MONTREAL, Nov. 10, 2021 /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" or "Q3") ended September 30, 2021.
Third Quarter 2021 Highlights
- Property revenue of $19.6
million, a 13.2% increase from Q3 2020
- Same property net operating income1 of $10.0 million, a 5.6% increase from Q3 2020, or
3.4% increase excluding COVID-19 related impacts
- Net operating income1 of $12.1 million, a 16.4% increase from Q3 2020
- Net income and comprehensive income of $4.1 million, compared to a net loss and
comprehensive loss of $0.7 million in
Q3 2020
- AFFO1 of $6.6 million,
a 11.8% increase from Q3 2020
- Occupancy rate remains high at 98.5%
- Completion of previously announced accretive acquisitions of 16
industrial properties for $163.2
million subsequent to quarter-end, industrial exposure now
representing 63% of base rent
- Closing of previously announced $69.0
million bought deal equity offering and $14.3 million concurrent private placement
subsequent to quarter-end
- Credit facility to be expanded on improved terms to
$60 million, up $15 million
"We delivered another strong performance in the third quarter of
2021, with historical transaction levels on the acquisition and
capital raise front. With $297
million of industrial market acquisitions since the
beginning of the year, we are actively executing on our specific
growth strategies, increasing our industrial segment exposure and
strengthening our presence in attractive mid-sized Canadian cities
with strong economies," said James W.
Beckerleg, President and Chief Executive Officer of
PROREIT.
"We are also pleased with our robust internal growth, as
evidenced by the increase in same property net operating income
across asset classes during the third quarter and since the
beginning of the year, with the strongest performance in the
industrial segment. With our recent acquisitions and a shorter
average lease term in our industrial portfolio generally, we
believe this positive trend will continue to improve over the
coming quarters, further improving our cash flows and performance
ratios.
"We remain fully committed to maintaining a solid financial and
liquidity position, while steadily decreasing our leverage.
Excluding a $5.2 million deposit made
on recent acquisitions closed subsequent to quarter-end, our debt
to gross book value ratio1 stood at 57.9% at the end of
third quarter, compared to 58.7% a year ago. These strong
results also translate in a payout ratio trending down.
_______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
"In a rebounding economy, we are well-positioned to pursue our
growth and capitalize on the significant potential embedded in our
portfolio. With real estate markets tightening in cities such as
Ottawa, Winnipeg and Halifax where we have a strong presence, our
business outlook is positive and we look forward to creating more
value for our unitholders," Mr. Beckerleg concluded.
RESULTS
Table 1 - Financial Highlights
(CAD $ thousands
except unit, per unit amounts and unless otherwise
stated)
|
3 Months
Ended
September 30
2021
|
3 Months
Ended
September 30
2020
|
9 Months
Ended
September 30
2021
|
9 Months
Ended
September 30
2020
|
Financial data
|
|
|
|
|
|
|
|
|
Property
revenue
|
$
|
19,588
|
$
|
17,302
|
$
|
54,742
|
$
|
52,221
|
Net operating income
(NOI) (1)
|
$
|
12,100
|
$
|
10,399
|
$
|
32,924
|
$
|
30,527
|
Net income (loss) and
comprehensive income (loss)
|
$
|
4,068
|
$
|
(709)
|
$
|
16,803
|
$
|
14,659
|
Total
assets
|
$
|
769,085
|
$
|
634,079
|
$
|
769,085
|
$
|
634,079
|
Debt to Gross Book
Value (1)
|
|
58.19%
|
|
58.72%
|
|
58.19%
|
|
58.72%
|
Interest Coverage
Ratio (1)
|
|
2.7x
|
|
2.8x
|
|
2.7x
|
|
2.7x
|
Debt Service Coverage
Ratio (1)
|
|
1.6x
|
|
1.6x
|
|
1.6x
|
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
|
3.50%
|
|
3.73%
|
|
3.50%
|
|
3.73%
|
Net cash flows
provided from operating activities
|
$
|
833
|
$
|
8,936
|
$
|
9,034
|
$
|
13,137
|
Funds from Operations
(FFO) (1)
|
$
|
6,349
|
$
|
5,527
|
$
|
15,009
|
$
|
16,119
|
Basic FFO per unit
(1)(2)
|
$
|
0.1315
|
$
|
0.1381
|
$
|
0.3323
|
$
|
0.4031
|
Diluted FFO per unit
(2)(2)
|
$
|
0.1284
|
$
|
0.1349
|
$
|
0.3244
|
$
|
0.3943
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
6,556
|
$
|
5,863
|
$
|
17,719
|
$
|
17,070
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1358
|
$
|
0.1465
|
$
|
0.3923
|
|
0.4269
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1325
|
$
|
0.1431
|
$
|
0.3829
|
$
|
0.4176
|
AFFO Payout Ratio –
Basic (1)
|
|
82.8%
|
|
76.8%
|
|
86.0%
|
|
89.6%
|
AFFO Payout Ratio –
Diluted (1)
|
|
84.9%
|
|
78.6%
|
|
88.1%
|
|
91.6%
|
|
|
(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 104 investment properties as at September 30, 2021, compared to 92 properties at
the same time last year. Total assets amounted to $769.1 million as of September 30, 2021,
representing an increase of $135.0
million, or 21.3%, compared to $634.1
million on September 30, 2020.
