MONTREAL, Aug. 11, 2021 /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" or "Q2") ended June
30, 2021.
Second Quarter 2021 Highlights
- Property revenue of $17.8
million, a 3.2% increase from Q2 2020
- Same property net operating income1 of $9.9 million, a 6.2% increase from Q2 2020, or
4.3% increase excluding COVID-19 related impacts
- Net operating income1 of $10.7 million, a 9.8% increase from Q2 2020
- Net income and comprehensive income of $11.1 million, compared to a net loss and
comprehensive loss of $2.7 million in
Q2 2020
- AFFO1 of $5.7 million,
a 10.0% increase from Q2 2020
- Occupancy rate up at 98.5%
- Completion of previously announced accretive acquisitions of 18
industrial properties for $133.7
million
- Closing of previously announced $50
million private placement with major equity investor
"As we move towards a new normal and a strong restart of the
economy, we are pleased with our results for the second quarter of
2021," said James Beckerleg, CEO of
PROREIT.
"We continue to experience solid momentum, as evidenced by the
positive trends reflected across our key operational and financial
metrics. Notably, the increase in same property net operating
income across our sectors of activity highlights the fundamental
strength of our high-quality portfolio and stability of our tenant
base. On the occupancy front, we continue to successfully renew
maturing leases at favourable terms and are progressing well in our
negotiations for remaining leases coming due in 2021 and
2022.
"We have maintained a solid balance sheet, underpinned by the
completion of accretive portfolio acquisitions and financing
transactions in the quarter. The benefits of the private placement,
refinanced mortgages with improved terms and 18 property
acquisitions at very attractive debt terms will be fully reflected
in our third quarter results.
"Looking ahead, we are staying the course regarding our
strategic plan, with a focus on the robust industrial sector while
scaling up our presence in attractive Canadian mid-market cities.
With our next stage of growth currently underway and many new
opportunities to capture ahead, we are committed to creating
long-term value to the benefit of our unitholders,"
Mr. Beckerleg concluded.
RESULTS
Table 1 - Financial Highlights
(CAD $ thousands
except unit, per unit amounts and unless otherwise
stated)
|
3 Months
Ended
June 30
2021
|
3 Months
Ended
June 30
2020
|
6 Months
Ended
June 30
2021
|
6 Months
Ended
June 30
2020
|
Financial data
|
|
|
|
|
|
|
|
|
Property
revenue
|
$
|
17,764
|
$
|
17,212
|
$
|
35,154
|
$
|
34,919
|
Net operating income
(NOI) (1)
|
$
|
10,731
|
$
|
9,773
|
$
|
20,824
|
$
|
20,128
|
Net income (loss) and
comprehensive income (loss)
|
$
|
11,101
|
$
|
(2,770)
|
$
|
12,735
|
$
|
15,367
|
Total
assets
|
$
|
772,881
|
$
|
646,321
|
$
|
772,881
|
$
|
646,321
|
Debt to Gross Book
Value (1)
|
58.22%
|
58.71%
|
58.22%
|
58.71%
|
Interest Coverage
Ratio (1)
|
2.8x
|
2.8x
|
2.7x
|
2.9x
|
Debt Service Coverage
Ratio (1)
|
1.6x
|
1.7x
|
1.6x
|
1.7x
|
Weighted average
interest rate on mortgage debt
|
3.50%
|
3.72%
|
3.50%
|
3.72%
|
Net cash flows
provided from operating activities
|
$
|
7,994
|
$
|
900
|
$
|
8,201
|
$
|
4,200
|
Funds from Operations
(FFO) (1)
|
$
|
4,782
|
$
|
4,835
|
$
|
8,660
|
$
|
10,591
|
Basic FFO per unit
(1)(2)
|
$
|
0.1015
|
$
|
0.1208
|
$
|
0.1987
|
$
|
0.2649
|
Diluted FFO per unit
(1)(2)
|
$
|
0.0990
|
$
|
0.1180
|
$
|
0.1940
|
$
|
0.2594
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,741
|
$
|
5,217
|
$
|
11,163
|
$
|
11,206
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1219
|
$
|
0.1304
|
$
|
0.2561
|
$
|
0.2803
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1189
|
$
|
0.1274
|
$
|
0.2500
|
$
|
0.2745
|
AFFO Payout Ratio –
Basic (1)
|
92.3%
|
86.3%
|
87.9%
|
96.3%
|
AFFO Payout Ratio –
Diluted (1)
|
94.6%
|
88.3%
|
90.0%
|
98.4%
|
(1)
|
Non–IFRS measure. See
"Non–IFRS and Operational Key Performance Indicators".
