Summit announces record results....Looks like Gail and you are quite wrong...
Summit Real Estate Investment Trust Quick Quote: SMU.UN 19.10 (+0.02)
Summit REIT Announces Record 2004 Results
2/7/05
14% Increase in Recurring Distributable Income
Distributions for February and March 2005 Also Announced
/NOT FOR DISSEMINATION IN THE UNITED STATES/
TORONTO, Feb 07, 2005 (Canada NewsWire via COMTEX) --
The Trustees of Summit REIT announced today the financial results for the three months and year ended December 31, 2004.
Highlights: - Accretive acquisitions and expansion activities generate 14.3% and 9.2% growth in fourth quarter and annual revenue respectively - Canadian industrial portfolio same property net operating income rises 3.1% in fourth quarter and 2.4% in 2004 - Canadian industrial portfolio occupancy rises 2.2 percentage points from prior year - Recurring distributable income increases 22.3% in Q4 and 14.1% for year - Property management subsidiary internalized at no cost to Unitholders - Summit transformed into Canada's largest industrial landlord with strong presence in key markets
Operating revenues in the fourth quarter of 2004 increased 14.3% to $69.7 million compared to $61.0 million in the fourth quarter of 2003. For the year ended December 31, 2004 revenues rose 9.2% to $257.3 million from $235.6 million last year. The increase in revenues in 2004 is primarily due to accretive acquisitions and property expansions completed during the year. Through 2004, Summit acquired over 5.6 million square feet of light industrial space in major markets across the country. Summit also extended approximately $16.0 million in mezzanine financing to its development partners in 2004 at a 9% annualized interest rate.
"2004 was an exceptionally busy and successful year at Summit. Our growth transformed the REIT into Canada's largest industrial landlord and generated significant increases in operating revenues and distributable income," commented Lou Maroun, President and CEO. "With its high total income returns, stable track record, broad range of tenants, and lower overall cost structure, the Canadian light industrial sector will continue to generate consistent and growing cash flow for our Unitholders over the long term."
Net operating income ("NOI") in the fourth quarter rose 20.6% to $45.9 million from $38.1 million last year. For the year ended December 31, 2004, NOI increased 11.9% to $167.4 million from $149.6 million in 2003. For the 345 properties owned since the beginning of 2003, NOI increased by 1.6% for the total portfolio and by 2.4% for Summit's Canadian light industrial portfolio. Fourth quarter same property NOI for the Canadian industrial portfolio increased 3.1% compared to the prior year. In calculating the increase in same property NOI, the impacts from the change in accounting policies implemented in 2004 have been excluded. The increases in "same property" NOI are due to higher occupancies, increased average rents, and enhanced cost efficiencies and synergies generated by the increase in Summit's property portfolio. Occupancy for Summit's total portfolio rose 2.3 percentage points in 2004, with occupancy in its Canadian industrial portfolio rising 2.2 percentage points compared to the prior year.
Recurring distributable income for the fourth quarter of 2004, not including gains or losses on real estate transactions, realized foreign exchange losses and reduction of income properties to fair value, rose 22.3% to $26.4 million ($0.462 per Unit) from $21.6 million ($0.407 per Unit) last year. During the fourth quarter of 2004, Summit incurred net losses on the sale of non-core properties of approximately $0.6 million ($0.011 per Unit) compared to a loss of $1.2 million ($0.021 per Unit) in 2003. During the fourth quarter of 2004, Summit also incurred a charge of $1.5 million ($0.026 per Unit) to write down the value of a certain non-core property to its fair value. Including these items, distributable income in the fourth quarter was $24.3 million ($0.424 per Unit) compared to $15.5 million ($0.288 per Unit) last year.
For the year ended December 31, 2004 recurring distributable income rose 14.1% to $96.2 million ($1.683 per Unit) from $84.3 million ($1.620 per Unit) in 2003. During 2004, Summit recognized losses on real estate transactions, including realized foreign exchange losses, of $4.8 million ($0.084 per Unit) compared to $3.1 million ($0.054 per Unit) in 2003. Including these losses, and the $1.5 million reduction of income properties to fair value incurred in the fourth quarter of 2004, distributable income rose to $89.9 million ($1.572 per Unit) from $76.2 million ($1.464 per Unit) in 2003. As at December 31, 2004 the weighted average number of Units outstanding had increased by 9.8% compared to the prior year.