During the twelve-month period ended September 30, 2021, PROREIT acquired 18
investment properties and sold six non-strategic investment
properties at or above their related carrying values.
For the third quarter ended September
30, 2021:
- Property revenue amounted to $19.6
million, an increase of $2.3
million, or 13.2%, 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 September 30, 2021.
- Same property net operating income1 increased across
all segments to reach $10.0 million,
an increase of $0.5 million, or 5.6%,
compared to the same prior year period. Excluding COVID-related
expenses of $0.2 million recorded in
the third quarter of 2020, same property net operating income
increased by 3.4% in Q3 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 $12.1 million, a $1.7
million or 16.4% 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
September 30, 2021.
- Net income and comprehensive income amounted to $4.1 million, compared to a loss of $0.7 million for the same prior year period. The
increase mainly relates to the impact of non-cash fair value
adjustments in investment properties as well as the favourable
variance in net operating income in the third quarter of 2021
compared to the same prior year period.
- AFFO1 totaled $6.6
million, a $0.7 million or
11.8% increase, compared to the same period last year. The increase
reflects the favourable impact of the net property acquisitions in
the twelve-month period ended September 30,
2021, partially offset by an increase in maintenance capital
expenditures, stabilized leasing costs and general and
administrative expenses.
- Net cash flows provided from operating activities was
$0.8 million, compared to
$8.9 million for the same prior
period. The change is mainly attributable to timing between cash
receipts from rent collections and settlement of payables in
addition to a $5.2 million deposit
paid with respect to recent acquisitions closed subsequent to
quarter-end.
- AFFO payout ratio1 stood at 82.8% compared to 76.8%
for the same prior year period. The increase in the payout ratio as
well as the reduction in the corresponding AFFO per
unit1 amounts is mainly due to a non-recurring expense
reduction for one property in prior period of 2020.
For the nine-month period ended September
30, 2021:
- Property revenue was $54.7
million. The increase of $2.5
million or 4.8%, 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
September 30, 2021.
- Same property net operating income1 increased across
all segments to reach $29.1 million,
an increase of $1.0 million or 3,4%,
compared to the same period last year. Excluding COVID-19 related
expenses of $0.3 million recorded in
the nine-month period of 2020, the increases was 2.2%. The growth
reflects increased occupancy, contracted rent steps and higher net
renewal rents in the portfolio.
- Net operating income1 was $32.9 million, an increase of $2.4 million or 7.8%, 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 September 30, 2021.
- Net income and comprehensive income amounted to $16.8 million, an increase of $2.1 million or 14.6%, compared to the same prior
year period. The difference relates to the net property
acquisitions as well as non-cash fair value adjustments in
investment properties and non-cash long-term incentive plan expense
for the first nine months of 2021, partially offset by the impact
of the non-cash fair value of Class B LP Units compared to the same
prior year period.
- AFFO1 totaled $17.7
million, an increase of $0.6
million or 3.8%, compared to the same prior year period. The
increase reflects the favourable impact of the net property
acquisitions in the twelve-month period ended September 30, 2021, partially offset by the
increase in maintenance capital expenditures, stabilized leasing
costs and general and administrative expenses.
- Net cash flows provided from operating activities was
$9.0 million, compared to
$13.1 million for the same prior
period. The change is mainly attributable to timing between cash
receipts from rent collections and settlement of payables in
addition to a $5.2 million deposit
paid with respect to recent acquisitions.
- AFFO payout ratio1 stood at 86.0% compared to 89.6%
for the same period last year. The decrease in the payout ratio was
primarily driven by 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".
|
Solid Balance Sheet and Liquidity Position
PROREIT is committed to steadily improving its balance sheet and
liquidity position. As at September 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 58.19%. Excluding
the impact of a $5.2 million deposit
made on recent acquisitions closed subsequent to quarter-end, debt
to gross book value ratio amounted to 57.9%.
Subsequent to quarter-end, PROREIT received confirmation from
its lender that its revolving credit facility will be increased to
$60.0 million on improved terms, an
increase of $15.0 million, adding to
PROREIT's operating liquidity availability while reducing its
contracted borrowing costs going forward.
On October 6, 2021, subsequent to
quarter-end, PROREIT completed its previously announced public
offering of trust units on a bought deal basis for total gross
proceeds of $69 million, including
1,314,000 units issued pursuant to the full exercise of the
over–allotment option. Concurrently, PROREIT completed a
non–brokered private placement with Collingwood Investments
Incorporated, a member of the Bragg Group of Companies, from
Nova Scotia, for total gross
proceeds of $14.3 million. PROREIT
used the net proceeds from the offering and the private placement
to partially fund the acquisitions closed subsequent to
quarter-end, to repay certain indebtedness which may be
subsequently redrawn, and the balance if any to fund future
acquisitions and for general business and working capital
purposes.