|
(2)
|
Total basic units
consist of trust units of the REIT and Class B LP Units (as defined
herein). Total diluted units also includes deferred trust units and
restricted trust units issued under the REIT's long–term incentive
plan.
|
PROREIT owned 107 investment properties as at June 30, 2021, compared to 93 properties at the
same time last year. Total assets amounted to $772.8 million as of June
30, 2021, representing an increase of $126.5 million, or 19.6%, compared to
$646.3 million on June 30, 2020. During the twelve-month period
ended June 30, 2021, PROREIT acquired
18 industrial investment properties and sold four non-strategic
investment properties at or above their related carrying
values.
For the second quarter ended June
30, 2021:
- Property revenue amounted to $17.8
million, an increase of $0.5
million, or 3.2%, compared to the same prior year period.
The increase relates to the favourable impact of the net property
acquisitions in the twelve-month period ended June 30, 2021.
- Same property net operating income1 reached
$9.9 million, an increase of
$0.6 million, or 6.2%, compared to
the same prior year period. Excluding COVID-related expenses of
$0.2 million recorded in the second
quarter of 2020, same property net operating income increased by
4.3% in Q2 2021 compared to the same prior year period. The growth
reflects increased occupancy, contracted rent steps, and higher net
renewal rents in the portfolio.
- Net operating income1 reached $10.7 million, a $1.0
million or 9.8% increase, compared to the same prior year
period. The change is mainly attributable to the net increase in
the number of properties in the twelve-month period ended
June 30, 2021.
- Net income and comprehensive income amounted to $11.1 million, compared to a loss of $2.8 million for the same prior year period. The
increase relates to the net impact of non-cash fair value
adjustments in investment properties as well as the favourable
variance in net operating income in the second quarter of 2021
compared to the same prior year period.
- AFFO1 totaled $5.7
million, a $0.5 million or
10.4% increase, compared to $5.2
million for the same period last year. The increase reflects
the favourable impact of the net property acquisitions in the
twelve-month period ended June 30,
2021.
- Net cash flows provided from operating activities was
$7.9 million, compared to
$0.9 million for the same prior
period. The change is mainly attributable to the net change in
non-cash working capital in comparing the respective periods.
- AFFO payout ratio1 stood at 92.3% compared to 86.3%
for the same prior year period. The increase in the payout ratio as
well as the reduction in the corresponding per unit amounts relate
to the impact of the timing of the deployment of funds from the
private placement and incremental monthly distributions paid in the
current quarter on the newly issued units from the private
placement.
For the six-month period ended June 30,
2021:
- Property revenue was $35.2
million. The increase of $0.2
million compared to the same period last year is primarily
due to incremental revenues from the net property acquisitions
completed in the twelve-month period ended June 30, 2021.
- Same property net operating income1 was $19.6 million, an increase of $0.3 million or 2.6%, compared to the same period
last year. Excluding COVID-19 related expenses of $0.1 million recorded in the second quarter of
2020, the increases was 2.0%. The growth reflects increased
occupancy, contracted rent steps, and higher net renewal rents in
the portfolio.
- Net operating income1 was $20.8 million, an increase of $0.7 million or 3.5%, compared to the same period
last year. This increase results primarily from the favourable
impact of the net property acquisitions in the twelve-month period
ended June 30, 2021.
- Net income and comprehensive income amounted to $12.7 million, a decrease of $2.6 million compared to the same prior year
period. The difference relates to non-cash fair value adjustments
in investment properties, the impact of the non-cash fair value of
Class B LP Units (as defined below) and the variance in non-cash
long-term incentive plan expense for the first six months of 2021,
compared to the same prior year period.
- AFFO1 totaled $11.2
million, comparable to the same prior year period.
- Net cash flows provided from operating activities was
$8.2 million, compared to
$4.2 million for the same prior
period. The change is due to net changes in non-cash working
capital, long-term incentive plan expense, and fair value
adjustments to Class B LP units and investment properties in
comparing the respective periods.
