- 45.5% year-over-year increase in total assets from Q3
2018
- 29.7% year-over-year increase in property revenue from Q3
2018
- 28.3% year-over-year increase in net operating
income1 from Q3 2018
- 45.6% year-over-year increase in net cash flows provided
from operating activities from Q3 2018
- 38.8% year-over-year increase in AFFO1 from
Q3 2018
- 91% of leases maturing in 2019 renewed
MONTRÉAL, Nov. 13, 2019 /CNW
Telbec/ - PRO Real Estate Investment Trust ("PROREIT" or the
"REIT") (TSX: PRV.UN) today reported its financial and operating
results for the three-month period (or "third quarter") ended
September 30, 2019.
"2019 has been an outstanding year for PROREIT so far, and I am
pleased with our continued growth and our sound financial
position," said Jim Beckerleg,
President and CEO, PROREIT.
"In the third quarter of 2019, we generated a solid increase in
net operating income, and same property net operating income and
occupancy rates remained strong, reflecting the strength of our
business fundamentals. The third quarter also marked the successful
completion of our acquisition of seven high-quality assets on an
accretive basis, and of our largest equity raise to-date. In line
with our growth strategy, the timing and full deployment of the
proceeds from our equity raise will have an accretive impact on our
AFFO and payout ratio within the next few months," added Mr.
Beckerleg.
"With our increased scale and a growing profile, we have access
to properties within larger urban centres, with about one-third of
our GLA now located in the attractive Montreal and Ottawa regions. During the quarter, we have
also increased our exposure to the industrial and commercial
mixed-used sectors, which account for more than 64% of our GLA,"
added Mr. Beckerleg
"Our asset and property management functions are now well
integrated, resulting in operational synergies that will improve
results over time to the benefit of unitholders. With TSX
graduation and management internalization now behind us, our key
operational metrics can reflect our strong momentum as we remain
focused on pursuing our vision to build a high-quality, diversified
mid-cap Canadian REIT," concluded Mr. Beckerleg.
TABLE 1- FINANCIAL
HIGHLIGHTS
|
|
(CAD $ thousands
except unit, per unit amounts and
unless otherwise stated)
|
|
3 Months
Ended
September 30
2019
|
|
3 Months
Ended
September
30 2018
|
|
9 Months
Ended
September 30
2019
|
|
9 Months
Ended
September 30
2018
|
Financial
data
|
|
|
|
|
|
|
|
|
Property
revenue
|
$
|
13,241
|
$
|
10,210
|
$
|
40,312
|
$
|
28,682
|
Net operating income
(NOI) (1)
|
$
|
8,525
|
$
|
6,643
|
$
|
25,431
|
$
|
18,389
|
Total
assets
|
$
|
628,604
|
$
|
432,176
|
$
|
628,604
|
$
|
432,176
|
Debt to Gross Book
Value (1)
|
|
56.72%
|
|
51.05%
|
|
56.72%
|
|
51.05%
|
Interest Coverage
Ratio (1)
|
|
2.8x
|
|
2.5x
|
|
2.7x
|
|
2.6x
|
Debt Service Coverage
Ratio (1)
|
|
1.7x
|
|
1.6x
|
|
1.7x
|
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
|
3.74%
|
|
3.82%
|
|
3.74%
|
|
3.82%
|
Net cash flows
provided from operating activities
|
$
|
5,339
|
$
|
3,666
|
$
|
9,498
|
$
|
9,024
|
Funds from Operations
(FFO) (1)(3)
|
$
|
4,410
|
$
|
3,344
|
$
|
10,279
|
$
|
8,335
|
Basic FFO per unit
(1)(2)
|
$
|
0.1234
|
$
|
0.1317
|
$
|
0.3126
|
$
|
0.3410
|
Diluted FFO per unit
(1)(2)
|
$
|
0.1205
|
$
|
0.1288
|
$
|
0.3050
|
$
|
0.3345
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,070
|
$
|
3,652
|
$
|
14,747
|
$
|
10,107
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1419
|
$
|
0.1438
|
$
|
0.4485
|
$
|
0.4135
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1386
|
$
|
0.1407
|
$
|
0.4376
|
$
|
0.4056
|
AFFO Payout Ratio –
Basic (1)
|
|
111.0%
|
|
109.6%
|
|
105.4%
|
|
114.3%
|
AFFO Payout Ratio –
Diluted (1)
|
|
113.6%
|
|
111.9%
|
|
108.0%
|
|
116.5%
|
|
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS and Operational Key Performance Indicators".
|
(2)
|
Total basic units
consist of Units (as defined herein) and Class B LP Units (as
defined herein). Total diluted units also include deferred trust
units and restricted trust units issued under the REIT's long‑term
incentive plan.
|
(3)
|
Includes one-time
transaction costs relating to management internalization and
graduation to the TSX (as defined herein) of $nil and $3,076
respectively for the three and nine months ended September 30,
2019.
|
PROREIT owned 91 investment properties at September 30, 2019, compared to 76 properties at
the same time last year. Total assets amounted to $628.6 million at September 30, 2019, representing an increase of
$196.4 million, or 45.5%,
compared to $432.2 million at
September 30, 2018. The increase is mainly due to the
acquisition of 15 investment properties in the twelve-month period
ended September 30, 2019.