_______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
Portfolio Transactions
On September 29, 2021, PROREIT
sold three non–strategic properties located in New Brunswick for gross proceed of
$8.1 million, marginally above their
related carrying value. The proceeds were used to repay the
property mortgages and for general trust purposes.
On November 9, 2021, subsequent to
quarter-end, PROREIT announced the completion of its acquisition of
a 100% interest in 15 industrial properties located in Atlantic Canada and one industrial property in
Winnipeg, Manitoba, for an
aggregate purchase price of $163.2
million (excluding closing costs). The purchase price was
substantially financed by the proceeds of $105.6 million of new three–year and seven–year
first mortgages at an average rate of 2.97% and the assumption of
an $8.4 million first mortgage with
an effective interest rate of 2.75%. The balance of the purchase
price was satisfied with cash on hand from the offering and the
private placement.
Impact of the Transactions on PROREIT's Overall
Portfolio
PROREIT's portfolio is now comprised of 120 income producing
commercial properties representing approximately 6.6 million square
feet of gross leasable area ("GLA") with a weighted average lease
term of 4.5 years. The recent addition of industrial properties has
improved portfolio balance by increasing exposure to the industrial
segment to 78% by GLA and 63% by base rent, while increasing the
footprint in the Maritime provinces to 51% by GLA and 47% by base
rent.
Portfolio Overview
Province
|
% By Base
Rent
|
% By
GLA
|
Asset
Class
|
% By Base
Rent
|
% By
GLA
|
Maritime
Provinces
|
47%
|
51%
|
Industrial
|
63%
|
78%
|
Ontario
|
27%
|
24%
|
Retail
|
26%
|
15%
|
Western
Canada
|
16%
|
14%
|
Office
|
11%
|
7%
|
Quebec
|
10%
|
12%
|
|
|
|
Total
|
100%
|
100%
|
Total
|
100%
|
100%
|
Table 2 - Operational Highlights
|
September 30
2021
|
September 30
2020
|
|
|
|
Operational data
|
|
|
Number of
properties
|
104
|
92
|
Gross leasable area
(square feet) (GLA)
|
5,407,664
|
4,571,311
|
Occupancy rate
(1)
|
98.5%
|
98.1%
|
|
|
(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, 2021 was approximately 110,653 square feet of GLA
(43,203 square feet of GLA at September 30, 2020). The occupancy at
September 30, 2021 excludes an 82,000 square foot building under
redevelopment.
|
GLA increased 18.3% to 5,407,664 square feet at September 30, 2021, compared to 4,571,311 square
feet at September 30, 2020. The
increase of 836,353 square feet is mainly attributable to the net
increase in investment properties in the twelve-month period ended
September 30, 2021.
Leasing momentum continued in the third quarter of 2021.
Occupancy rate increased to 98.5% as of September 30, 2021, compared to 98.1% a year
earlier, with substantially all rent collected in Q3 2021. PROREIT
has renewed approximately 92% of total square feet maturing in 2021
at positive spreads averaging 10.2%, as well as approximately one
third of 2022 renewals which will also be at positive spreads,
again especially in the industrial sector.
PROREIT's tenant mix is well diversified by industry sector. As
of September 30, 2021, approximately
77% of portfolio base rent is from national and government tenants,
and 66.5% 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 34.9% of annual base rent at September 30, 2021 and have an average remaining
lease term of 5.6 years.
Distributions
Distributions to unitholders of $0.0375 per trust unit of the REIT were declared
monthly during the three months ended September 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.
Renewal of Normal Course Issuer Bid
On September 21, 2021, PROREIT announced that the Toronto
Stock Exchange accepted its notice to renew its normal course
issuer bid ("NCIB") for a one-year period. The NCIB commenced
on September 24, 2021 and will terminate on the earlier
of: (i) September 23, 2022, and (ii) the date on which the
maximum number of units that can be acquired pursuant to the NCIB
are purchased. PROREIT may purchase up to 1,404,238 trust units
under the NCIB, representing 3.0% of the REIT's 46,807,962 issued
and outstanding trust units as at September 17, 2021.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its third quarter
2021 results on November 11, 2021, at 10:30 a.m. Eastern. 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: 81238978). A recording of the call will be available
until November 18, 2021 by
dialing 888-390-0541 or 416-764-8677 Access code:
238978 #
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=1504529&tp_key=20c1180403
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 September 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,
economic conditions, the future performance of PROREIT and the
increase of its credit facility and the terms thereof. 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 September 30, 2021, which are
available under PROREIT's profile on SEDAR at www.sedar.com.
SOURCE PROREIT