MONTREAL, Nov. 04, 2020 (GLOBE NEWSWIRE) -- (TSX-V: FRO.UN) Fronsac Real Estate Investment Trust (“Fronsac”) announces its results for the quarter ended September 30th, 2020, an increase in its annual per unit distribution for a ninth consecutive year as well as distributions for the months of January, February and March 2021. Fronsac also announces to its unitholders that its Board of Trustee has approved a consolidation of units at a ratio of 1 for 10 to take place in the week of November 9th, 2020.
Distributions
Starting in January 2021, the annual distribution will go from 2.555¢ to 3.000¢ per unit (25.55¢ to 30.00¢ post-consolidation), representing an increase of 17.4%. Including this increase, Fronsac’s distributions have increased 140% since its first distributions in 2012, representing a compounded annual growth rate of 10.4%.
Fronsac also announces that it will make monthly cash distributions of 2.5¢ per unit, representing 30.0¢ per unit on an annualized basis (post-consolidation), on January 29th, February 26th and March 31st, 2021 to unitholders of record on January 15th, February 15th and March 15th, 2021, respectively.
For the quarter ended September 30th, 2020, Fronsac reported recurring funds from operations ("Recurring FFO") per unit of 1.27¢ compared to 1.02¢ per unit for the quarter ended September 30, 2019, an increase of 24%. Recurring FFO was $1,864,681, an increase of 56% ($1,197,449 in Q3 2019). During Q3 2020, the Trust’s property rental income was $3,219,366 compared to $2,458,451 in Q3 2019, an increase of 31%. NOI (Net operating Income) was $2,477,609 compared to $1,881,747 in Q3 2019, an increase of 32%. Fronsac recorded a net income attributable to unitholders of $2,139,737, or 1.45¢ per unit, compared to a net income of $3,891,506, or 3.33¢ per unit in Q3 2019.
For the nine-month period ended September 30th, 2020, Fronsac reported Recurring FFO per unit of 3.61¢ compared to 3.04¢ per unit for the comparable period in 2019, an increase of 19%. Recurring FFO was $5,139,573, an increase of 55% ($3,319,677 for the same period in 2019). During the 9-month period ended September 30, 2020, the Trust’s property rental income was $9,286,366 compared to $6,650,030 for the same period in 2019, an increase of 40%. NOI (Net operating Income) was $7,126,776 compared to $5,142,963 for the same period in 2019, an increase of 39%. Fronsac recorded a net income attributable to unitholders of $8,773,525, or 6.16¢ per unit, compared to a net income of $5,078,881, or 4.64¢ per unit for the same period in 2019.
Jason Parravano, President and CEO declares: “For another year we have continued to execute our business plan and have delivered year over year per unit FFO growth. That growth has allowed us, for a ninth consecutive year, to increase our per unit distribution this year by 17%. I believe that these two factors together prove the resilience of our model and tenant base in what we can call a challenging year on all fronts. On that note, I am proud to say that our collections for the quarter remained in excess of 99%. In addition, we announced today the consolidation of our units which we believe will attract a wider audience of potential investors thereby resulting in a more efficient market for our units.”
The tables below represent other financial highlights as well as the reconciliation from net income to FFO for the periods ended September 30th, 2020 and its comparative period. This information should be read in conjunction with the Consolidated Financials Statements and MD&A for the quarter ended September 30th, 2020 and the Amended and Restated Consolidated Financials Statements and MD&A for the quarter ended September 30th, 2019.