During the quarter, PROREIT acquired seven properties for
$97.8 million, representing a total
of 696,000 square feet of gross leasable area ("GLA"). The
properties include a boutique office tower in the central business
district in Ottawa and a Class-A
mixed-used industrial property located in Kanata, Ontario, in addition to a
five-property light industrial portfolio in Halifax, Nova Scotia.
PROREIT closed, on August 16,
2019, its previously announced public offering of trust
units of the REIT ("Units"), on a bought-deal basis, at a price of
$7.00 per Unit, resulting in
8,222,500 Units being issued for total gross proceeds of
$57.6 million, including 1,072,500
Units issued pursuant to the full exercise of the over-allotment
option.
For the third quarter ended September 30,
2019:
- Property revenue amounted to $13.2
million. The increase of $3.0
million, or 29.7%, compared to the same period last year, is
primarily due to incremental revenues from the property
acquisitions completed in the twelve-month period ended
September 30, 2019.
- Same property net operating income[2] amounted to $6.5 million, an increase of $0.1 million, or 1.4%, compared to the same
period last year. This increase is primarily driven by higher
rental rates, property management synergies and higher occupancy
rates compared to the same period in 2018.
- Net operating income1 was $8.5
million, an increase of $1.9
million, or 28.3%, compared to $6.6 million for the same period last year.
This increase results primarily from the favourable impact of
property acquisitions completed in the twelve-month period ended
September 30, 2019.
- AFFO1 totalled $5.1
million, a $1.4 million
increase compared to $3.7 million
last year, or a 38.8% increase year-over-year. This increase is
mainly due to the property acquisitions completed in the
twelve-month period ended September 30,
2019.
- AFFO payout ratio1 stood at 111.0% compared to
109.6% for the same period last year. The difference mainly relates
to the impact of the lag between the deployment of funds from the
mid-August 2019 equity offering and
the acquisitions of properties at the end of September 2019 when the majority of funds were
deployed. The current participation level under the REIT's
distribution reinvestment plan ("DRIP") is approximately 10%, which
reduces the cash requirements of the REIT to pay distributions and
is not reflected in the AFFO payout ratio.
- Total debt to gross book value1 stood at 56.72% at
September 30, 2019, compared to
51.05% at the same date in 2018. The weighted average interest rate
on mortgage debt was 3.74% at the end of the third quarter, down
from 3.82% at September 30,
2018.
For the nine-month period ended September
30, 2019:
- Property revenue amounted to $40.3
million. The increase of $11.6
million, or 40.5%, compared to the same period last year, is
primarily due to incremental revenues from property acquisitions
completed in the twelve-month period ended September 30, 2019.
- Same property net operating income1 amounted to $17.7 million, an increase of $0.8 million, or 4.8%, compared to the same
period last year. This increase is primarily driven by higher
rental rates, property management synergies and higher occupancy
rates compared to the same period in 2018.
- Net operating income1 was $25.4
million, an increase of $7.0
million, or 38.3%, compared to $18.4 million for the same period last year.
This increase results primarily from the favourable impact of
property acquisitions completed in the twelve-month period ended
September 30, 2019.
- AFFO1 totalled $14.7
million, a $4.6 million
increase compared to $10.1 million
last year, or a 45.9% increase year-over-year. This increase is
mainly due to property acquisitions completed in the twelve-month
period ended September 30, 2019.
- AFFO payout ratio1 stood at 105.4% compared to
114.3% for the same period last year. The improvement mainly
relates to the impact of the funds raised in September 2018 from a public offering being fully
deployed in the first quarter of 2019, partially offset by the
impact of the lag between the deployment of funds from the
mid-August 2019 equity offering
and the acquisitions of properties at the end of September 2019 when the majority of funds were
deployed. The current participation level under the DRIP is
approximately 10%, which reduces the cash requirements of the REIT
to pay distributions and is not reflected in the AFFO payout
ratio.
