WINNIPEG, Nov. 8, 2013 /CNW/ - Lanesborough Real Estate Investment Trust
("LREIT") (TSX: LRT.UN) today reported its operating results for the
quarter ended September 30, 2013. The following comments in regard to
the financial position and operating results of LREIT should be read in
conjunction with Management's Discussion & Analysis and the financial
statements for the quarter ended September 30, 2013, which may be
obtained from the LREIT website at www.lreit.com or the SEDAR website at www.sedar.com.
HIGHLIGHTS
-
Net operating income ("NOI") was $6.41 million during Q3-2013 and $18.19
million for the nine months ended September 30, 2013, an increase of
$1.05 million (19.6%) compared to Q3-2012 and $1.05 million (6.13%)
compared to the nine months ended September 30, 2012.
-
Overall occupancy of 93% (92% for Fort McMurray properties) during
Q3-2013, compared to 95% (95% for Fort McMurray properties) during
Q2-2013 and 91% (87% for Fort McMurray properties) during Q3-2012.
-
Average monthly rent of $1,780 during Q3-2013 ($2,318 for Fort McMurray
properties), compared to $1,749 during Q2-2013 ($2,275 for Fort
McMurray properties) and $1,704 during Q3-2012 ($2,251 for Fort
McMurray properties).
-
Weighted average interest rate on total mortgage debt decreased to 5.4%
at September 30, 2013, compared to 7.2% at December 31, 2012 and 5.5%
at June 30, 2013.
Mortgage Loan Covenants
During Q3-2013, a covenant breach on a $4.6 million mortgage loan was
eliminated as a result of the renewal of the loan. Subsequent to
September 30, 2013, the mortgage loans for Nelson Ridge and the
Lakewood Townhomes were refinanced. In total, the refinancings
comprised mortgage loan debt of $49.5 million at a weighted average
interest rate of 6.4%. The proceeds from the new financings, combined
with the release of collateral deposits, were used to discharge or
repay $48.3 million of existing mortgage loan debt with a weighted
average interest rate of 6.8%, with the remaining balance used for
working capital purposes. The covenant breaches for two mortgage loans
were eliminated as a result of the refinancings.
The mortgage refinancings which were completed subsequent to September
30, 2013, served to eliminate all of the mortgage loan covenant
breaches of LREIT, with the exception of one swap mortgage loan in the
amount of $17.3 million which is in breach of a "global" debt service
coverage requirement. A request has recently been submitted to the
lender to waive the global debt service coverage requirement.
Parsons Landing
On October 3, 2013, the reconstruction of the remaining 76 suites at
Parsons Landing was completed and the entire project returned to active
operations. The suites are currently in the lease-up stage. As of
November 8, 2013, 99 of the 160 suites have been leased.
Management expects to have $44 million of first mortgage financing in
place in order to complete the acquisition of Parsons Landing this
year, prior to the scheduled closing date of January 2, 2014.
Divestiture Program
On October 1, 2013, LREIT completed the sale of the Purolator Building
in Burlington, Ontario at a price of $1.6 Million with net sale
proceeds of approximately $0.8 Million. LREIT has also entered into a
sale agreement for the Nova Court property, at a sale price of $21.68
million. After accounting for selling costs, the assumption of the
first mortgage loan by the purchaser and the required prepayment of $10
million of the 9% mortgage bonds which are secured by the property, the
net proceeds from sale are estimated to be $3.6 million. The sale is
expected to close by December 31, 2013.
LREIT is pursuing the sale of additional properties and it is
anticipated that the remaining two seniors' housing complexes and/or
other properties will be sold in 2014.
