- Property revenue of $17.2
million, 26.9% increase from Q2 2019
- Net operating income1 of $9.8 million, 15.7% increase from Q2 2019
- Net loss and comprehensive loss of $2.8 million
- AFFO1 of $5.2
million, 7.6% increase from Q2 2019
- Successful renewal of 76% of leases maturing in 2020 to
date
- Occupancy rate firm at 98.1%
- Secured additional liquidity subsequent to
quarter-end
MONTRÉAL, Aug. 12, 2020 /CNW/ -
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 "second quarter") ended June 30, 2020.
"We are pleased to report a solid operating and financial
performance during the second quarter, highlighting the soundness
of our business strategies, and our disciplined financial approach.
With exceptional rent collection during this challenging period –
to date among the better in our sector – we have been able to
maintain a strong financial position while continuing to build a
solid structure for the use of our capital going forward," said
Jim Beckerleg, President and CEO,
PROREIT.
"Over the past few months, the global pandemic and consequent
economic disruption have changed the environment in which we
operate. As property owners and responsible community members, we
are taking appropriate measures to protect the health and safety of
our tenants, employees and various stakeholders in accordance with
public health directives. Committed to maintaining our
long-standing and strong tenant relationships, we supported smaller
tenants requiring assistance, both through the Canada Emergency Commercial Rent Assistance
program and deferral arrangements that we put in place," added Mr.
Beckerleg.
"We are truly gratified with a tenant base that has held up
outstandingly well so far, reflecting the soundness of our
diversification strategy and focus on strong secondary markets
outside of larger metropolitan cores. Our combined commercial
mixed-use and industrial portfolio now account for close to half of
our base rent while our retail portfolio, almost exclusively
comprised of community strip centres providing essential services
and products anchored by grocery and drugstores, has also
contributed to our solid results," added Mr. Beckerleg.
"The past four months have demonstrated the strength of our
business model, and we remain fully committed to staying the course
so that we can continue to create long-term value for our
unitholders as the economy recovers. I wish to sincerely thank our
employees and tenants who have adapted with agility to the
challenges they have faced over the past months," concluded Mr.
Beckerleg.
___________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
COVID-19 Impact
Throughout the ongoing COVID-19 global pandemic, PROREIT has
remained fully committed to ensuring the health and safety of its
employees, tenants and the communities in which it owns properties.
In the second quarter of 2020, PROREIT supported certain tenants
that have been negatively impacted by the pandemic by providing
rent deferrals on a case-by-case basis as well as participating in
the Canada Emergency Commercial
Rent Assistance ("CECRA") program, which provides qualifying
tenants with a 75% gross rent reduction − 50% funded by the
government and 25% by the landlord incurring a rent abatement. For
the six-month period ended June 30,
2020, PROREIT recorded a $0.4
million provision in relation to COVID-19 bad debt
provisions, CECRA participation and rent abatements.