Net income for the fourth quarter of 2004 was $11.8 million ($0.205 per Unit) compared to $12.3 million ($0.229 per Unit) last year. For the year ended December 31, 2004, net income was $51.6 million ($0.903 per Unit) compared to $63.7 million ($1.225 per Unit) in the prior year. Net income in 2004 was impacted by a new Canadian Institute of Chartered Accountants ("CICA") accounting policy adopted in January 2004 by the entire Canadian real estate industry for the amortization of income property. This accounting change resulted in amortization expense of 2004 increasing by $7.3 million ($0.128 per unit) and $22.5 million ($0.394 per unit) in the quarter and year ended December 31, 2004 respectively compared to last year. Partially offsetting the negative impact of the change in accounting for amortization was the addition of approximately $1.8 million in the fourth quarter and $5.2 million for the year in gross rental income resulting from a change in CICA accounting policy effective January 2004 to recognize contractual rent increases on a straight-line basis. Had there been no changes in these accounting policies, Summit's reported net income would have been $17.1 million ($0.299 per unit) and $68.9 million ($1.205 per unit) for the three months and year ended December 31, 2004 respectively. There was no effect on cash flow or distributable income as a result of these accounting changes.
The changes to Summit's balance sheet as at December 31, 2004 compared to the prior year-end reflect property acquisitions and financings completed over the last year. During 2004, Summit secured a $173 million financing by way of commercial mortgage pass-through certificates, completed an offering of $100 million in unsecured convertible debentures, issued $115 million in senior unsecured debentures, and completed an $82.5 million offering of units. Summit's overall leverage was at 54.6% at December 31, 2004, well within its target range.
During 2004, Summit consolidated the property management of its entire Canadian portfolio and fully internalized its property management subsidiary at no cost to Unitholders. The initiative is estimated to save approximately $1.0 million annually.
"We are very pleased with our growth and record performance in 2004," Mr. Maroun concluded. "Looking ahead, we will continue to build the critical mass of our portfolio with a target to double in size over the next few years. As we grow through acquisitions, our expansion and development initiatives, and through new joint venture relationships, we will significantly grow our cash flow for the benefit of our Unitholders."
Financial Highlights (financial statements attached): -----------------------------------------------------
------------------------------------------------------------------------- Period Ended December 31, Three Months Year ------------------------------------------------------------------------- (in $,000 except per Unit amounts) 2004 2003 2004 2003 -------------------------------------------------------------------------
------------------------------------------------------------------------- Operating Revenues(1) 69,672 60,962 257,330 235,588 ------------------------------------------------------------------------- Net Operating Income 45,920 38,063 167,375 149,562 ------------------------------------------------------------------------- Net Income(1)(2) 11,777 12,266 51,616 63,736 ------------------------------------------------------------------------- Distributable Income 24,304 15,453 89,867 76,217 ------------------------------------------------------------------------- Recurring Distributable Income(3) 26,449 21,634 96,190 84,305 ------------------------------------------------------------------------- Distributable Income per Unit $0.424 $0.288 $1.572 $1.464 ------------------------------------------------------------------------- Recurring Distributable Income per Unit(3) $0.462 $0.407 $1.683 $1.620 ------------------------------------------------------------------------- Distributions per Unit $0.3825 $0.3825 $1.530 $1.530 ------------------------------------------------------------------------- Net Income per Unit (basic)(1)(2) $0.205 $0.229 $0.903 $1.225 ------------------------------------------------------------------------- Real Estate Investments 1,882,515 1,591,872 ------------------------------------------------------------------------- Weighted Average Units Outstanding 57,171,975 52,047,681 ------------------------------------------------------------------------- (1) Includes positive change in generally accepted accounting principals ("GAAP") for straight-lining of contractual rent increases effective January 2004 of $1.8 million in the fourth quarter and $5.2 million in 2004 (2) Includes negative impact due to change in GAAP for amortization of income properties effective January 2004 of $7.3 million in the fourth quarter and $22.5 million in 2004 (3) Excludes loss on real estate transactions, realized foreign currency loss and reduction of income properties to fair value.