- AFFO payout ratio1 stood at 87.9% compared to 96.3%
for the same period last year. This improvement is mainly due to
the change in monthly distributions starting April 2020.
Solid Balance Sheet and Liquidity Position
PROREIT is committed to steadily improving its balance sheet and
liquidity position, including improving its debt to gross book
value ratio. As at June 30, 2021,
PROREIT had in excess of $20 million
of operating liquidity through cash on hand and undrawn operating
facilities. At the end of the quarter, PROREIT's debt to gross book
value ratio1 was 58.2%.
During the second quarter, PROREIT closed its previously
announced $50 million private
placement with Collingwood Investments Incorporated, a member of
the Bragg Group of Companies of Nova
Scotia. PROREIT also entered into a new $24.8 million mortgage financing with a term of
seven years at a rate of 3.70%, to refinance six retail
properties.
Portfolio Transactions
During the second quarter of 2021, PROREIT completed the
acquisition of 18 previously announced properties and sold one
non-strategic property:
- On April 23, 2021, PROREIT closed
its previously announced acquisition of a 100% interest in three
light industrial buildings in Ottawa,
Ontario, for an aggregate purchase price of $49.2 million before closing costs.
- On April 28, 2021, PROREIT sold a
non-strategic retail property located in Fredericton, New Brunswick, for gross proceeds
of $4.9 million, marginally above
IFRS carrying value.
- On May 14, 2021, PROREIT acquired
an industrial building in Moncton, New
Brunswick, for $4.5 million
before closing costs.
- On May 25, 2021, PROREIT closed
its previously announced acquisition of a light industrial property
located in Winnipeg, Manitoba, for
an aggregate purchase price of $5.2
million before closing costs.
- On June 28, 2021, PROREIT closed
its previously announced acquisition of a 100% interest in five
single-tenant light industrial properties located in four of
Atlantic Canada's major cities,
for an aggregate purchase price of $42.5
million before closing costs.
- On June 29, 2021, PROREIT closed
its previously announced acquisition of a 100% interest in eight
light industrial buildings in Winnipeg,
Manitoba, for an aggregate purchase price of $32.3 million before closing costs.
Table 2- Total Portfolio Base Rent
BY ASSET CLASS
|
June 30,
2021
|
June 30,
2020
|
|
Number of Properties
|
% Base
Rent
|
Number
of Properties
|
% Base
Rent
|
Retail
|
47
|
30.4
|
49
|
36.2
|
Office
|
9
|
13.2
|
10
|
15.7
|
Industrial
|
51
|
56.4
|
34
|
48.2
|
TOTAL
|
107
|
100.0
|
93
|
100.0
|
BY PROVINCE
|
June 30,
2021
|
June 30,
2020
|
|
Number of Properties
|
% Base Rent
|
Number
of Properties
|
% Base Rent
|
Maritime
Provinces
|
43
|
40.5
|
39
|
42.3
|
Quebec
|
14
|
11.7
|
16
|
14.7
|
Western
Canada
|
35
|
17.0
|
26
|
14.4
|
Ontario
|
15
|
30.8
|
12
|
28.6
|
TOTAL
|
107
|
100.0
|
93
|
100.0
|
PROREIT's portfolio is diversified by asset class and geography,
focused on strategic locations in attractive mid-sized Canadian
markets. Acquisitions made during the twelve-month period ended
June 30, 2021 have further
diversified the portfolio. Industrial exposure increased to 56.4%
at the end of the second quarter of 2021, compared to 48.2% a year
ago. Acquisitions made in Winnipeg
and Ottawa have increased
PROREIT's geographic presence in Ontario and Manitoba.
Table 3- Operational Highlights
|
June 30
2021
|
June 30
2020
|
Operational data
|
|
|
Number of
properties
|
107
|
93
|
Gross leasable area
(square feet) ("GLA")
|
5,510,707
|
4,580,932
|
Occupancy rate
(1)
|
98.5%
|
98.1%
|
Weighted average
lease term to maturity (years)
|
4.8
|
5.4
|
(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,
2021 was approximately 99,039 square feet of GLA (12,728 square
feet of GLA at June 30, 2020). The occupancy at June 30, 2021
excludes an 82,000 square foot building under
redevelopment.
|
GLA increased 20.3% to 5,510,707 square feet at June 30, 2021, compared to 4,580,932 square feet
at June 30, 2020. The increase
of 929,775 square feet is mainly attributable to the net increase
in investment properties in the twelve-month period ended
June 30, 2021.