As previously announced, PROREIT's monthly collection of gross
rent as of July 21, 2020 is as
follows:
|
July
2020
|
June
2020
|
May
2020
|
April
2020
|
Gross rent
collection, including government and
other tenants who typically pay at the end of the
month, based on historical collection cycles
|
98.5%
|
95.3%
|
90.4%
|
92.5%
|
Breakdown:
|
|
|
|
|
Industrial
tenants
|
97.9%
|
96.2%
|
87.5%
|
90.7%
|
Mixed-use commercial
tenants
|
100.0%
|
95.6%
|
96.3%
|
99.5%
|
Office
tenants
|
100.0%
|
98.7%
|
90.5%
|
92.0%
|
Retail
tenants
|
97.4%
|
92.1%
|
88.4%
|
88.2%
|
Temporary rent
deferral agreements under fixed
repayment terms
|
0.6%
|
3.3%
|
7.7%
|
5.3%
|
Gross rent in arrears
and ongoing discussions with
tenants, managed on a case-by-case basis
|
0.9%
|
1.4%
|
1.9%
|
2.2%
|
Results
TABLE 1- FINANCIAL HIGHLIGHTS
(CAD $ thousands
except unit, per unit amounts and
unless otherwise stated)
|
3 Months
Ended
June 30
2020
|
3 Months
Ended
June 30
2019
|
6 Months
Ended
June 30
2020
|
6 Months
Ended
June 30
2019
|
Financial data
|
|
|
|
|
Property
revenue
|
$
|
17,212
|
$
|
13,561
|
$
|
34,919
|
$
|
27,071
|
Net operating income
(NOI) (1)
|
$
|
9,773
|
$
|
8,448
|
$
|
20,128
|
$
|
16,906
|
Total
assets
|
$
|
646,321
|
$
|
524,217
|
$
|
646,321
|
$
|
524,217
|
Debt to Gross Book
Value (1)
|
|
58.71%
|
58.26%
|
58.71%
|
58.26%
|
Interest Coverage
Ratio (1)
|
2.8x
|
2.6x
|
2.9x
|
2.6x
|
Debt Service Coverage
Ratio (1)
|
1.6x
|
1.6x
|
1.7x
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
3.72%
|
3.87%
|
3.72%
|
3.87%
|
Net cash flows
provided from (used in) operating
activities
|
$
|
900
|
$
|
(382)
|
$
|
4,200
|
$
|
4,159
|
Funds from Operations
(FFO) (1)
|
$
|
4,835
|
$
|
1,509
|
$
|
10,591
|
$
|
5,869
|
Basic FFO per unit
(1)(2)
|
$
|
0.1208
|
$
|
0.0480
|
$
|
0.2649
|
$
|
0.1865
|
Diluted FFO per unit
(1)(2)
|
$
|
0.1180
|
$
|
0.0467
|
$
|
0.2594
|
$
|
0.1818
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,217
|
$
|
4,848
|
$
|
11,206
|
$
|
9,677
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1304
|
$
|
0.1541
|
$
|
0.2803
|
$
|
0.3075
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1274
|
$
|
0.1501
|
$
|
0.2745
|
$
|
0.2998
|
AFFO Payout Ratio –
Basic (1)
|
86.3%
|
102.2%
|
96.3%
|
102.4%
|
AFFO Payout Ratio –
Diluted (1)
|
88.3%
|
104.9%
|
98.4%
|
105.1%
|
|
|
(1)
|
Non–IFRS measure. See
"Non–IFRS and Operational Key Performance Indicators".
|
|
|
(2)
|
Total basic units
consist of trust units of PROREIT 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.
|
PROREIT owned 93 investment properties at June 30, 2020, compared to 84 properties at the
same time last year. Total assets amounted to $646.3 million at June 30,
2020, representing an increase of $122.1 million, or 23.3%, compared to
$524.2 million at June 30, 2019. The increase is mainly due to the
acquisition of nine investment properties in the twelve-month
period ended June 30, 2020.
For the second quarter ended June 30,
2020:
- Property revenue was $17.2
million. The increase of $3.7
million, or 26.9%, compared to the same period last year, is
primarily due to incremental revenues from property acquisitions
completed in the twelve-month period ended June 30, 2020.
- Same property net operating income1 was $7.8 million, a decrease of $0.4 million, or 4.3%, compared to the same
quarter last year. The decrease is mainly attributable to COVID-19
related bad debt provisions, CECRA participation and rental
abatements.
- Net operating income1 was $9.8 million, an increase of $1.3 million, or 15.7%, compared to $8.4 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
June 30, 2020, partially offset by
COVID–19 related bad debt provisions, CECRA participation and
rental abatements of $0.4
million.
- AFFO1 totalled $5.2
million, a $0.4 million
increase compared to $4.8 million for
the same period last year, or a 7.6% increase year over year. This
increase is mainly due to property acquisitions completed in the
twelve-month period ended June 30,
2020, partially offset by COVID–19 related bad debt
provisions, CECRA participation and rental abatements of
$0.4 million.