FINANCIAL AND OPERATING SUMMARY
|
|
|
|
|
|
September 30
|
|
December 31
|
|
|
|
|
|
|
2013
|
|
2012
|
STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
$
|
494,424,755
|
$
|
481,552,578
|
|
Total long-term financial liabilities (1)
|
|
|
|
|
$
|
310,626,674
|
$
|
323,026,417
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
KEY FINANCIAL PERFORMANCE INDICATORS
|
|
|
|
|
|
|
|
|
Operating Results
|
|
|
|
|
|
|
|
|
|
Rentals from investment properties
|
$
|
10,417,760
|
$
|
9,206,783
|
$
|
30,212,858
|
$
|
28,978,605
|
|
Net operating income
|
$
|
6,405,204
|
$
|
5,355,272
|
$
|
18,185,494
|
$
|
17,134,762
|
|
Income (loss) before taxes and discontinued operations
|
$
|
13,422,853
|
$
|
(3,078,641)
|
$
|
15,358,454
|
$
|
1,380,093
|
|
Income (loss) and comprehensive income (loss)
|
$
|
13,505,324
|
$
|
(2,298,800)
|
$
|
16,028,750
|
$
|
3,912,535
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
$
|
3,280,950
|
$
|
488,083
|
$
|
3,191,759
|
$
|
(5,111,689)
|
|
Funds from Operations (FFO)
|
$
|
700,219
|
$
|
(2,644,953)
|
$
|
(544,062)
|
$
|
(5,173,307)
|
|
Adjusted Funds from Operations (AFFO)
|
$
|
(481,765)
|
$
|
(3,341,145)
|
$
|
(2,909,604)
|
$
|
(6,614,948)
|
|
Distributable income (loss)
|
$
|
714,151
|
$
|
733,513
|
$
|
(833,474)
|
$
|
400,635
|
(1)
|
Long-term financial liabilities consist of mortgage loans, a swap
mortgage loan, debentures, defeased liability and
mortgage bonds. The swap mortgage loan and mortgage bonds are included
at face value.
|
Q3-2013 COMPARED TO Q3-2012
Analysis of Income (Loss)
|
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Rentals from investment properties
|
$
|
10,417,760
|
$
|
9,206,783
|
$
|
30,212,858
|
$
|
28,978,605
|
Property operating costs
|
|
4,012,556
|
|
3,851,511
|
|
12,027,364
|
|
11,843,843
|
Net operating income
|
|
6,405,204
|
|
5,355,272
|
|
18,185,494
|
|
17,134,762
|
Interest income
|
|
303,792
|
|
281,209
|
|
932,039
|
|
614,962
|
Forgiveness of debt
|
|
-
|
|
-
|
|
-
|
|
859,561
|
Interest expense
|
|
(6,281,557)
|
|
(10,116,020)
|
|
(20,733,401)
|
|
(24,474,974)
|
Trust expense
|
|
(440,395)
|
|
(407,263)
|
|
(1,762,327)
|
|
(1,572,022)
|
Income recovery on Parsons Landing
|
|
630,704
|
|
869,547
|
|
2,272,334
|
|
2,393,658
|
Insurance proceeds
|
|
-
|
|
400,000
|
|
-
|
|
400,000
|
Income (loss) before the following
|
|
617,748
|
|
(3,617,255)
|
|
(1,105,861)
|
|
(4,644,053)
|
Profit on sale of investment properties
|
|
-
|
|
-
|
|
164,928
|
|
1,045,307
|
Fair value gains
|
|
7,652,786
|
|
38,614
|
|
9,077,308
|
|
8,978,839
|
Fair value adjustment of Parsons Landing
|
|
5,152,319
|
|
500,000
|
|
7,222,079
|
|
(4,000,000)
|
Income (loss) before taxes and discontinued
|
|
|
|
|
|
|
|
|
|
operations
|
|
13,422,853
|
|
(3,078,641)
|
|
15,358,454
|
|
1,380,093
|
Deferred income tax recovery
|
|
-
|
|
(181,339)
|
|
-
|
|
-
|
Income (loss) before discontinued operations
|
|
13,422,853
|
|
(2,897,302)
|
|
15,358,454
|
|
1,380,093
|
Income from discontinued operations
|
|
82,471
|
|
598,502
|
|
670,296
|
|
2,532,442
|
Income (loss) and comprehensive income
|
|
|
|
|
|
|
|
|
|
(loss)
|
$
|
13,505,324
|
$
|
(2,298,800)
|
$
|
16,028,750
|
$
|
3,912,535
|
LREIT completed Q3-2013 with comprehensive income of $13.51 million
compared to a comprehensive loss of $2.30 million during Q3-2012. The
improvement in bottom-line results is mainly due to the following
factors:
-
A combined increase in fair value gains/adjustment of $12.27 million.
-
A decrease in interest expense of $3.8 million or which $2.75 million
reflects mortgage prepayment charges that were incurred in Q3-2012.
Excluding prepayment charges, interest expense decreased by $1.1
million in Q3-2013 compared to Q3-2012.
-
An increase in net operating income of $1.05 million which was almost
entirely attributable to rental properties in Fort McMurray as a result
of expanded activity in the oilsands industry and the continuation of
rental rate increases and improving occupancy levels. The return of
reconstructed suites at Parsons Landing to active operations also
contributed to the increase in net operating income.