TABLE 2-
RECONCILIATION OF NET OPERATING INCOME TO NET COMPREHENSIVE
INCOME
|
|
(CAD $
thousands)
|
3 Months
Ended
September 30
2019
|
3 Months
Ended
September 30
2018
|
9 Months
Ended
September 30
2019
|
9 Months
Ended
September 30
2018
|
Property
revenue
|
$
|
13,241
|
$
|
10,210
|
$
|
40,312
|
$
|
28,682
|
Property operating
expenses
|
4,716
|
3,567
|
14,881
|
10,293
|
Net operating income
(NOI) (1)
|
8,525
|
6,643
|
25,431
|
18,389
|
General and
administrative expenses
|
623
|
458
|
1,720
|
1,332
|
Long‑term incentive
plan expense
|
662
|
335
|
2,329
|
708
|
Depreciation of
property and equipment
|
65
|
13
|
137
|
34
|
Amortization of
intangible assets
|
93
|
-
|
279
|
-
|
Interest and
financing costs
|
3,094
|
2,636
|
9,644
|
6,905
|
Distributions ‑ Class
B LP Units
|
407
|
438
|
1,255
|
1,167
|
Fair value adjustment
‑ Class B LP Units
|
155
|
(107)
|
4,081
|
(260)
|
Fair value adjustment
‑ investment properties
|
(3,255)
|
(6,767)
|
(9,983)
|
(4,825)
|
Other
income
|
(599)
|
(553)
|
(1,944)
|
(553)
|
Other
expenses
|
370
|
368
|
1,180
|
368
|
Transaction
costs
|
-
|
26
|
3,076
|
501
|
Debt settlement
costs
|
-
|
-
|
-
|
719
|
Net comprehensive
income
|
$
|
6,910
|
$
|
9,796
|
$
|
13,657
|
$
|
12,293
|
|
(1) See "Non‑IFRS and
Operational Key Performance Indicators".
|
For the three months ended September 30,
2019, net comprehensive income amounted to $6.9 million, compared to $9.8 million for the same period last year. The
$2.9 million decrease mainly relates
to the $3.5 million difference in
non-cash fair value gain on investment properties for the third
quarter of 2019 compared to the same period last year, partially
offset by the impact of property acquisitions completed in the
twelve-month period ended September 30,
2019.
For the nine months ended September 30,
2019, net comprehensive income amounted to $13.7 million, an increase of $1.4 million compared to $12.3 million for the same period last year,
mainly as a result of the impact of property acquisitions completed
in the twelve-month period ended September
30, 2019, combined with a $5.2
million increase in the non-cash fair value gain on
investment properties, partially offset by one-time transaction
costs of $3.1 million relating
to the internalization of PROREIT's asset management function and
the graduation to the Toronto Stock Exchange ("TSX").
TABLE 3- TOTAL
PORTFOLIO BASE RENT
|
|
BY
ASSET CLASS
|
|
|
September 30,
2019
|
September 30,
2018
|
|
Number
of properties
|
% Base
Rent
|
Number of
properties
|
%
Base Rent
|
Retail
|
49
|
37.8
|
49
|
54.2
|
Commercial Mixed
Use
|
8
|
17.9
|
7
|
12.5
|
Office
|
10
|
16.2
|
4
|
7.4
|
Industrial
|
24
|
28.2
|
16
|
25.9
|
TOTAL
|
91
|
100.0
|
76
|
100.0
|
|
BY
PROVINCE
|
|
|
September 30,
2019
|
September 30,
2018
|
|
Number
of properties
|
% Base
Rent
|
Number
of properties
|
% Base
Rent
|
Maritime
Provinces
|
37
|
40.6
|
32
|
51.1
|
Quebec
|
16
|
15.3
|
15
|
20.1
|
Western
Canada
|
26
|
14.8
|
26
|
21.5
|
Ontario
|
12
|
29.4
|
3
|
7.3
|
TOTAL
|
91
|
100.0
|
76
|
100.0
|
Acquisitions made during the last twelve-month period
contributed to the diversification of PROREIT's asset portfolio.
PROREIT's industrial exposure rose to 28.2% while commercial
mixed-used and office exposure increased to 17.9% and 16.2%
respectively at the end of the third quarter of 2019. The
acquisitions also increased exposure to the Ontario market to 29.4% at the end of the
three-month period ended September 30,
2019.
TABLE 4-
OPERATIONAL HIGHLIGHTS
|
|
|
September 30
2019
|
September 30
2018
|
Operational data
|
|
|
Number of
properties
|
91
|
76
|
Gross leasable area
(square feet)
|
4,396,004
|
3,041,030
|
Occupancy rate
(1)
|
98.2%
|
98.1%
|
Weighted average
lease term to maturity (years)
|
5.6
|
6.5
|
|
(1) Occupancy rate includes
lease contracts for future occupancy of currently vacant space.