- AFFO payout ratio1 stood at 86.3% compared to 102.2%
for the same period last year, a 15.6% improvement. The favorable
variance mainly relates to the revision of PROREIT's monthly
distributions to $0.0375 per unit
from $0.0525 commencing April 2020.
______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
For the six-month period ended June
30, 2020:
- Property revenue was $34.9
million. The increase of $7.8
million, or 29.0%, compared to the same period last year, is
primarily due to incremental revenues from property acquisitions
completed in the twelve-month period ended June 30, 2020.
- Same property net operating income1 was $16.0 million, a decrease of $0.3 million, or 2.1%, compared to the same
period last year. The decrease is mainly attributable to COVID-19
related bad debt provisions, CECRA participation and rental
abatements.
- Net operating income1 was $20.1 million, an increase of $3.2 million, or 19.1%, compared to $16.9 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
June 30, 2020, partially offset by
COVID–19 related bad debt provisions, CECRA participation and
rental abatements of $0.4
million.
- AFFO1 totalled $11.2
million, a $1.5 million
increase compared to $9.7 million
last year, or a 15.8% increase year over year. This increase is
mainly due to property acquisitions completed in the twelve-month
period ended June 30, 2020, partially
offset by COVID–19 related bad debt provisions, CECRA participation
and rental abatements of $0.4
million.
- AFFO payout ratio1 stood at 96.3% compared to 102.4%
for the same period last year, a 6.0% improvement. The favorable
variance mainly relates to the revision of PROREIT's monthly
distributions to $0.0375 per unit
from $0.0525 commencing April 2020.
- During the first quarter of 2020, PROREIT acquired a 100%
interest in a 135,494 square-foot light industrial property in
Moncton, New Brunswick, for
$8.4 million before closing
costs.
______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
TABLE 2- RECONCILIATION OF NET OPERATING INCOME TO NET INCOME
(LOSS) AND COMPREHENSIVE INCOME (LOSS)
(CAD $
thousands)
|
3 Months
Ended
June 30
2020
|
3 Months
Ended
June 30
2019
|
6 Months
Ended
June 30
2020
|
6 Months
Ended
June 30
2019
|
Property
revenue
|
$
|
17,212
|
$
|
13,561
|
$
|
34,919
|
$
|
27,071
|
Property operating
expenses
|
7,439
|
5,113
|
14,791
|
10,165
|
Net operating
income (NOI) (1)
|
9,773
|
8,448
|
20,128
|
16,906
|
General and
administrative expenses
|
893
|
574
|
1,576
|
1,097
|
Long–term incentive
plan expense
|
942
|
395
|
(2,316)
|
1,667
|
Depreciation of
property and equipment
|
67
|
54
|
141
|
72
|
Amortization of
intangible assets
|
93
|
93
|
186
|
186
|
Interest and
financing costs
|
3,787
|
3,325
|
7,676
|
6,550
|
Distributions – Class
B LP Units
|
186
|
419
|
584
|
848
|
Fair value adjustment
– Class B LP Units
|
1,442
|
571
|
(7,946)
|
3,926
|
Fair value adjustment
– investment properties
|
5,301
|
(6,777)
|
5,259
|
(6,728)
|
Other
income
|
(490)
|
(819)
|
(999)
|
(1,345)
|
Other
expenses
|
322
|
491
|
600
|
810
|
Transaction
costs
|
-
|
3,045
|
-
|
3,076
|
Net income (loss)
and comprehensive income
(loss)
|
$
|
(2,770)
|
$
|
7,077
|
$
|
15,367
|
$
|
6,747
|
(1)
|
See "Non–IFRS and
Operational Key Performance Indicators".
|
For the three months ended June 30,
2020, net loss and comprehensive loss was $2.8 million, compared to net income and
comprehensive income of $7.1 million
for the same prior-year period. The $9.8
million decrease mainly relates to the $12.1 million difference in the non-cash fair
value adjustment on investment properties, partially offset by a
$1.3 million favourable impact in net
operating income for the quarter ended June
30, 2020, compared to the same period in 2019.