Analysis of Rental Revenue
|
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
|
2013
|
2012
|
Increase
(Decrease)
|
2013
|
2012
|
Increase
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort McMurray
|
$
|
6,228,415
|
$
|
5,686,706
|
$
|
541,709
|
$
|
18,668,698
|
$
|
17,093,994
|
$
|
1,574,704
|
Other investment properties
|
|
3,590,891
|
|
3,520,077
|
|
70,814
|
|
10,814,958
|
|
10,693,323
|
|
121,635
|
Sub-total
|
|
9,819,306
|
|
9,206,783
|
|
612,523
|
|
29,483,656
|
|
27,787,317
|
|
1,696,339
|
Properties sold
|
|
-
|
|
-
|
|
-
|
|
-
|
|
796,861
|
|
(796,861)
|
Impaired property
|
|
598,454
|
|
-
|
|
598,454
|
|
729,202
|
|
394,427
|
|
334,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
10,417,760
|
$
|
9,206,783
|
$
|
1,210,977
|
$
|
30,212,858
|
$
|
28,978,605
|
$
|
1,234,253
|
As disclosed in the chart above, total revenue from the investment
properties, excluding properties sold and the impaired property,
increased by $0.61 million in Q3-2013, compared to Q3-2012. The
increase is comprised of an increase in revenue from investment
properties in Fort McMurray of $0.54 million and an increase in revenue
from the Other investment properties of $0.07 million.
The increase in revenue from the Fort McMurray property portfolio
reflects an increase in the average occupancy level, as well as an
increase in the average rental rate. As disclosed in the charts below,
the average occupancy level for the Fort McMurray portfolio increased
from 87% during Q3-2012 to 92% in Q3-2013, while the average monthly
rental rate increased by $67 or 3.0%.
For the nine month period ended September 30, 2013, total revenue from
the investment properties, excluding properties sold and the impaired
property, increased by $1.70 million, compared to the first nine months
of 2012. The nine month comparatives also reflect an improvement in
occupancy level and rental rate.
Occupancy Level, by Quarter
|
|
2013
|
|
|
|
|
Q1
|
Q2
|
Q3
|
9 Month
Average
|
|
|
|
Fort McMurray
|
93%
|
95%
|
92%
|
93%
|
|
|
|
Other investment properties
|
96%
|
95%
|
94%
|
95%
|
|
|
|
Properties sold
|
n/a
|
n/a
|
n/a
|
n/a
|
|
|
|
Impaired property
|
n/a
|
n/a
|
n/a
|
n/a
|
|
|
|
Total
|
94%
|
95%
|
93%
|
94%
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
Q1
|
Q2
|
Q3
|
9 Month
Average
|
Q4
|
12 Month
Average
|
Fort McMurray
|
92%
|
90%
|
87%
|
90%
|
88%
|
90%
|
Other investment properties
|
98%
|
97%
|
97%
|
97%
|
98%
|
97%
|
Properties sold
|
100%
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Impaired property
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Total
|
95%
|
92%
|
91%
|
93%
|
92%
|
92%
|
The occupancy level represents the portion of potential revenue that was
achieved
Average Monthly Rents, by Quarter
|
|
2013
|
|
Q1
|
Q2
|
Q3
|
9 Month
Average
|
Fort McMurray
|
$2,259
|
$2,275
|
$2,318
|
$2,284
|
Other investment properties
|
$1,109
|
$1,114
|
$1,133
|
$1,118
|
Properties sold
|
n/a
|
n/a
|
n/a
|
n/a
|
Impaired property
|
n/a
|
n/a
|
n/a
|
n/a
|
Total
|
$1,739
|
$1,749
|
$1,780
|
$1,756
|
|
2012
|
|
Q1
|
Q2
|
Q3
|
9 Month
Average
|
Q4
|
12 Month
Average
|
Fort McMurray
|
$2,124
|
$2,191
|
$2,251
|
$2,187
|
$2,293
|
$2,218
|
Other investment properties
|
$1,075
|
$1,069
|
$1,048
|
$1,064
|
$1,076
|
$1,067
|
Properties sold
|
$3,100
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Impaired property
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
Total
|
$1,704
|
$1,684
|
$1,704
|
$1,697
|
$1,739
|
$1,709
|
Analysis of Property Operating Costs
|
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
|
2013
|
|
2012
|
|
Increase
(Decrease)
|
|
2013
|
|
2012
|
|
Increase
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort McMurray
|
$ 2,120,697
|
|
$ 2,122,286
|
|
$ (1,589)
|
|
$ 6,582,146
|
|
$ 6,358,508
|
|
$ 223,638
|
Other investment properties
|
1,701,799
|
|
1,729,225
|
|
(27,426)
|
|
5,182,572
|
|
5,091,443
|
|
91,129
|
Sub-total
|
3,822,496
|
|
3,851,511
|
|
(29,015)
|
|
11,764,718
|
|
11,449,951
|
|
314,767
|
Properties sold
|
-
|
|
-
|
|
-
|
|
-
|
|
99,509
|
|
(99,509)
|
Impaired property
|
190,060
|
|
-
|
|
190,060
|
|
262,646
|
|
294,383
|
|
(31,737)
|
Total
|
$ 4,012,556
|
|
$ 3,851,511
|
|
$ 161,045
|
|
$ 12,027,364
|
|
$11,843,83
|
|
$ 183,521
|
Property operating costs for the Fort McMurray and Other investment
property portfolios decreased by $0.03 million or 1% during Q3-2013
compared to Q2-2012 and was mainly attributable to the Other investment
properties. For the nine months ended September 30, 2013, property
operating costs for the Fort McMurray and Other investment property
portfolios increased by $0.31 million or 3%, compared to the first nine
months of 2012. The increase in the nine month property operating costs
is mainly due to increased property tax and utilities expenses for the
Fort McMurray properties.
