar
and its clients. This transition will essentially be completed in
the first quarter of 2019.
The following tables present our current portfolio:
Operating
segment
|
Number of
properties
|
Leasable area
(sq. ft.)
|
Committed
occupancy rate
|
In-place
occupancy rate
|
|
|
|
|
|
Office
|
97
|
11,800,000
|
90.8%
|
85.5%
|
Retail
|
136
|
10,714,000
|
93.3%
|
84.1%
|
Industrial and
flex
|
196
|
15,706,000
|
95.2%
|
90.9%
|
TOTAL
|
429
|
38,220,000
|
93.3%
|
87.3%
|
|
|
|
|
|
|
|
|
|
|
Geographic
market
|
Number of
properties
|
Leasable area
(sq. ft.)
|
Committed
occupancy rate
|
In-place
occupancy rate
|
|
|
|
|
|
Montreal
|
282
|
25,420,000
|
92.9%
|
87.3%
|
Québec
City
|
126
|
10,264,000
|
94.6%
|
89.6%
|
Ottawa
|
20
|
2,476,000
|
91.5%
|
77.8%
|
Atlantic
Provinces
|
1
|
60,000
|
100.0%
|
—
|
TOTAL
|
429
|
38,220,000
|
93.3%
|
87.3%
|
We continue to review our property portfolio in order to
identify both additional opportunities to sell assets to further
stabilize our balance sheet, and to enhance and increase the value
of our properties to increase net operating income. Our portfolio
includes many well-located urban assets in close proximity to
transit lines with significant potential for value creation.
PRESENTATION OF RESULTS
For the quarter ended September 30,
2018, net operating income (NOI) – Cominar's
proportionate share(1) was $93.5 million compared to $112.2 million for the same period of 2017.
This $18.7 million decrease is
the result of a $1.6 million
increase in net operating income in our same property portfolio and
a $20.3 million decrease mainly
attributable to the portfolio of 95 non-core properties sold on
March 27, 2018.
Same property net operating income – Cominar's proportionate
share(1) increased by 1.7% from the corresponding
period in 2017. This increase is the result of a 4.4% same property
growth in the industrial segment combined with a 2.1% growth in the
office segment, partially offset by a slight decrease of 0.4% in
the retail segment.
Finance charges decreased by $5.5
million during the third quarter compared with the same
period of 2017. This decrease is mainly due to the decrease in
mortgages payable and bank borrowings following the sale of a 95
non-core property portfolio on March 27,
2018.
For the quarter ended September 30,
2018, Trust administrative expenses decreased by
$0.9 million from the
corresponding period in 2017. This decrease is due mainly to the
$0.5 million decrease in
salaries and other benefits.
Adjusted net income(1) for the third quarter
of 2018 amounted to $51.9 million compared to $64.0 million for the same period of
2017. The $12.1 million
decrease in adjusted net income(1) is explained mainly
by a $20.3 million decrease in
net operating income resulting from the sale of a portfolio of 95
non-core properties on March 27,
2018, partially offset by a $5.5 million decrease in finance charges and
by the $1.6 million increase in
same property net operating income.
Recurring funds from operations (FFO)(1) for
the third quarter of 2018 was $52.7 million, compared to $65.3million for the same period of 2017. This
$12.6 million decrease is due to
the $12.1 million decrease in
adjusted net income(1) explained above. Fully diluted
recurring funds from operations(1) per unit amounted to
$0.29 for the quarter ended
September 30, 2018.
Recurring adjusted funds from operations
(AFFO)(1) for the third quarter of 2018 was
$41.2 million compared to
$55.4 million for the same
period of 2017. This decrease of $14.2 million results mainly to the
$12.1 million decrease in
adjusted net income explained above, to the $0.7 million increase of the provision for
leasing costs and the $1.9 million increase in the capital
expenditures to maintain rental income generating capacity. Fully
diluted per unit, recurring AFFO(1) amounted to
$0.23 for the quarter ended
September 30, 2018.
Payout ratio of recurring adjusted funds from operations
(AFFO)(1) for the third quarter of 2018 decreased to
78.3% compared to 104.2% for the corresponding period
of 2017.
FINANCIAL POSITION
As at September 30, 2018, only
$68.0 million was used on our
$700 million unsecured credit
facility. In addition, we intend to use this credit facility to
repay $54.7 million in mortgages
payable maturing by the end of 2018.