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| SUMMARY OF SELECTED ANNUAL INFORMATION |
| | 9 months | | | | |
| Periods ended September 30 | 2020 | 2019 | | | Δ | % |
| Financial info | | | | | | |
| Property rental income | 9,286,366 | 6,650,030 | | | 2,636,336 | 40% |
| Total revenue | 9,296,656 | 6,650,030 | | | 2,646,626 | 40% |
| Net income (loss) and | | | | | | |
| comprehensive income (loss) | 8,773,525 | 5,078,881 | | | 3,694,644 | - |
| NOI (1) | 7,126,776 | 5,142,963 | | | 1,983,813 | 39% |
| FFO (1) | 5,149,863 | 3,319,677 | | | 1,830,186 | 55% |
| Recurring FFO (1)(2) | 5,139,573 | 3,319,677 | | | 1,819,896 | 55% |
| AFFO (1) | 4,747,684 | 3,276,191 | | | 1,471,493 | 45% |
| EBITDA (1) | 7,074,997 | 4,887,851 | | | 2,187,146 | 45% |
| Investment properties (3) | 171,615,448 | 133,413,308 | | | 38,202,140 | 29% |
| Total assets | 159,169,429 | 126,614,742 | | | 32,554,687 | 26% |
| Total mortgage/loans/long term debt (4) | 73,912,110 | 60,553,952 | | | 13,358,158 | 22% |
| (including revolving line of credit) | 79,247,110 | 68,379,232 | | | 10,867,878 | 16% |
| Total convertible debentures | 3,004,263 | 2,967,498 | | | 36,765 | 1% |
| Total equity | 74,303,173 | 53,031,403 | | | 21,271,770 | 40% |
| Weighted average units o/s - basic | 142,399,929 | 109,356,605 | | | 33,043,324 | 30% |
| Amounts on a per unit basis | | | | | | |
| FFO | 0.0362 | 0.0304 | | | 0.0058 | 19% |
| Recurring FFO | 0.0361 | 0.0304 | | | 0.0057 | 19% |
| AFFO | 0.0333 | 0.0300 | | | 0.0033 | 11% |
| Distributions | 0.0192 | 0.0167 | | | 0.0025 | 15% |
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| (1) See appropriate sections for reconciliation to the closest IFRS measure and section "Explanation of non-IFRS financial measures" |
| (2) Recurring FFO excludes ''Other revenues'' items as presented on the Consolidated Financial Statements |
| (3) Includes value of investment properties owned through joint ventures; Refer to Note 4 (Investment Properties) and Note 5 ([1] value of developed properties, [2] leased properties and [3] properties under development) in Fronsac's financial statements |
| (4) Excludes convertible debentures |
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| RECONCILIATION OF NET INCOME TO FFO |
| | 3 months | | | | | 9 months | | | |
| Periods ended September 30 | 2020 | 2019 | | | Δ | | 2020 | 2019 | | | Δ |
| Net income (loss) attributable | | | | | | | | | | | |
| to unitholders | 2,139,737 | 3,891,506 | | | (1,751,769) | | 8,773,525 | 5,078,881 | | | 3,694,644 |
| Debenture issuance costs | - | - | | | - | | - | 30,660 | | | (30,660) |
| Δ in value of investment properties | 101,944 | (2,689,721) | | | 2,791,665 | | (2,261,029) | (2,047,733) | | | (213,296) |
| Δ in value of investment | | | | | | | | | | | |
| properties in joint ventures | (573,653) | 79,560 | | | (653,213) | | (998,787) | 156,687 | | | (1,155,474) |
| Unit based compensation | (66,046) | (275) | | | (65,771) | | 38,404 | 181,305 | | | (142,901) |
| Δ fair value adjustments on derivative | | | | | | | | | | | |
| financial instruments | 85,924 | (112,959) | | | 198,883 | | (602,281) | (107,513) | | | (494,768) |
| Accretion of lease payments | 6,898 | 29,338 | | | (22,440) | | 20,414 | 29,338 | | | (8,924) |
| Income taxes | 167 | - | | | 167 | | (383) | (1,948) | | | 1,565 |
| Realized loss on sale of investment properties | 180,000 | - | | | 180,000 | | 180,000 | - | | | 180,000 |
| FFO(1) | 1,874,971 | 1,197,449 | | | 57% | | 5,149,863 | 3,319,677 | | | 55% |
| FFO per unit | 0.0127 | 0.0102 | | | 24% | | 0.0362 | 0.0304 | | | 19% |
| Other revenues | (10,290) | - | | | (10,290) | | (10,290) | - | | | (10,290) |
| Recurring FFO(1) | 1,864,681 | 1,197,449 | | | 56% | | 5,139,573 | 3,319,677 | | | 55% |