Analysis of Net Operating Income
|
|
Net Operating Income
|
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
|
2013
|
|
2012
|
|
Increase
(Decrease)
|
|
2013
|
|
2012
|
|
Increase
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fort McMurray
|
$ 4,107,718
|
|
$ 3,564,420
|
|
$ 543,298
|
|
$12,086,552
|
|
$10,735,486
|
|
$ 1,351,066
|
Other investment properties
|
1,889,092
|
|
1,790,852
|
|
98,240
|
|
5,632,386
|
|
5,601,880
|
|
30,506
|
Sub-total
|
5,996,810
|
|
5,355,272
|
|
641,538
|
|
17,718,938
|
|
16,337,366
|
|
1,381,572
|
Properties sold
|
-
|
|
-
|
|
-
|
|
-
|
|
697,352
|
|
(697,352)
|
Impaired property
|
408,394
|
|
-
|
|
408,394
|
|
466,556
|
|
100,044
|
|
366,512
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ 6,405,204
|
|
$ 5,355,272
|
|
$ 1,049,932
|
|
$ 18,185,494
|
|
$ 17,134,762
|
|
$ 1,050,732
|
After considering the increase in rental revenue and the decrease in
property operating costs, as analyzed in the preceding sections of this
press release, net operating income for the portfolio of investment
properties, excluding properties sold and the impaired property,
increased by $0.64 million or 12% during Q3-2013, compared to Q3-2012.
As disclosed in the table above, net operating income for the Fort
McMurray portfolio increased by $0.54 million during Q3-2013, compared
to Q3-2012, while net operating income for the Other investment
properties portfolio increased by $0.10 million.
For the nine month period ended September 30, 2013, net operating income
from investment properties, excluding properties sold and the impaired
property, increased by $1.38 million or 8.5% compared to the same
period in 2012.
Analysis of Operating Margin
|
|
Operating Margin
|
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
2013
|
2012
|
|
2013
|
2012
|
|
|
|
|
|
|
Fort McMurray
|
66%
|
63%
|
|
65%
|
63%
|
Other investment properties
|
53%
|
51%
|
|
52%
|
52%
|
Sub-total
|
61%
|
58%
|
|
60%
|
59%
|
Properties sold
|
n/a
|
n/a
|
|
n/a
|
88%
|
Impaired property
|
68%
|
n/a
|
|
64%
|
25%
|
|
|
|
|
|
|
Total
|
61%
|
58%
|
|
60%
|
59%
|
Overall, the operating margin for the property portfolio, excluding
properties sold and the impaired property, increased from 58% in
Q3-2012, to 61% in Q3-2013. The increase in the overall operating
margin reflects an increase in the operating margin for both the Fort
McMurray property portfolio and the Other property portfolio. For the
nine month period ended September 30, 2013, the operating margin
increased to 60% compared to 59% for the nine month period ended
September 30, 2012.
