Dundee REIT Reports Solid First Quarter 2014 Results and Appointment of New CEO
May 08 2014 - 2:18PM
Marketwired
Dundee REIT Reports Solid First Quarter 2014 Results and
Appointment of New CEO
This news release contains forward-looking information that is
based upon assumptions and is subject to risks and uncertainties as
indicated in the cautionary note contained within this press
release.
TORONTO, ONTARIO--(Marketwired - May 8, 2014) - DUNDEE REIT
(TSX:D.UN) today announced its financial results for the three
months ended March 31, 2014. Senior management will host a
conference call to discuss the results tomorrow, May 9, 2014 at
9:00 a.m. (ET).
As previously announced in the Trust's annual report, we are
moving into a new and exciting time in our business and starting
May 8, 2014, Dundee REIT's name will be Dream Office REIT.
HIGHLIGHTS FOR THE QUARTER
- Appointment of new CEO - Jane Gavan has been appointed the
Chief Executive Officer of the Trust effective May 8, 2014. Michael
Cooper will remain Chair of the Executive Committee;
- AFFO per unit increased 1.6% compared to same period in prior
year - AFFO per unit was $0.62 for the quarter compared to $0.61 in
the first quarter of 2013 and $0.62 in the fourth quarter of
2013;
- Portfolio occupancy remains strong at 94.2% - occupancy rate at
quarter end was 94.2%, remains well above the national average;
631,000 square feet of leasing was completed during the quarter at
incrementally higher rates;
- Leasing activity - To date, the Trust has leased approximately
2.1 million square feet for tenants taking occupancy in 2014, which
represents approximately 66% of the total 2014 lease
maturities.
- Embedded rent growth potential remains strong - average
in-place net rents are approximately 9% below estimated market
rents.
- Financing activities - issued $150 million of unsecured
debentures in the quarter with a fixed rate of 4.07% and a term to
maturity of six years;
- Strong and conservative capital structure maintained - the
Trust's leverage remained stable at 47.6% compared to December 31,
2013. Interest coverage ratio remains at 2.9 times and
debt-to-EBITDFV ratio remains at 8.0 years.
|
|
|
(unaudited) |
|
Three Months Ended |
($000's except unit and per unit amounts) |
|
March 31, 2014 |
|
December 30, 2013 |
|
March 31, 2013 |
Investment properties revenue (1) |
|
$ |
206,679 |
|
$ |
208,418 |
|
$ |
189,568 |
Net operating income ("NOI") (2) |
|
|
116,066 |
|
|
115,899 |
|
|
107,237 |
Comparative properties NOI (3) |
|
|
106,701 |
|
|
106,459 |
|
|
106,035 |
Funds from operations ("FFO") (4) |
|
|
78,104 |
|
|
78,242 |
|
|
72,669 |
Adjusted funds from operations ("AFFO") (4) |
|
|
67,291 |
|
|
66,984 |
|
|
61,615 |
Investment properties value (5) |
|
|
7,298,526 |
|
|
7,303,121 |
|
|
6,695,410 |
Debt (1) |
|
|
3,649,505 |
|
|
3,662,543 |
|
|
3,326,521 |
Debt-to-gross book value (4) |
|
|
47.6% |
|
|
47.6% |
|
|
47.3% |
|
|
|
|
|
|
|
|
|
|
Per unit data (basic) |
|
|
|
|
|
|
|
|
|
FFO |
|
$ |
0.73 |
|
$ |
0.72 |
|
$ |
0.72 |
AFFO |
|
$ |
0.62 |
|
$ |
0.62 |
|
$ |
0.61 |
Distributions |
|
$ |
0.56 |
|
$ |
0.56 |
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
|
Units (period end) |
|
|
|
|
|
|
|
|
|
REIT Units, Series A |
|
|
103,966,154 |
|
|
103,420,221 |
|
|
97,910,460 |
REIT Units, Series B |
|
|
- |
|
|
- |
|
|
16,316 |
LP
Class B Units, Series 1 |
|
|
3,538,457 |
|
|
3,538,457 |
|
|
3,534,432 |
Total number of units |
|
|
107,504,611 |
|
|
106,958,678 |
|
|
101,461,208 |
|
|
|
|
|
|
|
|
|
|
Portfolio gross leasable area (square feet) (6) |
|
|
24,557,452 |
|
|
24,561,791 |
|
|
23,327,935 |
Occupied and committed space |
|
|
94.2% |
|
|
94.3% |
|
|
94.7% |
|
|
|
|
|
|
|
|
|
|
"Our portfolio occupancy continues to outperform the national
average, allowing us to continue to deliver solid financial and
operating results," said Ana Radic, Chief Operating Officer of
Dundee REIT. "We are pleased with our ability to maintain our
leasing pipeline under challenging conditions in the office
market."