As at September 30, 2018,
Cominar's debt ratio stood at 51.9%, compared to 57.4% as at
December 31, 2017. This significant improvement in our debt
ratio results from the sale of our 95 non-core property portfolio
for gross proceeds of $1.14 billion on March 27, 2018. At quarter end, unencumbered
income properties totalled $2.8 billion, representing an unencumbered
asset ratio of 1.57:1, up from 1.43:1 as at December 31, 2017.
LEASING ACTIVITY
During the first nine months of 2018, our leasing efforts
allowed us to renew 64.6% [59.2% in 2017] of the total leasable
area expiring in 2018, totalling 4.6 million square feet, and
to sign new leases for 2.7 million square feet, overall
representing 102.3% [93.5% in 2017] of the total leasable area
expiring in 2018.
Committed occupancy stood at 93.3% as at September 30, 2018, compared to 92.2% as at
September 30, 2017. In-place occupancy stood at 87.3% as
at September 30, 2018, compared to
88.0% as at September 30, 2017. The
difference between the committed occupancy rate and the in-place
occupancy rate comes from 1.6 million square feet of signed
leases beginning in the next five quarters, representing
approximately $22.4 million in
net operating income on an annualized basis. This difference also
includes 781,000 square feet under redevelopment, mostly
comprised of space formerly occupied by Sears.
The following table presents the occupancy rates as at
September 30, 2018 by operating
segment:
|
Montreal
|
|
Québec
City
|
|
Ottawa
|
|
Total
|
|
Committed
|
In-place
|
|
Committed
|
In-place
|
|
Committed
|
In-place
|
|
Committed
|
In-place
|
Operating
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
88.0%
|
83.5%
|
|
96.7%
|
93.3%
|
|
92.5%
|
82.0%
|
|
90.8%
|
85.5%
|
|
Retail
|
94.1%
|
85.4%
|
|
92.8%
|
84.9%
|
|
82.9%
|
54.5%
|
|
93.3%
|
84.1%
|
|
Industrial and
flex
|
95.3%
|
90.5%
|
|
95.0%
|
92.5%
|
|
N/A
|
N/A
|
|
95.2%
|
90.9%
|
Total
markets
|
92.9%
|
87.3%
|
|
94.6%
|
89.6%
|
|
91.5%
|
77.8%
|
|
93.3%
|
87.3%
|
The variance between the portfolio's in-place occupancy rate and
committed occupancy rate was 6.0% as at September 30, 2018. For the retail segment, this
difference was 9.2% and consisted of several signed leases with a
total area of approximately 277,000 square feet, of which 61%
will come into force by the end of 2018. This difference also
includes 781,000 square feet of spaces under redevelopment
mostly comprising spaces formerly occupied by Sears. For the
Ottawa office segment, this
difference was 10.5% and represents signed leases of which
approximately 50% will come into force by the end of the year 2018.
As to the industrial and flex segment, the difference was 4.3%,
representing 663,000 square feet of signed leases, of which
approximately 72% will come into force by the end 2018.
(1)
|
Non-IFRS financial
measure. See the reconciliation to closest IFRS
measure.
|
SEARS UPDATE
|
Area (square
feet)
|
Location
|
Leasable
area
|
Signed
leases
|
Area in
advanced
discussions
|
Area in
preliminary
discussions
|
Available
area
|
Common
area
planned
|
|
|
|
|
|
|
|
Quartier Laval,
Laval
|
43,147
|
43,147
|
—
|
—
|
—
|
—
|
Carrefour
Saint-Georges, Saint-Georges
|
54,221
|
21,077
|
18,500
|
—
|
10,103
|
4,541
|
Galeries de Hull,
Gatineau
|
128,040
|
—
|
39,513
|
27,038
|
45,683
|
15,806
|
Mail Champlain,
Brossard
|
153,600
|
—
|
—
|
42,500
|
95,086
|
16,014
|
Galeries Rive Nord,
Repentigny
|
125,471
|
—
|
57,669
|
26,743
|
29,762
|
11,297
|
Les Rivières shopping
centre, Trois-Rivières(1)
|
144,398(1)
|
—
|
25,776
|
37,776
|
61,877
|
18,969
|
Boulevard
Pierre-Bertrand, Québec
(industrial sector)
|
23,947
|
23,947
|
—
|
—
|
—
|
—
|
Total
|
672,824
|
88,171
|
141,458
|
134,057
|
242,511
|
66,627
|
|
100%
|
13%
|
21%
|
20%
|
36%
|
10%
|
|
|
(1)
|
Shadow tenant for
which Cominar acquired the building during the second quarter of
2018.
|
NON-IFRS FINANCIAL MEASURES
Net operating income, funds from operations (FFO), adjusted
funds from operations (AFFO) and adjusted net income are not
measures recognized by International Financial Reporting Standards
("IFRS") and do not have standardized meanings prescribed by IFRS.