Cash Distributions for February and March 2005
Summit also announced today cash distributions of $0.1275 per Unit for each of the months of February and March 2005. The record dates and payable dates are as follows:
------------------------------------------------------------------------- Income Period Declaration Date Record Date Payable Date ------------------------------------------------------------------------- February 1 - 28, 2005 February 7, 2005 February 28, 2005 March 10, 2005 ------------------------------------------------------------------------- March 1 - 31, 2005 February 7, 2005 March 31, 2005 April 11, 2005 -------------------------------------------------------------------------
As one of Canada's largest Real Estate Investment Trusts, Summit REIT owns a portfolio of high-quality properties in Canada and the United States containing approximately 31.9 million square feet of leaseable space. Focused primarily on the light industrial segment of the Canadian real estate market, Summit is dedicated to maximizing recurring distributable income and the value of its property portfolio through active property management, accretive acquisitions, innovative financing and selective development opportunities. Summit REIT's Units and convertible debentures are listed on the Toronto Stock Exchange under the symbols SMU.UN and SMU.DB respectively. For more information on Summit REIT, visit our website at www.summitreit.com.
CONSOLIDATED BALANCE SHEETS
as at December 31 2004 2003 ------------------------------------------------------------------------- (dollar amounts in thousands)
ASSETS Real estate assets Income properties $ 1,831,550 $ 1,555,319 Deferred leasing costs 40,453 24,942 Mortgages receivable 10,512 11,611 ------------------------------------------------------------------------- 1,882,515 1,591,872
Cash and cash equivalents 10,420 1,970 Rents receivable 1,778 4,937 Other receivables 12,635 7,394 Prepaid expenses 5,003 5,698 Intangible assets 5,547 - Other assets 13,392 9,238 ------------------------------------------------------------------------- $ 1,931,290 $ 1,621,109 ------------------------------------------------------------------------- -------------------------------------------------------------------------
LIABILITIES Mortgages payable $ 826,773 $ 681,978 Convertible debentures 100,000 - Unsecured debentures 115,000 - Bank loans 50,000 170,285 Accounts payable and accrued liabilities 50,462 35,362 Intangible liabilities 9,784 - Distributions in the normal course of payment 7,889 6,798 Deferred revenue 864 3,451 ------------------------------------------------------------------------- 1,160,772 897,874 ------------------------------------------------------------------------- ------------------------------------------------------------------------- EQUITY Unitholders' equity 770,518 723,235 ------------------------------------------------------------------------- $ 1,931,290 $ 1,621,109 ------------------------------------------------------------------------- -------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
3 months 3 months 12 months 12 months ended ended ended ended December December December December year ended 31 31 31 31 December 31, 2004 2004 2003 2004 2003 ------------------------------------------------------------------------- (dollar amounts in thousands, except per Unit amounts)
INCOME
Gross property rental income and recoveries $ 69,672 $ 60,962 $ 257,330 $ 235,588
Property operating expenses 23,752 22,899 89,955 86,026 -------------------------------------------------------------------------
45,920 38,063 167,375 149,562 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest expense 16,840 14,093 61,210 56,275 Amortization of income properties 12,527 3,185 38,251 12,379 Amortization of deferred leasing costs 2,867 1,672 9,208 5,838 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 32,234 18,950 108,669 74,492
INCOME FROM REAL PROPERTIES 13,686 19,113 58,706 75,070 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other income 1,246 208 3,049 320 General and administrative expenses (1,010) (872) (3,816) (3,464) ------------------------------------------------------------------------- -------------------------------------------------------------------------
INCOME BEFORE THE UNDERNOTED 13,922 18,449 57,939 71,926 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Imputed interest expense - (2) - (102) Realized foreign exchange loss on dispositions - - (2,288) - Loss on real estate transactions (645) (1,181) (2,535) (3,088) Reduction of income properties to fair value (1,500) (5,000) (1,500) (5,000) ------------------------------------------------------------------------- -------------------------------------------------------------------------