OPERATIONAL HIGHLIGHTS
- Portfolio occupancy remains strong at 94.2% - the overall
percentage of occupied and committed space remains strong at 94.2%.
On a comparative property basis, occupancy has decreased modestly
by 10 basis points over Q4 2013. National average occupancy was
89.7%, a decline of 60 basis points over Q4 2013.
- Leasing activity - Leasing activity for the quarter consisted
of 218,000 square feet of new leases and 413,000 square feet of
renewals, all at higher rates than expiries, which totaled 631,000
square feet. In addition, approximately 404,400 square feet of
gross leasable area was committed for future occupancy at quarter
end. To date, the Trust has leased 2.1 million square feet for
tenants taking occupancy in 2014, which represents 66% of the total
2014 lease maturities.
- Average in-place net rents 9% below market rents - The Trust
continues to capture rental rate gains in connection with leasing
activity. At the end of Q1 2014, the portfolio average in-place
rent was $17.97 per square foot, up from $17.83 at December 31,
2013 and up from $17.26 at March 31, 2013, yet remain approximately
9% below estimated market rents.
FINANCIAL
HIGHLIGHTS
- 0.6% growth in comparative properties net operating income
("NOI") compared to Q4 2013 and Q1 2013 - comparative property NOI
was up $0.7 million, or 0.6% compared to both Q4 2013 and Q1 2013,
with increases in Western and Eastern Canada and Calgary downtown,
driven mainly by higher rental rates achieved on new leasing done
over the past year and the benefit of step rents, offset by lower
occupancy. Total NOI for the quarter is up $8.8 million, or 8.2%
compared to Q1 2013, including $9.5 million generated by properties
acquired in 2013.
- AFFO per unit growth of 1.6% over the same quarter in the prior
year - AFFO per unit for the first quarter increased by $0.01 over
the same period in the prior year and was stable compared to Q4 of
2013.
- FFO per unit growth of 1.4% over the same quarter in the prior
year - FFO per unit increased by $0.01 compared to both the same
period in the prior year and the fourth quarter of 2013.
CAPITAL
INITIATIVES
- $150 million unsecured debentures offering in Q1 2014 - On
January 21, 2014, the Trust completed the issuance of $150 million
aggregate principal amount of Series C senior unsecured debentures
("Series C Debentures"). The Series C Debentures bear interest at a
rate of 4.074% with a maturity date of January 21, 2020. DBRS
Limited has assigned the Series B Debentures a BBB (low) rating
with a stable trend. The net proceeds of $148.6 million from the
Series C Debentures was used to repay one of the demand revolving
credit facility totalling $87.5 million and discharged mortgages
totalling $59.3 million (including debt settlement costs). This
further strengthened the Trust's debt metrics reducing our variable
rate debt to 6.3% at Q1 2014 from 8.7% at Q4 2013 of total
debt.
- Discharged $58.0 million of secured debt - During the quarter,
the Trust repaid approximately 59% of the mortgages due in 2014,
totalling approximately $58.0 million, increasing our unencumbered
assets by approximately $150 million.
- Strong and conservative capital structure maintained - The
Trust's leverage remained flat at 47.6% compared to Q4 2013 and its
pool of unencumbered assets increased to over $770 million from
approximately $620 million at December 2013.
- Normal course issuer bid - During the quarter, the Trust
purchased for cancellation 11,000 REIT A Units under the normal
course issuer bid at an average price of $27.16 per unit and a
total cost of approximately $0.3 million. To date, the Trust
purchased for cancellation approximately 2.1 million REIT A Units
under the normal course issuer bid at an average price of $28.42
per unit and a total cost of approximately $61.0 million.
Key performance metrics |
|
March 31, 2014 |
|
December 31, 2013 |
|
March 31, 2013 |
Financing activities |
|
|
|
|
|
|
Weighted average face interest rate |
|
4.23% |
|
4.22% |
|
4.49% |
Level of debt (debt-to-gross book value)(4) |
|
47.6 % |
|
47.6% |
|
47.3% |
Interest coverage ratio(4) |
|
2.9 times |
|
2.9 times |
|
2.9 times |
Debt-to-EBITDFV (4) |
|
8.0 years |
|
8.0 years |
|
8.0 years |
Debt - average term to maturity (years) |
|
4.6 years |
|
4.6 years |
|
4.8 years |
Variable rate debt as percentage of total debt |
|
6.3% |
|
8.7% |
|
5.4% |
Appointment of new CEO - Jane Gavan has been appointed the Chief
Executive Officer of the Trust; Michael Cooper to remain Chair of
the Executive Committee. "Jane is a proven leader with business
vision and exceptional management skills" said Michael Cooper,
"Together with Mario and Ana, the four of us have worked together
for years transforming the REIT into an industry leader and will
continue to build on that foundation under Jane's direction". Jane
joined DREAM in 1998 and has played a key role in numerous
transactions including the 1998 acquisition of Lehndorff
Properties, the 2003 business restructuring that resulted in the
creation of DREAM Office REIT, the REIT's $2.3 billion portfolio
sale to GE Real Estate, the initial public offering of DREAM Global
REIT and the $1.3 billion acquisition of Scotia Plaza. Jane is
presently the President, Asset Management of DREAM. In that
capacity, she oversees the operations of the three public REIT's
managed by DREAM.