Such measures may differ from similar computations as reported by
similar entities and, accordingly, may not be comparable to similar
measures reported by such other entities.
RESULTS OF OPERATIONS
|
Quarter
|
|
Year-to-date (nine
months)
|
For the periods ended
September 30
|
|
|
2018(1)
|
2017
|
|
2018(1)
|
2017
|
|
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
|
172,665
|
204,160
|
|
558,577
|
628,071
|
Operating
expenses
|
|
|
(81,688)
|
(93,980)
|
|
(277,241)
|
(302,521)
|
Net operating
income(2)
|
|
|
90,977
|
110,180
|
|
281,336
|
325,550
|
Finance
charges
|
|
|
(36,373)
|
(41,860)
|
|
(115,844)
|
(125,913)
|
Trust administrative
expenses
|
|
|
(4,314)
|
(5,160)
|
|
(17,149)
|
(14,569)
|
Change in fair value
of investment properties
|
|
|
13,393
|
—
|
|
9,062
|
—
|
Share of joint
ventures' net income
|
|
|
1,560
|
1,064
|
|
4,093
|
5,168
|
Transaction
costs
|
|
|
—
|
—
|
|
(19,981)
|
—
|
Derecognition of
goodwill
|
|
|
(594)
|
—
|
|
(594)
|
—
|
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
|
64,649
|
64,224
|
|
140,923
|
190,236
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
|
|
|
|
|
|
Payable
|
|
|
—
|
—
|
|
(6,391)
|
—
|
|
Deferred
|
|
|
—
|
(243)
|
|
6,539
|
(705)
|
|
|
|
—
|
(243)
|
|
148
|
(705)
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
64,649
|
63,981
|
|
141,071
|
189,531
|
|
|
(1)
|
Results for
periods ended September 30, 2018 have been impacted by the sale of
95 non-core properties to Slate in the first quarter of
2018.
|
(2)
|
Non-IFRS financial
measure.
|
SAME PROPERTY NET OPERATING
INCOME(1)
|
Quarter
|
|
Year-to-date (nine
months)
|
For the periods ended
September 30
|
2018
|
2017
|
|
|
2018
|
2017
|
|
|
($000)
|
($000)
|
% Δ
|
|
($000)
|
($000)
|
% Δ
|
|
|
|
|
|
|
|
|
Net operating income
– Financial statements
|
90,977
|
110,180
|
|
|
281,336
|
325,550
|
|
Joint-ventures
|
2,571
|
2,067
|
|
|
7,095
|
5,382
|
|
Net operating
income – Cominar's proportionate share(1)
|
93,548
|
112,247
|
|
|
288,431
|
330,932
|
|
|
|
|
|
|
|
|
|
Breakdown
|
|
|
|
|
|
|
|
Same property
portfolio
|
|
|
|
|
|
|
|
|
Office
|
36,008
|
35,280
|
2.1
|
|
107,557
|
104,057
|
3.4
|
|
Retail
|
34,905
|
35,052
|
(0.4)
|
|
101,045
|
105,116
|
(3.9)
|
|
Industrial and
flex
|
22,242
|
21,299
|
4.4
|
|
65,309
|
62,187
|
5.0
|
|
|
|
|
|
|
|
|
|
Same property
portfolio
|
93,155
|
91,631
|
1.7
|
|
273,911
|
271,360
|
0.9
|
|
|
|
|
|
|
|
|
|
Other
|
393
|
20,616
|
|
|
14,520
|
59,572
|
|
Net operating
income – Cominar's proportionate share(1)
|
93,548
|
112,247
|
|
|
288,431
|
330,932
|
|
|
|
(1)
|
Non-IFRS financial
measure. See the reconciliation to closest IFRS
measure.