NET INCOME $ 11,777 $ 12,266 $ 51,616 $ 63,736 ------------------------------------------------------------------------- -------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
3 months 3 months 12 months 12 months ended ended ended ended December December December December 31 31 31 31 2004 2003 2004 2003 ------------------------------------------------------------------------- (dollar amounts in thousands)
NET INFLOW (OUTFLOW) OF CASH AND CASH EQUIVALENTS RELATED TO THE FOLLOWING ACTIVITIES: OPERATING Net income $ 11,777 $ 12,266 $ 51,616 $ 63,736 Items not affecting cash: Amortization of income properties 12,527 3,185 38,251 12,379 Amortization of deferred leasing costs 2,649 1,672 8,810 5,838 Amortization of deferred leasing cost on acquisition properties 218 - 398 - Amortization of value of above and below-market leases (215) - (469) - Realized foreign exchange loss on dispositions - - 2,288 - Reduction of income properties to fair value 1,500 5,000 1,500 5,000 Loss on real estate transactions 645 1,181 2,535 3,088 Amortization of other deferred costs 6 146 144 281 Amortization of deferred financing costs 308 285 1,159 939 Imputed interest expense - 2 - 102 Deferred rent receivable (1,747) - (5,187) - Deferred leasing costs (5,215) (5,011) (18,983) (14,416) Changes in non-cash operating items 17,915 (1,964) 3,187 (6,116) ------------------------------------------------------------------------- Cash flow from operating activities 40,368 16,762 85,249 70,831 ------------------------------------------------------------------------- FINANCING Net proceeds of new mortgage financing 14,844 - 201,826 35,734 Proceeds of convertible debenture offering - - 100,000 - Proceeds of unsecured debenture offering 115,000 - 115,000 - Mortgage principal repayments (5,152) (4,467) (16,621) (16,466) Discharge of mortgages (19,875) (18,772) (120,851) (57,918) Bank loans (repaid) advanced (118,665) (5,966) (120,285) 102,970 Distributions, net of distributions reinvested (19,732) (17,920) (79,842) (72,972) Proceeds of Units issued from treasury 82,507 82,500 82,507 82,500 Costs to issue units from treasury (3,550) (3,386) (3,685) (3,483) Units delivered to settle vested Restricted Unit obligations - 1,290 1,522 1,290 Units acquired and issued in escrow, net of discount, to fund future restricted Unit obligations (785) - (1,236) - Deferred financing costs (1,260) (311) (6,416) (1,377) Proceeds of Unit options exercised - - - 1,388 ------------------------------------------------------------------------- Cash flow from financing activities 43,332 32,968 151,919 71,666 ------------------------------------------------------------------------- INVESTING Acquisition of income properties (77,140) (49,368) (240,034) (211,430) Development expenditures (6,822) (3,271) (20,046) (15,847) Deferred leasing costs on acquisition of properties (7,371) - (11,547) - Intangible assets on acquisition of properties - - (780) - Intangible liabilities on acquisition of properties 3,279 - 10,327 - Recoverable capital expenditures (2,137) (2,729) (4,038) (1,800) Non recoverable capital expenditures (3,262) - (3,555) (3,090) Mortgages receivable advanced 135 - (16,057) - Mortgage receivable re-paid 18,514 - 18,980 - Net proceeds from disposition of income properties (531) 6,711 39,011 94,484 Other deferred costs 26 (1,970) (979) (3,370) ------------------------------------------------------------------------- Cash flow (to) investing activities (75,309) (50,627) (228,718) (141,053) -------------------------------------------------------------------------
NET CASH AND CASH EQUIVALENTS INFLOW (OUTFLOW) 8,391 (897) 8,450 1,444 CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR (PERIOD) 2,029 2,867 1,970 526 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF THE YEAR (PERIOD) $ 10,420 $ 1,970 $ 10,420 $ 1,970 ------------------------------------------------------------------------- -------------------------------------------------------------------------
VIEW ADDITIONAL COMPANY-SPECIFIC INFORMATION: https://www.newswire.ca/en/releases/orgDisplay.cgi?okey=52034
For further information: Paul Dykeman, Executive Vice President & Chief Financial Officer, Toll-Free (866) 786-6481 and Fax Toll-Free (866) 786-1300, E-mail pdykeman(at)summitreit.com
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