OUTLOOK
We are pleased with our strong leasing velocity and financial
results. Our occupancy levels are presently high and have
historically been well above the national average. Our tenant base
is well diversified, with balanced exposure to large and
small tenants, which should mitigate the impact from the supply of
the new office developments in downtown Toronto and Calgary.
We are increasing our focus to value-add and repositioning
initiatives. We are exploring new ideas to increase the income and
value of our properties through intensification and alternative
uses, especially in downtown buildings where urbanization allows
for increased revenue in office and retail space. We are also
looking at development opportunities on underutilized land within
our portfolio. We are in the early stages of our assessment but are
excited about the potential opportunities.
Looking ahead, our focus continues to be on operational
performance, tenant retention, proactive asset management and
maintaining a strong and flexible balance sheet.
CONFERENCE CALL
Senior management will host a conference call to discuss the
results tomorrow, May 9, 2014 at 9:00 a.m. (ET). To access the
conference call, please dial 1-866-229-4144 in Canada and the
United States or 416-216-4169 elsewhere and use passcode 8839 855#.
To access the conference call via webcast, please go to Dundee
REIT's website at www.dundeereit.com and click on the link for News
& Events, then click on Calendar of Events. A taped replay of
the conference call and the webcast will be available 90 days.
Other information
Information appearing in this news release is a select summary
of results. The consolidated financial statements and management's
discussion and analysis for the Trust, as well as its Supplementary
Information Package are available at www.dundeereit.com and on
www.sedar.com.
Dundee REIT is an unincorporated, open-ended real estate
investment trust. Dundee REIT is focused on owning, acquiring,
leasing and managing well-located, high-quality central business
district and suburban office properties. Its portfolio currently
comprises approximately 24.6 million square feet of gross leasable
area in major urban centres across Canada. Dundee REIT's portfolio
is well diversified by geographic location and tenant mix. For more
information, please visit www.dundeereit.com.
FOOTNOTES
(1) |
Includes investment properties revenue of investments in joint
ventures. |
(2) |
NOI
(non-GAAP measure) - is defined as total of net rental
income, including the share of net rental income from investment in
joint ventures and property management income, excluding net rental
income from properties sold and assets held for sale. |
(3) |
Includes investments in joint ventures and excludes redevelopment
properties, properties sold and assets held for sale. |
(4) |
Non-GAAP measures - FFO, AFFO, debt-to-gross book value, level of
debt, interest coverage ratio, and debt-to-EBITDFV are key measures
of performance used by real estate operating companies; however,
they are not defined by International Financial Reporting Standards
("IFRS"), do not have standard meanings and may not be comparable
with other industries or income trusts. Refer to the "Non-GAAP
Measures" section of the MD&A for the detailed calculations of
these non-GAAP measures. |
(5) |
Includes investments in joint ventures and excludes assets held for
sale. |
(6) |
Excludes redevelopment properties and properties held for
sale. |
Forward looking information
This press release may contain forward-looking information
within the meaning of applicable securities legislation.
Forward-looking information is based on a number of assumptions and
is subject to a number of risks and uncertainties, many of which
are beyond Dundee REIT's control, which could cause actual results
to differ materially from those that are disclosed in or implied by
such forward-looking information. These risks and uncertainties
include, but are not limited to, general and local economic and
business conditions; the financial condition of tenants; our
ability to refinance maturing debt; leasing risks, including those
associated with the ability to lease vacant space; and interest and
currency rate functions. Our objectives and forward-looking
statements are based on certain assumptions, including that the
general economy remains stable, interest rates remain stable,
conditions within the real estate market remain consistent,
competition for acquisitions remains consistent with the current
climate and that the capital markets continue to provide ready
access to equity and/or debt. All forward-looking information in
this press release speaks as of the date of this press release.
Dundee REIT does not undertake to update any such forward-looking
information whether as a result of new information, future events
or otherwise. Additional information about these assumptions and
risks and uncertainties is contained in Dundee REIT's filings with
securities regulators, including its latest annual information form
and MD&A. These filings are also available at Dundee REIT's
website at www.dundeereit.com.
Dundee REITP. Jane GavanChief Executive Officer(416)
365-6572Dundee REITMario BarrafatoChief Financial Officer(416)
365-4132Dundee REITAna RadicChief Operating Officer(416)
365-4136www.dundeereit.com
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