Management believes the inclusion of this committed space provides
a more balanced reporting. The committed space at September 30,
2019 was approximately 30,327 square feet of GLA (79,989 square
feet of GLA at September 30, 2018).
|
GLA increased 44.6% to 4,396,004 square feet at September 30, 2019, compared to 3,041,030 square
feet at September 30, 2018. The
increase of 1,354,974 square feet in GLA is a result of the
acquisition of 15 investment properties in the twelve-month period
ended September 30, 2019.
Occupancy rate remained firm at 98.2% as at September 30, 2019, compared to 98.1% a year
earlier. The solid, high profile 10 largest tenants in PROREIT's
portfolio accounted for approximately 34.9% of annualized in-place
and committed base rent at September 30,
2019 and comprise approximately 7.5 years of remaining
lease term, while credit quality tenants represent 45.5% of
in-place annualized base rent.
Weighted average lease term to maturity stood at 5.6 years for
the three months ended September 30,
2019, compared to 6.5 years for the same period in 2018.
Over 91% of PROREIT's leases maturing in 2019 have been renewed as
of September 30, 2019.
Distributions
Distributions to unitholders totaling $0.0525 per Unit were declared monthly during the
three months ended September 30,
2019, representing distributions of $0.63 per Unit on an annual basis.
Equivalent distributions are paid on the Class B limited
partnership units ("Class B LP Units") of PRO REIT Limited
Partnership, a subsidiary of the REIT.
On October 22, 2019, PROREIT
announced a cash distribution of $0.0525 per Unit for the month of October 2019. The distribution is payable on
November 15, 2019 to unitholders of
record as at October 31, 2019.
STRATEGY AND OUTLOOK
Given the current economic fundamentals in Canada, management expects the low-interest
rate and high liquidity context to prevail. The real estate market
outlook should also remain favourable, with demand for properties
remaining solid and rental rates firming up.
Management continues to seek opportunities to strategically
grow, diversify and improve its asset portfolio both in high-demand
asset classes as well as in provinces with a sound and resilient
economy, while achieving additional economies of scale.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its third quarter
2019 results on November 14, 2019, at 11:00 a.m. EDT. There will be a question period
reserved for financial analysts. To access the conference call,
please dial 888-390-0605 or 416-764-8609 or 514-225-7341. A
recording of the call will be available from November 14 to
February 14, 2020 by
dialing 888‑390‑0541 or 416-764-8677, access code for
participants 545796#. The conference call will also be accessible
via live webcast on PROREIT's website at www.proreit.com.
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS"). In this press release, as a complement to results
provided in accordance with IFRS, PROREIT discloses and discusses
certain non-IFRS financial measures, including same property net
operating income (or same property NOI), adjusted funds from
operations or AFFO, AFFO payout ratio, net operating income or NOI,
debt to gross book value, gross book value, interest coverage
ratio, debt service coverage ratio, and funds from operations or
FFO. These non-IFRS measures are not defined by IFRS, do not have a
standardized meaning and may not be comparable with similar
measures presented by other issuers. PROREIT has presented such
non-IFRS measures as management of the REIT believes they are
relevant measures of PROREIT's underlying operating performance and
debt management. Non-IFRS measures should not be considered as
alternatives to net income, cash generated from (utilized in)
operating activities or comparable metrics determined in accordance
with IFRS as indicators of PROREIT's performance, liquidity, cash
flow, and profitability. For a full description of these measures
and, where applicable, a reconciliation to the most directly
comparable measure calculated in accordance with IFRS, please refer
to the "Non-IFRS and Operational Key Performance Indicators"
section in PROREIT's management's discussion and analysis for the
three months ended September 30,
2019, available under PROREIT's profile on SEDAR at
www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities legislation. Forward-looking
statements are based on a number of assumptions and are subject to
a number of risks and uncertainties, many of which are beyond
PROREIT's control, that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to the impact of
the recently completed acquisitions on the REIT's future financial
performance, the impact of recent transactions on the REIT's AFFO
per unit and AFFO payout ratio, the ability of the REIT to
executive its growth strategy, the performance of the real estate
markets and the payment and level of future distributions.
PROREIT's objectives and forward-looking statements are based on
certain assumptions, including management's perceptions of
historical trends, current conditions and expected future
developments.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT does not
undertake to update any such forward-looking information whether as
a result of new information, future events or otherwise, except as
required by law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form, which is available on SEDAR at
www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
About PROREIT
PROREIT (www.proreit.com) is an unincorporated open-ended real
estate investment trust owning a diversified portfolio of 91
commercial properties across Canada representing over 4.4 million square
feet of GLA. Established in March
2013, PROREIT is mainly focused on strong primary and
secondary markets in Québec, Atlantic
Canada and Ontario, with
selective exposure in Western
Canada.
|
|
|
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
SOURCE PROREIT