For the six months ended June 30,
2020, net income and comprehensive income was $15.4 million, an increase of $8.6 million compared to $6.7 million for the same period last year,
mainly as a result of the favourable $11.9
million impact of the non-cash fair value of Class B LP
Units combined with the $4.0 million
non-cash long-term incentive plan and $3.2
million favourable impact in net operating income, partially
offset by the $11.9 million
difference in non-cash fair value adjustment on investment
properties for the six months ended June 30,
2020, compared to the same period last year.
During the quarter, PROREIT internally reviewed the
capitalization rates and expected future cash flows on certain
retail related properties resulting in a fair market value expense
of approximately $4.5 million for the
three- and six-month periods ended June 30,
2020.
Strong Balance Sheet and Solid Cash Position
PROREIT continued to exercise prudent capital management and
remains committed to maintaining a conservative balance sheet. At
the end of the quarter, its debt to gross book
value1 ratio was 58.71% and the weighted
average interest on mortgage debt was 3.72%. PROREIT has no
mortgage maturities coming due in 2020, with only $6 million due in 2021.
PROREIT has an adequate liquidity position, with $10 million of cash and credit available as at
August 12, 2020. PROREIT has a term
loan with an alternative lender to finance acquisitions and fund
deposits on future acquisitions, reduced to $9 million in April
2020, that is fully drawn.
Subsequent to quarter end, on July 16,
2020, PROREIT entered into a new non-revolving credit
facility of $5 million bearing
interest at prime plus 325.0 basis points or bankers' acceptance
rate plus 425.0 basis points. PROREIT continues to seek other
sources of liquidity, although not required at this time.
TABLE 3- TOTAL PORTFOLIO BASE RENT
BY ASSET CLASS
|
June 30,
2020
|
June 30,
2019
|
|
Number of Properties
|
% Base
Rent
|
Number of Properties
|
% Base
Rent
|
Retail
|
49
|
36.2
|
49
|
46.3
|
Commercial Mixed
Use
|
8
|
18.6
|
7
|
10.1
|
Office
|
10
|
15.7
|
9
|
16.1
|
Industrial
|
26
|
29.6
|
19
|
27.6
|
TOTAL
|
93
|
100.0
|
84
|
100.0
|
BY PROVINCE
|
June 30,
2020
|
June 30,
2019
|
|
Number of Properties
|
% Base Rent
|
Number of Properties
|
% Base
Rent
|
Maritime
Provinces
|
39
|
42.3
|
32
|
43.7
|
Quebec
|
16
|
14.7
|
16
|
18.3
|
Western
Canada
|
26
|
14.4
|
26
|
18.3
|
Ontario
|
12
|
28.6
|
10
|
19.7
|
TOTAL
|
93
|
100.0
|
84
|
100.0
|
Acquisitions made during the twelve-month period ended
June 30, 2020 contributed to the
diversification of PROREIT's asset portfolio. PROREIT's combined
commercial mixed-use and industrial exposure increased to 48.2% at
the end of the second quarter of 2020 while the Ontario, Quebec and Maritime markets accounted for
85.6% of its portfolio.
______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
TABLE 4- OPERATIONAL HIGHLIGHTS
|
June 30
2020
|
June 30
2019
|
Operational
data
|
|
|
Number of
properties
|
93
|
84
|
Gross leasable area
(square feet) ("GLA")
|
4,580,932
|
3,701,132
|
Occupancy rate
(1)
|
98.1%
|
97.9%
|
Weighted average
lease term to maturity (years)
|
5.4
|
5.7
|
(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 June 30,
2020 was approximately 12,728 square feet of GLA (8,787 square feet
of GLA at June 30, 2019).
|
GLA increased 23.8% to 4,580,932 square feet at June 30, 2020, compared to 3,701,132 square feet
at June 30, 2019. The increase of
879,800 square feet in GLA is a result of the acquisition of nine
investment properties in the twelve-month period ended June 30, 2020.