|
FUNDS FROM OPERATIONS (FFO) AND ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
The following table presents a reconciliation of net income, as
determined in accordance with IFRS, and recurring funds from
operations and recurring adjusted funds from operations:
|
Quarter
|
|
Year-to-date (nine
months)
|
For the periods ended
September 30
|
2018(1)
|
2017
|
|
2018(1)
|
2017
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
Net
income
|
64,649
|
63,981
|
|
141,071
|
189,531
|
Taxes on disposition
of properties
|
—
|
—
|
|
6,391
|
—
|
Deferred income
taxes
|
—
|
243
|
|
(6,539)
|
705
|
Initial and
re-leasing salary costs
|
729
|
868
|
|
2,635
|
2,650
|
Change in fair value
of investment properties
|
(13,393)
|
—
|
|
(9,062)
|
(2,284)
|
Capitalizable
interest on properties under development – joint
ventures
|
154
|
195
|
|
462
|
595
|
Transaction
costs
|
—
|
—
|
|
19,981
|
—
|
Derecognition of
goodwill
|
594
|
—
|
|
594
|
—
|
|
|
|
|
|
|
Funds from
operations(2)(3)
|
52,733
|
65,287
|
|
155,533
|
191,197
|
|
|
|
|
|
|
Governance and
strategic alternative consulting fees
|
—
|
—
|
|
3,529
|
—
|
|
|
|
|
|
|
Recurring funds from
operations (2)(3)
|
52,733
|
65,287
|
|
159,062
|
191,197
|
|
|
|
|
|
|
Provision for leasing
costs
|
(7,306)
|
(6,650)
|
|
(21,612)
|
(19,237)
|
Recognition of leases
on a straight-line basis(2)
|
(159)
|
(1,098)
|
|
(1,016)
|
(2,473)
|
Capital expenditures –
maintenance of rental income generating capacity
|
(4,019)
|
(2,125)
|
|
(11,801)
|
(5,288)
|
|
|
|
|
|
|
Recurring adjusted
funds from operations(2)(3)
|
41,249
|
55,414
|
|
124,633
|
164,199
|
|
|
|
|
|
|
Payout ratio of
recurring adjusted funds from operations
|
78.3%
|
104.2%
|
|
89.7%
|
117.7%
|
|
|
(1)
|
FFO and AFFO for
periods ended September 30, 2018 have been impacted by the sale of
95 non-core properties to Slate in the first quarter of
2018.
|
(2)
|
Including
Cominar's proportionate share in joint ventures.
|
(3)
|
Non-IFRS financial
measure.
|
SUBSEQUENT EVENT
The current normal course issuer bid ("NCIB") of a maximum of
17,596,591 units will expire on November 14,
2018. Cominar's Board of Trustees authorized the application
to renew for an additional year the NCIB for a maximum of 10% of
the units held by the public. The renewal of this NCIB is subject
to the Toronto Stock Exchange approval.
ADDITIONAL FINANCIAL INFORMATION
Cominar's condensed interim consolidated financial statements
and interim management's discussion and analysis for the third
quarter of 2018 are filed with SEDAR at www.sedar.com and are
available on Cominar's website at www.cominar.com.
CONFERENCE CALL ON NOVEMBER 9,
2018
On Friday, November 9, 2018 at
11 a.m. (ET), Cominar's management will hold a conference call
to present the results for the third quarter of 2018. Interested
persons may take part in this call by dialing
1 888 390-0546. A presentation regarding these
results will be available before the conference call on the REIT's
website at www.cominar.com, under the Conference Call header. In
addition, a taped rebroadcast of the conference call will be
available from Friday, November 9,
2018 at 2 p.m. to Friday,
November 16, 2018 at 11:59 p.m., by dialing
1 888 390-0541 followed by this
code: 471308#.
PROFILE AS AT NOVEMBER 9,
2018
Cominar is the second largest diversified real estate investment
trust in Canada and is the largest
commercial property owner in the Province of Québec. The REIT owns
a real estate portfolio of 429 properties in three different market
segments, that is, office properties, retail properties and
industrial and flex properties. Cominar's portfolio totals
38.2 million square feet located in the Montreal, Québec City and Ottawa areas. Cominar's primary objectives are
to maximize unit value through the proactive management of its
properties.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements with
respect to Cominar and its operations, strategy, financial
performance and financial position. These statements generally can
be identified by the use of forward-looking words such as "may",
"will", "expect", "estimate", "anticipate", "intend", "believe" or
"continue" or the negative thereof or similar variations and the
use of conditional and future tenses. The actual results and
performance of Cominar discussed herein could differ materially
from those expressed or implied by such statements. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Some important
factors that could cause actual results to differ materially from
expectations include, among other things, general economic and
market factors, competition, changes in government regulation and
the factors described under "Risk Factors" in Cominar's Annual
Information Form. The cautionary statements qualify all
forward-looking statements attributable to Cominar and persons
acting on its behalf. Unless otherwise stated, all forward-looking
statements speak only as of the date of this press release. Cominar
does not assume any obligation to update the aforementioned
forward-looking statements, except as required by applicable
laws.
SOURCE COMINAR REAL ESTATE INVESTMENT TRUST