COMPARISON TO PREVIOUS QUARTER
Analysis of Income (Loss)
|
|
Three Months Ended
|
Increase (Decrease)
|
|
September 30,
2013
|
June 30, 2013
|
Amount
|
%
|
Rentals from investment properties
|
$
|
10,417,760
|
$
|
10,026,210
|
$
|
391,550
|
|
3.9%
|
Property operating costs
|
|
4,012,556
|
|
3,939,488
|
|
(73,068)
|
|
1.9%
|
Net operating income
|
|
6,405,204
|
|
6,086,722
|
|
318,482
|
|
5.2%
|
Interest income
|
|
303,792
|
|
329,946
|
|
(26,154)
|
|
(7.9)%
|
Interest expense
|
|
(6,281,557)
|
|
(6,609,966)
|
|
328,409
|
|
(5.0)%
|
Trust expense
|
|
(440,395)
|
|
(790,635)
|
|
350,240
|
|
(44.3)%
|
Income recovery on Parsons Landing
|
|
630,704
|
|
742,500
|
|
(111,796)
|
|
(15.1)%
|
(Income) loss before the following
|
|
617,748
|
|
(241,433)
|
|
859,181
|
|
355.9%
|
Profit on sale of investment properties
|
|
-
|
|
164,928
|
|
(164,928)
|
|
(100.0)%
|
Fair value gains
|
|
7,652,786
|
|
1,286,668
|
|
6,366,118
|
|
494.8%
|
Fair value adjustment of Parsons Landing
|
|
5,152,319
|
|
1,769,760
|
|
3,382,559
|
|
191.1%
|
Income for the period before taxes and
|
|
|
|
|
|
|
|
|
|
discontinued operations
|
|
13,422,853
|
|
2,979,923
|
|
10,442,930
|
|
350.4%
|
Income from discontinued operations
|
|
82,471
|
|
355,731
|
|
(273,260)
|
|
(76.8)%
|
Comprehensive income
|
$
|
13,505,324
|
$
|
3,335,654
|
$
|
10,169,670
|
|
304.9%
|
During Q3-2013, the income, before profit on sale of investment
properties, fair value gains, fair value adjustment of Parsons Landing,
income taxes and discontinued operations, increased by $0.86 million
compared to Q2-2013. The increase in the income mainly reflects a
decrease in trust expense of $0.35 million, a decrease in interest
expense of $0.33 million and an increase in net operating income of
$0.32 million, partially offset by a decrease in income recovery on
Parsons Landing of $0.11 million. The decrease in trust expense is
mainly attributable to the comparatively high level of trust expense in
Q2-2013 as a result of a one-time charge of $0.19 million associated
with the write down of a loan receivable. The decrease in interest
expense is due to the reduction in the weighted average interest rate
on mortgage loan debt, which decreased from 6.7% at the end of Q1-2013
to 5.5% at the end of Q2-2013. The increase in operating income is
mainly due to the Fort McMurray property portfolio as a result of the
return of 84 suites at Parsons Landing to active rental operations on
June 1, 2013, as well as an improvement in occupancy levels and
increased rental rates at other properties. Conversely, the decrease in
income recovery is mainly due to the return of 84 suites at Parsons
Landing.
After accounting for the increase in fair value gains and fair value
adjustment of Parsons Landing in the combined amount of $9.75 million
and a decrease in profit on sale of investment properties of $0.16
million, the income before income taxes and discontinued operations
increased by $10.44 million during Q3-2013, compared to Q2-2013.
Income from discontinued operations decreased by $0.27 million during
Q3-2013 compared to Q2-2013. The decrease in income from discontinued
operations mainly reflects a decrease in income tax recoveries and net
operating income. After accounting for discontinued operations and
income tax expense, LREIT completed Q3-2013 with comprehensive income
of $13.51 million, compared to comprehensive income of $3.34 million
during Q2-2013.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the Toronto
Stock Exchange under the symbols LRT.UN (Trust Units), LRT.DB.G (Series
G Debentures), LRT.NT.A (Second Mortgage Bonds due December 24, 2015),
LRT.WT (Warrants expiring March 9, 2015) and LRT.WT.A (Warrants
expiring December 23, 2015). The objective of LREIT is to provide
Unitholders with stable cash distributions from investment in a
diversified portfolio of quality real estate properties. For further
information on LREIT, please visit our website at www.lreit.com.
This press release contains certain statements that could be considered
as forward-looking information. The forward-looking information is
subject to certain risks and uncertainties, which could result in
actual results differing materially from the forward-looking
statements.
The Toronto Stock Exchange has not reviewed or approved the contents of
this press release and does not accept responsibility for the adequacy
or accuracy of this press release.
SOURCE Lanesborough Real Estate Investment Trust
Arni Thorsteinson, Chief Executive Officer, or Gino Romagnoli, Investor Relations
Tel: (204) 475-9090, Fax: (204) 452-5505, Email: info@lreit.com