| Recurring FFO per unit | 0.0127 | 0.0102 | | | 24% | | 0.0361 | 0.0304 | | | 19% |
| Distributions | 940,929 | 649,344 | | | 291,585 | | 2,755,753 | 1,805,493 | | | 950,260 |
| Distributions per unit | 0.0064 | 0.0056 | | | 14% | | 0.0192 | 0.0167 | | | 15% |
| FFO - after distributions | 0.0063 | 0.0047 | | | 35% | | 0.0170 | 0.0137 | | | 24% |
| Recurring FFO - after distributions | 0.0063 | 0.0047 | | | 34% | | 0.0169 | 0.0137 | | | 24% |
| Distributions per unit as a % of | | | | | | | | | | | |
| FFO per unit | 50% | 54% | | | (4%) | | 53% | 55% | | | (2%) |
| Recurring FFO per unit | 50% | 54% | | | (4%) | | 53% | 55% | | | (2%) |
| Weighted avg. units o/s | | | | | | | | | | | |
| Basic | 147,266,894 | 117,014,413 | | | 30,252,481 | | 142,399,929 | 109,356,605 | | | 33,043,324 |
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| (1) See appropriate sections for reconciliation to the closest IFRS measure and section "Explanation of non-IFRS financial measures" |
| (2) Recurring FFO excludes ''Other revenues'' as presented on the Consolidated Financial Statements |
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Upcoming Unit Consolidation
Fronsac is pleased to announce that the Board of Trustees has approved a special resolution (the “Consolidation Resolution”) authorizing a unit consolidation (the “Unit Consolidation”) of all of the issued and outstanding units of Fronsac (the “Units”) on the basis of one (1) post-consolidation Unit for every ten (10) pre-consolidation Unit.
As per Policy 5.8 of the TSX Venture Exchange, the Consolidation Resolution did not require the approval of unitholders as the consolidation ratio is not greater than 1:10 and the Trust has not consolidated any securities in the past 24 months. The consolidation also does not require the approval of unitholders as per article 7 of Fronsac’s contract of trust and the applicable laws.
Fronsac intends to implement the Unit Consolidation with effect on or about November 10, 2020 (the “Effective Date”).
It is expected that upon completion of the Unit Consolidation, the number of Units issued and outstanding will be consolidated from 147,454,178 to approximately 14,745,417. The exact number of outstanding Units after the Unit Consolidation will vary based on the elimination of fractional units. No fractional Units will be issued in connection with the Unit Consolidation. All fractions of post-consolidation Units will be paid out by Fronsac at a rate equal to the closing price of pre-consolidation units the day prior to the consolidation.
The Unit Consolidation is expected to affect unitholders uniformly, including holders of outstanding warrants and convertible debentures exercisable for Units on the Effective Date, except for minor changes or adjustments resulting from the treatment of fractional units. On the Effective Date, the exercise prices and the number of Units issuable upon the exercise or deemed exercise of any options, warrants or convertible debentures of the Trust will be automatically proportionately adjusted based on the consolidation ratio to reflect the Unit Consolidation.
Letters of transmittal providing for the exchange of certificates representing pre-Consolidation Units for certificates representing post-Consolidation Units will be delivered to unitholders holding such physical certificates.
As a result of the Consolidation, the current monthly distributions of the REIT for November and December 2020 of 0.213¢ per Unit on a pre-Consolidation basis will be adjusted to 2.13¢ per Unit on a post-Consolidation basis, representing annualized distributions of 25.55¢ per Unit on a post-Consolidation basis.
About Fronsac - Fronsac Real Estate Investment Trust is an open-ended trust that acquires and owns high quality triple net and management-free commercial real estate properties.