Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

TD ON EARNINGS

[Princeps979]

Artis REIT (AX.UN-T) C$10.65 Q4/18 First Look: Results In Line Jonathan Kelcher, CFA Lorne Kalmar, CPA, CA (Associate) Event Artis reported Q4/18 FFO/unit (f.d.) of $0.33, 6% below Q4/17, but in line with our estimate and consensus at $0.33. AFFO/unit (our calculation) of $0.24 was a penny below our estimate. Conference call is today at 1:00 PM ET (416-764-8688 or 1-888-390-0546). Impact: NEUTRAL Operating Highlights Portfolio SPNOI was +2.7% (+1.1% in 2018). Canada was -0.4% with declines in Office (-2.1%) and Retail (-0.5%) partially offset by Industrial (+2.4%). U.S. SPNOI was +3.4% (+7.4% in CAD). Gains in Office (+1.4%) and Industrial (+9.9%) portfolios were partially offset by the Retail portfolio (0.0%). Stabilized SPNOI was +4.4%. Q4/18 Occupancy was 92.1% (93.7% committed), +90bps q/q. Q4 lease renewal rental rates were flat (+2.3% in 2018). Artis estimates market rents are 1.3% above in-place rents. 21.9% of 2019 lease maturities have either been renewed/released. Acquisition/Disposition/Development Activity Acquired Boulder Lakes Business Park in Minnesota for US$56.9 million (US $255/sf). As part of its strategic initiative, Artis has identified $800 million to $1 billion of non-core assets to sell over the next three years. The REIT currently has listed 16 properties for sale with an IFRS value of $320 million. During Q4, completed base-building construction on Park Lucero IV and leased the entire 96,000 sf building to one tenant, beginning Q2/19. Balance Sheet NCIB. During Q4, acquired 3.5 million units for $34.6 million ($9.77/unit). Post Q4, acquired a further 3.5 million units for $36.0 million ($10.27/unit). Q4 IFRS NAV was $15.55, +2.9% q/q. $26.8 million FV loss (related to AB office properties and select U.S. office properties) was more than offset by NCIB. D/GBV was +130bps q/q to 49.9%.