Leasing momentum continued in the second quarter of 2021.
Occupancy rate increased to 98.5% as of June
30, 2021, compared to 98.1% a year earlier, with
substantially all rent collected in Q2 2021. PROREIT has renewed
approximately 80% of total square feet maturing in 2021 at positive
spreads averaging 4%, as well as 17% of 2022 renewals at positive
spreads averaging 3%.
PROREIT's tenant mix is well diversified by industry sector. As
of June 30, 2021, approximately 79%
of portfolio base rent is from national and government tenants.
Approximately 66% of base rent in the retail segment is from
tenants providing necessary services to the public, including
groceries, pharmacies, financial institutions, government offices
and medical offices. The ten largest tenants in PROREIT's portfolio
accounted for approximately 33.7% of annual base rent at
June 30, 2021, compared to 37.5% at
March 31, 2021, and have an average
remaining lease term of 5.9 years.
Distributions
Distributions to unitholders of $0.0375 per trust unit of the REIT were declared
monthly during the three months ended June
30, 2021, representing distributions of $0.45 per unit on an annual basis.
Equivalent distributions are paid on the Class B limited
partnership units of PROREIT Limited Partnership ("Class B LP
Units"), a subsidiary of the REIT.
Strategy and Outlook
PROREIT remains committed to driving growth and creating value
for unitholders, while maintaining a solid financial position in
order to make sound capital allocation decisions on a long-term
basis.
With the restart of the economy and debt financing available at
historically low interest rates benefiting the real estate market,
business outlook is positive. PROREIT has resumed its growth
strategy, focused on the acquisition of high-quality, low-risk real
estate in the many attractive Canadian mid-sized cities, with
increased exposure to the industrial sector.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its second
quarter 2021 results on August 12, 2021, at 10:30 a.m. EDT. 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: 69006300). A recording of the call will be available
until August 19, 2021 by
dialing 888-390-0541 or 416-764-8677 Access code:
006300 #
The conference call will also be accessible via live webcast on
PROREIT's website at www.proreit.com or at
https://produceredition.webcasts.com/starthere.jsp?ei=1480387&tp_key=2df42416b7
About PROREIT
PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate
investment trust owning a diversified portfolio of diversified
commercial properties across Canada. 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. For more
information, go to: 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 net operating income
("NOI"), adjusted funds from operations ("AFFO"), debt to gross
book value, interest coverage ratio, debt service coverage ratio,
funds from operations ("FFO"), AFFO payout ratio and same property
net operating income ("same property NOI"). 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 month period
ended June 30, 2021, 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 execution
by PROREIT of its growth strategy, the future economic activity,
PROREIT's acquisition pipeline, economic conditions and the future
performance of PROREIT. PROREIT's objectives and forward-looking
statements are based on certain assumptions, including that (i)
PROREIT will receive financing on favourable terms; (ii) the future
level of indebtedness of PROREIT and its future growth potential
will remain consistent with the REIT's current expectations; (iii)
there will be no changes to tax laws adversely affecting PROREIT's
financing capacity or operations; (iv) the impact of the current
economic climate and the current global financial conditions on
PROREIT's operations, including its financing capacity and asset
value, will remain consistent with PROREIT's current expectations;
(v) the performance of PROREIT's investments in Canada will proceed on a basis consistent with
PROREIT's current expectations; and (vi) capital markets will
provide PROREIT with readily available access to equity and/or
debt. Without limitation, there can be no assurance that any
discussions or agreements PROREIT may have concerning future
acquisitions will result in definitive agreements or property
acquisitions, and, if they do, what the terms or timing of any such
acquisitions would be.
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 "Risk and Uncertainties" in PROREIT's
management's discussion and analysis for the three month period
ended June 30, 2021, which are
available under PROREIT's profile on SEDAR at www.sedar.com.
_____________________
|
1 Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
SOURCE PROREIT