Well-diversified and Resilient Tenant Base
Occupancy rate remained solid at 98.1% as at June 30, 2020, compared to 97.9% a year earlier.
The anchored, high- profile 10 largest tenants by base rent in
PROREIT's portfolio accounted for approximately 36.4% of base rent
at June 30, 2020, and comprise
approximately 6.9 years of remaining lease term. Credit
quality tenants represent 47.5% of in-place annualized base rent,
and 87% of the portfolio base rent is from national and government
tenants. 67% of the base rent in the retail segment is from tenants
providing essential services to the public, including grocery
stores, pharmacies, financial institutions, government offices and
medical offices.
Weighted average lease term to maturity stood at 5.4 years, and
over 76% of PROREIT's leases maturing in 2020 have been renewed to
date, at an additional 2% average annual rent increase.
Distributions and DRIP
Distributions to unitholders totaling $0.0375 per trust unit of the REIT were declared
monthly during the three months ended June
30, 2020, representing distributions of $0.45 per unit on an annual basis.
Equivalent distributions are paid on the Class B limited
partnership units of PRO REIT Limited Partnership ("Class B LP
Units"), a subsidiary of the REIT.
As announced on April 22, 2020,
monthly distributions, which were previously of $0.0525 per unit, were revised to $0.0375 per unit, allowing for a reduction of
PROREIT'S debt and for flexibility in allocating capital to the
benefit of unitholders. Concurrently, in response to the current
stock market volatility flowing from the COVID-19 pandemic, PROREIT
also suspended its distribution reinvestment plan ("DRIP")
effective April 22, 2020, with
distributions only being paid in cash. The DRIP will remain
suspended until further notice and distributions of PROREIT will be
paid only in cash.
On July 21, 2020, subsequent to
quarter-end, PROREIT announced a cash distribution of $0.0375 per unit for the month of July 2020. The distribution is payable on
August 17, 2020, to unitholders of
record as at July 31, 2020.
Outlook
PROREIT will continue to proactively monitor the situation and
adapt its near-term strategy in light of the global pandemic and
consequent economic disruption, while mitigating the potential
risks facing its business.
While it is impossible to predict the extent or the duration of
the impact of the COVID-19 pandemic, PROREIT believes that its
stable portfolio, solid financial position and experienced team
makes it well-positioned to benefit from an eventual economy
recovery. PROREIT remains fully committed to its long-term strategy
and to creating value for its unitholders.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its second
quarter 2020 results on August 13, 2020, at 10:00 a.m. ET. There will be a question period
reserved for financial analysts. To access the conference call,
please dial (888) 664-6383 or 416-764-8650 or 514-225-6995
(conference id: 17158864). A recording of the call will be
available until August 20, 2020, by
dialing (888) 390-0541 or 416-764-8677, access code
158864.
The conference call will also be accessible via live webcast on
PROREIT's website at www.proreit.com or
https://produceredition.webcasts.com/starthere.jsp?ei=1348066&tp_key=3b0ca72815
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 June 30, 2020 (the
"Q2 2020 MD&A"), 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 ability
of the REIT to executive its growth strategy, the duration and
impact on the REIT and its tenants of the COVID-19 pandemic, the
liquidity position and cash flow of the REIT and its capacity to
pay all expenses, the future use of capital available to the REIT,
and the future performance of the REIT. 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 and "Risks and Uncertainties" in the Q2
2020 MD&A, both of which are available under PROREIT's profile
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 93
commercial properties across Canada representing over 4.5 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.
SOURCE PROREIT